Russian Commercial Bank (Cyprus) Ltd v Fedor Khoroshilov
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Cockerill |
| Judgment Date | 12 May 2020 |
| Neutral Citation | [2020] EWHC 1164 (Comm) |
| Date | 12 May 2020 |
| Docket Number | Case No: CL-2009-000382 |
| Court | Queen's Bench Division (Commercial Court) |
[2020] EWHC 1164 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Royal Courts of Justice,
Rolls Building
Fetter Lane,
London, EC4A 1NL
Mrs Justice Cockerill DBE
Case No: CL-2009-000382
Mr Iain Pester (instructed by SCA Ontier LLP) for the Claimant
Dr Anton van Dellen (instructed by Direct Access) for the Defendant
Hearing dates: 6 May 2020
Draft Judgment sent to parties: 7 May 2020
Approved Judgment
Introduction
This judgment is given in respect of two applications made by the Defendant, Mr Khoroshilov, a Russian businessman:
i) An application, issued 25 July 2019 (“the First Application”), to set aside paragraph 2 of the Order of Teare J of 7 May 2013, dispensing with the requirement of personal service on Mr Khoroshilov pursuant to CPR Part 81, r. 81.10(5) (“the Service Order”). Mr Khoroshilov says that the method of service under the Hague Convention should have been used.
ii) An application, issued 5 August 2019 (“the Second Application”), to set aside the Order of HHJ Mackie QC sitting as a Judge of the High Court dated 1 October 2013 (“the Committal Order”). Pursuant to the Committal Order, Mr Khoroshilov was held to be in contempt of Court, by reason of his having transferred the yacht “Giant 1” in breach of the express provisions of the worldwide freezing order dated 9 October 2009 (“the WFO”). Mr Khoroshilov says that the sale of Giant 1 did not merit a finding of contempt.
The applications are described by the Respondent RCB as extraordinary. They are certainly unusual. They relate to proceedings for and a finding of contempt over six years ago. The basis for the application at this very late stage is that Mr Khoroshilov's case is that he did not attend the earlier hearings on 7 May 2013 and 1 October 2013, because he was unaware of the Bank's attempt to commit him, and that he has an express permission to apply pursuant to paragraph 3 of the Committal Order which provides that “… [Mr Khoroshilov] has liberty to apply to set aside or vary this Order within 14 (fourteen) days of it coming to his attention”.
The position on the evidence
The applications were made in July and August 2019. No evidence was served with them. The time limit for filing evidence in reply was a month later. No evidence was served then. The hearing was listed in October 2019.
On 30 April, after bundles had been put together containing evidence from the past applications in this matter, the Claimant served a fourth witness statement of Mr Booker (“Booker 4”). That statement was said to be in opposition to the applications. It dealt with the debt, Mr Khoroshilov's arrest and imprisonment, his presence in Moscow – and brought to the attention of the court an affidavit of 30 September 2013 which dealt with the question of whether the committal application had come to Mr Khoroshilov's attention.
Overnight the night before the hearing Mr Khoroshilov then produced a witness statement supposedly in response to Booker 4. Certainly it takes issue with whether any part of the judgment debt has been paid. It also deals with the circumstances of Mr Khoroshilov's arrest and his location prior to that. It also takes issue with some of the articles in exhibits to earlier statements.
I have indicated to the parties that I regarded both these statements as coming way too late, and as also being irrelevant to the issues before me, although I have taken notice of the admissions against the Bank's case in the earlier affidavit of Mr Booker, which was a document which had previously been deployed in these proceedings. The hearing thus proceeded by reference only to the Application Notices and the historic documents.
Background
The Worldwide Freezing Order
On 9 October 2009, the Bank obtained the WFO from Gross J, at a hearing at which Mr Khoroshilov was represented. Pursuant to paragraph 2 of the WFO, Mr Khoroshilov was enjoined from disposing, dealing with or diminishing his assets up to the value of US$245,493,499.62.
Paragraph 3 specifies that paragraph 2 applies to all Mr Khoroshilov's assets, whether or not they are in his own name, and whether they are solely or jointly owned. Paragraph 3 also includes the wording.
“For the purpose of this order the Defendant's assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own. The Defendant is to be regarded as having such power if a third party holds or controls the asset in accordance with his direct or indirect instructions.”
