QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| PJSC TATNEFT
- and –
|(1) GENNADIY BOGOLYUBOV
(2) IGOR KOLOMOISKY
(3) ALEXANDER YAROSLAVSKY
(4) PAVEL OVCHARENKO
Ali Malek QC, Matthew Parker and Philip Hinks (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) for the First Defendant
Jonathan Adkin QC, Ruth Den Besten and Tom Ford (instructed by Fieldfisher LLP) for the Second Defendant
Kenneth MacLean QC and Owain Draper (instructed by Mishcon de Reya LLP) for the Third Defendant
Tom Weisselberg QC (instructed by Byrne & Partners LLP) for the Fourth Defendant
Richard Morgan QC (instructed by Pinsent Masons LLP) for the 'Non-Cause of Action Respondents'
Hearing dates: 7, 10, 11, 12 and 13 October 2016
(Judgment provided in draft to the parties on 2 November 2016).
Crown Copyright ©
THE HON. MR. JUSTICE PICKEN:
(1) The First Defendant ('Mr Bogolyubov'), who is domiciled in this jurisdiction and so who has been served here without Tatneft having to obtain permission from the Court, seeks summary judgment or an order striking out the claim.
(2) The Second Defendant ('Mr Kolomoisky'), who has been served out of the jurisdiction on the basis that he is a necessary or proper party to the action brought against Mr Bogolyubov, seeks an order setting aside the order permitting service out on him on the basis that there is no 'serious issue to be tried' on the merits of the claim against him.
(3) The Third Defendant ('Mr Yaroslavsky'), in respect of whom Tatneft also obtained permission to serve out of the jurisdiction but who has submitted to the jurisdiction having been served in England, applies, like Mr Bogolyubov, for summary judgment or an order striking out the claim.
(4) The Fourth Defendant ('Mr Ovcharenko') who, like Mr Kolomoisky, has been served out of the jurisdiction, seeks an order, again like Mr Kolomoisky, setting aside the order permitting service out on him on the basis that there is no 'serious issue to be tried' on the merits of the claim against him and/or because the proceedings represent an abuse of process.
In addition, all four of the Defendants seek the discharge of a worldwide freezing order made by Teare J in March this year (the 'Worldwide Freezing Order') on the basis that Tatneft's claim does not amount to a 'good arguable case' and/or on the basis that there is an insufficient risk of dissipation. They also complain that, in obtaining the Worldwide Freezing Order, Tatneft failed properly to discharge its duty of full and frank disclosure.
Background and Tatneft's case
"In bare essentials, it consisted of the Defendants acquiring control over Taiz and Tekhnoprogress in the first half of 2009, and then procuring a series of payments totalling 2.24 billion Ukrainian Hryvnia ('UAH') from UTN to those companies in June 2009. This represented purported payment for the oil by UTN. However, this UAH 2.24 billion never found its way to S-K, the seller of the oil. It was never intended to. Instead it was siphoned away in a series of sham share sale and purchase agreements whereby Taiz and Tekhnoprogress used the money purportedly to purchase at gross overvalue a series of shareholdings in worthless or fictitious 'junk' companies. The counterparties to these sham transactions were a series of Ukrainian and offshore companies of obscure ownership, although many of them are now known to be connected with D1 and D2 (as D1 now admits). Having paid away all the funds pursuant to the sham transactions, Taiz, Tekhnoprogress and Avto were then driven into bankruptcy based on minuscule debts."
This reflects the way in which the case is pleaded in the Particulars of Claim, both in its original and its draft amended form, where in paragraph 55 the same four "basic elements" are alleged: (i) gaining control (or participated in gaining control) over Avto, Taiz and Tekhnoprogress; (ii) causing (or participated in causing) UTN to inject the monies owed to S-K, and ultimately to Tatneft, into Taiz and Tekhnoprogress; (iii) causing (or participated in causing) Taiz and Tekhnoprogress to enter into sham share and sale transactions, only days apart, first to convert the UAH-denominated funds into US dollars, and secondly to siphon the US dollars into offshore companies which the Defendants controlled; and (iv) subsequently procuring for Taiz, Tekhnoprogress and Avto to be put into bankruptcy.
(1) In March 2009, a BVI company called Avallox acquired 100% of Taiz and 99.9% of Tekhnoprogress and new general directors were installed. At the same time, a Mr Dmitry Zhuchenya, an individual associated with Privat, acquired the remaining 0.1% in Tekhnoprogress and a 100% stake in Avto.
(2) On 22 April 2009, Taiz and Tekhnoprogress opened bank accounts with PrivatBank (and shortly after that also opened share deposit accounts with FC Gambit, a company controlled by Privat).
(3) On 23 April 2009, Taiz, Tekhnoprogress and Avto all entered into purported services agreements with a company called Optima Trade, controlled by Privat. These agreements, which Tatneft contends were obviously shams, created debts owed by Taiz, Tekhnoprogress and Avto to Optima Trade for fictional "services" and were, Tatneft says, a device ultimately used to secure the bankruptcy of Taiz, Tekhnoprogress and Avto later in the year.
(4) On 12 May 2009, Tatneft's 18.296% indirect shareholding in UTN, owned through companies called AmRuz and Seagroup, was written off the depository accounts of AmRuz and Seagroup and re-registered to UTN's treasury account.
(5) Starting on 3 June 2009, Taiz and Tekhnoprogress apparently entered into a series of sham share purchase and sale agreements under which those companies agreed to pay very substantial amounts for a large number of worthless shares in 'junk' companies. These agreements, Tatneft alleges, were nothing more than a paper device to allow money to be extracted from Taiz and Tekhnoprogress.
(6) Between 12 and 17 June 2009, UTN paid a total of UAH 2.24 billion to Taiz and Tekhnoprogress. This corresponded exactly to the amount of debt recorded on UTN's books for the oil that UTN had received through the contractual chain. This money was then, as Tatneft puts it, siphoned out of Taiz and Tekhnoprogress through payments under the sham share purchase agreements described above.
(7) Between 18 and 27 June 2009, Optima demanded payment from Taiz, Tekhnoprogress and Avto under the purported services agreements that had been signed earlier in the year. The amounts demanded were approximately US$75,000 combined. Tatneft maintains that there was no intention that Taiz, Tekhnoprogress and Avto would pay these very modest sums demanded as those agreements had, from the start, been merely a device to secure the bankruptcy of those companies.
(8) On 21 August 2009, the Ukrainian court initiated bankruptcy proceedings against Taiz, Tekhnoprogress and Avto at Optima's request. The companies were held to be bankrupt on 1 October 2009 (and were liquidated in 2010).
(9) Meanwhile, as Tatneft puts it, the UAH 2.24 billion extracted from Taiz and Tekhnoprogress was finding its way to Korsan, the vehicle to be used by the Defendants to acquire Tatneft's former indirect shareholding in UTN. Specifically, on 15 June 2009, a date about half-way through the numerous wire transfers, it was agreed that the charter capital of Korsan would be increased by UAH 2.24 billion, exactly the same amount that UTN had paid to Taiz and Tekhnoprogress. This contribution of new capital was made by a number of companies which, Tatneft alleges, were associated with the Defendants. The Privat share of the contribution was 50%, with Mr Yaroslavsky and Mr Ovcharenko each contributing 25%. None of the Defendants could have been under any illusion, Tatneft suggests, as to where the UAH 2.24 billion had come from.
(10) On 27 June 2009, Korsan won the auction, in which it was the sole bidder, to acquire Tatneft's confiscated (indirect) 18.296% shareholding in UTN. The auction was arranged by UTN itself (under D4's control). The only other potential bidder, Naftogaz, initially filed a bid but then failed to provide the necessary deposit.
(11) On 30 June 2009, Korsan signed a sale and purchase agreement with UTN under which Korsan acquired 18.296% of UTN for a price of UAH 2.1 billion.
The present proceedings
The parties' positions on the applications in outline
Structure of this judgment
The jurisdictional challenges and the summary judgment/strike-out application: the merits-related issues
"i) The court must consider whether the claimant has a 'realistic' as opposed to a 'fanciful' prospect of success: Swain v Hillman  1 All ER 91;
ii) A 'realistic' claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel  EWCA Civ 472 at ;
iii) In reaching its conclusion the court must not conduct a 'mini-trial': Swain v Hillman;
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at ;
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)  EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd  FSR 3;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd  EWCA Civ 725."
"The judge's assessment has to start with the relevant party's pleaded case but the enquiry does not end there. The allegations may be legally adequate but may have no realistic chance of being proved. On the other hand, the limitations in the allegations pleaded and any lack of particularisation may show that the party's case is hopeless. ... The law quite rightly requires that questions of dishonesty be approached more rigorously than other questions of fault. The burden of proof remains the civil burden - the balance of probabilities - but the assessment of the evidence has to take account of the seriousness of the allegations and, if that be the case, any unlikelihood that the person accused of dishonesty would have acted in that way. Dishonesty is not to be inferred from evidence which is equally consistent with mere negligence. At the pleading stage the party making the allegation of dishonesty has to be prepared to particularise it and, if he is unable to do so, his allegation will be struck out ... It is normally to be assumed that a party's pleaded case is the best case he can make (or wishes to make)... ."
(1) The claimant must satisfy the Court that, in relation to the foreign defendant, there is a 'serious issue to be tried' on the merits. This is the same as the test for summary judgment, namely whether there is 'a real prospect of success'.
(2) The claimant must satisfy the Court that there is a 'good arguable case' that the claim falls within one or more classes of case in which permission to serve out may be given, which in this context connotes that one side has a much better argument than the other on that point.
(3) The claimant must satisfy the Court that, in all the circumstances, England and Wales is clearly or distinctly the appropriate forum for the trial of the dispute, and that in all the circumstances the Court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction.
"The Supreme Court has recently made clear the correct approach to the question whether there is a serious issue to be tried. Thus hearings on jurisdictional issues should not 'involve masses of documents, long witness statements, detailed analysis of the issues, and long argument': VTB Capital Plc v Nutritek International Corpn  UKSC 5,  2 WLR 398 at  and . Even more recently, Flaux J has spoken of the need for a defendant challenging jurisdiction on the basis that the claim has no real prospect of success to identify 'some "killer point" which demonstrated that [the claimant's] case on the facts was unsustainable', without which 'the expending of so much time and energy on a full-scale evidential challenge is a fruitless exercise': Erste Group Bank AG v JSC "VMZ Red October"  EWHC 2926 (Comm) at  (reversed on other grounds)."
