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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> PJSC VTB Bank v Laptev [2020] EWHC 321 (Ch) (26 February 2020) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2020/321.html Cite as: [2020] EWHC 321 (Ch) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Fetter Lane, London EC4A 1NL |
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B e f o r e :
____________________
PJSC VTB BANK |
Petitioner |
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- and - |
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VALERIY VLADISLAVOVICH LAPTEV |
Respondent |
____________________
Alexander Halban (instructed by New Media Law LLP) for the Respondent
Hearing dates: 4 - 6 November 2019
____________________
Crown Copyright ©
ICC Judge Burton :
i) having "proved" in the Russian bankruptcy proceeding, the Bank is no longer a creditor to whom the Debt is payable, and therefore not entitled to bring the petition ("Locus Issue"); and
ii) Mr Laptev is beyond the jurisdiction of the court. He disputes, as claimed by the Bank, that he had a place of residence in this jurisdiction in the relevant three-year period which preceded the presentation of the petition ("Place of Residence Issue"); or
iii) if the Court should find that it does have jurisdiction, he pleads in the alternative that the Court should not exercise its discretion in favour of making a bankruptcy order ("Discretion Considerations").
Relevant English statutory provisions
"264 Who may present a bankruptcy petition
(1) A petition for a bankruptcy order to be made against an individual may be presented to the court in accordance with the following provisions of this Part—
a) by one of the individual's creditors or jointly by more than one of them…"
(1) Creditor –
… (b) in relation to an individual to whom a bankruptcy application or bankruptcy petition relates, means a person who would be a creditor in the bankruptcy if a bankruptcy order were made on the application or petition.
267 Grounds of creditor's petition
(1) A creditor's petition must be in respect of one or more debts owed by the debtor, and the petitioning creditor or each of the petitioning creditors must be a person to whom the debt or (as the case may be) at least one of the debts is owed.
(2) Subject to the next three sections, a creditor's petition may be presented to the court in respect of a debt or debts only if, at the time the petition is presented—
(a) the amount of the debt, or the aggregate amount of the debts, is equal to or exceeds the bankruptcy level,
(b) the debt, or each of the debts, is for a liquidated sum payable to the petitioning creditor, or one or more of the petitioning creditors, either immediately or at some certain, future time, and is unsecured,
(c) the debt, or each of the debts, is a debt which the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay, and
(d) there is no outstanding application to set aside a statutory demand served (under section 268 below) in respect of the debt or any of the debts.
The Locus Issue - Can the petition be brought before the English court?
"In any case in which foreign law applies, the law must be pleaded and proved as a fact to the satisfaction of the judge by expert evidence or sometimes by certain other means".
The chapter provides helpful guidance regarding the approach which should be taken to cases where foreign law applies. Omitting the footnotes, the following paragraphs are pertinent to the evidence before me of Russian law.
Paragraph 9-013 provides:
"It is now well settled that foreign law must, in general, be proved by expert evidence. Foreign law cannot be proved merely by putting the text of a foreign enactment before the court, nor merely by citing foreign decisions or books of authority. Such materials can only be brought before the court as part of the evidence of an expert witness, since without his assistance the court cannot evaluate or interpret them."
"An English court will not conduct its own researches into foreign law; in the common law system, "the trial is not an inquisition into the content of relevant foreign law any more than it is an inquisition into other factual issues that the parties tender for decision by the court". But if an expert witness refers to foreign statutes, decisions or books, the court is entitled to look at them as part of his evidence. But the court is not entitled to go beyond this: thus if a witness cites a passage from a foreign law-book he does not put the whole book in evidence since he does not necessarily regard the whole book as accurate. Similarly, if the witness cites a section from a foreign code or a passage from a foreign decision the court will not look at other sections of the code or at other parts of the decision without the aid of the witness, since they may have been abrogated by subsequent legislation."
Expert evidence regarding Russian law
i) Whether, as a matter or Russian law, the making of a bankruptcy order in Russia discharges or releases a debt to which the debtor was subject prior to the making of the order;
ii) Whether, as a matter of Russian law, a creditor who has been recognised in Russian bankruptcy proceedings has the right to take steps separate from its participation in those proceedings (such as by taking other enforcement action in Russia or elsewhere, or by petitioning for bankruptcy in a foreign jurisdiction);
iii) Whether an English bankruptcy order made against a debtor who is domiciled and resident in Russia would be recognised in Russia; in particular, whether the Russian court can and would recognise an English bankruptcy order against such a debtor where the debtor is already subject to Russian bankruptcy proceedings; and
iv) How Russian law treats matrimonial and other property owned by spouses and gifts between spouses (in the absence of a marital property contract between the spouses regulating their property affairs).
