JSC VTB Bank (a company incorporated in Russia) v Pavel Valerjevich Skurikhin
| Jurisdiction | England & Wales |
| Judge | Mr Andrew Henshaw |
| Judgment Date | 13 November 2018 |
| Neutral Citation | [2018] EWHC 3072 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2012-000478 |
| Date | 13 November 2018 |
[2018] EWHC 3072 (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
Andrew Henshaw QC (sitting as a Judge of the High Court)
Case No: CL-2012-000478
and
Tim Matthewson (instructed by PCB Litigation LLP) for the Claimant
David Lord QC and Sebastian Kokelaar (instructed by Withers LLP) for the Fourth Respondent
The Defendants and the First to Third Respondents did not appear and were not represented
Hearing date: 2 November 2018
Approved Judgment
Mr Andrew Henshaw QC:
| (A) INTRODUCTION | 2 |
| (B) FACTS | 2 |
| (1) VTB's claims against Mr Skurikhin | 2 |
| (2) Berenger and the Olympic trust | 3 |
| (3) The Receivership Application | 4 |
| (4) Subsequent events in relation to Mr Skurikhin, Berenger and Olympic | 6 |
| (5) The Discharge Application | 6 |
| (C) VTB'S APPLICATION FOR SECURITY FOR COSTS | 8 |
| (1) VTB's application under CPR 25.12 | 8 |
| (2) Whether VTB is the defendant to a claim for CPR 25.12 purposes | 9 |
| (3) Application to the present case | 16 |
| (4) VTB's alternative basis: CPR 3.1/inherent jurisdiction | 24 |
| (D) CONCLUSION | 29 |
(A) INTRODUCTION
The Claimant (“ VTB”) applies by a notice dated 16 August 2018 for security for its costs in respect of an application by the Fourth Respondent (“ Berenger”) issued on 12 July 2018 to discharge the order of Mr Christopher Butcher QC (sitting as a Deputy Judge of the High Court) dated 21 July 2015, whereby Mr David Rubin and Mr Stephen Katz were appointed as receivers by way of equitable execution over the membership shares and interests in the Second Defendant (“ the Discharge Application”). The Discharge Application is listed for hearing on 23 and 24 January 2019.
(B) FACTS
(1) VTB's claims against Mr Skurikhin
VTB is the second largest bank in Russia, and its majority shareholder is the Russian state. The First Defendant (“ Mr Skurikhin”) is a Russian individual resident and domiciled in Russia, who was the Chairman of the SAHO group of companies, which carried on business in the agricultural sector in Russia.
In December 2008, VTB re-financed loans in roubles to the SAHO group of companies in an amount equivalent to around £42 million, and Mr Skurikhin provided personal guarantees for the loans. The SAHO group companies defaulted on the loans, and demands were served on Mr Skurikhin in respect of his personal guarantees. The demands were not complied with and proceedings were issued against Mr Skurikhin in the Russian courts, leading to VTB obtaining a number of Russian judgments against him.
Having sought and obtained a domestic freezing order in England against Mr Skurikhin and worldwide freezing orders against the Second Defendant (“ Pikeville”) and the Third Defendant (“ Perchwell”), VTB sued Mr Skurikhin in England and Wales on the basis of the Russian judgments. VTB was granted summary judgment in respect of sixteen Russian judgments (in amounts equivalent to approximately £7.6 million) by order of Simon J dated 7 March 2014, and in respect of a further nine Russian judgments (in amounts equivalent to approximately £5.8 million) by order of Blair J dated 14 November 2014. Mr Skurikhin has not satisfied these judgments or related costs orders.
On 12 June 2014, VTB applied for and obtained a worldwide freezing order against Mr Skurikhin (the “ WFO”). The WFO required Mr Skurikhin to make worldwide asset disclosure, but he failed to comply with that order. On 10 July 2014, Mr Skurikhin failed to attend court or to produce documentation under CPR Part 71 as had been ordered by Males J. VTB accordingly issued a committal application against Mr Skurikhin. On 31 October 2014 Flaux J sentenced Mr Skurikhin to 16 months' imprisonment (with 4 months suspended) for contempt of court. The Claimant says Mr Skurikhin has not come into the country since then, so the committal orders have not been enforced against him and he remains in contempt of court.
On 16 December 2014, VTB issued an application to enforce its judgments against Mr Skurikhin by seeking the appointment of receivers by way of equitable execution over the limited liability partnership interests in Pikeville (the “ Receivership Application”).