The 2015 Compensation Agreement
"The Debtor [S-K] has claims against Closed Joint Stock Company Transnational Financial and Industrial Oil Company Ukrtatnafta (according to the company's official website, in 2010 it changed its name for Public Joint Stock Company Transnational Financial and Industrial Oil Company Ukrtatnafta …, registered under the laws of Ukraine, state registration No. 00152307, with its registered office at: Ukraine, 39609, Poltava Region, Kremenchug, UI. Svishtovskaya, 3 (hereinafter 'TFIOC UTN'), in the amount of one billion six hundred fifteen million eight hundred fourteen thousand nine hundred seventy-six Ukrainian Hryvnas (UAH 1,615,814,976) in principal, plus all interest accrued and subject to accrual in the future (hereinafter, the 'Claims')."
The operative part of the agreement then provides as follows in Clauses 1.1, 1.2, 1.3 and 1.4:
"1.1 In partial discharge of the obligations owing to the Creditor and referred to in clause 1.2.1 hereof the Debtor shall provide compensation to the Creditor pursuant to Article 409 of the Russian Civil Code and on the terms set forth herein.
1.2 Details of the Debtor's obligations to the Creditor:
1.2.1 the aggregate amount of the outstanding monetary obligations of the Debtor owing to the Creditor is eighteen billion one hundred twenty-three million six hundred forty-one thousand six hundred sixty-two Rubles 89 kopecks (RUB 18,123,641,662.89) (hereinafter, the 'Obligations');
1.2.2 the Obligations arise under the Commission Agency Agreement and the Assignment Agreement;
1.2.3 part of Obligations in respect of which the compensation is provided, amounts to one hundred twenty-eight million seven hundred seventy-one thousand nine hundred fourteen Rubles 42 kopecks (RUB 128, 771,914.42), including:
- One hundred twenty-eight million seven hundred sixty-one thousand six hundred twelve Rubles 67 kopecks (RUB 128,761,612.67) as part of the obligations arising out of the Commission Agency Agreement;
- Ten thousand three hundred one Rubles 75 kopecks (RUB 10,301.75) as part of the obligation arising out of the Assignment Agreement.
The Debtor's Obligations to the Creditor shall be discharged pro rata to the amount of the Obligations.
1.3 In discharge of part of the Obligations the Debtor on the date hereof shall transfer compensation to the Creditor, and the Creditor shall accept such compensation being the Debtor's Claim against TFIOC UTN in the amount of one billion six hundred fifteen million eight hundred fourteen thousand nine hundred seventy-six Ukrainian Hryvnas (UAH 1,615,814,976) in principal, plus all interest accrued and which may continue to accrue, arising under the following documents:
1.3.1 Deed of Assignment dated 18 April 2008 between LLC 'Kompaniya 'Suvar-Kazan' (currently LLC 'Kompaniya 'Fenix'), Private Multi-Industry Production and Commercial Enterprise Avto, registered in accordance with the Ukrainian laws (state registration number 13951872), Limited Liability Company TAIZ, registered in accordance with the Ukrainian laws (state registration number 32635669), and Research and Development and Manufacturing Limited Liability Company TEKHNO-PROGRESS, registered in accordance with the Ukrainian laws (state registration number 30601617);
1.3.2 Judgment of the Arbitration Court of the Republic of Tatarstan issued on 05 September 2008 in case No. A65-9070/2008-sg2-4;
1.3.3 Enforcement Order No.265221 issued on 03 December 2008.
1.4 The Claims transferred by Debtor to Creditor as compensation under the Agreement also include all other rights available to Debtor as of the time of execution of the Agreement and associated with and/or arising from the Claims and/or directly or indirectly related in any way to the non-payment of sums owed to the Debtor under any or all of the documents set forth in Clauses 1.3.1 to 1.3.3 hereof, including, but not limited to: (1) the Debtor's right to require TFIOC UTN and/or any third parties to make any payments: (a) by way of indemnification and/or liquidated damages (fines, penalties) caused by a default, delay or another undue performance; (b) in the form of interest payable for unlawful use of other people's money, (c) by way of reimbursement of litigation costs and other expenses related to the lawsuit; (2) the Debtor's claims against TFIOC UTN and/or third parties arising from damages caused and/or unjust enrichment; and (3) the Debtor's right to sue TFIOC UTN and/or third parties, and the Debtor's right to seek enforcement of obligations before competent authorities and/or file a criminal complaint against TFIOC UTN and/or third parties."
"In the interpretation of the terms of the contract, the court shall take into account the literal meaning of the words and expressions contained in it. The literal meaning of a term of the contract, in the case the term is not clear, shall be established by comparison with other terms and with the sense of the contract as a whole.
If the rules contained in the first part of this Article do not allow the determination of the content of the contract, the real common will of the parties must be ascertained taking into account the purpose of the contract. All the corresponding circumstances shall be taken into account, including negotiations and correspondence preceding the conclusion of the contract, the practice in the mutual relationships of the parties, the customs, and the subsequent conduct of the parties."
Accordingly, under this provision, the primary rule of interpretation is the literal meaning of the words but, if that is unclear, it is permissible to refer to all the surrounding circumstances, including negotiating history and subjective intent. Arguing that it is appropriate in the present case to look beyond the literal meaning of the words used, Mr Millett QC pointed to the evidence which was before me concerned with what Tatneft intended when entering into the 2015 Compensation Agreement. Particular emphasis was placed on a witness statement from Mr Nurislam Syubaev, a member of Tatneft's Management Board, in which this is stated at paragraph 94:
"In October 2015 as part of the bankruptcy proceedings Tatneft and S-K entered into the compensation agreement whereby S-K assigned to Tatneft all its claims relating directly or indirectly to non-payment of any amounts owed to S-K in connection with oil supplies to UTN in August-October 2007, including all non-contractual claims. Clause 1.4 of the agreement expressly provided for assignment from S-K to Tatneft of claims against UTN and/or third parties arising in tort and/or from unjust enrichment. On Tatneft's part the draft of the compensation agreement was negotiated by our lawyers, and I personally confirmed inclusion of that clause into the agreement. While I was not involved in the actual drafting of corresponding documents I was part of the decision-making process at Tatneft and, thus, I am perfectly aware that the parties intended, in particular, to assign to Tatneft S-K's claims against Kolomoisky, Bogolyubov, Yaroslavsky and Ovcharenko in connection with the harm caused by them to S-K. That was the aim and purpose of the agreement and the reference to third parties was intended to be a reference to the Defendants in this case, and any other persons who had participated in the wrongdoing to deprive S-K of the oil monies."
The claim under Article 1064
(i) Tatneft's case under Article 1064
"1. Harm caused to the person or property of a citizen and also harm caused to the property of a legal person shall be subject to compensation in full by the person who has caused the harm.
A statute may place a duty for compensation for harm on a person who is not the person that caused the harm.
A statute or contract may establish a duty for the person who has caused the harm to pay the victim compensation in addition to compensation for the harm.
2. The person who has caused the harm is freed from compensation for the harm if he proves that the harm was caused not by his fault. A statute may provide for compensation for the harm even in the absence of fault of the person who caused the harm.
3. Harm caused by lawful actions shall be subject to compensation in the cases provided by a statute.
Compensation for harm may be refused if the harm was caused at the request, or with the consent, of the victim, and the actions of the person who caused the harm do not violate the moral principles of society."
"The necessary elements of a claim under Article 1064 of the RCC are (i) infliction of harm to the claimant, (ii) an unlawful act on the part of the defendant, (iii) causation between the act of the defendant and the harm suffered by the claimant, and (iv) guilt of the defendant (either intention or negligence). The first three elements are to be proved by the claimant. Once the claimant has proved the relevant elements, the existence of the fourth element (i.e. guilt) is presumed. It is then for the defendant to prove that he did not act intentionally or negligently in causing the harm."
Tatneft then goes on to set out its case in relation to each of these elements in paragraphs 86 to 90. It is important to appreciate what is there alleged given the nature of the Defendants' attack on the case which has been put forward, although I will need later also to deal with a broader 'in principle' objection which was led by Mr Weisselberg QC. Paragraphs 86 and 87 deal with the first element ("harm") and state as follows:
"86. Under Article 15 of the RCC, S-K is entitled to recover the full amount of the debt that Avto owed it but which it failed to pay due to the unlawful acts pleaded above, namely the USD 439.4 million in oil monies less the USD 105.3 million recovered by way of enforcement of the decision of the Arbitrazh Court of the Republic of Tatarstan dated 28 August 2008 (which S-K subsequently paid to Tatneft under the Suvar-Tatneft Commission Agreement), in total USD 334.1 million.
87 Furthermore, S-K's claim lies in US Dollars on the basis that:
(i) S-K's rights against Avto under the Suvar-Avto Framework Contract were denominated in US Dollars;
(ii) the Assignment Agreement was a forced step for S-K, in mitigation of the harm that it was suffering by virtue of UTN's failure after October 2007, in breach of contract, to pay what it owed Taiz and Tekhnoprogress for Tatneft oil, and consequently did not and does not amount to an irrevocable election by S-K to abandon its US Dollar claims and rights against Avto and substitute them with UAH claims and rights against UTN, particularly in circumstances where UTN (it is to be inferred under the control or at the direction of the Defendants) successfully impugned the Assignment Agreement before the Ukrainian courts. In any event, the Defendants' unlawful actions in perpetrating the Oil Payment Siphoning Scheme were consistent and only consistent with the Assignment Agreement being of no effect, and followed not long after the Ukrainian judgments invalidating the Assignment Agreement.
(iii) so far as concerns these Defendants, Tatneft has given credit to them for the recovery of USD 105.3 million from UTN pursuant to the Tatarstan judgment."
"Tatneft relies on the following facts and matters as constituting relevant unlawful acts committed by the Defendants or some of them under the 'general tort' principle of Russian law for the purposes of Article 1064:
(i) after taking over Taiz and Tekhnoprogress, they caused them to breach their contractual obligations to pay the oil money upstream via Avto to S-K by diverting the money offshore through the two rounds of sham share transactions connected with purchase of shares of various 'junk' companies; and/or
(ii) by taking over and procuring the bankruptcy of Avto, Taiz and Tekhnoprogress, they deprived S-K of the full value of its claims against Avto under the Suvar-Avto Framework Contract (and in consequence any rights of recourse that Avto might otherwise have had downstream against Taiz and Tekhnoprogress, and that Taiz and Tekhnoprogress had against UTN, were rendered worthless)."
Although this paragraph does not refer back to the earlier paragraphs which describe the Oil Payment Siphoning Scheme, namely paragraphs 55 to 82 of the Particulars of Claim, it is nonetheless implicit that reliance is here placed by Tatneft on those earlier paragraphs since otherwise the references in (i) and (ii) make little sense.