Expert witnesses
Conflict of laws issue: Should this court determine the Bank's entitlement to petition by reference to English or Russian law?
(1) The law applicable to a contract by virtue of this Regulation shall govern in particular:
(a) interpretation;
(b) performance;
(c) within the limits of the powers conferred on the court by its procedural law, the consequences of a total or partial breach of obligations, including the assessment of damages in so far as it is governed by rules of law;
(d) the various ways of extinguishing obligations, and prescription and limitation of actions;
(e) the consequences of nullity of the contract.
(2) In relation to the manner of performance and the steps to be taken in the event of defective performance, regard shall be had to the law of the country in which performance takes place.
"those of the highest courts (the Constitutional Court, the Supreme Court and the Supreme Arbitrazh Court [("SAC")] (until its abolition in 2014)) in certain cases are mandatory for lower courts, including in regard to questions of interpretation of provisions of laws and other statutes. In any event, in practice Russian court judgments (especially the ones of the highest courts) provide important guidance on the correct interpretation of laws. This is so despite the fact that sometimes Russian court judgments reflect opposite interpretations of law.
Scholarly writings, especially of reputable Russian scholars, are also taken into account by Russian judges. However, usually such writings are not explicitly referred to in court judgments".
i) Registration of a creditor's claim is an exclusive remedy ("Exclusive Remedy Theory");
ii) Following the commencement of insolvency proceedings, performance by the debtor of his obligations changes: creditors can no longer individually approach the debtor for settlement of their claims but must instead submit their claims in compliance with the Russian Insolvency Law procedure ("Change in Performance Theory");
iii) After commencement of insolvency proceedings, individual obligations between the debtor and his creditors cease to exist and are replaced with a new "protective shared obligation"; and
iv) The fact that creditors' claims cannot be enforced outside the insolvency proceedings gives rise to a limitation on the debtor's legal capacity.
"What happens with the initial debt obligation? Does it terminate or transform into a different legal relationship? …
In our view, the more justified is the position, according to which the initial relationships do not disappear, they continue to exist and not lose their essential character.
… It appears that when a legal relationship is changing from a regulatory into a protective one, it is possible to speak about change of its legal status, including the status of rights and obligations of the parties, as well as status of relationships of the debtor and creditors with the state and other persons …
… One of the special means of protection of violated substantive norms peculiar to insolvency procedure is a submission by the creditor of the claims to the debtor."
Conflict of laws Issue - Summary
Is the Bank entitled to petition for Mr Laptev's bankruptcy in England?
"Q. Let us just say on the facts of the particular case that all the creditors are agreed that the creditor was acting for the benefit of everyone else.
A. Sorry, are you speaking about this particular case or a hypothetical case?
Q. Hypothetically.
A. As I said in the beginning, the Russian law still does not provide such a possibility. What you are suggesting is changing the law, just based on the fact that in one case, the Supreme Court slightly extensively interpreted, not extensively but narrowly interpreted the provision on the admissibility of the release from the obligation. It says that a discharge still can occur if the failure to disclose was insignificant or made in good faith. So, this just was a narrow interpretation.
What you are suggesting is something much more significant. At least, for the time being, the Russian insolvency law is not interpreted in this way, so you cannot elaborate new concepts or new possibilities just on such general consideration. At least, maybe in future, the Supreme Court would allow this, and that situation would be different, but I am afraid this particular case is not a correct place for elaboration of Russian law.
Q. I sense you are wavering a bit here. You cannot say categorically that the Russian court would not allow this?
A. Say that again, please?
Q. You cannot say categorically that the Russian court would say, "No, a creditor acting in the interests of all creditors cannot bring claims abroad"?
A. Well, the Russian courts and the Supreme Court said already numerous times that enforcement actions, individual enforcement actions outside of insolvency proceedings are not allowed, are prohibited. This is a clear position. As I said, there are no grounds now to (unclear) an exception from this and there is not any authority known to me which would allow this.
Q. Equally, there is no authority dealing with the situation saying it cannot be done, as we have agreed already?
A. Regarding appointment of the receiver, yes. Regarding enforcement actions abroad, no. I have referred to some authorities, at least one judgment, specifically.
