Vneshprombank LLC v Georgy Ivanovich Bedzhamov
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Falk |
| Judgment Date | 20 May 2022 |
| Neutral Citation | [2022] EWHC 1166 (Ch) |
| Docket Number | Case No: BL-2018-002691 |
| Court | Chancery Division |
Business List (ChD)
Insolvency and Companies List (ChD)
[2022] EWHC 1166 (Ch)
Mrs Justice Falk DBE
Case No: BL-2018-002691
Case No: BR-2021-000044
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
Stephen Davies QC & William Willson (instructed by DCQ Legal) for the Applicant
Justin Fenwick QC & Mark Cullen (instructed by Greenberg Traurig LLP) for the First Defendant/Respondent
Hearing dates: 27 & 28 April 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 and background
This is my decision on an application made on 23 February 2022 by the First Defendant and Respondent, Georgy Bedzhamov, to vary a worldwide freezing order (the “WFO”) obtained by Vneshprombank LLC (“VPB”). The variation would permit Mr Bedzhamov to sell or raise funds against property at 17 Belgrave Square and 17 Belgrave Mews West, London (“the Property”) to pay legal costs and living expenses (the “Variation Application”).
My decision follows a two day hearing at which I also granted security for costs in connection with the remittal from the Court of Appeal referred to below. My ex tempore judgment on the principle for security for costs can be found at [2022] EWHC 1047 (Ch) (the “Costs Judgment”). The quantum of security was determined following submissions made immediately after that ruling. I am very grateful for the assistance of Master Kaye, who sat with me to hear those submissions and helped to enable quantum to be determined in the most efficient manner possible.
The background can be summarised briefly as follows. The underlying claim brought by VPB in case reference BL-2018-002691 (the “Bank Proceedings”) 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. The claim was originally issued in December 2018, although the court file was sealed pending an application for interim relief, which was granted on 27 March 2019 in the form of the WFO and a search order.
Before the claim was brought there were bankruptcy proceedings against Mr Bedzhamov in Russia. Details are set out in the judgment of Snowden J in Kireeva v Bedzhamov [2021] EWHC 2281 (Ch). They culminated in the appointment on 2 July 2018 of Ms Lyubov Kireeva, a Russian insolvency practitioner (the “Trustee”), for the purpose of realising and liquidating Mr Bedzhamov's assets (the “Bankruptcy Order”). The Trustee's position is that the effect of the Bankruptcy Order is that all of Mr Bedzhamov's assets worldwide vested in her automatically under Russian law.
While 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: see Snowden J's judgment at [15]. The successful petitioning creditor was another bank, VTB 24 Bank (“VTB 24”). VPB's claim in the bankruptcy has since been increased by around £12m, but it remains relatively 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 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, 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.
Shortly thereafter, on 16 March 2021, the Trustee applied to set aside my order of 5 March 2021 which had varied 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 (the “Set Aside Application”). The Trustee's position is that she is entitled to all of Mr Bedzhamov's assets, including funds that would otherwise be spent in accordance with the WFO. I ordered an expedited hearing of both the Recognition Application and Set Aside Application.
Snowden J's judgment in respect of the Recognition Application and Set Aside Application was handed down on 13 August 2021. He recognised the Bankruptcy Order but dismissed the Set Aside Application and refused assistance in relation to the Property, on the basis that there was no general power at common law to make an order vesting immovables in the Trustee or otherwise conferring possession or control on her (in contrast to movable property).
Both the Trustee and Mr Bedzhamov appealed. 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 not raised the issue until the consequentials hearing before Snowden J on 25 August 2021), the Trustee made a further application in the Bankruptcy Proceedings on 13 September 2021. This application sought 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. The current position is that the Trustee has sought permission to appeal from the Supreme Court in respect of her request for assistance in respect of the Property (an application which has not yet been determined), and the remittal is due to be heard in a two-day trial in early October.
Mr Bedzhamov owes his previous solicitors Mishcon de Reya over £5m. £5m of that is secured by a first charge on the Property. This was granted pursuant to my order of 5 March 2021 to enable that firm to continue acting pending sale, which at that time was obviously hoped would occur within a relatively short time frame. Following a move of the relevant legal team from Mishcon de Reya to Greenberg Traurig, the latter firm has now run up fees and disbursements in excess of £500,000. Significant further sums will be required to prepare for the remittal hearing. The figures were considered at the hearing in connection with 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 is that they will not be able to continue to represent him if his funding position is not urgently resolved.
The charge granted in favour of Mishcon de Reya gave that firm priority over a charge in favour of an entity called Clement Glory Limited (“CGL”) which secures a debt of around £38m. The position of the Trustee and VPB is that the CGL debt and charge are a sham, and/or (what now appears to be the primary allegation) that Mr Bedzhamov is the beneficial owner of CGL. The Trustee has sought to bring a claim against CGL to make good its sham allegation, and to join VPB to it. Its initial attempt has fallen away due to the dismissal by Master Kaye of an application for an extension of time to serve the claim form, but the Trustee's stated intention is to reissue it.
At the hearing of the Recognition Application and Set Aside Application before Snowden J it was confirmed, following a question from the judge, that VPB would remit any sums it recovers in the Bank Proceedings to the Trustee. This is discussed in Snowden J's judgment at [99]–[102], where the judge also commented that that position must have been accepted by A1.
The Variation Application also sought a declaration that the Trustee does not have any proprietary rights prior to recognition and assistance, and therefore could not seek to claw back amounts paid to Mr Bedzhamov's lawyers from the proceeds of sale or any loan as reasonable legal expenses, even if the Trustee obtained recognition and/or her appeal to the Supreme Court succeeded.
VPB chose not to participate in the hearing and made no written submissions. It therefore must be taken not to object to the variation of the WFO that Mr Bedzhamov seeks.
The Property
Mr Bedzhamov's interest in the Property comprises a short lease expiring on 20 September 2034, plus a contractual right to a 129 year lease upon completion of development...
To continue reading
Request your trial
-
Kireeva v Bedzhamov
...provided consent in principle to a further variation of the WFO with a view to permitting a realisation of the Property (reported at [2022] EWHC 1166 (Ch)), the original permission given by my order dated 5 March 2021 having expired. The remittal directions 12 Following a directions hearin......