JSC VTB Bank v Mr Pavel Valerjevich Skurikhin
| Jurisdiction | England & Wales |
| Judge | Mr Justice Flaux |
| Judgment Date | 28 June 2013 |
| Neutral Citation | [2013] EWHC 3863 (Comm) |
| Docket Number | Claim No: 2012 FOLIO 1105 & 2013 FOLIO 197 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 28 June 2013 |
[2013] EWHC 3863 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Flaux
Claim No: 2012 FOLIO 1105 & 2013 FOLIO 197
Mr Tim Penny (instructed by Messrs PCB Litigation LLP) appeared on behalf of the Claimant
Mr Adam Tolley (instructed by Messrs Wedlake Bell LLP) appeared on behalf of the Defendant
Approved Judgment
Friday, 28 June 2013
This case concerns attempts by the claimant, the VTB Bank (the second largest bank in Russia), to enforce judgments it has obtained in the Russian courts against Mr Pavel Skurikhin, to whom I will refer as the defendant, who is a Russian businessman who is the chairman of the SAHO group of companies which carries on business in the agricultural sector in Russia.
During 2007 and 2008 the bank made substantial loans amounting to the rouble equivalent to some $42 million to companies in the SAHO group. There were 40 loan agreements in all. In the case of all 40 the defendant provided personal guarantees. The borrowers defaulted and a demand was made on the guarantees by the bank. The bank has commenced numerous proceedings in the Russian courts against the borrowers and against the defendant. Thirteen of those sets of proceedings have proceeded to the point where there are final and conclusive judgments against the defendant in Russia.
Before any such final and conclusive judgments had been entered, the bank issued a claim against the defendant and two English LLPs, Pikeville and Porchwell, under section 25 of the Civil Jurisdiction and Judgments Act 1982 for interim relief in the form of freezing injunctions to support the enforcement in due course of judgments that would be obtained in Russia. A domestic freezing order was sought against the defendant on the basis that he had assets within the jurisdiction of this court, namely his beneficial interests in the two English LLPs, and a worldwide freezing order was sought against the LLPs as non-cause of action defendants under the so-called Chabra jurisdiction. The bank limited the amount in respect of which assets were sought to be frozen to some £15 million, having filleted out, at least for the present, that part of the outstanding debt which represents default interest under the loan agreements, described as a penalty under Russian law. Whether such amounts are in truth penal and therefore unenforceable in this jurisdiction the bank disputes, and it may be that this court will have to decide that point in due course.
Hamblen J granted without notice freezing orders against the defendant and the two LLPs on 16 August 2012. He also granted permission to serve the claim form out of the jurisdiction on the defendant in Russia and made orders for alternative service. The defendant subsequently challenged the jurisdiction of the court and the on notice application to continue the injunctions and the defendant's application to challenge the jurisdiction were heard by Burton J between 29 November and 3 December 2012. He handed down judgment on 4 December, continuing the injunction until further order and dismissing the application to contest the jurisdiction. The basis upon which he concluded that the court had jurisdiction and the defendant was properly served out, that there was a good arguable case that the defendant had assets within the jurisdiction in the form of his alleged beneficial ownership of the membership interests held by nominee LLP members in the two English LLPs, all of which had been contested by the defendant.
Burton J held further that there was a sufficiently strong arguable case that, once the bank obtained judgments in Russia against the defendant, they could enforce such judgments by common law action and would be entitled to have an equitable receiver appointed to the nominee membership interests in the LLPs, giving the bank control over the LLPs, which could be liquidated or otherwise the subject of enforcement procedures on the part of the equitable receiver. Burton J also considered that, unless restrained by freezing injunction, there was a risk that assets would be put beyond the reach of creditors. In the context of the matters currently before the court, the findings that he made at paragraphs 46 and 47 of his judgment about the real risk of the defendant seeking to exercise his control to put assets beyond the reach of creditors, unless he was restrained by the injunction, are of considerable significance.
