![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |
England and Wales High Court (Chancery Division) Decisions |
||
|
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> JSC Mezhdunarodniy Promyshlenniy Bank & Anor v Pugachev & Ors [2017] EWHC 1847 (Ch) (13 July 2017) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2017/1847.html Cite as: [2017] EWHC 1847 (Ch) |
||
[New search]
[Context
]
[View without highlighting]
[Printable RTF version]
[Help]
CHANCERY DIVISION
Rolls Building, Fetter Lane, London EC4A 1NL |
||
B e f o r e :
B E T W E E N:
____________________
| (1) JSCMEZHDUNARODNIY PROMYSHLENNIY BANK | ||
| (2) STATE CORPORATION "DEPOSIT INSURANCE AGENCY" | Claimants | |
| - and - | ||
(1) SERGEI VICTOROVICH PUGACHEV | ||
| (2) KEA TRUST COMPANY LIMITED | ||
| (3) FINETREE COMPANY LIMITED | ||
| (4) BRAMERTON COMPANY LIMITED | ||
| (5) BLUERING COMPANY LIMITED | ||
| (6)MARU LIMITED | ||
| (7) HAPORI LIMITED | ||
| (8)MIHARO LIMITED | ||
| (9) AROTAU LIMITED | ||
| (10) LUXURY CONSULTING LIMITED | ||
(11) VICTOR PUGACHEV | ||
(12) ALEXIS SERGEEVICH PUGACHEV | ||
(13) IVAN SERGEEVICH PUGACHEV | ||
(14) MARIA SERGEEVNA PUGACHEV | ||
| (The 12th, 13th and 14th Defendants by their litigation friend ALEXANDRA TOLSTOY) | Defendants |
____________________
HODGE MALEK QC AND PAUL BURTON (instructed by DEVONSHIRES SOLICITORS LLP) appeared on behalf of the Twelfth to Fourteenth Defendants.
CHARLES SAMEK QC AND NICO LESLIE (instructed by HUGHMANS SOLICITORS LLP) appeared on behalf of the First Defendant.
____________________
Crown Copyright ©
MR JUSTICE BIRSS:
Pugachev
was an oligarch. He was also a senator in Russia. He used to own the largest private bank in Russia. The bank went into liquidation. The claimants are the Russian state agency dealing with that kind of insolvency, called the DIA, and the bank itself, which is now controlled by the DIA.
Pugachev
misappropriated very large sums of money from the bank. There was a judgment in Russia against Mr
Pugachev
for a very large sum in roubles which comes to about £1 billion.
Pugachev
says this is all political and that there has been expropriation by the Russian state of his assets, which were worth very large sums of money. Having fled Russia, Mr
Pugachev
was living in England with his partner, Ms Tolstoy, in London. They have three young children. The children are all under ten years old. The children are the 12th to 14th Defendants.
Pugachev
and various other orders.
Pugachev,
both via lawyers and counsel on his instructions. Also at times Mr
Pugachev
appeared as a litigant in person.
Pugachev
fled to France where he is now living, as far as I can tell. He lives in a large chateau which he controls in the south of France. He lives there with an entourage of bodyguards and others. His entourage includes or included a lady called Natalia Dozortseva, and a gentleman called Mr Mike McNutt, at least at one time. There is clear evidence that both of them have been involved with Mr
Pugachev
for many years.
Pugachev
himself. I cannot now remember, but it does not matter at this stage, whether Mr
Pugachev
is a named beneficiary in all five trusts.
Pugachev
was in serious breach of numerous court orders and was in contempt of court. Mr
Pugachev
was sentenced to two years' imprisonment for this contempt, which is the maximum sentence possible ([2016] EWHC 258 (Ch)). This prison sentence has not yet been served and Mr
Pugachev's
contempt of court is not purged.
Pugachev
by the order of Henry Carr J on 22nd February 2016.
Pugachev
before me, put it, the purpose of this trusts claim is to bust the trusts.
Pugachev
himself. That would be because Mr
Pugachev
was the settlor. In some cases a given transfer of assets into the trusts was from his older son, Mr Victor
Pugachev.
The claimants' case is that Victor
Pugachev
was at all relevant times acting as a nominee for his father, Sergei
Pugachev.
So in any event, the claimants say all the assets are truly held by Mr
Pugachev
beneficially, and are therefore amenable to this enforcement action. There is also a claim under section 423 of the Insolvency Act 1986.
Pugachev
to defend the trusts in these proceedings. They were joined as 12th to 14th Defendants and appear by their mother Ms Tolstoy acting as their litigation friend. Directions were given for a trial, and this is the trial.
Pugachev
to be served with documents relating to this dispute. In the 18th May order that I have referred to, when I gave permission for the infant children to defend the claim, I directed service of the Amended Particulars of Claim on Mr
Pugachev
at an email address which he had been using before, but was by then probably defunct, but also by service at his chateau in France.