"But for the acts and omissions of the Defendants pleaded above comprising the unlawful acts, UTN would have paid Taiz and Tekhnoprogress what it owed them for the Tatneft oil sold and delivered in accordance with the agreements pleaded above, who in turn would have paid Avto and Avto would have paid S-K. As a matter of Russian law, it is an actionable wrong under Article 1064 of the RCC for a person to cause another person to breach his contractual obligations to, or not to pay his debt to, a third person, and the loss sustained by that third person is recoverable as damages by him pursuant to Article 15 of the RCC."
"It is to be inferred from the facts and matters pleaded at paragraphs 57 to 82 above, and in particular as to the timing of those events, that the unlawful acts were carried out intentionally. UTN's management would not likely have decided to (i) stop payments to Tatneft in 2007 and (ii) restart payments to Taiz and Tekhnoprogress in June 2009, a matter of days after the steps preparatory to the siphoning were completed, unless each of the Defendants was involved in the scheme and acted intentionally to bring it into effect."
(i) Tekhnoprogress assigned to Taiz its payment claims against UTN under the Tekhnoprogress-UTN Contracts dated 11, 21 and 24 September 2007, in a total principal debt amount of UAH 658,247,011. Tekhnoprogress' payment obligations to Taiz were thereby terminated.
(ii) Taiz assigned to Avto (i) the payment claims which it received from Tekhnoprogress and (ii) Taiz's own payment claims against UTN under the Taiz-UTN Contracts dated 30 May, 6 June, 11 June, 27 June, 3 July, 6 July, and 11 July 2007, in a total principal debt amount of UAH 1,470,571,955. Taiz's payment obligations to Avto were thereby terminated.
(iii) Avto assigned all of the foregoing claims in a total principal debt amount of UAH 2,128,818,966 to S-K. Avto's payment obligations (which included the principal debt) to S-K were thereby terminated. The amount was in UAH rather than USD, despite the fact Avto's payment obligation to S-K was in USD, because the amounts owed by UTN to Taiz and Tekhnoprogress were denominated in UAH, and UTN's obligation to pay in UAH could not have been amended by Taiz and Tekhnoprogress in a contract to which UTN was not a party. Avto's payment obligations to S-K in the amount of USD 421,548,310 were thereby terminated (this amount does not include approximately USD 17.9 million which were awarded in favour of S-K pursuant to ICAC proceedings, but were never recovered by S-K from Avto)."
Mr Malek QC submitted that this makes it abundantly clear that Tatneft's "harm" case, based as it is on the continued existence of a contractual chain which is no longer effective, is doomed to fail.
"A Party assigning the relevant claims shall be liable for the accurateness of the documents transferred under this Agreement and shall guarantee the availability and transfer of all of the assigned rights."
It is clear to me that this is not a provision which should be treated as meaning that the various intermediate contracts continue to have effect, and in particular that there remain in place liabilities in respect of the oil monies. To reach the conclusion advocated by Mr Millett QC would be wholly at odds with earlier provisions in the 2008 Assignment Agreement, including Clause 1.5 dealing with the position as between Avto ("Assignor 1") and S-K ("Assignee"), as follows:
"the Assignor 1 shall assign and the Assignee shall accept all claims against the Debtor [UTN] arising out of the agreements between the Assignor 2 [Taiz] and the Debtor, as listed in Clause 1.2 of this Agreement, and out of the agreements between the Assignor 3 [Tekhnoprogress] and the Debtor, as listed in Clause 1.1 of this Agreement, subject to paragraph 2 of Clause 1.3, and any rights ensuring the performance of such obligations and any other related rights, including the right to any outstanding interest and any penalties."
It would also contradict Clause 2.2.3, again concerned with the position as between Avto and S-K, which states:
"Payment obligations of the Assignor 1 to Assignee in the amount of 421,548,310 US dollars … under the Contract No.3-0407 between them dated April 23, 2007 and Additional Agreements Nos. 14-20 thereto shall be terminated …".
Furthermore, Mr Millett QC's argument is difficult to reconcile with Clauses 3.4 and 3.5 as follows:
"3.4 Immediately upon the execution of the Act of delivery and acceptance mentioned in Clause 3.2 of this Agreement, the obligations of the party assigning the relevant claims towards the Party accepting the relevant claims under this Agreement shall be deemed performed .…
3.5 Immediately upon the execution of this Agreement the Assignee shall become a new creditor of the Debtor under the claims arising out of the agreements between the Assignor 3 and the Debtor, as listed in Clause 1.1 of this Agreement, and under the claims arising out of the agreements between the Assignor 2 and the Debtor, as listed in Clause 1.2 of this Agreement."
It is quite clear, in the light of these provisions, that the obligations of Avto, Taiz and Tekhnoprogress ceased on execution of the 2008 Assignment Agreement. The wording relied upon in Clause 4.1 cannot, in my view, sensibly have the effect for which Mr Millett QC contended. It simply makes no sense to treat such language as resurrecting a primary liability which the preceding provisions have brought to an end. Indeed, the use of the word "guarantee" itself counts against an argument that Taiz and Tekhnoprogress continued to be under payment obligations 'up the chain' of the type suggested by Mr Millett QC since a guarantee denotes a secondary, rather than a primary, liability.
"At this point, UTN (having paid for the oil supplied by Tatneft, or much of it, hitherto) ceased making any further payments for Tatneft's oil. As Ovcharenko was then Chairman of the Management Board of UTN, it is to be inferred that Ovcharenko made the decision to stop making any further payments for the oil, since Chairman of the Management Board was the most powerful executive position in UTN, and the Board by this stage had been packed with Ovcharenko's supporters … ."
The same point is made in paragraph 45, where this is stated:
"After Ovcharenko entered UTN's premises on 19 October 2007, UTN's payments ceased and UTN failed thereafter to pay either Taiz or Tekhnoprogress any further sums for oil deliveries made between August and October 2007… It is to be inferred from the timing of UTN's ceasing to make payments for Tatneft's oil (once the Defendants forcibly took over UTN) that the Defendants procured UTN not to make these payments."
As Mr MacLean QC submitted, it is, therefore, Tatneft's own case that from October 2007 UTN was not going to pay for the oil, and that obviously is why Tatneft remains to this day substantially out of pocket even though it has obtained the Tatarstan Judgment.
"This Agreement shall become effective and should be deemed to be executed upon its execution by all parties and shall remain effective until full performance by the Parties of their obligations under this Agreement."
This makes it abundantly clear that any obligations ceased. Furthermore, although Mr Millett QC relied upon the expert evidence given by Dr Pastukhov, Mr Ovcharenko's expert on Russian law, it is important to bear in mind that that evidence was to the effect that the duty of good faith, as recognised by Russian law, applies to the performance of contractual obligations; in other words, it does not create new, or freestanding, obligations.
"There is always an exercise of judgment to be undertaken by the judge whether the perceived short-cut will turn out to have been beneficial and, inevitably in a proportion of cases expectations will be confounded. Caution is required. But it is simplistic to suppose that in complex litigation the exercise should never be attempted. The volume of documentation and the complexity of the issues raised on the pleadings should be the subject of critical scrutiny and should not without more deter the judge from considering whether it is really necessary to commit the parties and the court to a lengthy trial and all the preparatory steps which that will involve. Indeed it can be submitted with force that those are just the sorts of case which most strongly cry out for the exclusion of anything that is unnecessary for the achievement of a just outcome for the parties."
As I see it, this is an appropriate case in which it is not only appropriate, but absolutely necessary, to subject Tatneft's claim to "critical scrutiny". The more so, given what Lord Hobhouse went on to say at  about what is to be expected when a case is pleaded:
"… Any skilful pleader should be able to draft a pleading which sufficiently makes the minimum allegations to support the legal definition of the tort and I have detected no lack of skill in the lawyers acting for either side in this litigation. The question then becomes whether the particulars given provide realistic support for the primary allegations. …".
The Particulars of Claim in the present case, despite their length and detail, suffer from fundamental inconsistencies which simply cannot be, and certainly should not be, overlooked. The conclusion which I have reached has not entailed any sort of 'mini-trial'; it is merely the result of examining how Tatneft puts its own case.
(ii) The 'in principle' objection
(iii) The case against Mr Yaroslavsky
"The best particulars that Tatneft can presently give as to the involvement of the Defendants in the Oil Payment Siphoning Scheme are based on inferences to be drawn from the facts and matters as to that involvement pleaded above and more particularly the following."
There then follow thirteen sub-paragraphs setting out details of a number of companies and links alleged between those companies and Mr Bogolyubov and Mr Kolomoisky, but not Mr Yaroslavsky or, for that matter, Mr Ovcharenko (albeit that, as Chairman of UTN's Management Board, Mr Weisselberg QC accepted that he was "front and centre" in relation to the case as it is advanced by Tatneft, a submission which he made in making the point, as regards the limitation issue, that S-K ought to have known about that involvement for some time).
"Tatneft also relies on the following facts and matters linking the Defendants and each of them to the Oil Payment Siphoning Scheme:"
Eight sub-paragraphs then follow. They do not, however, provide details of the "assistance" which Tatneft pleads in paragraph 55 of the Particulars of Claim was given by Mr Yaroslavsky. Sub-paragraph (i) is concerned with Mr Ovcharenko and repeats that, after taking over the Kremenchug refinery, in his position as Chairman of the Management Board, he decided to suspend payments to Taiz and Tekhnoprogress. Sub-paragraph (ii) similarly provides no particulars concerning Mr Yaroslavsky. It states as follows:
"After the Ukrainian courts invalidated the shareholdings of Tatneft, AmRuz and Seagroup in UTN as pleaded above, Korsan began to buy up these UTN shares. On 27 June 2009, in an auction organised by UTN (under Ovcharenko's management), Korsan, acting as sole auction participant, purchased the 18.296% stake which had previously belonged to AmRuz and Seagroup. Further, Korsan also acquired shares in UTN previously owned by the Republic of Tatarstan, effectively Korsan ended up with 47.07% of UTN's shares".
Sub-paragraph (iii) likewise gives no particulars concerning Mr Yaroslavsky, whilst sub-paragraph (iv) is concerned with Mr Bogolyubov, stating:
"Bogolyubov is one of the ultimate beneficial owners of Korsan and Viloris. Bogolyubov also was the beneficial owner of B.O.G. (through Modena), the company that had provided an armed gang to Ovcharenko for his forced takeover of UTN on 19 October 2007."
Sub-paragraph (v) then states:
"As Kolomoisky told the BIT Arbitration tribunal on 25 March 2013, Korsan was a joint venture between Privat (i.e. Bogolyubov and Kolomoisky) and Yaroslavsky for the ultimate acquisition of the Tatneft shares in UTN. In the same evidence, referring to the take-over of UTN, he referred to 'our reinstatement of Ovcharenko' (emphasis added)."
