Vneshprombank LLC v Georgy Ivanovich Bedzhamov
| Jurisdiction | England & Wales |
| Judge | Mr Justice Miles |
| Judgment Date | 16 June 2023 |
| Neutral Citation | [2023] EWHC 1459 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2018-002691 |
[2023] EWHC 1459 (Ch)
Mr Justice Miles
and
Master Kaye
Case No: BL-2018-002691
BL-2023-000277
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Stephen Davies KC (instructed by DCQ Legal Ltd) for the Trustee
Justin Fenwick KC & Mark Cullen (instructed by Greenberg Traurig LLP) for the First Defendant/Respondent
Hearing date: 25 May 2023
APPROVED JUDGMENT
This judgment was handed down remotely at 10:30am on 16 June 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives
Introduction
Mr Bedzhamov has applied by notice dated 31 March 2023 for permission to sell his interest in a property at 17 Belgrave Square and 17 Belgrave Square Mews, London, SW1X 8PG ( the Property).
The Property is subject to a worldwide freezing order ( WFO) made in claim no BL-2018-002691 ( the Bank Proceedings) on 27 March 2019. In that case the claimant is Vneshprombank LLC ( VPB), a Russian bank in bankruptcy.
The application is for the approval of the sale as a variation to the WFO for the purpose of enabling him to pay outstanding and future legal expenses and some living expenses. This is not the first such application, but is part of a process. Mr Bedzhamov was granted permission in principle to sell the Property by an order of Falk J dated 9 June 2022 ( the June 2022 Order), which gave effect to her judgment reported at [2022] EWHC 1166 (Ch) ( the May 2022 judgment). That followed a hearing over two days in April 2022.
VPB has not opposed the sale at any stage. It has recently indicated that it is neutral. It was not represented at the hearing.
Mr Bedzhamov is bankrupt under an order made in Russia in 2018. Ms Kireeva ( the Trustee) was appointed as his trustee in bankruptcy. She has brought recognition proceedings in these courts. She opposes the sale of the Property.
The Trustee is not a party to the Bank Proceedings. So, though the application is for a variation of the WFO made in the Bank Proceedings, the present contest over the sale is between Mr Bedzhamov and the Trustee.
I heard the application with Master Kaye who is jointly responsible for the case management of this case. This judgment represents our joint views. I thank counsel for their helpful and interesting submissions.
Facts
Events up to April 2022
The history up to April 2022 was summarised by Falk J in the May 2022 judgment, from which I borrow here.
The Bank proceedings were commenced in 2018. It relates to what VPB alleges is a massive fraud carried out by Mr Bedzhamov along with his sister Larisa Markus, who was President of VPB.
VPB was declared bankrupt on 14 March 2016, and a Russian state corporation, the Deposit Insurance Agency ( DIA), was appointed to act as its liquidator.
Mr Bedzhamov resists the claim, and denies his participation in any fraud.
Before the claim was brought there were bankruptcy proceedings against Mr Bedzhamov in Russia. The details are set out in a judgment of Snowden J in the recognition proceedings, Kireeva v Bedzhamov [2021] EWHC 2281 (Ch).
The Russian bankruptcy proceedings culminated in the appointment on 2 July 2018 of the Trustee, for the purpose of realising and liquidating Mr Bedzhamov's assets ( the Bankruptcy Order). The Trustee says that the Bankruptcy Order vested all of Bedzhamov's worldwide assets in her automatically under Russian law.
Though VPB is the majority creditor in Mr Bedzhamov's bankruptcy, its own petition, founded on a claim for unjust enrichment of around £40m, was not the basis on which Mr Bedzhamov was declared bankrupt. The successful petitioning creditor was another bank, VTB 24 Bank ( VTB 24).
VPB's claim in the bankruptcy is small compared to the c.£1.34bn that it has claimed in the Bank Proceedings and which is subject to the WFO.
VPB's evidence in support of its original application for the WFO stated among other things that the prospects of the Trustee seeking recognition in England and Wales appeared “very low indeed”, but that she would be informed if the WFO was granted.
In the event the Trustee took no steps in this jurisdiction until 19 February 2021, when she applied for common law recognition ( the Recognition Application) in proceedings under case reference BR-2021-000044 ( the Recognition Proceedings).