Q. So, if a case, on the assumed facts we have been discussing, went to the Supreme Court, are you absolutely convinced that the Supreme Court would not say, "No, it is appropriate to construe this legislation as permitting a creditor, acting in the interests of all other creditors, to seek ---
A. I do not think so because again it would be a Pandora's box.
Q. Are you 100% sure about that?
A. In Russia, it is difficult to be 100% sure about anything, especially about the judicial minds, but I do not think that it is possible."
Ms Knutova's expert evidence
"(26) So, in the normal course of actions Russian law expects all creditors of a Russian debtor to participate in the Russian bankruptcy, however, it also expects the Russian debtor to include all available assets in the bankruptcy estate rather than apply a "catch me if you can" approach. That being said, Russian law does not impose an obligation on a creditor to chase for foreign assets of a Russian debtor and to make sure that these assets are included into the Russian bankruptcy estate.
(27) Russian law does not therefore contain any express prohibition on a creditor in a Russian bankruptcy procedure from pursuing the same debtor in a separate jurisdiction. However Russian law does not contain an express provision allowing for such actions. In such a scenario, Russian law would likely consider a creditor's actions from the perspective of public policy.
(28) On that basis it is fair and reasonable for me to suggest that as a matter of public policy, the Debtor cannot use a reference to the Russian bankruptcy as a shield to prevent creditors from trying to reach his foreign assets through an English bankruptcy case, particularly where the Debtor failed to disclose his assets located abroad."
"(39) The Russian courts did not want to assist Mr Kekhman in using the English bankruptcy as an excuse to evade his obligations, with which he failed to deal with in the English case in due course. Moreover, the Russian bankruptcy was concluded on 19 July 2018, but the Russian courts refused to release Mr Kekhman from his obligations. Hence, from Russian law viewpoint Russian creditors are still capable of chasing after his assets.
(40) To summarise: currently the Russian courts will not recognize English court judgments in respect of the Debtor's bankruptcy, in particular where there is a domestic Russian bankruptcy case. Having said that, I opine that Russian courts do not treat the opening of a parallel bankruptcy case abroad as a violation of the Insolvency Law, as long as it is a good faith attempt of the creditors to chase after assets of the debtor which the latter is hiding from the Russian bankruptcy case. I have not heard of a stay order from any Russian court which would prohibit a creditor from doing so.
(41) Naturally, it goes without saying that Russian courts would not permit a double collection attempt in two parallel bankruptcies (based on article 10 of the Russian Civil Code which does not permit abuse of rights)".
"There is a general principle of good faith, Article 10 Civil Code, which is now really very broadly applied. Whenever you are taking steps which are not in good faith, for example when you are chasing after foreign assets just for your own benefit, of course, it can be challenged by the rest of the creditors, but if the efficient way is to start foreign bankruptcy and to take the proceeds and to ensure that they are delivered to the bankruptcy estate in Russia and proportionately distributed between all the creditors, I do not see any prohibition of the Russian law to do so".
Locus Issue - Summary and conclusion
Place of residence Issue
Place of residence - applicable legal principles
"(1) Having a place of residence is a de facto situation rather than a matter of legal right (Skjevesland para 50 and the passage from Brauch there cited). So a licensee may have a place of residence (Brauch 334).
(2) A moral claim to premises may be sufficient (Skjevesland para 52).
(3) The person concerned may well have to phone to make arrangements to occupy because others use the premises as well as him but this is no obstacle to a finding of having a place of residence (Skjevesland para 53).
(4) It is possible to have a dwelling house without being in occupation in the relevant period (Brauch, 335) but the greater the occupation the more likely the finding; but not perhaps if the relevant property has been abandoned (Nordenfelt and Brauch, 335).
(5) Living in a place with one's family as a tenant in rooms makes those rooms a dwelling house (Hecquard 74)".
Did Mr Laptev have a place of residence in the jurisdiction within the Relevant Period (from 28 September 2015)?
Artillery Mansions was purchased in Mr Laptev's sole name for £1,645,000 on 2 June 2008. On 4 September 2017, it was transferred to Mr Laptev's former wife, Ms Stepanenko as part of their divorce.
Park House was purchased for £5.2 million on 20 June 2012 in Ms Stepanenko's name, part-funded by a £3.64 million mortgage which Mr Laptev guaranteed. He also paid the deposit.
