JSC Commercial Bank Privatbank v Igor Valeryevich Kolomoisky
| Jurisdiction | England & Wales |
| Judge | Mr Justice Trower |
| Judgment Date | 01 April 2022 |
| Neutral Citation | [2022] EWHC 775 (Ch) |
| Docket Number | Case No: BL-2017-000665 |
| Court | Chancery Division |
[2022] EWHC 775 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
THE HONOURABLE Mr Justice Trower
Case No: BL-2017-000665
Andrew Hunter QC, Robert Anderson QC, James Willan QC, Tim Akkouh QC, Christopher Lloyd, David Baker and Conor McLaughlin (instructed by Hogan Lovells International LLP) for the Claimant
Mark Howard QC, Michael Bools QC, Alec Haydon QC, Geoffrey Kuehne and Ben Woolgar (instructed by Fieldfisher LLP) for the First Defendant
Clare Montgomery QC, Matthew Parker QC, Nathaniel Bird and Alyssa Stansbury (instructed by Enyo Law LLP) for the Second Defendant
Thomas Plewman QC and Marc Delehanty (instructed by Pinsent Masons LLP) for the Third to Eighth Defendants
Hearing date 28 March 2022
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.
THE HONOURABLE Mr Justice Trower
Introduction
On 15 and 18 March 2022, seven of the eight defendants made applications for the adjournment of the trial, which is listed to commence on 7 June 2022 with a time estimate of 10 to 13 weeks. The court listed these applications for hearing at the PTR fixed to be heard over two days from 28 March 2022. I directed that the applications be heard before the other business to be determined at the PTR (including a number of applications for disclosure and further information) on the basis that the outcome of the adjournment applications would affect the question of whether the remaining relief sought ought to be granted. On the day of the hearing, the eighth defendant joined the third to seventh defendants' application in support of adjournment.
At the end of the first day of the hearing, I gave my ruling adjourning the trial to a date to be fixed during the first half of June 2023. Given the significance of the matter to the court and the parties, I decided that it was appropriate to explain my reasons for reaching that decision in greater detail than might normally have been the case. These are those reasons.
The basis for the applications can be stated quite simply. This is what Mr Mark Howard QC for the first defendant called a Ukrainian case. The claimant is a Ukrainian bank and the first defendant, the second defendant and the directors of the third to eighth defendants (“the corporate defendants”) are all Ukrainian citizens who live in Ukraine. The non-party witnesses are Ukrainian as well. It is common ground that the issues and causes of action are governed by Ukrainian law save for an unjust enrichment claim against the corporate defendants which they contend to be governed by Cypriot law. On 24 February 2022, Russian forces invaded Ukraine, threatening its very existence as a state. The defendants contended that, up until the invasion, life was proceeding largely as normal, but that the impact of the war on themselves and others involved in the litigation on their behalf or who will give evidence for them at trial is very severe. It has already impaired their ability to deal with this litigation and will continue to do so for the foreseeable future.
It was submitted that it is difficult to imagine more compelling circumstances requiring an adjournment. All defendants said that there is no serious prospect that it could be tried today and that there are no serious proposals from the claimant as to how it could be. It is also said that it can already be clearly seen that the immensely disruptive consequences of the Russian invasion mean that it will not be possible for there to be a fair trial starting on 7 June 2022.
The claimant did not contend that the case is capable of being tried were it to start today, but it said that I cannot conclude now that a fair trial commencing on 7 June will not be possible. Rather, it invited the court to fix a further PTR in just over one month's time when it will be in a better position to consider whether an adjournment is necessary and if so what the appropriate length of the adjournment should be.
In making that submission, the claimant stressed the determination of the Ukrainian people to carry on their lives as normally as possible. It also contrasts its own evidence on this application, which demonstrates an ease of communication with its own witnesses, experts and local lawyers who are all willing and able to take the case to trial in June, with the evidence put in by the defendants. This speaks of minimal contact between those in Ukraine and their English lawyers and a much greater disruption to everyday life in Ukraine than was said by the claimant to be reflected by what is actually happening on the ground.
The claimant submitted that the adjournment of such a substantial and significant trial at this stage would be what Mr Andrew Hunter QC called a “momentous decision” which should only be countenanced as a last resort. He said that the delay would cause very substantial prejudice not just to the claimant but to the state of Ukraine. The claimant relied on the evidence from a member of its supervisory board who acts as one of the three representatives of the state on that board:
“These proceedings are of the utmost importance to the Bank and to the State, as the Bank's owner. In many ways, given the value of the Bank's claim in these proceedings, securing a prompt and effective recovery of the billions of dollars misappropriated from it by the defendants has become even more important for the Bank and the State since the war began. Any recoveries made by the Bank in these proceedings are likely to be critical to supporting Ukraine's financial system and rebuilding the country when the war is over.”
The claimant also submitted that matters continue to develop rapidly on the ground and there is no need to pre-empt now the possibility that peace talks will lead to early stabilisation, and even resolution, well before June and that it should be possible to continue to prepare for trial in the meantime.
The claims in these proceedings
In a judgment I gave in July 2021 ( [2021] EWHC 1910 (Ch)), when giving my reasons for terminating a confidentiality club order, I summarised the claimant's case and the principal issues that arose out of the defendants' defences. In so doing I drew on a judgment of the Court of Appeal ( [2020] Ch 783) delivered on the defendants' jurisdiction challenge, the then current versions of the parties' case summary and a list of common ground and contested issues. Although the parties' statements of case have been amended since then, the essential thrust of their respective positions remains unchanged. I can therefore repeat what I said then.
The first and second defendants were amongst the founders of the claimant, a bank incorporated in Ukraine in 1992. Prior to the nationalisation of the claimant in December 2016, they were the ultimate beneficial owners of more than 80% of its shares. The extent of their control over any material decisions made by the claimant is an important issue in the proceedings.
The claimant alleges that the first and second defendants orchestrated the fraudulent misappropriation of over US$1.9 billion. The misappropriation is said to have been achieved through loans made by the claimant to 47 Ukrainian and 3 Cypriot borrowers between April 2013 and August 2014. These borrowers then entered into supply agreements with supplier companies including the corporate defendants. The supply agreements, said by the claimant to be shams, were for the supply of quantities of commodities and industrial equipment and provided for the pre-payment of the entire purchase price before the time for delivery of the commodities or equipment had arrived.
The claimant alleges that, in respect of prepayments totalling US$1.9 billion, no goods or commodities were supplied, and the prepayments were not repaid by the suppliers to the borrowers. It also claims that loans in that amount have not been repaid to it by the borrowers and claims US$1.9 billion as loss from the defendants. The claimant says that the total amount it seeks to recover now stands at US$4.2 billion (including interest), the recovery of which will eventually benefit the state of Ukraine as its sole shareholder.
The claimant contends that the misappropriation was disguised by, amongst other things, the grant of sham security for the loans, including over both shares in companies owned or controlled by the first and second defendants and the borrowers' rights under the supply agreements. It is said that they were also disguised by the entering into of further sham supply agreements which purported to provide for payment after delivery. The claimant relies on the fact that the first and second defendants have never explained the commercial rationale for these supply agreements.
Some of the corporate defendants assert that they entered into the supply agreements as agent for undisclosed principals and say that they have no knowledge of their commercial purpose. The others assert that the transactions they entered into were genuine and entered into at arm's length. They accept that they remain obliged to repay the counterparty borrowers the amounts of the...
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