The bank now seeks, having obtained a series of judgments in Russia, to proceed to the next stage, which is enforcement of those judgments by action at common law, Russia not being party to any international convention for reciprocal enforcement of judgments. Hence the present applications, which are as follows. Firstly, an application by an application notice dated 5 April 2013 for permission to amend the claim form in 2012 folio 1105 to include claims to enforce the Russian judgments against the defendant and consequential orders and directions. That application is made on notice to the defendant. Secondly, in the alternative, if the court considers it is not appropriate for the claims to enforce to be added to the existing claim form by amendment, an application by an application notice also dated 5 April 2013 (a) seeking permission to serve the defendant outside the jurisdiction with a new claim form in 2013 folio 197, pursuant to CPR 6.37 and paragraph 3.1(10) of the practice direction B to part 6, (b) an order pursuant to CPR 6.15(1) and 6.37(5) for alternative service of that claim form by delivery to Wedlake Bell, who have acted for the defendant and are on the record in 2012 folio 1105.
That application is strictly without notice, but notice has been given to the defendant and the defendant is represented in relation to both applications by Mr Adam Tolley of counsel. The defendant's position as explained by Mr Tolley is that (a) the application to amend the existing claim form is resisted, (b) there is no objection taken to permission to serve the new claim form out of the jurisdiction in Russia being granted, but (c) any order for alternative service is also resisted. Perhaps unsurprisingly, the bank's primary position is that it is entitled to amend the existing claim form on the basis that the court can be satisfied that the cause of action to enforce the judgments is one for which permission to serve out would be granted. That point is, as I have just indicated, accepted by the defendant.
Before dealing further with the merits of the application, I should address a point taken by Mr Tolley that the court should consider first the application in the new claim form for alternative service because if, as Mr Tolley contends, the court should conclude that there should not be an order for alternative service, but the bank should be required to serve out of the jurisdiction pursuant to the Hague Service Convention, then Mr Tolley submits that the court should in any event exercise its discretion against granting permission to amend the existing claim form because to allow such permission would be, as he puts it, "a device to evade the rules on service out of the jurisdiction." I should say at the outset that I reject that submission. Were it correct, it would never be open to a claimant to amend its claim form against a defendant already validly served out of the jurisdiction, at least if such service were pursuant to the Hague Convention, in order to add a fresh claim for which permission to serve out would be granted if the matter proceeded by way of a separate new claim form. That clearly is not the law, as can be seen from two paragraphs of the judgment of Lord Phillips in the Supreme Court in NML Capital v Republic of Argentina [2011] UKSC 31; [2011] 2 AC 495 in a passage disapproving and declining to follow the decision of the Court of Appeal in Parker v Schuller [1901] 17 TLR 299. I quote from paragraphs 76 and 77 of Lord Phillips' judgment as follows:
"Before Parker v Schuller there had been a relevant decision of a powerful Court of Appeal, of which AL Smith LJ was a member, which was not referred to and does not seem to have been cited in the later case. In Holland v Leslie [1894] 2 QB 450 leave to serve out of the jurisdiction had been granted in relation to a bill of exchange which had been erroneously described in the statement of claim endorsed on the writ. The Court of Appeal upheld an order giving leave to amend the writ. In doing so Lord Esher MR said at page 451:
"'Leave was given for the issue of the writ so endorsed and service of the notice of it out of the jurisdiction. Such notice was duly served upon the defendant abroad and the defendant has in due course appeared in this country. It is argued that under these circumstances the writ cannot be amended. Why not? The rules with regard to amendments appear in terms to apply to such a case. It is contended nevertheless that there cannot be an amendment because the writ was for service and has been served out of the jurisdiction, but the defendant has now appeared in this country and I can see no reason why an...
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Charles Ridley v Dubai Islamic Bank PJSC
...to the effect that a different approach applies in Hague Convention cases was rejected, by Flaux J in JSC VTB Bank v Skurikhin [2013] EWHC 3863 (Comm) at 40 The second point taken by the Bank was that the provisions of CPR 6.33 were not apposite here since not every claim made in the claim......