Elena Nikolaevna Tsareva and 8 others in Claim 477 v Dmitri Ananyev
| Jurisdiction | England & Wales |
| Judge | Mr Justice Andrew Baker |
| Judgment Date | 16 September 2019 |
| Neutral Citation | [2019] EWHC 2414 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000477 & CL-2018-000544 |
| Date | 16 September 2019 |
[2019] EWHC 2414 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice Rolls Building, Fetter Lane, London EC4A 1NL
Mr Justice Andrew Baker
Case No: CL-2018-000477 & CL-2018-000544
Charles Samek QC and Adam Cloherty (instructed by Lipman Karas LLP) for the Claimants in Claim 477 (‘the Tsareva claimants’)
David Lord QC and Sebastian Kokelaar (instructed by Withers LLP) for the Claimants in Claim 544 (‘the Galagaev claimants’)
Alain Choo Choy QC, Marcos Dracos and Saul Lemer (instructed by Skadden Arps Slate Meagher & Flom (UK) LLP) for the First Defendant
Neil Kitchener QC and Henry Hoskins (instructed by Clifford Chance LLP) for the Second Defendant
Thomas Sprange QC and Ruth Byrne (instructed by King & Spalding International LLP) for the Third to Fifth Defendants
David Foxton QC and Sam O'Leary (instructed by Osborne Clarke LLP) for the Sixth to Ninth Defendants
Alexander Brown (instructed by Reed Smith LLP) for the Tenth Defendant
Hearing dates: 25, 26, 27, 28 February, 1 March 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
The claimants are Russian nationals, domiciled and resident in Russia. They were all customers in 2017 of Promsvyaz Bank (‘PSB’) with substantial funds there on interest-bearing deposits. All invested in Notes issued in 2017 by the seventh defendant (‘Peters Cayman’ or ‘the Issuer’), guaranteed by the sixth and eighth defendants (‘Promsvyaz’ and ‘Peters International’, together ‘the Guarantors’). What is meant exactly by the statement that the claimants ‘invested in’ the Notes is not necessarily straightforward; the Notes were not issued to them and each claimant's investment will have been constituted by entries in a securities account in his or her name at PSB.
There were four Note issues, two in April 2017 and two in July 2017. The April issues were 2-year Notes with semi-annual coupons payable in arrears, one denominated in US$ and one in €; the July issues were 3-year Notes, also with semi-annual coupons payable in arrears, again one denominated in US$ and one in €. The Notes were materially similar to five previous series of Notes that had been marketed by PSB. At the time the Notes were issued, the prior series had all performed satisfactorily (and three of them had therefore matured and been fully repaid). The total face value of the Notes was US$170 million and €60 million. To put those figures into their immediate context, PSB had assets as at September 2017 of RUB 1.2 trillion, then equivalent to c.US$21 billion, and in July 2017 the Central Bank of Russia (‘the CBR’) had authorised PSB to issue bonds for US$500 million.
After PSB was put into administration by the CBR at the end of 2017, as I mention further below, the Issuer and the Guarantors defaulted on their obligations under or in respect of the Notes. (The first semi-annual coupon under the April Notes was duly paid in October 2017, but nothing further was paid.) The claimants, according to the evidence put before the court at this stage, were all individuals of at least comfortable means and some were, by ordinary standards, quite wealthy. All invested in the Notes and as a result lost, they say, at least a significant proportion of their life savings.
Nothing in this judgment should be taken as underestimating the significance to the claimants of the failure of the Notes to perform. A desire on the part of the claimants to obtain compensation, if they can, in respect of their decision to invest is understandable. But the question for this judgment is not the legitimacy or reasonableness of that desire. It is whether the jurisdiction of this court is available to the claimants for the pursuit of that desire and, if so, whether there should be interim relief by way of freezing orders in support.
From the evidence at this stage, I infer that the choice of this jurisdiction as a venue for the claimants' claims has been led by the lawyers (Russian and English) who have engaged themselves in assisting the claimants as disappointed investors. Indeed, I think it unlikely it would have occurred to the claimants, unless so led, to try to sue here. The most natural targets for any claim are PSB and (possibly) the first defendant, so the most natural venues for any litigation (all things being equal) are Russia and (perhaps) Cyprus. But none of that means that this court does not have jurisdiction.