Pugachev
had played no part in this trial.
Pugachev,
instructed by Hughmans, came to court to apply to adjourn the trial and for directions. This was on the basis that Mr
Pugachev
contends that the court has no jurisdiction over him. Although there is more to it than this, the submission is essentially that the Judgments Regulation (Recast) (1215/2012) does not apply to these proceedings, whereas, says Mr Samek, the claimants have hitherto assumed that it did. Therefore the default the judgment of Henry Carr J and my order on 18th May 2016 for service are wrongly made because, it is argued, the claimants needed permission to serve the proceedings out of the jurisdiction under the relevant rule in CPR Part 6 but they did not seek and did not obtain any such permission. Therefore the court has no jurisdiction over Mr
Pugachev.
For present purposes this summary is sufficient
Pugachev,
also explains in his witness statement that Mr
Pugachev
only became aware of these proceedings in May of 2017, and he had trouble making arrangements with lawyers, and that explains why this application is made, although very, very late indeed.
Pugachev's
application should be heard, subject to what follows, on 26 July 2017. That will be after all the cross-examination of the evidence at the trial is finished (which will finish today) but before the final speeches. So if Mr
Pugachev's
application succeeds, any change that needs to be made to these proceedings or any impact on them can be taken into account. That may or may not necessitate a recall of witnesses and further cross-examination and submissions, but all those matters are for another day.
Pugachev
had issued a further application to set aside the default judgment entered by Henry Carr J on essentially the same grounds. I decided that, to the extent that it overlaps with the first application, that set aside application can be dealt with at the same time as this jurisdiction application, but to the extent that there are substantial extra issues, they will have to go off to be dealt with on another occasion if necessary.
Pugachev's
adult son Alexander to join her children, who are also said to be beneficiaries of one of the trusts, possibly others, as co-defendants. Their mother's name is, forgive me, Julia
Pugacheva
and she seeks to act as their litigation friend.
Pugachev's
application should be heard. I heard the parties and reserved judgment yesterday over to today to be done first thing before the witnesses. This is my decision.
"1. Subject to paragraph 6 below, the application be heard on [26 July] 2017 with a time estimate of one day.
2. The first defendant shall, pursuant to CPR Rule 3.1(2)(m) and (3), pay the summary of £35,000 [into court][into the client account of his solicitors (such sum to be held by said solicitors to the further order of the court)] by 4.30 pm on 19 July 2017.
3. (Provision of costs for infant children).
4. The defendant shall, by 4.30 pm on 19 July 2017, file and serve on the claimants an affidavit setting out who ultimately is providing the money being used to fund his legal expenses in connection with the application, and where that person obtained the money from. The said affidavit shall exhibit documents which evidence the answers that are given.
5. The first defendant shall attend the hearing of the application via video link in order to be cross-examined on the evidence relied upon in support of the application.
6. Unless the first defendant complies with each of paragraphs 2 to 5 above, the application shall stand struck out without further order."
Pugachev
was unaware of these proceedings is wrong. His evidence is as follows:
"Knowledge of these proceedings
13. MrPugachev
has seen a Part 8 claim form on 13 August 2015 which named him as a defendant, together with Victor
Pugachev
(his son) and nine other corporate entities [pages 6-7]. That claim form was served apparently in support of a freezing injunction that was to be extended to those corporate entities.
14. However, no particulars of claim making the allegations now advanced in the Trusts Trial were served. Indeed no particulars of claim, so far as I understand, were served at all. Those allegations appear to have been raised in or around March 2016, and they were the subject of an order of Mr Justice Birss dated 18 May 2016 [pages 146-149]. In that Order, the learned Judge gave permission to serve the newly Amended Claim Form and the Particulars of Claim either (i) by sending them to an email address, being splegal63@gmail.com; or (ii) service at a residential address, being 260 Avenue de Gairaut, 06100 Nice, France (the "Nice Address").
15. I am instructed by MrPugachev,
and therefore believe, that he did not receive these documents. His email address was closed or inaccessible at the material time, and he did not himself receive documents sent to it. He has also informed me that he did not receive any documents in Nice.
16. In any event, I understand that MrPugachev
was not aware of the new claim until on or around May 2017. At that time, he was approached by his ex-partner, Ms Alexandra Tolstoy. Mr
Pugachev
tells me that he has strained relations with Ms Tolstoy. She informed him that there was a claim on foot impugning the validity of certain trusts that had been created and which named as discretionary beneficiaries certain members of Mr
Pugachev's
family.
17. So far as I believe, therefore, this is the first occasion on which MrPugachev
himself became aware of the trusts litigation. Subsequently, he has been provided with a number of documents from those proceedings. Having learnt of the claim, he set about finding English lawyers to assist him.