Evidence
i) Date of separation, including time spent by Mr Laptev and his connections and assets within this jurisdiction after the breakdown of the marriage
ii) Artillery Mansions as a place of residence
iii) Park House as a place of residence
Witnesses of fact
"Q: I will move on. I want to ask you some questions about the transfer of Artillery Mansions to Ms Stepanenko in 2017.
A: Okay. Ask questions.
Q: Your financial administrator was appointed in Russia on 15th June 2017?
A: Possibly.
Q: On 17th July, you gave disclosure to the financial administrator of your assets?
A: I do not remember. It is possible.
Q: You did not disclose Artillery Mansions or Park House, did you?
A: I do not remember about this.
Q: But you did tell the administrator that all of the property acquired during the marriage with Ms Stepanenko is joint property. Do you remember that?
A: I never said that, and I could not have possibly say that because it is not true."
"Q: Did you appreciate the letter was a very serious matter?
A: I do not care.
Q: Would you have cared if the Home Office had been misled by your letter?
A: Then probably I would be in prison for that.
Q: Are you telling this court that you took no steps whatsoever to independently verify the truth of the matters contained in your letter?
A: That is exactly what I want to say to the court. I neither had it translated, nor was it read to me. Is it in contradiction to anything?"
Date of separation
"Q: …So you are now adopting a third case as to when you entirely separated?
A: Because it is not a specific date. You know, we were talking and we already separate. It was just process, you know, like month by month. We were just far from each other, that is it".
Factual matrix
"A: What is Cornwall? What country?
Q: it is in England, in the south west.
A: What shall I say to this?
Q: Do you deny that you visited Cornwall?
A: It is possible. It is possible that I visited Cornwall. I just do not remember. It was not the most important thing in my life. It is possible that I visited my children at that time and together we went to Cornwall".
He said he did not remember the name the Fistral Beach Hotel. Mr Akkouh referred him to a credit card payment from his Barclays Wealth Account for the Fistral Beach Hotel in August 2016. He was asked to confirm that he stayed at that hotel in August:
"A: Well, as I made this payment, then this appears to be so. What does this supposed to prove? Is it a crime to be in Cornwall, or what?
Q: Now, Ms Stepanenko was in Cornwall with you in August 2016, was she not?
A: It is possible, yes. Are we supposed to hate one another? Am I supposed to greet her when I see, or what? [I interject here to say that my recollection is that rather than "greet" Mr Laptev said "beat"]
Q: Can we please look in D, tab 20, page 22.3
A: Once again I would like to reiterate that every year, I stayed in England for about two or three weeks and my goal was to maintain some kind of relationship with my children. It is quite possible that on several occasions, we went together somewhere, including Cornwall, and I could not tell my children, you know, "Let us go to Cornwall and let us not take mum with us because she is bad, or because she is in a relationship with another man" or something else. That is why."
a) statements for Sberbank Platinum Visa account which provide any meaningful description of the transactions,
b) any of his diaries, travel documents or other records.
Each of these documents could have helped to confirm his case, that during the Relevant Period he only travelled to England twice, in 2016. Mr Gordienko's witness statement for the Bank dated 14 June 2019 highlighted the absence of detail from the statements and that he had not disclosed statements for the entire Relevant Period. Mr Laptev was asked in cross-examination about the absence of detail in the Sberbank statements that were disclosed. He claimed never to have been asked by his solicitors about the lack of detail in the statements and suggested that his bankruptcy trustee in Russia would be able to get full information if required. I do not believe that Mr Laptev was not told by his advisors of the criticism levelled against him regarding the scant detail in these statements.
Artillery Mansions as a place of residence
Park House
Gifts and payments to Ms Stepanenko
"It was not exactly our wedding anniversary because wedding anniversary, our wedding anniversary, 8th February. This is just money, just money for me, and also I remember at that time, Artillery Mansions was under renovation and Valeriy just helped me to renovate the flat".
"It was me probably. I do not remember, because I .. I managed those accounts. Yes it was me probably. It was me probably me paying because I managed two accounts, Barclays and HSBC, yes"
Q: So are you now saying that it was you that transferred this money to yourself?
A: Yes".
"Probably for Easter, yes, but it was just money. We put it always "Gift". How should I call it, just money for what?"
"This is not a gift. These are just funds provided to me and my children to cover our current expenses related to our life in London".
