PJSC Vseukrainskyi Aktsionernyi Bank v Sergey Maksimov and Others
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 07 March 2013 |
| Neutral Citation | [2013] EWHC 422 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: FOLIO 2013/57 |
| Date | 07 March 2013 |
[2013] EWHC 422 (Comm)
The Hon. Mr Justice Popplewell
Case No: FOLIO 2013/57
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane
London EC4A 1NL
Mr D'Cruz (instructed by Eversheds LLP) for the Claimant
Ms Healy (instructed by Ince & Co) for the Second to FourthDefendants
Hearing dates: 26 February 2013
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 is an application by the Second to Fourth Defendants ("the Corporate Defendants") to set aside a freezing order granted ex parte by Cooke J on 16 January 2013 and continued by order of Flaux J on 1 February 2013. The Claimant ("the Bank") brings its substantive claim against the First Defendant ("Mr Maksimov") in arbitration proceedings in London. The Bank does not assert a cause of action against the Corporate Defendants, but claims relief against them under the jurisdiction recognised in T.S.B Private Bank International SA v Chabra [1991] 1 WLR 231 on the grounds that their assets are in truth the assets of Mr Maksimov. The Corporate Defendants seek to set aside the order against them on the grounds that:
(1) the Bank's evidence does not fulfil the requirements for the exercise of the Chabra jurisdiction; and/or
(2) there was material non disclosure by the Bank when making the ex parte application to Mr Justice Cooke.
The Bank is a public joint stock company incorporated under Ukrainian law which has carried on business as a medium sized bank in Ukraine since July 199Mr Maksimov was President of the Bank and Chairman of its Supervisory Board from 1996 until 2 November 2010. He is a Russian citizen with significant business interests in Ukraine. According to an interview he gave to a Ukrainian newspaper he purchased control of the Bank in 1995. When he ceased to be Chairman of the Supervisory Board in 2010 his son-in-law, Peter Baron, took over as Chairman and remained in that position until November 2011. Mr Maksimov is the subject of criminal proceedings brought in Ukraine, as a result of which he was in prison on remand between 22 December 2011 and 2 June 2012, since when he has been on bail.
On 4 July 2012 the Bank commenced arbitration proceedings against Mr Maksimov in London. Its claim arises out of a Framework Agreement dated 19 November 2009 under which Mr Maksimov was to sell a major stake in the Bank to another major shareholder, TBIF Financial Services BV ("TBIF"). The sale was subject to conditions precedent which involved undertakings by Mr Maksimov that he would repay, or provide adequate security for the repayment of, loans which the Bank had made to companies owned and controlled by him during his tenure. The Bank claims that Mr Maksimov undertook to use his best efforts to fulfil such conditions precedent and has failed to do so. The damages claimed are equivalent to the sums outstanding on the loans minus the value of the security realised in relation to them, which is said to amount to US$78,269.996 as at 8 January 2013.
The Corporate Defendants are each companies registered under the laws of England and Wales. The registered shareholders of each are Starwell International Limited, a company registered in St Kitts and Nevis. It is the Bank's case that these companies are effectively nominees for Mr Maksimov who exercises substantial control over them. It is the Corporate Defendants' case that they are beneficially owned by Mr Krykryvtsev, Mr Nikolchuk and Ms Petrenko respectively. Each of those individuals is resident in Ukraine and has sworn an affidavit in which he or she claims to be the beneficial owner of the relevant Corporate Defendant. Each of Mr Krykryvtsev, Mr Nikolchuk and Ms Petrenko deposes that the relevant Corporate Defendant is not owned or controlled by, or in any way connected with, Mr Maksimov.
Each deposes that the Corporate Defendant holds no assets anywhere in the world with a value exceeding US$50,000 save for a shareholding in a Ukrainian company PJSC Odeskyi Portovyi Holodylnyk ("OPH"). OPH is a Ukrainian company which provides transport, stevedore and cold storage services in Odessa. It is these shareholdings in OPH which comprise the assets whose ultimate beneficial ownership is in dispute on this application. Each of the Corporate Defendants owns 13,764,369 of its shares. OPH's largest shareholder is a Cypriot company, Carlsbad Enterprise Limited ("Carlsbad"), which holds 14,999,998 shares. Those four shareholdings comprise about 94% of OPH's capital.