18. For a number of practical reasons, MrPugachev
was unable to find English lawyers for some time. I shall explain those difficulties, and (without waiving legal professional privilege) the circumstances of my firm's instruction, below."
Pugachev
knows full well about this matter and that the instructions to Mr Jenkins have been dishonest. The claimants do not make any suggestion that Mr Jenkins himself or his firm or Mr Samek have behaved improperly. The claimants' point is that the information given to them by or on Mr
Pugachev's
behalf about his knowledge of all this has not just been wrong, but dishonestly so. Deliberate lies have been told with a motive of undermining this trial. I can refer to the following key submissions.
Pugachev's
chateau in France. He explains that the evidence shows that this service took place in June 2016. A bailiff left a card known as a "notice of visit" at the chateau, with an indication of where at a local address the documents could be obtained. Mr McNutt arrived at the bailiff's office and collected the documents. He arrived with his identity card, and produced a notarised copy of Mr
Pugachev's
passport, and a proxy signed by Mr
Pugachev
confirming Mr McNutt's authority to receive the documents on Mr
Pugachev's
behalf. Copies of these documents are exhibited by Mr Roberts in his witness statement.
Pugachev
was then still using.
Pugachev,
including the following. There are references in the Russian press to the trust claims. There have been attempts to derail the sale of the property known as Old Battersea House, which is the property held by one of the five trusts I am dealing with. Those attempts to derail the sale appear to be attempts made by Mr
Pugachev
himself or those acting for him. There is also evidence of attempts in the early part of this year to sell another of the properties held by the trusts, the Gorki 10 property.
Pugachev,
the son of Sergei
Pugachev
and the letter seems to relate to the application I mentioned earlier. The date of this means that it is not corroborative of a point that anyone has known about this trial before the date described by Mr Jenkins. So I will not take that one into account.
Pugachev
is fully aware of this trial, but the matters I have mentioned are sufficient.
Pugachev
to take the various steps at all and whether to make them as part of a condition in an unless order.
Pugachev
has been exposed as a gross abuse of the process, and if Mr
Pugachev
had wanted to make this application, he could and should have done so long, long ago, at least a year ago or thereabouts. The timing is a transparent attempt to derail this trial.
Pugachev
has known all along that Mr Jenkins' evidence is wrong, so he did not make submissions about that.
Pugachev's
behalf Mr Samek submitted I should not impose these conditions. Mr Samek recognised, obviously rightly, that Mr
Pugachev
is an unpurged contemnor, but nevertheless, submits Mr Samek, I should not impose these conditions, particularly bearing in mind that this application is a challenge to the court's jurisdiction. That is a very important issue, which the court will always be concerned about. Mr Samek also made some further detailed points which I will address below in context.
Cross-examination
Pugachev
should be required to attend for cross-examination, and whether that attendance should be made the subject of a condition to allow this application to be heard.
Pugachev
was provided with the relevant documents at his chateau a year ago and that he knows full well about these trust claims and has done so for many, many months.
Pugachev
may wish to make himself available for cross-examination to answer those sorts of allegations. If he does and if he does that in good time so as not to disrupt the application, then I will make sure that I can facilitate his cross-examination by video link if he wishes, despite the fact that he is an unpurged contemnor. But that is a matter for him. It would not be right in my judgment to require him to present himself for cross-examination, nor to make that a condition of even hearing his application which goes to the jurisdiction of the court, despite how late it is.
Pay costs into the solicitor's client account
Pugachev
to pay a sum either into court or into his solicitors' client account to be held on the order of the court. The sum would be to cover the other parties' costs if he loses. The amount sought is £35,000 for the claimants' costs, and, I think I have not mentioned this before, £25,000 for the costs of the infant children.
Pugachev
to the maximum term of imprisonment for contempt of court.
Pugachev
has access to funds to pay his lawyers, here Hughmans and Mr Samek, and the French lawyers instructing Hughmans, which -- I think the firm is called Betto Seraglini. He is making substantial claims against the Russian state and there is clear evidence of that. By requiring this payment in as a condition of hearing the application, I would not prejudice the application.
Pugachev,
even if I ordered him to do so, after the application has been heard. And, as I have said, there is no real prejudice to require him to take this step as a condition of the court entertaining the application. I say that having well in mind that the application goes to the jurisdiction of the court.
Disclosure
Pugachev
to state where the funds are coming from. This issue starts with the wording of the freezing order against Mr
Pugachev,
which contains essentially standard wording as follows:
"This order does not prohibit the respondent from spending ... a reasonable sum on legal advice and representation. But before spending any money, the respondent must tell the applicant's legal representatives where the money is to come from."
