Ivan Cherkasov and Others v Nogotkov Kirill Olegovich, the Official Receiver of Dalnyaya Step LLC ((in Liquidation))
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Rose |
| Judgment Date | 10 April 2017 |
| Neutral Citation | [2017] EWHC 756 (Ch) |
| Docket Number | Case No: CR-2016-002375 |
| Court | Chancery Division |
| Date | 10 April 2017 |
[2017] EWHC 756 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF DALNYAYA STEP LLC (IN LIQUIDATION)
AND IN THE MATTER OF THE CROSS-BORDER INSOLVENCY REGULATIONS 2006
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
The Rolls Building,
London, EC4A 1NL
Mrs Justice Rose
Case No: CR-2016-002375
Mr Joe Smouha QC and Mr Ciaran Keller (instructed by Kobre & Kim (UK) LLP) for the Applicants
Mr Daniel Bayfield QC and Mr James Willan (instructed by Olswang LLP) for the Respondent
Hearing date: 23 March 2017
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
This is an application for security for costs brought by Mr Cherkasov, Mr Browder and Mr Wrench, whom I will refer to collectively as the Hermitage Parties. The person from whom they are seeking security is Mr Nogotkov who is, or claims to be, the liquidator appointed by a Russian court to carry out the liquidation of a company called Dalnyaya Step LLC ('DSL') incorporated in the Republic of Kalmykia in the Russian Federation.
Applications for security for costs are governed by CPR 25.12 which provides as follows:
" Security for costs
25.12 – (1) A defendant to any claim may apply under this section of this Part for security for his costs of the proceedings. …
(2) An application for security for costs must be supported by written evidence.
(3) where the court makes an order for security for costs, it will—
(a) determine the amount of security; and
(b) direct –
(i) the manner in which; and
(ii) the time within which
the security must be given."
CPR 25.13 provides:
"Conditions to be satisfied
25.13 – (1) The court may make an order for security for costs under rule 25.12 if —
(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and
(b) (i) one or more of the conditions in paragraph (2) applies, or
(ii) an enactment permits the court to require security for costs.
(2) the conditions are—
(a) the claimant is—
(i) resident out of the jurisdiction; but
(ii) not resident in a Brussels Contracting State, a State bound by the Lugano Convention, a State bound by the 2005 Hague Convention or a Regulation State, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982;
…"
The costs for which the Hermitage Parties seek security are their costs of a hearing listed to take place over five days in November 2017. That hearing will consider two applications. The first is the Hermitage Parties' application to set aside a recognition order obtained by Mr Nogotkov on 8 July 2016 after a short hearing before Registrar Barber. That recognition order was granted pursuant to the Cross-Border Insolvency Regulations 2006 (S.I. 2006 No 1030) ('CBIR'). The order described Mr Nogotkov as the official receiver of DSL appointed by order dated 27 November 2015 of the Arbitrazh Court of the Republic of Kalmykia, Russian Federation. It ordered that the liquidation of DSL commenced on 9 September 2015 pursuant to the relevant Federal Law concerning insolvency "be recognised as a foreign main proceeding in accordance with the UNCITRAL Model Law on cross-border insolvency" as set out in Schedule 1 to the CBIR. The grounds on which the Hermitage Parties will seek to set aside that recognition order are primarily that the making of the order was manifestly contrary to public policy.
The second application to be heard in November is Mr Nogotkov's application pursuant to Article 21(1)(d) and Article 21(1)(g) of Schedule 1 to the CBIR and section 236 of the Insolvency Act 1986. Section 236 empowers the court on the application of the office holder to summon to appear before it various people including any officer of the company and any person who may have in his possession any property of the company or any information concerning the business, dealings, affairs or property of the company. In his section 236 application Mr Nogotkov seeks the production of DSL's documents from the Hermitage Parties and a summons for each of them to attend for questioning. The Hermitage Parties will resist that application also primarily on the basis that the jurisdiction to grant it relies on the existence of the recognition order which they say should be set aside.