For reasons I shall explain, the critical issue for the purposes of this application is as to who is the ultimate beneficial owner of Carlsbad. The Bank contends that Carlsbad is, like the Corporate Defendants, a nominee company for Mr Maksimov and under his substantial control. The Corporate Defendants contend that Carlsbad is a company beneficially owned and controlled by Oleg Nemyrovskyy. Mr Nemyrovskyy was a member of the Ukrainian Parliament between 2002 and 2006, and both before and since that date has conducted a number of different businesses both within and outside Ukraine. He has made two witness statements in support of the Corporate Defendants' application, and represents the Corporate Defendants for the purposes of giving instructions to their solicitors. Carlsbad is paying the Corporate Defendants' costs in relation to this application.
The legal issues
I was referred to a number of authorities on the Chabra jurisdiction, including S.C.F Finance v Masri [1985] 1 WLR 876, T.S.B Private Bank International SA v Chabra [1991] 1 WLR 231, Cardile v LED Builder Pty Ltd (1999) 162 ALR 294, Dadourian Group International Inc v Azuri Ltd [2005] EWHC 1768 (Ch), Revenue & Customs Commissioners v Egleton [2007] 1 All ER 606, ETI Euro Telcom International NV v Republic of Bolivia [2009] 1 WLR 665, Yukos Capital Sarl v OJSC Rosneft Oil Company [2010] EWHC 784 (Comm), Algosaibi v Saad Investments Co Ltd (CICA 1 of 2010), Linsen International Ltd v Humpusss Sea Transport Pte Ltd [2011] 2 Lloyd's Rep 663, [2011] EWCA Civ 1042, and Parbulk II AS v PT Humpuss Intermoda Transportasi TBK (The Mahakan) [2012] 2 All ER (Comm) 513. The principles relevant to this application can be summarised as follows:
(1) The Chabra jurisdiction may be exercised where there is good reason to suppose that assets held in the name of a defendant against whom the claimant asserts no cause of action (the NCAD) would be amenable to some process, ultimately enforceable by the courts, by which the assets would be available to satisfy a judgment against a defendant whom the claimant asserts to be liable upon his substantive claim (the CAD).
(2) The test of "good reason to suppose" is to be equated with a good arguable case, that is to say one which is more than barely capable of serious argument, but yet not necessarily one which the Judge believes to have a better than 50% chance of success.
(3) In such cases the jurisdiction will be exercised where it is just and convenient to do so. The jurisdiction is exceptional and should be exercised with caution, taking care that it should not operate oppressively to innocent third parties who are not substantive defendants and have not acted to frustrate the administration of justice.
(4) A common example of assets falling within the Chabra jurisdiction is where there is good reason to suppose that the assets in the name of the NCAD are in truth the assets of the CAD. Such assets will be treated as in truth the assets of the CAD if they are held as nominee or trustee for the CAD as the ultimate beneficial owner.
(5) Substantial control by the CAD over the assets in the name of the NCAD is often a relevant consideration, but substantial control is not the test for the existence and exercise of the Chabra jurisdiction. Establishing such substantial control will not necessarily justify the freezing of the assets in the hands of the NCAD. Substantial control may be relevant in two ways. First, evidence that the CAD exercises substantial control over the assets may be evidence from which the Court will infer that the assets are held as nominee or trustee for the NCAD as the ultimate beneficial owner. Secondly, such evidence may establish that there is a real risk of dissipation of the assets in the absence of a freezing order, which the claimant will have to establish in order for it to be just and convenient to make the order. But the establishment of substantial control over the assets by the CAD will not necessarily be sufficient: a parent company may exercise substantial control over a wholly owned subsidiary, but the principles of separate corporate personality require the assets to be treated as those of the subsidiary not the parent. The ultimate test is always whether there is good reason to suppose that the assets would be amenable to execution of a judgment obtained against the CAD.
The factual issue
It was not seriously disputed before me that there is a good arguable case that the OPH shares are being held by the Corporate Defendants as nominees for Carlsbad; and that those shares are therefore in the beneficial ownership and subject to the substantial control of whoever is Carlsbad's ultimate beneficial owner exercising substantial control over Carlsbad. That emerges from the way in which the Corporate Defendants acquired the shares.
Prior to February 2012 the 94% shareholding in OPH was held by four companies which were vehicles beneficially owned by Mr Maksimov, namely...
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