Pugachev
notifies the claimants of its source. In relation to general principles, Mr Samek referred me to the judgment of Males J in Tidewater Marine v PhoenixTide [2015] EWHC 2748 (Comm) at paragraphs 35 and 36 in which he summarised the relevant legal principles:
"35. The starting point is that a freezing order has been made against the defendant. Otherwise the question of use of frozen funds to pay legal expenses could not arise. This means that the court has already concluded that, even before the claimant's claim has been established, justice requires that the defendant's freedom to dispose of its own assets as it sees fit should be restrained. However, a freezing order is not intended to provide a claimant with security for its claim but only to prevent the dissipation of assets outside of the ordinary course of business in a way which would render any future judgment unenforceable. While the disposal of assets outside of the ordinary course of business is prohibited as being contrary to the interests of justice, payments in the ordinary course of business are permitted even if the consequence will be that the defendant's assets are completely depleted before the claimant is able to obtain its judgment. This has been clear since the decision of Robert Goff J in The Angel Bell [1981] 1 QB 65 in the early days of what were then called Mareva injunctions. Moreover, so long as the payment is made in good faith, the court does not enquire as to whether it is made in order to discharge a legal obligation or whether it represents good or bad business on the defendant's part.
36. A further principle is that a defendant is entitled to defend itself and, if necessary, to spend the frozen funds, which are after all its own money, on legal advice and representation in order to do so. This is recognised by the standard wording of the usual freezing order, although the defendant's right to spend its own money on legal advice and representation is limited to expenditure of "a reasonable sum". (Despite the substantial figures for legal expenditure in this case, it was not submitted on this application that the sums which the Respondents propose to expend were unreasonable). It was held by Sir Thomas Bingham MR in Sundt Wrigley Co Ltd v Wrigley (unreported, 23 June 1995) to be "the ordinary rule" in a non-proprietary case. He put it this way:
'In the Mareva case, since the money is the defendant's subject to his demonstrating that he has no other assets with which to fund the litigation, the ordinary rule is that he should have resort to the frozen funds in order to finance his defence.'"
Pugachev
is not suggesting here that he is making an application for permission to use frozen assets to fund this application.
Pugachev
has known for a long time about this case and has lied to his lawyers about the state of his knowledge.
"157. DGI [the first claimant] says that the meaning of paragraph 9(1) is clear. Before spending any money at all on legal costs, the corporate defendants must disclose the source of the money. This applies regardless of whose money it is or where it comes from."
"It seems to me that in the absence of evidence indicating that the defendants have used assets covered by the freezing orders to fund their own costs, there is no basis for making the order sought. I do not accept that paragraph 9(1) of the order of 22 December 2005 has a general application divorced from the context of the order as a whole, and in the case of Azuri, the order does not even contain the provision equivalent to paragraph 9(1)."
"… the purpose of these provisions are clear: they are to show that, if a defendant is to have the benefit of spending money which would otherwise be frozen, he must show that there is no possibility of this money being the subject matter of a claim by the claimants from a tracing point of view. He must show that there is no possibility of this money, in reality, being his money, but being provided through a nominee to disguise the fact that it's his money. It therefore follows, in my view, that to comply with that provision he must show ultimately who has provided the money and where that person obtained the money from …"
Pugachev
to fund this application?
Pugachev's
solicitors, for information about where the funds had come from. The reply was that the money had come from the French law firm, Betto Seraglini. Betto Seraglini themselves have explained that they claim privilege in answering that question. It is not suggested before me that the French professionals are not entitled to take that point. I will not draw any adverse inference from it.
Pugachev
himself has a proper ground to refuse to answer. All I know at the moment is that the money to fund the litigation in this country has come from French lawyers acting for Mr
Pugachev.
It is fanciful to think that the French lawyers themselves are funding this litigation in London out of the goodness of their heart. Clearly, there is a source funding Mr
Pugachev's
participation in these London proceedings, other than the French lawyers I have mentioned.
Pugachev
personally. Prima facie money he has control of and the use of should be frozen money.
Pugachev
of his assets. In the evidence before me is an example of particular non-disclosure is what became of something like 100 million dollars, pounds or euros (the difference does not matter). That was money relating to a company called EPK.
Pugachev
has sought to use money in frozen funds to fund his legal expenses in the past. That seems to me to imply that there is not an obvious, ready alternative source of funding available to Mr
Pugachev,
such as a rich friend.
Pugachev
to disclose the source of the funding.
Pugachev's
application in any way. The source will be easy to explain. It can be done so readily. I am sure that Mr
Pugachev
does not wish to explain where the money has come from but that is another matter. I bear in mind the previous breaches of court orders that I have mentioned, the fact that Mr
Pugachev
stands before me as an unpurged contemnor, and the fact that some of the proven contempts related to the very same problem of disclosure that I am now considering.
Pugachev,
as a condition of bringing this application, to provide the information required in the draft order.
Timing and other matters
Pugachev to set aside the default judgment. I will hear the parties now, if they are able to do so, as to whether I should include those conditions relating to that application as well.