Although Mr Yaroslavsky is mentioned here, nonetheless no particulars are given in relation to his alleged "assistance". The same applies to sub-paragraph (vi) which states:
"In an interview with Forbes in November 2012, Yaroslavsky said that he owned 28.4% of UTN, which shareholding is equal to almost exactly half of the stake acquired by Korsan and Viloris from UTN after the expropriation of the Tatar shareholding."
Although, again, Mr Yaroslavsky is here mentioned in terms of his shareholding, it is not stated in what way, specifically, he gave "assistance" as alleged in paragraph 55. Nor do sub-paragraphs (vii) and (viii), the latter referring to Mr Yaroslavsky being elected to UTN's Supervisory Board in February 2010 and so after the Oil Payment Siphoning Scheme had been completed.
"… Article 1064 CCRF does not operate like the English law of conspiracy and instead works on the basis of a strict defendant-by-defendant analysis of the facts. PJSC Tatneft would have to show that Mr Yaroslavsky in fact committed the acts (or some of them) that caused harm to S-K. …".
He went further in his report, stating in the next paragraph as follows:
"… I consider that the statement that Mr Yaroslavsky was involved in the Oil Payment Siphoning Scheme is not a sufficiently precise allegation as to actual wrongdoing to be relied upon to establish liability under Article 1064 CCRF. It would not be possible to conclude from involvement what, if any, harm was caused by Mr Yaroslavsky….".
Here Dr Rachkov was directing his attention to the allegation of "involvement" made in paragraph 81 of the Particulars of Claim. Dr Rachkov went on, however, in the same paragraph to contrast the allegation made in the Particulars of Claim with what had been stated by Mr Williams in the witness statement prepared in support of the application for the Worldwide Freezing Order. In that witness statement, Mr Williams had referred to Mr Yaroslavsky as having "directed the dubious share transactions". Mr Williams set out his reasons for making this statement. These include the fact that Mr Ovcharenko has apparently been described in the past as Mr Yaroslavsky's protégé, as well as the suggestion that Mr Yaroslavsky lobbied for Mr Ovcharenko to be named Chairman of UTN's Management Board. Reliance was placed also on Mr Yaroslavsky's allegedly close relationship not only with Mr Ovcharenko but also with Mr Bogolyubov and Mr Kolomoisky "for example, through Korsan … which was a 50/50 joint venture between him and Privat". Mr Williams went on in the four following sub-paragraphs to say this:
"(iii) It follows that it is also reasonable to assume that Mr Yaroslavsky would have been aware of the reason why Mr Ovcharenko was asked by Privat to cause UTN to pay the oil monies to Taiz and Tekhnoprogress in June 2009, i.e. because the takeovers of Taiz and Tekhnoprogress had just been completed, and the stage set for the dubious share transactions and siphoning.
(iv) Given Mr Yaroslavsky's likely awareness of the planned siphoning, it is reasonable to assume that Mr Ovcharenko would not have caused UTN to pay the oil monies to Taiz and Tekhnoprogress in June 2009 without Mr Yaroslavsky's agreement. This is because Mr Yaroslavsky was Mr Ovcharenko's mentor and because Mr Yaroslavsky had a relationship with Privat through Korsan. Moreover, it would have been difficult to hide anything from Mr Yaroslavsky, as he was elected to UTN's Supervisory Board in February 2010.
(v) It is reasonable to assume that Mr Yaroslavsky would not have agreed with Mr Ovcharenko's decision to cause UTN to pay the oil monies to Taiz and Tekhnoprogress unless he was involved with the dubious share transactions and/or stood to benefit personally from the siphoning. I believe it is unrealistic to think that Mr Yaroslavsky would have consented to UTN, a company which he held a stake through Korsan, in essence to give hundreds of millions of dollars to Messrs Bogolyubov and Kolomoisky unless he, Mr Yaroslavsky, had a personal commercial interest in this occurring.
(vi) Finally, it was personally confirmed by Mr Kolomoisky in the BIT Arbitration that Mr Yaroslavsky became one of the beneficiaries of UTN through Korsan and Viloris (joint ventures between Privat (and hence Mr Bogolyubov and Mr Kolomoisky) and Mr Yaroslavsky and his affiliates) upon completion of the takeover of UTN in early 2010. Thus, it may be inferred that Mr Yaroslavsky was as much interested in the (successful) takeover of UTN and the Oil Payment Siphoning Scheme as Messrs Bogolyubov and Kolomoisky."
As Mr MacLean QC pointed out, the Particulars of Claim did not include the allegation that Mr Yaroslavsky himself directed anything. Although I shall come on to deal with the proposed amendments later, it is to be noted that the draft Amended Particulars of Claim similarly contain no such allegation, although they do contain details of Mr Yaroslavsky's involvement with Korsan. Why this should be so is not clear.
"First, Taiz and Tekhnoprogress are Ukrainian owned and controlled entities that in 2009, through a series of opaque and suspect transactions, along with another Ukrainian entity, Avto, came under the control of Igor Kolomoisky and Privat Group - the principal partners and co-conspirators of Mr Ovcharenko and his group of raiders - who now control the management of [UTN] and who are responsible for the orchestrated purchase at auction of shares seized from AmRuz and Seagroup. Thus, for Respondent now to argue that payment of hundreds of millions of dollars of debt for oil supplied by Tatneft has been made in full to two companies controlled by those who seized control of[UTN] and are attempting to own it outright is preposterous. Not a penny of the amounts allegedly paid by [UTN] under Mr Ovcharenko's control has gone to Tatneft. Instead, all of these amounts apparently would have gone to Privat, a further flagrantly illegal misappropriation of [UTN's] funds which has caused harm to Claimant."
Mr Adkin QC submitted that this paragraph makes it abundantly clear that, at the very least, Tatneft suspected Mr Kolomoisky of having diverted the payments which it now alleges in the current proceedings he diverted. He stressed that this was only a matter of months after the payments were made by UTN to Taiz and Tekhnoprogress.
"Since the end of October 2007 to the present, the Privat Group controls both petrol supplies to [UTN] and sales of finished production. The de facto management of [UTN] is performed by I.V. Kolomoisky.
Until June 2009 P.V. Ovcharenko denied existence of debts of [UTN] to [Tatneft], [S-K] and Ukrainian enterprises: [Avto], [Taiz] and [Tekhnoprogress] who participated in petrol supplies from [Tatneft] to the refinery of [UTN] in 2007. However, according to the information provided by legal consultants of Ukraine to international arbitration which was examining the lawsuit of [Tatneft] versus Ukraine according to UNCITRAL arbitration rules, it became known that in mid-June 2009 [UTN] fully paid all the amount of existed debt in the amount of circa 2.1 billion hryvnas to the accounts of [Taiz] and [Tekhnoprogress] … At the same time, despite existing contractual obligation, the named monetary funds were not received by [Tatneft] or S-K. I suppose that several months before transferring funds to [Avto], [Taiz] and Tekhnoprogress] these companies were acquired by the Privat Group.
I believe that the entire scheme of seizure of the plant and imaginary 'repayment' of debt for oil supplied by [Tatneft] was planned by I.V. Kolomoisky and P.V. Ovcharenko. It is also confirmed by the fact that funds were transferred to the accounts of [Taiz] and [Tekhnoprogress] opened in Commercial Bank Privatbank CJSC by both the plant and the above-mentioned intermediary enterprises. It became known to me from banking documents represented on behalf of [UTN] to the international court.
In October 2009 [Avto], [Taiz] and [Tekhnoprogress] were declared bankrupt on the basis of the lawsuit of one of enterprises taking part of the Privat Group, namely [Optima Trade] … At the present, on the basis of the decisions of the Economic Court of Poltava Region of Ukraine, the procedure of liquidation of the above-mentioned enterprises is underway.
The payment to[Korsan] for 18 percent of shares of [UTN] of the amount which is similar by scale to the amount of the plant's debt to [Tatneft] is also an element of the illegal scheme conceived by I.V. Kolomoisky and implemented by his associate on the Privat Group, Korban G.O., who acted on the auction acquiring the shares on behalf of [Korsan].
It became known to me from mass media that in the end of October 2009 the Economic Court of Poltava Region instituted the [UTN] bankruptcy proceedings. I possess neither information in more details on this case nor materials on this case. I suppose that this bankruptcy is controlled on the part of the Privat Group because the creditor referred to in mass media (Private Enterprise Industrial Enterprise AgroTechBusiness (city of Cherkasyy) has claims to [UTN] totalling in the amount of 250 thousand hryvynas only. I suppose that bankruptcy was initiated by the Privat Group in order, through termination of existence of[UTN], to hide its criminal acts and to avoid paying debts for petrol supplied by [Tatneft]."
This, too, supports the proposition, Mr Adkin QC submitted, that Tatneft had actual knowledge at a relatively early stage.
"The Republic of Tatarstan highly appreciates intentions of the new political-leadership of Ukraine to fully analyze situation with CJSC 'Ukrtatnafta' and to take steps to restore rule of law and legitimate rights of its Russian shareholders, which were greatly infringed by the actions taken in respect of CJSC 'Ukratnafta' since 2007."
"The Republic of Tatarstan and, in particular, the Ministry of Land and Property Relations of the Republic of Tatarstan, as the shareholder and the person representing interests of the Republic regarding ownership of 29% of CJSC 'Ukrtatnafta' shares, has always been interested in development and modernization of the company and is currently ready to fully cooperate with Ukrainian public authorities in the process of investigation of the raider seizure of CJSC 'Ukrtatnafta' and subsequent activities of raider character, which were organised by Ukrainian business group 'Privat', headed by businessman I. Kolomoisky (in cooperation with businessmen A. Yaroslavsky and P. Ovcharenko)."
The letter then goes on to say this:
"In 2007 from OJSC 'Tatneft' resources oil for amount of about 540 million USD was supplied to Kremenchug oil refinery, payment for oil was not made (i.e. actually its misappropriation took place).
In April 2008 intermediary companies, which had the right to claim to CJSC 'Ukrtatnafta' as to payment for oil, concluded assignment agreement and transferred specified rights to LLC 'Company 'Suvar-Kazan' (the Consignee of OJSC 'Tatneft' as for oil supplies). LLC 'Company 'Suvar-Kazan' appealed to the Russian court against CJSC 'Ukrtatnafta' and won the case. As a result, less than quarter of the debt was charged back from CJSC 'Ukrtatnafta' for account of its property on the territory of the Russian Federation."
Of particular importance, so Mr Adkin QC suggested, is the paragraph which then follows:
"However, according to information from OJSC 'Tatneft', in June 2009 CJSC 'Ukrtatnafta' organized financial transaction (having signs of fraud) for elimination of CJSC 'Ukrtatnafta' accounts payable for the oil supplied. Formally payments were made to accounts of Ukrainian companies opened in 'Privatbank', and after that funds disappeared. According to information available, earlier 'Privat' group established control over these intermediary companies, and is currently implementing their bankruptcy and liquidation."