In response to the Freezing Order, Mr Khoroshilov provided an affidavit on 23 October 2009, in which he named a yacht, “Giant 1” and explained that it was owned by a BVI company, Verber Holding Limited (“Verber”). Giant 1 was declared as having experienced a fire three years prior to the affidavit, causing significant damage and requiring substantial repair and refurbishment estimating to cost $19million. A mortgage in favour of Privatbank IHAG Zurich AG in the sum of $19.8 million was also declared and the current value was stated as negligible without substantial repair and investment.
While the sole director and shareholder of Verber is said to be a Mr Agapios Agapiou, it is apparent that Mr Khoroshilov considered Giant 1 to be his asset, not only because he provided details as to its value in his disclosure affidavit, but also because he explains that, while Giant 1 is held in trust, “ the trustees habitually deal with [the Yacht Giant 1] according to the instructions of the Respondent”, that is, Mr Khoroshilov
The reason this asset was covered is because pursuant to paragraph. 14.6, the definition of “assets” under the WFO expressly includes;
“any property held in discretionary trust which the trustees habitually deal with according to the instructions of the Defendant …”.
The Consent Order
On 2 August 2010, a Consent Order was made by David Steel J, whereby at paragraph 1 judgment was entered against Mr Khoroshilov for US$291,360,264.11. Pursuant to paragraph 5 of the Consent Order, the WFO continued, until satisfaction of the judgment in the proceedings. Pursuant to paragraph 7, there was a stay on enforcement of the judgment until 2 May 2011.
On 27 April 2011 (the last working prior to the expiry of the stay on enforcement under the Consent Order), Mr Khoroshilov applied without notice to have the Consent Order set aside, and for an injunction restraining the enforcement of the Consent Order, on the basis that the Consent Order had been obtained by fraudulent misrepresentations. Nicola Davies J granted the injunction sought.
Following a two day hearing (14 and 15 June 2011) before Blair J, by order dated 5 July 2011, Blair J discharged the injunction obtained by Mr Khoroshilov, gave directions for the trial of Mr Khoroshilov's application to set aside the Consent Order, and awarded the Bank the costs of the hearings before Nicola Davies J and himself. Blair J discharged the injunction obtained by Mr Khoroshilov on the balance of convenience and also because of non-disclosure at the without notice hearing on 27 April 2011, as is apparent from [81] of the judgment.
On 8 August 2011, the Bank sought an unless order to the effect that unless Mr Khoroshilov and his companies paid certain outstanding sums due to it, then Mr Khoroshilov's applications and Particulars of Claim dated 27 April 2011 should be struck out. On 5 September 2011, Eder J granted the Bank the unless order relief sought by the Bank.
By 9 September 2011, Mr Khoroshilov failed to comply with the obligations under the unless order, with the consequence that his claim was struck out and that the Bank was entitled to enforce the Consent Order. In other words the full sum of US$291,360,264.11 became payable.
The Sale of Giant 1
On 12 October 2011, Verber sold Giant 1 to a Panamanian company, Phoenixrise SA, for US$1. There remained a mortgage of US$19.8 million on the vessel. The Bank did not learn of the sale until June 2012, when it was given a report by a firm of investigators, GPW & Co Ltd (“GPW”), which indicated that Giant 1 was shown as being owned by Phoenixrise SA.
The Committal Application
The committal application was issued on 23 October 2012. It was brought in respect of the Giant 1 disposal.
At that time, the Bank did not know the whereabouts of Mr Khoroshilov, although it was believed that he was currently resident in Thailand.
Faced with the uncertainty as to Mr Khoroshilov's location, and mindful that the general rule is that a committal application should be served personally on a respondent (unless the Court orders otherwise: CPR 81.10(5)), the Bank applied by application dated 5 November 2012 for an order for alternative service. This application was heard by Popplewell J on 7 December 2012. Popplewell J adjourned the application, with liberty to restore, on the ground that he wished to have further evidence as to Mr Khoroshilov's current whereabouts.
At the time, in December 2012, Mr Khoroshilov's solicitors Field Fisher Waterhouse (“FFW”) were still on the record. They were notified of the committal application and the application for alternative service. FFW indicated by email that no one for the Defendant would attend the hearing on 7 December 2012.
The application for alternative service, supported by additional evidence, was relisted before Teare J on 3 May 2013. Teare J acceded to the application to permit...
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