There are two action groups of claimants, each separately represented in this jurisdiction. In Claim CL-2018-000477 (‘the Tsareva Claim’), Ms Tsareva is the firstnamed of 9 claimants and there is an application to join a further 24 claimants. In Claim CL-2018-000544 (‘the Galagaev Claim’), Mr Galagaev is the first-named of 7 claimants and there is an application for 72 more to join. The joinder applications do not give rise to any separate controversy. If and to the extent that the Claims survive the primary applications dealt with by this judgment, it will be appropriate for the additional claimants to be joined. If the Claims do not survive those primary applications there will be nothing for the additional claimants to join, and their proposed claims have no independent basis for proceeding, so the joinder applications will fall away.
In 2017, Promsvyaz owned a majority stake in PSB. In turn, Promsvyaz was owned as to 49.9975% each by the third and fourth defendants (‘the English companies’) and as to the remaining 0.005% by the fifth defendant (‘Menrela’). The third defendant was wholly owned by the second defendant, Alexei Ananyev, the fourth defendant was wholly owned by the first defendant, Dmitri Ananyev, and Menrela was owned 50:50 between them. Dmitri and Alexei Ananyev are brothers. I shall refer to them by their first names when distinguishing between them and as ‘the Ananyevs’ when not doing so. The English companies and Menrela were intermediate asset-holding companies with no trading activities of any kind.
The Ananyevs are Russian nationals who were domiciled and resident in Russia in 2017. Alexei is still domiciled and resident in Russia. Dmitri is now, and was when the Claims were commenced in 2018, domiciled and resident in Cyprus, where he has had a dual citizenship since June 2017. They are, or at all events they were in 2017, well-known in Russia as successful and very wealthy businessmen. They were the ultimate beneficial owners together of a number of businesses and assets, including (as above) PSB.
The core allegation underlying the claimants' claims is that they were induced to invest in the Notes by mis-selling on the part of PSB employees to the effect that the Notes were personally guaranteed by the Ananyevs and/or that they were safe investments. It is alleged that PSB was in a parlous financial condition rendering it highly likely the Notes would default, as in due course they did; and that the misselling was directed by the Ananyevs in a conspiracy to enrich themselves and/or their businesses at the expense of the claimants.
Since January 2018, the Ananyevs have separated their business interests. In an interview with Vedomosti reported on 26 February 2018 Alexei described the separation in this way: “ We exchanged stakes in the [business] assets. It was a nonmonetary transaction. The assets were apportioned based on who had been managing them historically. I have sole ownership and control of the Technoserv group of companies and everything relating to information technology. I quit as a shareholder of [Promsvyaz], transferring my stake to my brother, and my brother quit as a shareholder of Technoserv. Now 100% of Technoserv is mine, and 100% of [Promsvyaz] is my brother's.” There is no basis in any evidence I have been shown for supposing that this description is wrong to state that the division of interests was based on who had been managing what, with Promsvyaz (and therefore PSB) going to Dmitri because it was his domain, not Alexei's. Technoserv was and still is a major Russian IT business. Strictly, but presumably not relevant to Vedomosti, Alexei was not personally a shareholder in Promsvyaz, rather his ownership was indirect via his English company and his half of Menrela, and what was transferred to Dmitri, so far as Promsvyaz is concerned, was those shareholdings, so that now both English companies and Menrela are wholly owned by Dmitri.
PSB is not now indirectly owned by the Ananyevs or either of them, however. It has effectively been nationalised following a short period in administration into which it was placed by the CBR in December 2017 amid allegations of mismanagement unconnected to the Notes.
The Issuer was in 2017 and is still a wholly-owned subsidiary of Peters International. In 2017, Peters International was in turn owned 50:50 by the Ananyevs. As a result of the separation of the Ananyevs' interests to which I have just referred, Peters International is now wholly owned by Dmitri.
The English companies are English companies, although ‘tax-resident’ in Ireland in 2017, in Cyprus from some time later (and still now). Promsvyaz is a Dutch company, the Issuer is a Cayman Islands company, and Peters...
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