JSC Bank of Moscow v 1) Vladimir Abramovich Kekhman and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 20 February 2015 |
| Neutral Citation | [2015] EWHC 396 (Ch) |
| Docket Number | Case No: CH/2014/0316 |
| Court | Chancery Division |
| Date | 20 February 2015 |
[2015] EWHC 396 (Ch)
Mr Justice Morgan
Case No: CH/2014/0316
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, Fetter Lane
London EC4A 1NL
Mr Alan Gourgey QC and Ms Marcia Shekerdemian QC (instructed by PCB Litigation LLP) for the Appellant
Mr Michael Swainston QC and Ms Blair Leahy (instructed by Simmons & Simmons LLP) for the First Respondent
The Second and Third Respondents did not appear and were not represented
Hearing dates: 19th, 20th, 21st and 22nd January 2015
Introduction
The principal matter which is before me is an appeal by JSC Bank of Moscow ("Bank of Moscow") against the order of Chief Registrar Baister made on 15 April 2014, giving effect to a judgment he handed down on 9 April 2014. The appeal is brought with the permission of the Chief Registrar.
In summary, the procedural history of this matter is that on 25 September 2012, Mr Kekhman presented a debtor's petition seeking a bankruptcy order and on 5 October 2012, the court made a bankruptcy order on that petition. On 31 January 2013, Bank of Moscow (claiming to be a creditor of Mr Kekhman) applied under section 282 of the Insolvency Act 1986 for an order annulling the bankruptcy order. In his judgment of 9 April 2014, the Chief Registrar declined to annul the bankruptcy order and Bank of Moscow has appealed his consequential order of 15 April 2014. Mr Kekhman has served a Respondent's Notice challenging two findings which were made by the Chief Registrar. In this judgment, I will first consider Bank of Moscow's appeal and will postpone dealing with the issues raised by the Respondent's Notice.
Mr Alan Gourgey QC and Ms Marcia Shekerdemian QC appeared for Bank of Moscow. Mr Michael Swainston QC and Ms Blair Leahy appeared for Mr Kekhman. I am grateful to counsel for their considerable assistance. Mr Kekhman's trustees in bankruptcy (the Second and Third Respondents) were present at the hearing of the appeal, but did not take part in it, and were not represented.
All references in this judgment to sections of an Act are to the sections of the Insolvency Act 1986, save where the contrary is expressly stated.
Mr Kekhman
As at the date of his bankruptcy petition, and at all times since, Mr Kekhman has been a Russian citizen, domiciled and resident in the Russian Federation. Mr Kekhman has been an international businessman. He went into the fruit business in 1994. That business expanded rapidly from modest beginnings. In 1997, he formed the JFC Group, the ultimate holding company of which is JFC (BVI) Limited, which operates through companies in Russia, the British Virgin Islands, Costa Rica, Cyprus, Ecuador, Luxembourg and Panama. Mr Kekhman is the beneficial owner of the VK Family Private Foundation ("the Foundation"), a Dutch Antilles entity, which was set up in February 2008. The Foundation holds 70% of the shares in JFC (BVI) Limited and 90% of the shares in the LQ Group, which holds property in Russia. Mr Kekhman says that from around May 2007 he relinquished day-to-day control of the JFC Group and put its management and control in the hands of others. He says that he resumed control in March 2012.
Mr Kekhman's businesses were funded by loans from a number of banks and financial institutions, many of which were backed by his personal guarantees. In 2011, the businesses got into financial difficulties. Negotiations and restructuring attempts failed, and a number of lending banks took steps to enforce their securities and called in their guarantees. On 20 February 2012, insolvency proceedings were initiated in Russia by JFC Russia. A Russian supervisor was appointed over a number of Russian companies in the JFC Group. On 11 September 2012, Bank of Moscow obtained, in proceedings in the Commercial Court in London, a worldwide freezing order against the BVI companies in the group. In late 2012/early 2013, a receiver was appointed in Curaçao in relation to the Foundation.
Bank of Moscow is a Russian bank which claims to be a creditor of Mr Kekhman in a sum in excess of $150 million in respect of damages for an alleged conspiracy to defraud. Mr Kekhman denies the bank's allegations and contends that he had (before his bankruptcy) a claim against it, so that this claim is now vested in his trustees in bankruptcy.