Mr Adkin QC highlighted the reference in this paragraph to the fact that information had been received from Tatneft. Some months later, on 1 October 2010, the Russian Ministry of internal affairs wrote to the Ukrainian authorities with a "Request for Legal Assistance in connection with the investigation of a criminal case". The letter was again focused on what Tatneft now describes as the Oil Payment Siphoning Scheme.
"Beyond this, in 2009 Taiz, Tekhnoprogress Research and Production and Avto, through a series of opaque transactions, themselves came under the control of Igor Kolomoisky and Privat Group - the principal partners and co-conspirators of Mr Ovcharenko. As a result of these actions, even payments thereafter allegedly made by Ukrtatnafta to these entities for Tatneft oil never reached Tatneft. Instead, all of these amounts apparently went to Privat, a further flagrantly illegal misappropriation of Ukrtatnfafta's funds which has caused harm to Claimant."
This was followed by a Criminal Complaint made on 22 December 2011 to the Chief Investigation Directorate, Ministry of the Interior, Republic of Tatarstan by both Tatneft and S-K. This starts by referring to the Suvar-Avto Framework Contract and the fact that the oil supplied by S-K to Avto came from Tatneft, before going on to refer to the involvement of Taiz and Tekhnoprogress in a chain in which UTN was "the end purchaser". It then explains that "The oil supplied by [S-K] was only partially paid for, with the result that [S-K] could not meet its obligations to [Tatneft]" and the 2008 Assignment Agreement came to be entered into. There follows reference to the Russian Judgment and to UTN's continued non-payment. The complaint then states as follows:
"In spite of the decision of the court and the enforcement proceedings, instead of paying the debt, recognised by the court and due to be paid to [S-K], in about the summer of 2009 [UTN] began making payments to the companies [Taiz] and [Tekhnoprogress]. No payments whatever have been made to [S-K] (with the exception of the amount obtained as a result of the enforcement proceedings) until now.
Thereby, as we became aware, bankruptcy proceedings had begun in relation to the companies [Avto], [Taiz] and [Tekhnoprogress] and they were subsequently liquidated. Thus, there are grounds for supposing that the managers of [Avto], [Taiz] and [Tekhnoprogress] diverted funds which should have been transferred in compliance with the order of the Russian court, thereby causing a loss to the Russian companies, and since over 30% of the shares in [Tatneft] are held by OJSC 'Svyazinvestneftekhim' (an enterprise owned 100% by the Republic of Tatarstan through the MZIO RT) and thus to the interests of the Russian Federation."
Mr Adkin QC submitted that the fact that S-K was involved in the filing of this complaint demonstrates that S-K, as well as Tatneft, had at least constructive knowledge of relevant matters for limitation purposes. He suggested that it is, as he put it, "preposterous" to suppose that Tatneft did not share with S-K what it knew concerning the Oil Payment Siphoning Scheme at that stage.
"It was only after Privat Group took ownership and control of the oil intermediaries, and put these convoluted funnelling mechanisms in place, that UTN (under the control of Mr Ovcharenko) finally proceeded to 'pay' Taiz UAH 1.47 billion between June 12 and 16, 2009, and Tekhnoprogress nearly UAH 772 million between June 15 and 17, 2009. Those payments matched exactly the debts for valueless shares that had been engineered for Taiz (UAH 1.47 billion) and Tekhnoprogress (UAH 772 million) by its Privat-controlled management. Thus, through an elaborate series of transactions, Privat Group essentially managed to make the more than US$430 million UTN paid to the oil intermediaries and owed to Tatneft vanish into thin air."
In similar vein, paragraph 90 states as follows:
"In the end, the raiders had engineered a massive theft of more than US$400 million by taking control of the oil intermediaries that existed in the chain between Tatneft and UTN and then causing UTN to pay hundreds of millions of dollars to those intermediaries that were immediately siphoned off through prearranged mechanisms into Privat Group companies, with the intermediaries ceasing to exist as the result of sham bankruptcy proceedings in the Ukrainian courts commenced by Privat. This theft was accomplished to the detriment of UTN and its shareholders, and of Tatneft, which has never seen a penny of the stolen money."
It was Mr Adkin QC's submission that, in the circumstances, the fact that Tatneft had knowledge, by which he meant actual knowledge, of the Oil Payment Siphoning Scheme by this stage is obvious. He submitted, in particular, that Tatneft was able to make the same sort of allegations as are made in the current proceedings, whether in the BIT Arbitration or by way of Criminal Complaint. He went further, however, because he submitted that it is plain that S-K must, at the very least, have had constructive knowledge of what Tatneft knew at the time that Tatneft knew it. It was submitted that S-K was Tatneft's commission agent and, as such, ought to be regarded as having similar knowledge to that held by Tatneft, its principal. Mr Adkin QC added that, since Tatneft was able to make the allegations which it did in the BIT Arbitration, there is no sensible reason why S-K ought not also to have been able to acquire such knowledge. Mr Adkin QC suggested, in addition, that Mr Kolomoisky's involvement in the Oil Payment Siphoning Scheme was the subject of contemporary press comment, which should have alerted S-K also. Particular reference was made to a report on 31 May 2010, with a specific allegation that Mr Kolomoisky as follows:
"Igor Kolomoisky kills the chances of Rustam Minnikhanov to become the biggest creditor of [UTN]… . The once key oil suppliers to the Kremenchug Refinery – OOO Taiz and OOO [Tekhnoprogress] are about to be liquidated. Thus, Privat Group will kill the last chance of Tatar businessmen … to recover from ZAO [UTN] $300 mln of debt for the black gold supplies."
S-K, Mr Adkin QC stressed, was not merely a disinterested third party but, on the contrary, an entity which had its own primary liability (to Tatneft). This was a point which was made by Mr MacLean QC also. As he explained, S-K was at all relevant times under an obligation to pay Tatneft for the oil supplied to UTN. Tatneft wished to maintain the possibility of suing S-K for the debt and so gave S-K no comfort that it would not ultimately pursue that course of action. It follows that S-K had every commercial incentive to pursue with real diligence any line of enquiry that might have enabled it to recover in respect of the oil supplied to UTN and so discharge its (huge) payment obligation to Tatneft. Moreover, S-K, Mr Adkin QC suggested, had every opportunity to obtain from Tatneft the necessary knowledge. Indeed, Mr Adkin QC highlighted that Clause 2.2.8 of the Suvar-Tatneft Commission Contract expressly contemplated that Tatneft would provide S-K with information in response to enquiries, since it describes one of Tatneft's obligations as being to:
"Make timely replies to the Commission Agent's enquiries and take actions associated with the performance of this Contract."
There would, accordingly, it was suggested. have been no bar to Tatneft providing the information which S-K needed to know for S-K's own purposes in view of S-K's own liability to Tatneft.
"In the end of 2007, or the beginning of 2008…there were regular discussions between [S-K's lawyers]… and Tatneft's lawyers. There were regular calls to brainstorm ideas and discuss options as to how best to recover the money owed to S-K … That cooperation, in trying to find the best options for S-K to recover the contractual indebtedness for the supplied oil, continued until the beginning of 2010."
This clearly provides significant support for the Defendants' constructive knowledge case. The difficulty remains, however, that Mr Korolkov and his Deputy, Mr Gubaidullin, have each given witness statements disputing that they had the necessary knowledge before March 2013. Specifically, their evidence is to the effect that S-K was not aware that UTN had made payments in respect of the oil to Taiz and Tekhnoprogress in June 2009 and did not become aware of those payments until the end of December 2011. Similarly, they maintain, S-K was not aware of the bankruptcy proceedings in relation to Taiz and Tekhnoprogress until December 2011. Nor, they say, did S-K have access to the documents and submissions filed by Tatneft in its confidential BIT Arbitration against the Ukraine; instead, S-K simply provided documents to Tatneft as and when Tatneft asked. It was only towards the end of April 2013 that, he explains in his witness statement, Mr Gubaidullin learnt from Tatneft that Mr Kolomoisky had given oral testimony in the BIT Arbitration proceedings and that such testimony had pointed to the possibility that Mr Kolomoisky and his associates had been directly involved in the siphoning of the funds. Although this is evidence which is as to their actual knowledge and although Mr Adkin QC is able to submit, with considerable force, that given that S-K and Tatneft were in regular communication in relation to the recovery of the oil monies, S-K ought to have known what Tatneft knew, nonetheless it does not seem to me that it would be appropriate to decide, once and for all, that S-K had constructive knowledge, or more accurately that the case that S-K did not have such knowledge has no 'real prospect of success', and that, accordingly, the claim cannot succeed. Such a conclusion would involve the Court in the type of 'mini-trial' which the authorities are clear should not be allowed to take place.
"It is very important that applications to discharge freezing applications do not turn into mini-trials; parties are often tempted to anticipate the real trial on these applications but that temptation must be firmly resisted. The application took 3 days before the judge and, in my view, was a far heavier application than it need or should have been. As is evident from Barnstaple Boat Co Ltd v Jones  1 AER 1124 the English court has quite enough difficulty in establishing when the relevant English time limit begins for a fraud action. It was there held to be unsuitable for summary decision. It cannot be any easier for a court dealing with a Kazakh time-limit. Unless the position is very clear, it cannot be determined on an interlocutory application."
I consider that the position as regards limitation is insufficiently clear, and so that it cannot be resolved at this stage.
The proposed amendments
"… Working from first principles … it is plain that, provided the defendant can show a prima facie defence of limitation, the burden must be on the claimant to show that the defence is not in fact reasonably arguable. The claimant is after all in effect inviting the court to make a summary determination that the defence of limitation is unavailable. If the availability of the defence of limitation depends upon the resolution of factual issues which are seriously in dispute, it cannot be determined summarily but must go to trial. Hence it can only be appropriate at the interlocutory stage to deprive a defendant of a prima facie defence of limitation if the claimant can demonstrate that the defence is not reasonably arguable."
Then, in stating his conclusion, Tomlinson LJ said this at :
"…The Respondents did not show, and in my view did not come close to showing, that the Appellants have no reasonably arguable limitation defence to the new claims, and permission to amend should not therefore have been granted pursuant to CPR 17.1(2)(b). The judge answered question one of the threefold enquiry correctly and in the affirmative. It is important to appreciate that his determination was not a final determination that the relevant claims are time-barred. His finding was that the Appellants have a reasonably arguable case that they are time-barred. That does not preclude the Respondents from issuing separate proceedings in which they will seek to prove that the claims are not in fact time-barred, as they have indeed done. Thus the judge was in my view right to identify as decisive of the application before him the question whether the proposed amendments or any of them arise out of the same facts or substantially the same facts as those already in issue in the claims as then currently pleaded."
