PJSC Commercial Bank Privatbank v Igor Valeryevich Kolomoisky
| Jurisdiction | England & Wales |
| Judge | Mr Justice Fancourt |
| Judgment Date | 04 December 2018 |
| Neutral Citation | [2018] EWHC 3308 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2017-000665 |
| Date | 04 December 2018 |
[2018] EWHC 3308 (Ch)
THE HONOURABLE Mr Justice Fancourt
Case No: BL-2017-000665
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Rolls Building
7 Rolls Building
Fetter Lane,
London, EC4A 1NL
Stephen Smith QC, Tim Akkouh, Christopher Lloyd and Emma Williams (instructed by Hogan Lovells International LLP) for the Claimant
Mark Howard QC, Michael Bools QC, Alec Haydon and Ben Woolgar (instructed by Fieldfisher LLP) for the First Defendant Ali Malek QC and Matthew Parker (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) for the Second Defendant
Sonia Tolaney QC, Thomas Plewman QC and Marc Delehanty (instructed by Pinsent Masons LLP) for the Third to Eighth Defendants
Hearing dates: 25, 26, 27, 30, 31 July 2018
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.
This judgment comprises the following parts:
I. Introduction (paras 1–9)
I. Introduction
On 19 December 2017, Nugee J. made various orders upon without notice applications of the Claimant (“the Bank”). These included a worldwide freezing order up to US$2.6 billion against each of the Defendants (additional to sums in other Commercial Court proceedings, in the case of the First and Second Defendants); an order that each of the Defendants disclose assets held or controlled by them anywhere in the world of a value in excess of £25,000; orders for alternative service of the applications, claim form and orders on the First to Fifth Defendants, and permission to serve the application, claim form and orders on the Sixth to Eighth Defendants out of the jurisdiction.
The First and Second Defendants, Mr Kolomoisky and Mr Bogolyubov, were the majority shareholders of the Bank prior to its nationalisation in Ukraine in December 2016. Each of them is a wealthy Ukrainian businessman who also has Cypriot and Israeli nationality. At the date of the orders of Nugee J. both of them were domiciled in Switzerland.
The Third to Fifth Defendants (“the English Defendants”) are limited companies registered in England and Wales. They are wholly-owned subsidiaries of other non-UK companies. The Sixth to Eighth Defendants (“the BVI Defendants”) are companies incorporated in the British Virgin Islands. It is the Bank's case that the English and BVI Defendants were some of numerous corporations used by the First and Second Defendants to perpetrate an extensive fraud on the Bank and that each of the English and BVI Defendants is ultimately controlled by the First and Second Defendants, or by persons who act in accordance with their instructions.
The Bank's claim is quantified at US$1,911,877,385 plus interest. The claim is brought against the First and Second Defendants on the basis that they procured the misappropriation of that sum from the Bank, with the unlawful intention of injuring the Bank and benefitting themselves. The Bank's claim against the English and BVI Defendants is pleaded on two bases. First, that they procured or assisted in the misappropriation of the aforesaid sum and its subsequent concealment, with the unlawful intention of injuring the Bank and benefitting the First and Second Defendants. Second, that each of the English and BVI Defendants was unjustly enriched at the Bank's expense, in that each of them acquired part of the aforesaid sum of money without justification and at the expense of the Bank and so are liable to compensate the Bank in a proportionate amount (plus interest).
The first reaction of the First and Second Defendants was to apply to the court to vary the terms on which the worldwide freezing order required them to make disclosure of their assets. This application had the effect that they were only obliged to disclose assets exceeding £1,000,000 in value and that any assets located in Ukraine or Russia were able to be disclosed on a confidential basis. Thereafter, the applications came before Roth J. on 15 January 2018, who by consent continued the orders as previously made (and varied) but without prejudice to the Defendants' rights to challenge the jurisdiction of the English courts and to seek to set aside the worldwide freezing order. Thereafter, each of the Defendants complied with the orders for disclosure.
