VTB Bank (PJSC) v Mr Dmytro Firtash
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder |
| Judgment Date | 14 May 2021 |
| Neutral Citation | [2021] EWHC 1203 (Comm) |
| Date | 14 May 2021 |
| Docket Number | Case No: CL-2019-000122 |
| Court | Queen's Bench Division (Commercial Court) |
[2021] EWHC 1203 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Rolls Building
Fetter Lane, London
EC4A 1NL
Mrs Justice Moulder
Case No: CL-2019-000122
Paul Stanley QC (instructed by Herbert Smith Freehills LLP) for the Claimant
Brian Doctor QC and Tetyana Nesterchuk (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Defendant
Hearing date: 23 April 2021
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 the judgment of the court following a half day hearing on 23 April 2021 of the Defendant's application dated 18 February 2021, as amended by the application dated 5 March 2021 (as amended, the “Application”) relating to a freezing order granted to the Claimant (the “Claimant” or “VTB”) on 27 February 2019, as continued and amended on 26 March 2019 and 23 February 2021 (the “Freezing Order”) in support of proceedings brought by the Claimant in Cyprus (the “Cyprus Proceedings”).
The original application was supported by a witness statement of Mr Nicholas Marsh, a partner in the firm of Quinn Emanuel Urquhart and Sullivan UK LLP (“Quinn Emanuel”) having conduct of the matter on behalf of the Defendant, Mr Firtash, dated 18 February 2021. The amended application was supported by a second witness statement of Mr Marsh dated 5 March 2021. Mr Marsh subsequently filed a third witness statement dated 26 March 2021.
In response Mr Georgie Kandelaki of VTB Debt Centre LLC, a Russian lawyer responsible for managing VTB's claim in Cyprus, provided a witness statement on 19 March 2021 and a further witness statement dated 8 April 2021. VTB has also provided a witness statement of Mr Matthew Bonye, a partner in the London office of Herbert Smith Freehills LLP (“HSF”) whose particular area of expertise is said to be real estate litigation.
The Application
The application which is now before the court seeks an order that:
i) The restrictions imposed on the Respondent's dealings with his property by paragraphs 4–7 of the Freezing Order, be discharged and substituted with the entry of a restriction on the title of the Defendant's property known as 8 Cottage Place.
ii) The Claimant's representatives are ordered to take steps to procure the removal of the mortgage to the value of €7,609,335 over the property in France known as Chateau de Fompeyres-domaine de Guilhemanson (the “French Mortgage”).
iii) The Claimant provides further fortification of £10,000,000 in support of its undertaking to compensate the Defendant for any loss caused by the Freezing Order.
I propose to deal with each of these matters separately. However there is a dispute between the parties as to the scope of the Application to be determined by this court and it is necessary therefore to resolve this issue at the outset.
The grounds on which the Defendant relied in its application notice of 5 March 2021 (the “March Application Notice”) were said to be:
“In summary:
1) The Claimant would be sufficiently protected by an appropriate restriction against the title of the property known as 8 Cottage Place and thus any continuation of the Freezing Order is disproportionate and unjustified.
2) The Claimant's claim in Cyprus is over-secured and the continuation of the French Mortgage is unjustified and is likely to lead to a loss of a potential buyer for the French property.
3) The continuation of the Freezing Order for over 2 years in the circumstances where the Defendant failed to take any substantial steps to progress its claim in Cyprus had already caused significant losses to the Defendant and, even if discharged and substituted with the restriction on the title of 8 Cottage Place, may lead to further losses. Thus any further order restricting the Defendant's dealings with his property should only be allowed to continue if the Claimant substantially increases the amount of fortification it has provided from £100,000 to £10 million.
Full reasons are set out in the Second Witness statement of Mr Nicholas Dean Marsh.”
On its face therefore the Application is an application that the Freezing Order should be discharged because the Claimant would be sufficiently protected by an appropriate restriction against the title of the property, 8 Cottage Place.