"Q. What was Nikita's job in 2017?
A. Well, he is involved in some kind of illegal activities in Russia, so in all probability, he received some money, accumulated the money, and it was his Christian duty to support his mother and probably he paid her. This is what I think about it, but he may have his own opinion, so please ask him. He is a fully grown-up person. He lives his own life now. I cannot be held responsible in any way for his life or his money.
Q. So, you are saying that Nikita is entirely financially independent?
A. Absolutely.
Q. He can be financially independent because he is involved in some illegal activity in Russia?
A. This is what I think.
Q. And how long has he been financially independent for?
A. Since he turned 20".
Did Mr Laptev have a "place of residence at either Artillery Mansions or Park House during the Relevant Period?
[50] "I do not find fault with the registrar's comment about what is to be found in the case of Re Brauch. It seems to me where you are saying that a person has a place of residence, you are a looking at a de facto situation, not necessarily matters of legal right. If one goes to the Re Brauch [1978] Chancery Reports at p 335 Goff LJ said this:
"There only remains a question of a dwelling house. Mr Crystal in his submissions urged that the debtor must have a legal or equitable interest in the alleged dwelling house. It is not necessary for us to decide whether that be right or wrong, because in this case the debtor did in fact have such an interest because the lease of 51, Connell Street, which is put forward as the dwelling house, was vested in him. Although he had taken most of the steps necessary to assign it, he had not succeeded as the matter had been held up because of a question of breach of covenant contained in the lease. I doubt whether the submission is in truth correct. I do not see why a licensee should not be held to have a dwelling house."
[51] He concluded that where there is actual occupation, it is easier to reach a conclusion that there was a dwelling house, and the shorter the period of actual occupation, the more difficult it becomes to reach that conclusion. I am sure that is right.
[52] It seems to me that a moral claim is quite sufficient in a family context. One knows from family situations that people say, this is Uncle William's house, and after Uncle William has died, we find that the house actually has been put in the name of his son many years before with a view to inheritance tax saving. It does not cease to be Uncle William's house upon the transfer of the legal estate to his son. If he is the only person living there, it is Uncle William's house.
[53] Flat 8, in this case, was normally occupied first of all by Anna, and then by John, and finally by John and Charlotte together. But the evidence seems to be clear that Mr Skjevesland would phone up on a regular basis, and he and John between them would discuss when Mr Skjevesland could come over and stay there. On those times, first of all, John would move out to Charlotte's flat. Then after Charlotte had given up her flat, they would both move out and go somewhere else. It seems to me on those facts it was open to the registrar to conclude that Mr Skjevesland called the tune in regard to that flat. If he decided that he wanted to go there and stay there for a period of three or four days in a week or two weeks' time, he would get his own way. It was certainly open to the registrar conclude that. Thus it seems to me that the registrar was entitled to conclude that Flat 8 was a place of residence in this country for Mr Skjevesland, and that he had a place of residence there and in this country. That being so, that ground of appeal must fail."
a) He was at all relevant times, the legal owner of Artillery Mansions;
b) He purchased it and his funds met all the mortgage payments up until his bankruptcy in Russia;
c) He could gain access via the concierge at any time he wanted. Even if the concierge had not recognised him, his passport would almost certainly have been enough to gain him access as he was the legal owner of the property and all service charge and several other items of post were sent to him there. The concierge in my mind would recognise it as one of Mr Laptev's places of residence, even if (as is the case with many wealthy property owners who live overseas) Mr Laptev rarely visited the property;
d) He paid for very expensive refurbishment works at the flat;
e) He entirely funded the purchase and renovation of Park House. He visited and stayed there regularly with his wife and children before the deterioration in their relationship. He kept a bicycle there.
f) Until his Russian bankruptcy proceedings in 2017, he entirely funded Ms Stepanenko's and their children's lives in England. Ms Stepanenko's evidence that she sought to become financially independent from 2010 is of no consequence as she failed to achieve any such independence.
g) Mr Laptev may not have been able to drive any of them, but he paid for all the expensive cars in England.
h) Between November 2015 and July 2016 transfers, described for whatever reason as "gifts" to the tune of £121,000 were made from his account to Ms Stepanenko. I found both their evidence surrounding Nikita's ability to pay Ms Stepanenko approximately £100,000 after that, entirely unconvincing. It seems likely to me that that money also originated from Mr Laptev.
Discretion