Vneshprombank LLC (a company registered and (in Liquidation) in the Russian Federation) v Georgy Ivanovich Bedzhamov
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Falk |
| Judgment Date | 19 January 2022 |
| Neutral Citation | [2022] EWHC 101 (Ch) |
| Docket Number | Case No: CH-2021-000111 |
| Court | Chancery Division |
[2022] EWHC 101 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY APPEALS (ChD)
ON APPEAL FROM THE ORDER OF MASTER KAYE ON 19 APRIL 2021
Rolls Building, Royal Courts of Justice
Fetter Lane, London, EC4A 1NL
Mrs Justice Falk
Case No: CH-2021-000111
Alan Gourgey QC (instructed by Keystone Law) for the Appellant
Justin Fenwick QC and Mark Cullen (instructed by Greenberg Traurig LLP) for the Respondent
Hearing date: 12 January 2022
APPROVED JUDGMENT
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an appeal by the claimant in these proceedings, Vneshprombank LLC (“VPB”), against an order of Master Kaye dated 19 April 2021 in which she dismissed an application for relief from sanctions and for the variation of an order dated 26 January 2021 (the “January order”), an order which had itself been varied by an order dated 17 February 2021 (the “February order”). Both the January order and the February order were made by consent. I will refer to the January order as varied by the February order as the “Consent Order”.
I granted permission to appeal following an oral hearing on 30 July 2021. The appeal was listed for hearing in November but was vacated by consent and relisted.
Prior to the permission hearing VPB made an informal application to adduce additional evidence. That application is no longer pursued.
Background
Master Kaye's decision related to a long-running debate about whether, or more particularly the terms on which, VPB should be permitted to convert security for costs that currently exists in the form of cash paid into court, into a bank guarantee.
The underlying dispute between the parties relates to what VPB alleges is a massive fraud carried out by the First Defendant Georgy Bedzhamov (“GB”) together with his sister, who was President of VPB. VPB was declared bankrupt in 2016. GB resists the claim and denies participation in any fraud. A 40 day trial of the action was listed to start in January 2022. However, under the terms of an order made on 20 September 2021 the proceedings are generally stayed pending resolution of an appeal to the Court of Appeal against an order of Snowden J relating to the recognition of GB's Russian bankruptcy trustee and the consequences of that recognition. The terms of the stay do not affect this appeal.
The principle that security for costs should be provided in these proceedings was first determined in December 2019, and since then there have been further determinations as to the amount of security required. Master Kaye's decision records that approximately £4 million has been paid into court in relation to security for costs, together with an additional amount of around £1 million in respect of a freezing injunction cross-undertaking. Since at least April 2020 there has been ongoing correspondence about VPB's wish to convert the payments into court into a bank guarantee. An application to replace the security with such a guarantee was filed on 14 October 2020. VPB proposed that Standard Chartered Bank (“SCB”) should provide the guarantee. GB, who is the only active defendant, has from an early stage of the correspondence not opposed the provision of a bank guarantee from a reputable UK bank in principle.
The January order was made very shortly before a hearing listed to resolve the issues that had arisen in relation to the proposal. Paragraph 1 of that order provided that VPB would be permitted to provide security by way of a bank guarantee “substantially in the terms” set out in Schedule A to the order. That schedule included the following unnumbered paragraph, subsequently referred to as paragraph 12:
“The guarantee is irrevocable. We have considered whether any order made by the court seeking to prevent performance of the guarantee, in any jurisdiction, would cause a demand on the guarantee to be unsatisfied. We cannot envisage any such circumstances.”
As recorded by Master Kaye at paragraph [11] of her ex tempore judgment, this provision reflected concerns raised by GB that any guarantee might not be honoured in the event that a question arose about the effect of sanctions on its performance.