In his second witness statement referred to in the March Application Notice, Mr Marsh at paragraph 10 referred to an application to “ discharge the Freezing Injunction altogether” and to the provision of the Freezing Order that the Defendant has liberty to apply to vary or discharge the Freezing Order without the need to show any change in circumstances. At paragraphs 14 and 15 of his second witness statement under the heading “Grounds to Discharge the Freezing Injunction” Mr Marsh stated that the Freezing Order was abusive and went beyond what was required to protect VTB's interest. He said:
“14. As explained in detail in NM1, Mr Firtash's position is that the Cyprus Proceedings are misconceived and that no injunction should have been granted in Cyprus or England. However, even leaving aside the substantive merits of the Cyprus Proceedings, in light of the new circumstances that have arisen since the Freezing Injunction was granted it is clear that the Freezing Injunction is abusive and goes far beyond what is required to protect VTB's alleged interests in the Cyprus Proceedings.
15. Accordingly, Mr Firtash now applies for the Freezing Injunction to be discharged and replaced with an appropriate restriction over 8 Cottage Place to the effect that the property cannot be disposed of (i.e., sold or charged) without VTB's consent.” [emphasis added]
Mr Marsh then stated that Mr Firtash relied on the following grounds to discharge the Freezing Order and set out those reasons under a series of headings as follows:
i) VTB's continued failure to particularise the Cyprus Proceedings.
ii) The Cyprus Set Aside Application.
iii) VTB remains significantly over-secured.
iv) VTB's refusal to release the French Mortgage.
v) VTB's refusal to provide fortification.
Mr Marsh concluded (at paragraph 47 of his second witness statement):
“ In all the above circumstances, I believe that VTB would be sufficiently protected by an appropriate restriction against the title of 8 Cottage Place and that any continuation of the Freezing Injunction is entirely unjustified. The restriction should be confined to obtaining VTB's consent to any sale or other disposal, and I respectfully request the court to include in its order that any such consent should not be unreasonably withheld or delayed. On VTB's own valuation, the property is worth £35m, and Mr Firtash's advisers believe it is in fact worth £50m or more. As long as the property is sold for more than USD $22,854,931.085 and that that amount of the proceeds is deposited somewhere mutually acceptable, VTB could not withhold its consent. I make it clear that such offer is made without prejudice to Mr Firtash's contention that no Freezing Order or any restriction was ever justified or required, and that he reserves his rights to claim compensation for the losses which have already been caused to him by the wrongful application and grant of the Freezing Injunction.” [emphasis added]
In my view it is thus clear from the grounds expressly set out in the March Application Notice and in the second witness statement of Mr Marsh that the Defendant sought the release of the Freezing Order to be replaced by a restriction on the title at the Land Registry. Further the grounds for seeking this relief were that the continuation of the Freezing Order was abusive for the reasons listed in the second witness statement. It was not an application which sought to set aside the Freezing Order on the basis that no freezing order was justified or required. In other words, the Application did not seek the discharge of the Freezing Order on the basis that the Claimant has no arguable case or has not shown a real risk of dissipation on the part of the Defendant or failed to make full disclosure to the court on the ex parte application.
In his second witness statement Mr Marsh dealt with the application in Cyprus to set aside the Cyprus freezing injunction, the writ of summons and service (the “Cyprus Set Aside Application”). He stated that the Cyprus Set Aside Application is made on a number of grounds including:
“…lack of jurisdiction, improper service, VTB's failure to establish a good cause of action or prima facie good actionable right as against Mr Firtash, VTB's breach of the duty of full and frank disclosure and that the proceedings in Cyprus are abusive and issued with the intention to put pressure on Mr Firtash”.
Mr Marsh stated (at paragraph 26 of his witness statement):
“The Cyprus Set Aside Application, however, is yet to be heard and the present Application is made without prejudice to Mr Firtash's position in the Cyprus Set Aside Application.”
He then went on to state that the evidence filed in support of the Cyprus Set Aside Application is “ inherently weak” and provided brief details (two paragraphs) of why this is said to be the case.
Although therefore Mr Marsh on the one hand expressly relies on the existence of the Cyprus Set Aside Application as a ground for discharging the Freezing Order in this court, he appears to accept that the merits of that application are yet to be heard by the court in Cyprus.
In his submissions as to the scope of the Application, counsel for Mr Firtash also relied on the draft order referred to in the March Application Notice. However the draft order only contemplates the release...
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