In the present case, the fact that the new claim sought to be introduced by the proposed amendments, if it is a new claim (which Tatneft disputes), is time-barred is not merely reasonably arguable but is accepted by Tatneft.
"The remaining question is whether this court can, under Rome II, in the absence of proof as to Egyptian law, apply the presumption that Egyptian law is the same as English law. I would reject Mr Palmer's argument on this. In OPO v (1) MLA (2) SLT  EWCA Civ 1277, this court decided that Article 4(1) of Rome II did not exclude the presumption. Giving the judgment of the court, I held:
'111. There is no discussion in the judgment of Simon J, or the Law Commissions' report, of the important restriction on the presumption which would result if that were the effect of (in the case of the former) the Regulation or (in the case of the latter) what is now the 1995 Act. Nor is there any indication in the 1995 Act or the Regulation themselves as to what the court must do if there is no evidence as to foreign law. In my judgment, it is clearly a matter which has been left to be resolved in accordance with the rules of the forum. I note that the leading work on the subject, Dicey, Morris and Collins, The Conflict of Laws, (15th ed. 2012) previously took the contrary view, but no longer does so (see paragraph 35-122 of the main work and see paragraph 35-122 of the First Supplement published in January 2014 which merely notes the views of Simon J in Belhaj without expressing a view on this question). Accordingly I do not consider that the observations of Simon J should be taken as supporting the proposition for which Mr Dean has cited them.'
This case went to the Supreme Court, who reversed the decision of the Court of Appeal on the question whether there was a properly constituted tort under English law (James Rhodes v OPO  UKSC 32). Accordingly the Supreme Court did not have to deal with the question whether the mandatory nature of Article 4(1) of Rome II excluded the presumption that foreign law is the same as English law in the absence of proof to the contrary. However, at , Lord Neuberger (with whom Lord Wilson agreed) specifically accepted the presumption could be applicable, although he did not give his reasons for that conclusion. I accept Mr Palmer's submission that the ruling on the presumption in OPO is no longer binding under the doctrine of precedent, though it would constitute strong persuasive authority: see R v Secretary of State for the Home Department ex-parte Al-Mehdawi  1AC 876 at 883 per Taylor LJ with whom Nicholls and O'Connor LJJ agreed. However, Mr Palmer did not seek to address the point made in paragraph 111 of my judgment in OPO that there is no indication in Rome II as to what the court must do if there is no evidence as to foreign law. In a common law system, such as that in England and Wales, the court does not have any inquisitorial function and cannot therefore conduct an inquiry itself as to foreign law. Even if it did so it might not come to the right conclusion. If Mr Palmer's argument is right, it would moreover follow that the court could not act on any agreement of the parties as to what the foreign law was or any agreement by the parties not to plead foreign law. These seem to me to be startling conclusions. Accordingly, for these reasons, in addition to those which I gave in OPO, I reject Mr Palmer's submissions that the presumption as to foreign law being the same as English law does not apply and his overarching submission that Lady Brownlie has failed to show a completed cause of action in tort because she has not adduced evidence as to Egyptian law."
Adopting this approach, and so assuming that Russian law is the same as English law, results in the application of English law.
"19. A cause of action is, as Diplock LJ famously observed in Letang v Cooper  1 QB 232 at 242/3, 'a factual situation the existence of which entitles one person to obtain from the court a remedy against another person'. Longmore LJ in Berezovsky v Abramovich  1 WLR 2290 at 2309 expressed the concept in essentially the same way: 'A cause of action is that combination of facts which gives rise to a legal right'.
20. In the quest for what constitutes a 'new' cause of action, i.e. a cause of action different from that already asserted, it is the essential factual allegations upon which the original and the proposed new or different claims are reliant which must be compared. Thus 'the pleading of unnecessary allegations or the addition of further instances or better particulars do not amount to a distinct cause of action' – see Paragon Finance v Thakerar  1 All ER 400 at 405 per Millett LJ. 'So in identifying a new cause of action the bare minimum of essential facts abstracted from the original pleading is to be compared with the minimum as it would be constituted under the amended pleading' - see per Robert Walker LJ in Smith v Henniker-Major  Ch 182 at 210.
21. The court is therefore concerned with the comparison of 'the essential factual elements in a cause of action already pleaded with the essential factual elements in the cause of action as proposed' – see per David Richards J in HMRC v Begum  EWHC 1799 (Ch) at paragraph 32. 'A change in the essential features of the factual basis (rather than, say, giving further particulars of existing allegations) will introduce a new cause of action' – ibid, paragraph 30.
22. Where an amendment pleads a duty which differs from that pleaded in the original action, it will usually assert a new cause of action – see per Sir Iain Glidewell in Darlington Building Society v O'Rourke  PNLR 365 at 370. However as Sir Iain went on to observe, where different facts are alleged to constitute a breach of an already pleaded duty, the courts have had more difficulty in deciding whether a new cause of action is pleaded. Particularly has this been so in construction cases. Thus in Steamship Mutual Underwriting Association v Trollope and Colls  33 BLR 77 a claim in respect of a defect in brickwork caused by a breach of the self-same duty as had earlier been relied upon to found a claim in respect of air-conditioning pipes in the cavity walls was regarded by the Court of Appeal as a new claim, whereas on apparently indistinguishable facts the Court of Appeal had in Idyll Limited v Dinerman  1 CLJ 294 regarded claims in respect of the roof as asserting the same cause of action as the original claim founding on the same duty in relation to defects in the brickwork and functions of the building. In the former case May LJ offered the guidance that one must look not only to the duty, but also to the nature and extent of the breach relied upon, as well as to the nature and extent of the damage complained of in deciding whether, as a matter of degree, a new cause of action is sought to be relied upon. The question to be resolved is therefore one of fact and degree. For my part I am not convinced that one needs to look further than for a change in the essential features of the factual basis relied upon, bearing in mind that the factual basis will include the facts out of which the duty is to be spelled as well as those which allegedly give rise to breach and damage. I respectfully agree with Lloyd LJ, as he then was, later Lord Lloyd of Berwick, who observed in the Trollope and Colls case, at page 101, that 'in most cases it will be easy to say on which side of the line the case falls'. But as Lloyd LJ observed, there will sometimes be a grey area, where different views are possible. I would not therefore dissent from the following distillation of the principles by Jackson J, as he then was, in Secretary of State for Transport v Pell Frischmann  EWHC 2909 (TCC) at paragraph 38:-
'(i) If the claimant asserts a duty which was not previously pleaded and alleges a breach of such duty, this usually amounts to a new claim;
(ii) If the claimant alleges a different breach of some previously pleaded duty, it will be a question of fact and degree whether that constitutes a new claim.
(iii) In the case of a construction project, if the claimant alleges breach of a previously pleaded duty causing damage to a different element of the building, that will generally amount to a new claim.'"
"The submission made by Mr Myerson on behalf of the respondent would require us to see the 'facts already in issue' at a very high level of abstraction. It was put on the basis that the essential facts all occurred in the course of a meeting between the respondent and his solicitor on 28 August and that what passed at that meeting has always constituted 'the facts in issue'. In my judgment the 'facts already in issue' require more rigorous analysis than that and fall to be determined primarily on the content of the existing pleadings in comparison with the proposed amended pleading.
The claimant cannot move from one account of what was said at a meeting to another very different account and thereafter simply assert this is still a dispute about what was said at the meeting. In one rather loose sense it may be, but it is a different dispute from the earlier one and for the reasons given by Pill LJ it cannot be said that the new cause of action 'arises out of the same facts or substantially the same facts as are already in issue'."
This was in relation to an appeal against a decision of the judge at first instance to allow the amendments to be made under CPR 17.4(2) ('same or similar facts), the judge having decided that the amendments entail a new cause of action (indeed, that the "whole case has now changed in colour and context": see  per Pill LJ). It was not, therefore, a case in which it was decided that there was no new cause of action sought to be introduced by the amendments.
"UTN should have paid S-K pursuant to the Assignment Agreement (i) upon receipt of the notification of entry into the Assignment Agreement and payment request from S-K in May 2008 or (ii) upon confirmation by the Tatarstan judgments of UTN's indebtedness pursuant to the Assignment Agreement. However, as described below, rather than causing UTN to make such payment to S-K, the Defendants embarked on a dishonest scheme whereby UTN would, inconsistently with the Assignment Agreement and the Tatarstan judgments, make payment of the oil monies to Taiz and Tekhnoprogress (over which they had acquired control) with the sole aim of fraudulently siphoning off those funds from Taiz and Tekhnoprogress for the Defendants' own benefit."
Paragraph 54B then states:
"In any event, irrespective of the validity of the Assignment Agreement, and as the Defendants were well aware, S-K had a lawful right to be paid for the oil that had been supplied to UTN through the contractual chain, either directly, pursuant to the Assignment Agreement, or indirectly, through the intermediate companies in that contractual chain. By carrying out the Oil Payment Siphoning Scheme described below, the Defendants misappropriated UTN's payment for the oil for their own benefit and thus ensure that S-K would not be paid (thereby causing loss to S-K)."
Paragraph 56 in its draft amended form (with underlining) states as follows:
"In more detail, the fraudulent scheme preceded by the following steps. It is to be inferred from the facts pleaded below that each of the following steps was undertaken at the ultimate direction of the Defendants, alternatively Bogolyubov and Kolomoisky with the assistance or participation of Yaroslavsky and Ovcharenko as pleaded specifically at paragraphs 80A-E, 81 and 82 below. To the extent that any Defendant did not carry out these steps, they connived in and/or facilitated them and thus participated in the unlawful acts for the purposes of article 1064 and 1080 of the Russian Civil Code. The following are the best particulars that Tatneft can presently give as to the modus operandi of the Oil Payment Siphoning Scheme."
Paragraph 80A of the draft Amended Particulars of Claim then states:
"As set out at paragraph 30 above, on 30 June 2009, Korsan completed the purchase of a 18.296% shareholding in UTN (being the shareholding in UTN formerly controlled by Tatneft)."
This is followed by paragraph 80B, which alleges:
"Such purchase coincided with the Oil Payment Siphoning Scheme and followed only a few weeks after UTN had paid UAH 2.24 billion to Taiz and Tekhnoprogress as set out at paragraph 74 above."