SCB required amendments to the guarantee which included the deletion of paragraph 12. A revised form of guarantee was agreed, which was reflected in paragraph 1 of the February order. That provided:
“The [January order] shall be varied so that:
i. the form of bank guarantee shall be in the terms set out in Schedule 1 to this order and not in the terms set out in Schedule A to the [January order];
ii. Paragraph 5 shall be varied so it provides as follows:
“In the event that such guarantee and copy of the register of authorised signatures has not been provided to the First Defendant's solicitors by 12pm on 19 February 2021, the permission in paragraph 1 of this order shall cease to have effect and the form of security for costs in these proceedings shall remain as previously ordered.”
iii. Paragraph 9 shall be deleted.”
The previous version of paragraph 5 had contained a time limit of 21 days from the date of the January order. That expired on 16 February. The revised time limit of 19 February was two days after the date of the February order. The deleted paragraph 9 of the January order was a provision conferring liberty to apply.
The form of guarantee attached to the February order reflected the deletion of paragraph 12 but included (as the earlier version also did) a provision for payment into court rather than to the beneficiary if the relevant order so required. Master Kaye noted that this appears partially to have alleviated GB's concerns about the deletion.
The signed guarantee was provided to GB's solicitors (then Mishcon de Reya) on 19 February, but at 1.53pm rather than by noon, with screen shots from the online register of signatories following at 4.50pm. This was followed on 22 February by a certified copy of a printout from the online register. (The order did not expressly require provision of a certified copy, although it had also not been appreciated that the register was held online.) I will refer to the delay in providing the guarantee and a copy of the register as the “timing breaches”.
There were two other issues. First, unlike the form of the guarantee attached to the February order, the executed version included the following text immediately before the operative part of the guarantee:
“At the request of our client Credit Suisse AG and under a counter-guarantee issued in our favour from Credit Suisse AG…”
I will refer to this as the “Credit Suisse wording”. The background to this wording was the absence of a banking relationship between SCB and VPB (or more particularly VPB's litigation funder A1, which is referred to in the guarantee as the “applicant” for the guarantee), resulting in Credit Suisse being involved both as an intermediary and counter-guarantor.
The second issue was that the guarantee was accompanied by a covering document, referred to in the Master's judgment as an “Advisory Note”. The document was addressed to Mishcon de Reya, and was headed with the guarantee reference number. The material parts of it stated:
“As requested by our customer, Credit Suisse AG please find enclosed the original above guarantee, for onward transmission to Mishcon de Reya LLP.
All parties to this transaction are advised that banks may be unable to process a transaction that involves countries, regions, entities, vessels or individuals sanctioned by the United Nations, the United States, the European Union, the United Kingdom or any other relevant government and/or regulatory authority and that such authorities may require disclosure of information.
SCB is not liable if it, or any other person, fails or delays to perform the transaction or discloses information as a result of actual or potential breach of such sanctions.”
There followed contact details and an invitation to contact in the event of any enquiries, and this further statement:
“This is a computer generated advice that requires no signature.”
It is not disputed that GB's advisers had not been pre-warned about the Credit Suisse wording, the Advisory Note or the timing delays.
On receipt of the guarantee and related documentation GB's solicitors asserted that VPB was in breach of the Consent Order. Following an enquiry to it, SCB indicated that it was not prepared to remove or alter the Advisory Note. Its position, according to an email sent to Credit Suisse on 22 February 2021, was as follows:
“With refence to the sentence on Sanctions, please note that this is standard sanctions wording that goes into every guarantee we issue. It means that if, during the lifetime of the guarantee it turns out that sanctions are relevant due to sanctioned countries, regions, parties, vessels or individuals, we are unlikely to be in a position to pay under the guarantee if there is a claim. That should be the same for all banks – we would not and cannot be expected to breach Sanctions.”
VPB applied on 24 February 2021 for relief from sanctions and for a further variation of the January order.
SCB was subsequently asked what assurances could be provided to GB that, should sanctions become relevant, SCB would honour the terms of the guarantee, and in...
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Construction Of A Right Of Way
...of the provision" (per Falk J in Vneshprombank LLC (a company registered and in liquidation in the Russian Federation) v Bedzhamov [2022] EWHC 101 (Ch)). The language of the grant must thus be construed in the light of the circumstances, which may include the physical characteristics of the......