OJSC VTB Bank v Parline Ltd & Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Walker |
| Judgment Date | 21 February 2014 |
| Neutral Citation | [2014] EWHC 1045 (Comm) |
| Docket Number | Claim No: 2013 Folio 138 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 21 February 2014 |
[2014] EWHC 1045 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
Rolls Building,
110 Fetter Lane,
London EC4 1NL
Mr Justice Walker
Claim No: 2013 Folio 138
Mr D Alexander QC and Mr S Robins (instructed by SC Andrew LLP) appeared on behalf of the Claimant.
Mr S Moverley Smith QC and Mr S Thompson (instructed by Bird & Bird LLP appeared on behalf of the Defendants.
Friday, 21 February 2014
The hearing today has been fixed in order to deal with two things. The first is the defendants' application for an order directing a preliminary issue as to Russian law. Mr David Alexander QC and Mr Robins, who appear today on behalf of the claimant ("the bank"), have lodged a skeleton argument opposing the application. In that regard I have seen reports of Professor Maggs on behalf of the defendants and Dr Mukhachev on behalf of the bank. The second thing to deal with today is the first case management conference in this matter. I indicated at the outset that it seemed to me desirable to begin with the application. The outcome of the application will, of course, affect what directions have to be given at the case management conference. I have now heard the defendants' submissions on the application. Those submissions have not persuaded me that I should grant the application. In this judgment I explain my reasons for reaching that conclusion.
Mr Moverley Smith QC appears today with Mr Thompson on behalf of the defendants. In forceful submissions they assert that, if Professor Maggs is right, then, taken at their highest, the allegations in the particulars of claim would not ground a cause of action under Russian law.
Mr Moverley Smith acknowledges that the bank has reformulated its case, and points now to a number of features which differ from those which were in play at the time of Professor Maggs's first report. The claim now is that what occurred involved a much larger transaction in bonds issued by an associated company, which the bank says was unlawfully and deliberately favoured by the actions of the defendants, so as to injure the bank. Two additional and different ways of formulating the loss alleged have now been advanced. First, it is said that a loan which the Bank made to the Russian company, Yurganz, has a much diminished value as a receivable. The second is that the bank has to bear additional costs, because it has to find additional reserves. Mr Moverley Smith comments that what is now left in the case is no more than a "rump" of what had been a much broader claim, involving questions of English law, as well as many questions of Russian law, than are now accepted by the bank to arise. I readily acknowledge that the bank has changed its case considerably. That cannot though, as it seems to me, alter the fundamental question which I must consider. It is this: taking the claim as it is now, what is the most efficient and orderly and just way of determining the procedure which the court should adopt for deciding the issues which arise?
Features of Professor Maggs's evidence are, as described by Mr Moverley Smith in his oral submissions this morning, first, that there is no harm, for the purpose of Russian law, until the conclusion of the bankruptcy, which at the moment is a Russian procedure involving various stages. At the moment, the stage that Yurganz is in involves an administrator. The big issue, submits Mr Moverley Smith, is whether Russian insolvency law takes priority over the Russian Civil Code claims, which the bank seeks to rely upon under articles 1064 and 1082. Mr Moverley Smith adds that the third report of Professor Maggs examines the new heads of loss and asserts that it remains the case that the claim is not sustainable. Points that are made by Professor Maggs in that regard include an assertion that the new claims are unquantifiable and that they are too speculative. Professor Maggs also maintains the view that, even with the new claims, the whole matter belongs in the realm of bankruptcy. Mr Moverley Smith says that, if Professor Maggs is right, then that is a knockout blow.
At this stage of the argument, Mr Moverley Smith made an aside, which it is convenient to deal with now. He stressed the expertise of Professor Maggs who is, of course, a very well-known expert on Russian law. By contrast, the skeleton argument described the qualifications of the expert witness who has provided reports on behalf of the bank, who is said to be relatively inexperienced, and in oral submissions Mr Moverley Smith said that the bank's expert's view had never been tested in the Russian courts. I approach the matter on the basis that there are differing, genuine opinions as to Russian law. It would be quite wrong for me to take the approach that Professor Maggs, because of the standing which he undoubtedly holds, must be regarded as necessarily more persuasive than Dr Mukhachev. I note that Dr Mukhachev holds distinguished qualifications, even if he has not attained the many, many years of experience that Professor Maggs has attained.
Mr Moverley Smith seized upon a remark in the bank's skeleton argument, where it was said that two months would be needed to finalise Russian law for the purposes of a preliminary issue, if there were to be one. It seems to me that there is no reason to draw any adverse inference from that, and certainly no reason to conclude, as Mr Moverley Smith invited me to conclude, that the bank doubted their current expert evidence. Matters of Russian law are, in my experience, extremely complicated, and, in the case of the bank's expert, it is necessary to work through a translator. I see no reason to draw any adverse inference from the bank's statement that, if there were to be preliminary issues, it would wish to utilise a period of two months to make sure that it has the expert evidence on its side in order.
I turn then to the well-known principles of law which govern whether the court should order a preliminary issue. I bear in mind the stern warnings that have been given by appellate courts about the danger of identifying what may seem to be an easy shortcut. The reason is that the case may seem, at a relatively early stage, to be clear cut, but that, when minds are focused upon particular aspects of the case, the case may take a different shape. What seems to be an easy shortcut may turn out to be a treacherous slope.
The siren call made by Mr Moverley Smith is one that he repeated, and acknowledged that he repeated, as one went through the well-known factors in the decision of Neuberger J in Steele v Steele [2001] CP Rep 106. It was this. If Professor Maggs were right, then Russian insolvency law trumped everything. I readily accept that, if Professor Maggs is right and Russian insolvency law trumps absolutely everything, then there would be a knockout blow. I am not at all sure that it is a "succinct" knockout point, in the sense that Lindsay J used that word in CJ O'Shea Construction Limited v Bassi [1998] ICR 1130 at 1140. As Lord Hope pointed out in Boyle v SCA Packaging Limited [2009] UKHL 37, that is unlikely to be the case where a preliminary issue cannot be entirely divorced from the merits of the case, or the issue will require consideration of a substantial body of evidence. Mr Moverley Smith submitted that the proposed preliminary issue did not involve consideration of evidence at all. It was, he said, a clear point of Russian law akin to the sort of point of law which an English court decides on a strike out. To my mind, that does not properly reflect the nature of the preliminary issue which is proposed. First, a preliminary issue as to Russian law is, as is well known, a preliminary issue, for the purposes of the English court, of fact. It is not just a question of characterisation, however; it is a question of what is actually involved. The English court is not in a position where...
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