The following points are common ground for the purposes of the application for security for costs before me:
i) the condition in CPR r 25.13(2)(a) is satisfied because Mr Nogotkov is resident in Russia which is not a contracting state of the kind referred to in r 25.13(2)(a)(ii);
ii) if the Hermitage Parties are successful in November and Mr Nogotkov is ordered to pay their costs, it will be difficult, if not impossible, for any costs order to be enforced by the Hermitage Parties against Mr Nogotkov in Russia;
iii) Mr Nogotkov has no assets within this jurisdiction;
iv) the costs of the hearing in November are likely to be substantial (£400,000 according to Mr Nogotkov's estimate and over £1.8 million according to the Hermitage Parties);
v) the Hermitage Parties have a reasonable prospect of succeeding in setting aside the recognition order and resisting the section 236 application in November;
vi) Mr Nogotkov has sufficient funds to enable him to put up money for security for costs so that any award by this court will not stifle Mr Nogotkov's ability to participate in the hearing in November.
The CBIR incorporate into English law the Model Law on cross-border insolvency as adopted by the United Nations Commission on International Trade Law on 30th May 1997, known as the UNCITRAL Model Law. Regulation 2 of the CBIR provides that the UNCITRAL Model Law shall have the force of law in Great Britain in the form set out in Schedule 1 to the Regulations. Schedule 1 sets out the UNCITRAL Model Law with certain modifications to adapt it for application here. Regulation 2 further provides that the courts can use various instruments when interpreting the Model Law, including the Guide to Enactment of the UNCITRAL Model Law (UNCITRAL document A/CN.9/442) issued by UNCITRAL in May 1997 (the 'UNCITRAL Guide').
The UNCITRAL Model Law as set out in Schedule 1 provides that it applies when assistance is sought in Great Britain by a foreign court or a foreign representative in connection with a foreign proceeding. The term "foreign proceeding" is defined as a collective judicial or administrative proceeding in a foreign State pursuant to a law relating to insolvency, in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation or liquidation. A "foreign representative" means a person or body authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor's assets or affairs or to act as a representative of the foreign proceeding.
The relevant element of the Model Law for our purposes is Article 15 which provides that a foreign representative may apply to the court for recognition of the foreign proceeding in which the foreign representative has been appointed. That application must be accompanied by specified evidence showing the commencement of the foreign proceeding and the appointment of the foreign representative.
Article 17 then provides:
"Article 17. Decision to recognise a foreign proceeding
1. Subject to article 6, a foreign proceeding shall be recognised if—
(a) it is a foreign proceeding within the meaning of sub-paragraph (i) of article 2;
(b) the foreign representative applying for recognition is a person or body within the meaning of sub-paragraph (j) of article 2;
(c) the application meets the requirements of paragraphs 2 and 3 of article 15; and
(d) the application has been submitted to the court referred to in article 4.
2. …
3. An application for recognition of a foreign proceeding shall be decided upon at the earliest possible time.
4. The provisions of articles 15 to 16, this article and article 18 do not prevent modification or termination of recognition if it is shown that the grounds for granting it were fully or partially lacking or have fully or partially ceased to exist and in such a case, the court may, on the application of the foreign representative or a person affected by recognition, or of its own motion, modify or terminate recognition, either altogether or for a limited time, on such terms and conditions as the court thinks fit."
Article 17 is thus expressed to be subject to Article 6 of the Model Law. Article 6 provides:
" Article 6. Public policy exception
Nothing in this Law prevents the court from refusing to take an action governed by this Law if the action would be manifestly contrary to the public policy of Great Britain or any part of it."
Other provisions of the Model Law as set out in Schedule 1 to the CBIR include:
i) Article 19 which provides for the court, at the request of the foreign representative, to grant urgent relief to protect the assets of the debtor or the interests of the creditor;
ii) Article 20 which sets out the effects of recognition of a foreign proceeding, broadly that a stay and suspension come into effect of the same scope and effect as if the debtor had been made bankrupt or a company had been made the subject of a winding up order under the relevant domestic legislation;
iii) Article 21 which sets out the relief that may be granted upon recognition of a foreign proceeding, including...
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