On 16 February 2018, the English Defendants applied for declarations that the Court had no jurisdiction, or alternatively should not exercise its jurisdiction, for orders setting aside the claim form and the worldwide freezing order made against them, or alternatively for a stay of proceedings against them. On the same date, the BVI Defendants applied for an order that the claim form had not been validly served and/or that the court had no jurisdiction or should not exercise its jurisdiction, and for further orders setting aside the permission given to serve the claim form out of the jurisdiction and the worldwide freezing orders, and alternatively for a stay of the proceedings against them. On 2 March 2018, the English and BVI Defendants further applied to discharge or vary the worldwide freezing orders on grounds that the Bank had no good arguable case against them, alternatively that the English Defendants had no or negligible assets and there was no real risk of dissipation of assets by the English or BVI Defendants, and on the grounds of material non-disclosure and misleading of the court by the Bank on the without notice application.
On 9 March 2018, each of the First and Second Defendants applied to set aside the worldwide freezing order against them and for a determination that they cannot be sued in England and Wales under the terms of the Lugano Convention 2007, alternatively for a stay of the proceedings pursuant to EU Regulation No.1215/2012 (the recast Brussels Regulation) and/or the Lugano Convention.
These are the various applications that I heard between 23 and 31 July 2018. I had to consider the original evidence sworn in support of the application for a freezing injunction and the claim form, several rounds of very detailed evidence of the solicitors acting for each of the Defendants (and one witness statement from each of the First and Second Defendants), evidence in response from the Bank's solicitors, further responsive and additional evidence on behalf of all of the parties, and several rounds of expert opinion evidence from Ukrainian lawyers for all of the parties on matters of the substantive law of Ukraine and the operation of the judicial system in Ukraine.
I was about to circulate my draft judgment in October 2018 when the Bank served further evidence relating to potentially material developments in litigation in Ukraine involving all the Defendants. I allowed further evidence and submissions to be addressed to those developments.
II. The Issues for Determination
Against that brief recital of the background to the hearing, the issues that I have to determine are the following.
First, whether the Bank has a good arguable case (as pleaded in the particulars of claim) that loss of US$1.91 billion plus interest was caused to it by the alleged fraud of the Defendants. For the purposes of these applications, all Defendants do not dispute that there is a good arguable case that US$248 million of loss was caused to the Bank by the pleaded fraud, but they deny any good arguable case of loss in excess of that amount.
Second, whether the worldwide freezing orders should be set aside in whole or in part for non-disclosure or misrepresentation, or reduced to or reimposed in a lesser maximum sum than the current maximum sum of US$2.6 billion.
Third, whether the Court has jurisdiction over the First and Second Defendants under Article 6.1 of the Lugano Convention by reason of the claim against the English Defendants as “anchor defendants”. Although the claims as pleaded against the First and Second Defendants and the English Defendants are closely connected, the particular issue is whether the claim against the English Defendants was brought with the sole object of removing the First and Second Defendants from Swiss jurisdiction and so was an abuse of Article 6.
Fourth, if there is jurisdiction against the First and Second Defendants, whether the claims against them and the English Defendants should be stayed on grounds of lis pendens in Ukraine. This raises separate questions:
a) Whether the Court has power to stay proceedings against the First and Second Defendants (where jurisdiction only exists (if at all) under the Lugano Convention) in favour of proceedings in a non-Convention state, namely Ukraine. The First and Second Defendants argue that Article 28 of the Convention, which empowers a Convention State to stay proceedings on grounds of lis pendens in another Convention State, should be applied by analogy (or “reflexively”) in favour of proceedings in a non-Convention State.
b) Whether the Court should stay proceedings against the English Defendants (who are sued in accordance with Article 4 of the recast Brussels Regulation) in favour of proceedings in Ukraine. The issue here is as to the meaning, effect and application of Article 34 of the Regulation, which as from 10 January 2015 conferred a power on EU States in defined circumstances to stay proceedings in favour of proceedings in a non-Member State (“a third State”).
Fifth, to the extent that the Court has power to stay on grounds of lis pendens in Ukraine, whether it should exercise that power given the...
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