The petition
Mr Kekhman's petition contained the following statements:
(1) his address was given as Apartment 1, Arts Square, 1 St Petersburg, Russian Federation;
(2) his occupation was described as that of theatre director and company director;
(3) his centre of main interests was not in a member state within the meaning of the EC Regulation on Insolvency Proceedings;
(4) he was not resident in England and Wales;
(5) he was unable to pay his debts;
(6) jurisdiction was claimed on the basis that Mr Kekhman was personally present in the country on the day of presentation of his petition.
In support of the claim to jurisdiction, the petition stated:
"I have been present in the United Kingdom since 12.10 pm on 24th September 2012 when I arrived at Gatwick Airport and whilst in London I reside at the Corinthia Hotel in Whitehall Place, London SW1A 2BD and presently intended to leave on Thursday 27th September 2012 and when I travel to St Petersburg, Russia. I am therefore present in the United Kingdom for some 2 clear days and the Court has jurisdiction under section 264(1)(b) and section 265(1)(b) of the Insolvency Act 1986 and I am advised that the Court has jurisdiction to make a bankruptcy order. I wish to submit to the jurisdiction of the Courts of England and Wales with regard to bankruptcy, as I am advised that there is no personal bankruptcy law in the Russian Federation and as I am connected with international business matters and the English jurisdiction as a sophisticated jurisdiction in these matters appears appropriate to help resolve my affairs in an orderly manner that will be recognised internationally. I wish to add that under 3 personal guarantees and indemnit[ies] subject to English law which I have given to 6 international banks particularised in my Statement of affairs and dated 15th March 2011, a total sum of £86,201,784 has been demanded of me on 6th April 2012."
The statement of affairs which accompanied the petition showed:
(1) Mr Kekhman was subject to nine sets of legal proceedings in the Russian Federation;
(2) there were proceedings in the Commercial Court in London; the statement of affairs gave only limited information about those proceedings; the position was that Bank of Moscow had brought those proceedings against three companies through which Mr Kekhman had carried on business; Mr Kekhman was not himself a party to those proceedings; in those proceedings, Bank of Moscow had obtained injunctions (on 11 and 26 September 2012) which, amongst other things, required Mr Kekhman to provide it with certain information;
(3) his assets consisted of cash in hand of £200,000, land in St Petersburg valued at £4.3 million, a Mercedes-Benz in Russia and a Bentley in France;
(4) he had not been visited by an enforcement officer or bailiff in the last 6 months;
(5) he had 19 unsecured creditors totalling £316,136,088, all located in the Russian Federation;
(6) details of 23 bank accounts, three of which were "arrested";
(7) Mr Kekhman's monthly household income amounted to £7,912 but he had monthly expenditure of £49,000 odd;
(8) he had a wife, daughter and two sons, all described as dependants.
In his petition, Mr Kekhman attributed his insolvency to:
"The overwhelming demands made on me personally under the guarantees […] that I gave to support bank facilities granted to JFC Group and in which group I have a substantial indirect interest. That group defaulted on those facilities and hence the numerous calls under the personal guarantees I refer to."
The hearing of the petition
Mr Kekhman's petition first came on for hearing before Mr Registrar Jones on 26 September 2012. Mr Kekhman was represented by counsel. A transcript of the hearing shows that a number of issues were canvassed. The registrar wanted to know whether there were assets in the jurisdiction and whether the £200,000 was to be brought into the jurisdiction. The registrar did not at any stage direct that that sum be brought in. The registrar was concerned that an English bankruptcy would not benefit creditors. He expressed doubt as to whether an English order would be recognised in Russia. He considered whether notice should be given to creditors. He approached the petition on the basis that, whilst there was jurisdiction to make a bankruptcy order, there were a number of factors which needed to be clarified to enable the court to consider whether to exercise its discretion to make the order. The upshot was that the petition was adjourned so that those factors could be further considered by Mr Kekhman and his advisers.
The second hearing of the petition took place on 5 October 2012 before Chief Registrar Baister. At this hearing, there was a witness statement of 2 October 2012 from Mr Kekhman's solicitor exhibiting a report from a Russian lawyer, Mr Torkanovskiy of Ivanyan & Partners. Mr Kekhman's solicitor also explained the position in relation to the guarantee dated 15 March 2011 which Mr Kekhman had specifically referred to in the petition. This guarantee was in favour of Raiffesen Bank International AG as security agent for itself and five other banks. The amount said to be due from Mr Kekhman under it was £86,201,784, which had been demanded on 6 April 2012. Clause 16 of the guarantee provided that it was governed by English law....
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