A number of sub-paragraphs follow which set out the ownership structure of Korsan, including the interests held by Privat, Yaroslavsky and Ovcharenko. Specifically, it is alleged that on 15 June 2009 companies representing the interests of Privat, Yaroslavsky and Ovcharenko acquired interests and approved the increase in the charter capital of Korsan by UAH 2.24 billion, corresponding exactly, or almost exactly, with the payments made by UTN to Taiz and Tekhnoprogress. It is alleged that, in view of the contributions made by the respective companies, Privat had a 50% interest in Korsan and Yaroslavsky and Ovcharenko each a 25% interest. The following is then alleged:
"(5) On 17 June 2009 (the same day as the final payments by UTN to Tekhnoprogress), Korsan deposited UAH 303,526,720 with the account of UTN in PrivatBank as a guarantee for participation in the auction for the sale of the UTN shares and which constituted 20% of the initial auction price.
(6) On 27 June 2009 Korsan won the auction being the sole bidder.
(7) On 30 June 2009 Korsan signed a shares sale and purchase agreement ('SPA') with UTN in relation to the 18.296% shareholding in UTN.
(8) According to the SPA the purchase price for the shares amounted to UAH 2,100,000,000 and Korsan was to transfer the balance of UAH 1,796,473,280 within a month after the SPA execution date.
(9) It is to be inferred that the UAH 2.1 billion acquisition cost of the UTN shares was funded from the UAH 2.24 billion paid by UTN to Taiz and Tekhnoprogress (which had been extracted from Taiz and Tekhnoprogress pursuant to the sham share sale and purchase transactions pleaded above). In particular, it is to be inferred that the UAH 2.24 billion paid to Taiz and Tekhnoprogress was routed by the Defendants to the new participants in Korsan to allow them to fund their contributions to Korsan's increased charter capital, which funds were then, in substantial part, used to pay for Korsan's 18.296% shareholding in UTN.
(10) Further, the General Director of Korsan, Mr F.A. Lysenko, confirmed in a letter to the Ukrainian Ministry of Interior of the Dnepropetrovsk Region (in response to a request from the Ministry dated 25 August 2010) that the funds used by Korsan to purchase the shareholding in UTN were provided by the founders of the company."
Paragraphs 80C-E go on to state:
"80C. Accordingly, the Oil Payment Siphoning Scheme allowed the Defendants, via Korsan, to acquire the valuable shareholding in UTN formerly owned by Tatneft for the benefit of the Defendants with funds that should have been paid to S-K (and ultimately to Tatneft itself) in return for the oil that it had supplied, through the contractual chain, to UTN. Thus Tatneft was deprived not only of its shareholding in UTN, but (together with S-K) of payment for hundreds of millions of dollars' worth of oil which had been supplied to UTN.
80D. Privat (and therefore Bogolyubov and Kolomoisky), Yaroslavsky and Ovcharenko all had beneficial interests in Korsan as pleaded above and were therefore each direct financial beneficiaries of the Oil Payment Siphoning Scheme.
80E. As a consequence of the matters pleaded above, it is to be inferred that each of the Defendants was aware of the source of the funds used by Korsan to purchase its 18.296% shareholding in UTN and was aware of, and participated in, or at least connived in and/or facilitated, the Oil Payment Siphoning Scheme in order to obtain substantial financial benefits for themselves and causing harm to S-K."
"As set out above, rather than abiding by the Tatarstan judgments, the Defendants caused UTN to make payment of the oil monies to Taiz and Tekhnoprogress, a course of conduct consistent only with the invalidity of the Assignment Agreement. However, as pleaded above, the oil monies were then misappropriated by the Defendants before they could be passed up the contractual chain to S-K. Under Article 15 of the RCC, S-K is entitled to recover compensation representing the full amount of the debt that Avto
owed it but which itfailed to pay due to the unlawful acts pleaded below above, namely the USD 439.4 million in oil monies less the USD 105.3 million recovered by way of enforcement of the Decision of the Arbitrazh Court of republic of Tatarstan dated 28 August 2008 (which S-K subsequently paid to Tatneft under the Suvar-Tatneft Commission Agreement), in total USD 334.1 million."
Dealing with "unlawful acts", paragraph 88 of the draft Amended Particulars of Claim then states:
"Tatneft relies on the following facts and matters as constituting relevant unlawful acts committed by the Defendants or some of them under the 'general tort' principle of Russian law for the purposes of Article 1064:
(i) after taking over Taiz and Tekhnoprogress, they caused them to breach their contractual obligations to pay the oil money upstream
viato Avto to S-Kby diverting the money offshore through the two rounds of sham share transactions connected with purchase of shares of various 'junk' companies; and/or
bytaking over and procuring the bankruptcy of Avto, Taiz and Tekhnoprogress as pleaded at paragraphs 76 to 80 above; , they deprived S-K of the full value of its claims against Avto under the Suvar-Avto Framework Contract (and in consequence the rights of recourse that Avto might otherwise have had downstream against Taiz and Tekhnoprogress, and that Taiz and Tekhnoprogress had against UTN, were rendered worthless);and/or
(iii) further and in any event, in carrying out the Oil Payment Siphoning Scheme, the Defendants were not engaged in legitimate and lawful business activity but rather in a dishonest scheme to deprive S-K of substantial payments for oil that had been supplied by it through the contractual chain. Such scheme involved the misappropriation of funds for the Defendants' own financial benefit through fraudulent sham transactions as described above and the procurement of the bankruptcy of Avto, Taiz and Tekhnoprogress for the purpose of defrauding S-K and ensuring that it would not be paid the monies that were lawfully due to it. As a matter of Russian law, the infliction of harm through such a dishonest scheme is unlawful for the purposes of Article 1064.
(iv) The role of the Defendants in the said unlawful conduct is to be inferred from the facts and matters set out at paragraphs 80A-80E, 81 and 82 above."
Then, dealing with "causation", paragraph 89 states as follows:
"But for the acts and omissions of the Defendants pleaded above comprising the unlawful acts, UTN would have either paid S-K directly under the Assignment Agreement or else paid Taiz and Tekhnoprogress what it owed them for the Tatneft oil sold and delivered in accordance with the agreements pleaded above, who in turn (but for the unlawful Oil Payment Siphoning Scheme) would (consistently with having received the money from UTN and consistently with the position under Ukrainian law) have paid Avto and Avto would have paid S-K. As a matter of Russian law, it is an actionable wrong under Article 1064 of the RCC for a person to cause another person to breach his contractual obligations to, or not to pay his debt to, a third person, and the loss sustained by that third person is recoverable as damages by him pursuant to Article 15 of the RCC."
There then follows a new paragraph, paragraph 89A, which states:
"Accordingly, S-K was lawfully entitled to payment for the oil supplied to UTN through the contractual chain, whether directly, pursuant to the assignment agreement and the Tatarstan judgments or indirectly via Taiz and Tekhnoprogress and Avto. By means of the Oil Payment Siphoning Scheme described above, the Defendants intended and ensured that S-K would not receive such payments and that they would instead be diverted and misappropriated for the Defendants' own benefit as aforesaid. In the premises, the Defendants caused S-K not to receive substantial payments to which, on any view, it was lawfully entitled and thereby caused loss to S-K in the amount of the payment not received. To the extent that they did not cause these events they connived in and/or facilitated them and thus participated in the unlawful acts for the purposes of Articles 1064 and 1080 of the Russian Civil Code."
Abuse of process
"In my judgment, when regard is had to these authorities the key question must always be whether or not, at the time of issuing a Writ, the claimant was in a position properly to identify the essence of the tort or breach of contract complained of and if given appropriate time to marshal what it knew, to formulate Particulars of Claim. If the claimant was not in a position to do so, then the claimant could have no present intention of prosecuting proceedings, since it had no known basis for doing so. Whilst therefore the absence of present intention to prosecute proceedings is not enough to constitute an abuse of process, without the additional absence of known valid grounds for a claim, the latter carries with it, as a matter of necessity, the former. If a claimant cannot do that which is necessary to prosecute the claim by setting out the basis of it, even in a rudimentary way, a claimant has no business to issue a Claim Form at all 'in the hope that something may turn up'. The effect of issuing a Writ or Claim Form in such circumstances is, so the plaintiff/claimant hopes, to stop the limitation period running and thus deprive the defendant of a potential limitation defence. The plaintiff/claimant thus, unilaterally, by its own action, seeks to achieve for itself an extension of the time allowed by statute for the commencement of an action, even though it is in no position properly to formulate a claim against the relevant defendant. That must, in my judgment, be an abuse of process and one for which there can be no remedy save that of striking out the proceedings so as to deprive the claimant of its putative advantage. The illegitimate benefit hopefully achieved can only be nullified by this means. Whatever powers may be available to the court for other abuses, if this is an abuse, there is only one suitable sanction."
As is apparent from this passage, the abuse in that case was in the issuance of a claim form in order to protect time "in the hope that something may turn up". Cooke J stated his conclusion on this at :
"In my judgment therefore if Nomura, at the time of issuing its Claim Form, was not in a position to do the minimum necessary to set out the nature of the claim it was making, it would be seeking an illegitimate benefit, namely the prevention of further time running under the Limitation Acts for a claim which it could not properly identify or plead. That would be an abuse of the process of the court. Insofar as it sought to make any claim in contract, it would be necessary for it to be able to identify the particular contract and the alleged breach. In the case of any breach of tortious duty, it would be necessary for it to be in a position to identify the essential acts or omissions which constituted the breach of duty, negligence or negligent misstatement. For the purposes of negligent misstatement, Nomura would have to be able to identify what advice or information was inaccurate and what was given negligently, at least in essence. If Nomura was not in a position to do this, it was not in a position properly to issue a claim, since it could not have proceeded properly to plead Particulars of Claim without the off chance occurring that something would turn up. In such circumstances it could have no present intention to pursue a claim since it had no sufficient idea of the claim it wished to pursue."
The applications to discharge the Worldwide Freezing Order
'Good arguable case'
"A 'good arguable case' is no doubt the minimum which the plaintiff must show in order to cross what the judge rightly described as the 'threshold' for the exercise of the jurisdiction. But at the end of the day the court must consider the evidence as a whole in deciding whether or not to exercise this statutory jurisdiction."
"When the question is one of construction or one of law, and there is argument on the point, the court may well be able to take a view as to who appears, albeit at the interlocutory stage, to have the better, or indeed much the better, of the argument."
At , however, he explained that:
"In the case of purely factual questions, I consider that it is sufficient for the claimant to meet the traditional test laid down by Mustill J … that the claimant needs to show a good arguable case in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success."
"In the light of the increasing sophistication of fraudsters, and their extensive use of companies and other entities to mask their activities and assets, the court should adopt a robust and realistic approach to technical points of substantive law or evidence raised against the grant of a freezing order, in cases where there is good reason to believe that the fraud has occurred."