The Recognition Proceedings were brought with funding from A1 LLC ( A1), which is the same entity as is funding VPB in the Bank Proceedings, very shortly after VPB was notified of Mr Bedzhamov's intention to seek approval to sell the Property to fund his legal costs and living expenses.
On 5 March 2021 Falk J made an order varying the terms of the WFO to permit a sale of the Property for not less than £35m with a view to enabling the proceeds to be used to fund legal and living expenses in accordance with the terms of the WFO. By the same order Falk J allowed Mr Bedzhamov to grant a charge over the Property in favour of his former solicitors, Mishcon de Reya ( MdR), for outstanding legal fees (see further below).
The Trustee, which was represented at the hearing at which the 5 March 2021 order was made but had not at that time seen the evidence on the application, was given liberty to apply to set aside that order. The Trustee so applied on 16 March 2021. The Trustee's position was that she is entitled to all of Mr Bedzhamov's assets, including funds that would otherwise be spent in accordance with the WFO.
Falk J ordered expedition of both the Recognition Application and the Trustee's Set Aside Application.
Snowden J heard both applications. His judgment was handed down on 13 August 2021.
He recognised the Bankruptcy Order as regards Mr Bedzhamov's movable property but dismissed the Set Aside Application and refused assistance in relation to the Property, on the basis that under common law principles a foreign bankruptcy order did not vest immovables in the trustee in bankruptcy and that at common law (as opposed to statute) there was no power to make an order vesting immovables in a foreign trustee or otherwise confer possession or control on such a trustee.
Both the Trustee and Mr Bedzhamov appealed. Mr Bedzhamov contended that Snowden J was wrong to dismiss his contention that VTB 24's petition was based on a fraudulent claim. The Trustee contended that Snowden J had wrongly concluded that the court could not appoint a receiver over immovables sited here by way of assistance of a foreign bankruptcy.
By an order dated 20 September 2021 the Bank Proceedings were stayed pending resolution of the appeals, a stay which remains in place.
In the meantime (having raised the issue at the consequentials hearing before Snowden J on 25 August 2021), the Trustee made a further application in the Bankruptcy Proceedings on 13 September 2021 seeking a declaration that, on sale of the Property, the net proceeds of sale would be movables and thus vest automatically in the Trustee ( the Proceeds Application).
That application has also been stayed pending resolution of the appeals.
In the Court of Appeal ( [2022] EWCA Civ 35) Mr Bedzhamov's appeal against recognition was allowed and the Recognition Application was remitted to the High Court to determine Mr Bedzhamov's allegation that VTB 24's petition debt was vitiated by fraud. The Trustee's appeal for assistance in respect of the Property was unsuccessful.
At the time of the hearing before Falk J in April 2022 the Trustee had sought permission to appeal from the Supreme Court in respect of her request for assistance in respect of the Property and the remittal application was still to be heard. The Trustee suggested to the Supreme Court that its decision on permission to appeal could await the outcome of the remittal hearing.
As at April 2022 Mr Bedzhamov owed MdR for outstanding fees. £5m of that is secured by the first charge on the Property granted pursuant to the order of 5 March 2021 to enable that firm to continue acting pending a sale of the Property, which at that time was hoped would occur within a relatively short time frame. Following a move of the relevant legal team from MdR to Greenberg Traurig, the latter firm had by April 2022 run up fees and disbursements in excess of £500,000. Falk J noted that significant further sums would be required to prepare for the remittal hearing. The figures were considered at the hearing in connection with an application for security for costs in respect of the remittal. In summary, Mr Bedzhamov sought security in respect of a total of around £1m and was granted security in respect of £458,824.00 plus VAT of £91,764.80, including previously incurred costs of £60,000 plus VAT.
The position of Mr Bedzhamov's legal team in April 2022 was that they would not be able to continue to represent him if his funding position was not resolved urgently.
The charge granted in favour of MdR gave that firm priority over an existing registered charge in favour of an entity called Clement Glory Limited ( CGL) which (at that date) secured a debt of around £38m. The 5 March 2021 order was made on the basis that CGL had agreed to cap its charge at £30m and agreed to the grant of the charge in favour of MdR in priority to its own.
Falk J recorded in the May 2022 Judgment that the position of the Trustee and VPB was that the CGL debt and charge were a sham, and/or (what appeared to be the primary allegation) that Mr Bedzhamov is in fact the beneficial owner of CGL. The Trustee had sought to bring a claim...
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