Pikeville is an English registered limited liability partnership, and is the registered owner of three valuable Italian properties. Its registered members are the First Respondent (“ Mr Meier”), the Second Respondent (“ Mr Lerch”), and the Third Respondent (“ Crown”). Crown is a company incorporated in Hong Kong owned and controlled by Mr Meier and Mr Lerch. On 19 January 2010, Crown, Mr Meier and Mr Lerch each executed a declaration of trust pursuant to which they declared that they held the membership shares and interests in Pikeville on trust for Berenger. Accordingly, Berenger is the ultimate beneficial owner of Pikeville.
VTB's contention was (and is) that Mr Skurikhin either has a right to call for the assets of Berenger to be transferred to him, or has de facto control of those assets.
(2) Berenger and the Olympic trust
Berenger is a foundation incorporated under the laws of the Principality of Liechtenstein. It was formed on 12 January 2005 by WalPart Trust (“ the Founder”). Mr Skurikhin was its economic founder.
Article 4 of the statutes of Berenger (“the Statutes”) provides that:
“the beneficiaries and the extent of their benefits shall be specified in regulations, which shall be issued by the Founder of the foundation. Other bodies (e.g. the Board of Directors of the foundation) or third parties, who need not be involved in the foundation, may be appointed therein to determine in the form of regulations the beneficiaries and the extent of their benefits”.
On 12 January 2005 the Founder issued regulations pursuant to which Mr Skurikhin, his descendants, and trusts, foundations and the like whose beneficiaries include one or more classes of beneficiaries of the Berenger foundation, were appointed as beneficiaries (“ the Original Regulations”). By Article 3 of the Original Regulations, the Founder transferred, within the meaning of Article 4 of the Statutes, the right to modify the Original Regulations to the board (or council) of the foundation.
On 16 February 2005 Berenger's board replaced the Original Regulations with a new set of regulations, which named Mr Skurikhin and the trustee of the Olympic Settlement (Accreda Trustees Limited) as discretionary beneficiaries of the foundation.
The board of Berenger originally consisted of four individuals: Dr Andreas Schurti (a Liechtenstein attorney), Mr Urs Hanselmann (a Liechtenstein accountant and licensed trustee), Mr Meier and Mr Lerch. Mr Meier and Mr Lerch control Accreda Management AG, a provider of fiduciary and corporate services to businesses and individuals.
Mr Meier and Mr Lerch resigned as members of Berenger's board on 13 March 2012. Mr Meier has, however, continued to assist the board in the management of the foundation's affairs and assets.
The Olympic Settlement (“ Olympic”) is a discretionary trust established under the laws of the island of Nevis. It was established on Mr Skurikhin's instructions to act as the principal beneficiary of Berenger.
On 2 February 2005 the trustee of Olympic exercised its power under the trust deed to nominate thirteen individuals as beneficiaries of the settlement. These individuals were Mr Skurikhin himself, and members of his family and friends.
Also on 2 February 2005, the trustee of Olympic passed a resolution pursuant to clause 12 of the trust deed that a person could not be a beneficiary of the settlement in the event of a bankruptcy or lawsuit against him for an amount greater than $100,000.
(3) The Receivership Application
At a directions hearing on 6 February 2015, Leggatt J gave VTB permission to join Mr Meier, Mr Lerch, Crown and Berenger as Respondents to the Receivership Application, and granted permission to serve Berenger out of the jurisdiction. The Receivership Application was served on Berenger in Liechtenstein on 10 April 2015 through the court's foreign process section.
Berenger did not file any evidence in opposition to the Receivership Application, nor did it attend the hearing on 13 July 2015, which was an on notice hearing. Berenger says it was unable to respond to the Receivership Application at the time or to participate in the hearing because it lacked the funds to instruct solicitors and counsel in England; and has been able to make the Discharge Application only because a beneficiary of Olympic has made the necessary funds available to it.
At the hearing of the application VTB relied, inter alia, on a report from an expert in Liechtenstein law, Dr Heinz Frommelt, which concluded that it was likely that there was a “ mandate agreement” between Mr Skurikhin (as the economic founder of Berenger) and the members of Berenger's board pursuant to which Mr Skurikhin had the right to direct the members of the board to exercise their powers under the Statutes in a particular way, including by directing them to transfer Berenger's assets into his name.
The Receivership Application was heard by Christopher Butcher QC (as he then was), sitting as a Deputy High Court Judge. In his judgment dated 21 July 2015, the Deputy Judge found as follows:
i) The authorities establish that a receiver by way of equitable execution may be appointed over whatever may be considered in equity as the assets of the judgment debtor, and in that...
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