Mr McGrath QC did so at the same time as also making the point that the appropriate approach is not to ask, as is asked in the context of applications for service out of the jurisdiction, whether the claimant "has a much better argument on the material available" (Bols Distilleries BV v Superior Yacht Services Ltd  1 WLR 12 at ). That, the so-called 'Canada Trust Gloss', the Court of Appeal held in the Kazakhstan Kagazy case (at  per Longmore LJ and  to  per Elias LJ) does not apply to the 'good arguable case' test as it applies in the context of freezing orders. It is, indeed, Mr McGrath QC suggested, perfectly possible and logical to conclude that both sides have a good arguable case on the material presently available and that their dispute can only be resolved at trial. Mr McGrath QC also submitted, relying upon the Kazakhstan Kagazy case at  (as well as Derby & Co Ltd v Weldon  Ch 48 at 57-58), that the Court should, at this early stage in the litigation, discourage any attempt to embroil it in a detailed assessment of the facts or legal argument. I accept that Mr McGrath QC is right about this. In the present case, however, my having decided that there is no 'serious issue to be tried', it is impossible to conclude that the 'good arguable case' test has been met.
Risk of dissipation
"There are numerous paragraphs in the authorities relating to Mareva injunctions which make it plain that unsupported statements and expressions of fear carry very little, if any weight. The Court needs to act on objective facts from which the Court can infer that the Defendant is likely to move assets abroad or dissipate them within the jurisdiction".
In Thane Investments v Tomlinson  EWCA Civ 1272 at  Peter Gibson LJ emphasised that it "is important that there should be solid evidence adduced to the court of the likelihood of dissipation". More recently, Mann J commented in JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev  EWHC 4336 (Ch) at :
"What one has to do is to acknowledge the seriousness of the consequences of a freezing order, and the invasion of liberty that it involves (especially bearing in mind it is usually sought in a without notice application) and to reflect that in requiring proof to an appropriately high standard. Orders are not to be lightly sought and will not be granted on flimsy evidence. The requirement to demonstrate a risk of dissipation is a lot more than formal."
"As has been said many times, the purpose of a freezing order is not to provide the claimant with security but to restrain a defendant from evading justice by disposing of assets otherwise than in the ordinary course of business in a way which will have the effect of making itself judgment proof. It is that concept which is referred to by the label "risk of dissipation" …
… the defendants advance seven propositions which the bank does not dispute and which I accept. They were as follows:
a. The claimant must demonstrate a real risk that a judgment against the defendant may not be satisfied as a result of unjustified dealing with the defendant's assets.
b. That risk can only be demonstrated with solid evidence; mere inference or generalised assertion is not sufficient.
c. It is not enough to rely solely on allegations that a defendant has been dishonest; rather it is necessary to scrutinise the evidence to see whether the dishonesty in question does justify a conclusion that assets are likely to be dissipated.
d. The relevant inquiry is whether there is a current risk of dissipation; past events may be evidentially relevant, but only if they serve to demonstrate a current risk of dissipation of the assets now held.
e. The nature, location and liquidity of the defendant's assets are important considerations.
f. Whether or to what extent the assets are already secured or incapable of being dealt with is also relevant.
g. So too is the defendant's behaviour in response to the claim or anticipated claim."
"We agree with Peter Gibson LJ that the court should be careful in its treatment of evidence of dishonesty. However, where (as here) the dishonesty alleged is at the heart of the claim against the relevant defendant, the court may well find itself able to draw the inference that the making out, to the necessary standard, of that case against the defendant also establishes sufficiently the risk of dissipation of assets. That is supported by two earlier Court of Appeal decisions, not cited in Thane Investments. These are Norwich Union v Eden (25 January 1996 unreported) and Grupo Torras SA v Al Sabah (21 March 1997 unreported). Both of them were cited by Flaux J in his judgment in Madoff Securities International Ltd and others v Raven and others … . Those decisions are not inconsistent with what Peter Gibson LJ said in Thane Investments v Tomlinson, but they put it into context, and their context is a good deal closer to that of the present case."
Lloyd LJ then went on to quote from the Madoff Securities case ( EWHC 3102 (Comm)) where Flaux J said this at :
"163. In this context, and entirely properly, Mr Weekes referred me to the decision of the Court of Appeal in Thane Investments v Tomlinson  EWCA Civ 1272 where Peter Gibson LJ at  deprecates the tendency to infer a risk of dissipation from the fact that allegations of dishonesty are made against the defendant. However, Mr Weekes submitted that Thane Investments was a case which must be approached with caution, as it was an ex tempore judgment given where the defendant was unrepresented, so that the case was not perhaps as fully argued as it might have been. In particular, two earlier relevant decisions of the Court of Appeal do not appear to have been cited to the Court of Appeal."
Flaux J went on at  to address Norwich Union v Eden (25 January 1996, unreported), in which Phillips LJ (as he then was) said this:
"It seems to me that when the court considers whether there is a good arguable case it is at that stage that it considers whether the likelihood of a judgment in favour of the plaintiff is sufficient to justify the grant of Mareva relief. If it is so satisfied, the question then arises:- if such a judgment is given, what is the risk that there will be no assets there to satisfy it? If the judgment in question being considered is a judgment in which allegations of fraud are made, then it seems to me that it is open to the court to conclude from that fact alone that there is sufficient risk of dissipation of assets to justify the grant of relief. For myself it does not seem to me that there would be any prospect of persuading this court that the learned Judge had erred in principle in so concluding."
At  Flaux J then referred to Gruppo Torras SA v Al Sabah 1997 WL 1105536 (21 March 1997) where Saville LJ (as he then was) stated as follows:
"Mr Etherton also criticised the judge for failing, as he put it, properly to address himself to the question whether there was a real risk of dissipation of assets, and simply concluded that such a risk existed because this was a fraud case. In this context Mr Etherton pointed out that Mr Dawson had lived and worked as an investment adviser in Switzerland for a long time and that his assets included a very valuable house in Geneva, so that it was hardly likely that he would set about making them judgment proof. Mr Etherton also drew attention to the fact that the litigation had begun years ago and long before Mr Dawson was joined to it, yet there was no suggestion that he has yet made any attempt to dissipate assets.
These are certainly points that can be made on behalf of Mr Dawson, but again I am not persuaded that the judge simply failed to take them into account. What is clear from the judgment is that the judge took the view that there was a good arguable case that Mr Dawson was knowingly implicated in the fraud; and that the nature of the allegations was such that there was a strong fear of dissipation. Since it is part of Mr Dawson's own case that he was expert in the sort of intricate, sophisticated and international financial transactions which feature in this case, and since the plaintiffs had established a good arguable case that Mr Dawson had used his expertise for dishonest purposes, I am not in the least surprised that the judge reached the conclusion he did. In short I remain wholly unpersuaded that the judge so erred in his assessment of the risk of dissipation that it would be right for this court to interfere."
In the next two paragraphs, Flaux J said this:
"166. Mr Weekes relied upon that case in support of a submission that, like the defendant in that case, Mrs Kohn is experienced in sophisticated international financial transactions. He submitted that in the light of those earlier authorities, the way in which Thane Investments should be read is correctly set out by Patten J in Jarvis Field Press v Chelton  EWHC 2674 (Ch), where having cited the relevant passage from the judgment of Peter Gibson LJ, the learned judge says at :
'The relevance of that passage, of course, is to the submission made by Mr Lord, on behalf of the claimants on this application, that I should infer from the apparent dishonesty of Mrs Chelton, together with the recent change of circumstances, a real likelihood and risk of dissipation. I have no difficulty in accepting the general principle, emphasised by Peter Gibson LJ, that a mere unfocused finding of dishonesty is not, in itself, sufficient to ground an application for a freezing order. It is necessary to have regard to the particular respondents to the application and to ask oneself whether, in the light of the dishonest conduct which is asserted against them, there is a real risk of dissipation. As Peter Gibson LJ made clear in the passage I have already quoted, the court has to scrutinise with care whether what is alleged to have been dishonesty justifies the inference. That is not, therefore, a judgment to the effect that a finding of dishonesty (or, in this case, an allegation of dishonesty) is insufficient to found the necessary inference. It is merely a welcome reminder that in order to draw that inference it is necessary to have regard to the particular allegations of dishonesty and to consider them with some care.'
167. I agree with that analysis of the approach which the court should adopt when considering whether to grant a freezing injunction, in a case where there are allegations of fraud or deliberate misconduct against a defendant."
Returning to the VTB case, after referring to the Madoff Securities case, Lloyd LJ said this at :
"We agree with those observations by Flaux J. On that basis it seems to us that it would have been right for the judge to take into account a finding of a good arguable case that Mr Malofeev had been engaged in a major fraud, and that he operated a complex web of companies in a number of jurisdictions, which enabled him to commit the fraud and would make it difficult for any judgment to be enforced. We would regard such factors as capable of providing powerful support for the case of a risk of dissipation."
"It seems to me that the following principles relevant to the present application can be discerned from those two cases:
(1) The mere fact of delay in bringing an application for a freezing injunction or that it has first been heard inter partes, does not, without more, mean there is no risk of dissipation. If the court is satisfied on other evidence that there is a risk of dissipation, the court should grant the order, despite the delay, even if only limited assets are ultimately frozen by it;
(2) The rationale for a freezing injunction is the risk that a judgment will remain unsatisfied or be difficult to enforce by virtue of dissipation or disposal of assets (see further the citation from Congentra AG v Sixteen Thirteen Marine SA ('The Nicholas M')  2 Lloyd's Rep 602;  EWHC 1615 (Comm) below). In that context, the order for disclosure of assets normally made as an adjunct to a freezing injunction is an important aspect of the relief sought, in determining whether assets have been dissipated, and, if so, what has become of them, aiding subsequent enforcement of any judgment;
(3) Even if delay in bringing the application demonstrates that the claimant does not consider there is a risk of dissipation, that is only one factor to be weighed in the balance in considering whether or not to grant the injunction sought."
Duty of full and frank disclosure
"… an applicant must show the utmost good faith and disclose his case fully and fairly … He must identify the crucial points for and against the application, and not rely on general statements and the mere exhibiting of numerous documents. He must investigate the nature of the cause of action asserted and the facts relied on before applying and identify any likely defences. He must disclose all facts which reasonably could or would be taken into account by the Judge in deciding whether to grant the application. It is no excuse for an applicant to say that he was not aware of the importance of matters he has omitted to state."
In the Brink's Mat case, at page 1356F, Ralph Gibson LJ commented as follows:
"(1) The duty of the applicant is to make 'a full and fair disclosure of all the material facts' …
(2) The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers …
(3) The applicant must make proper inquiries before making the application … The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.
(4) The extent of the inquiries which will be held to be proper, and therefore necessary, must depend on all the circumstances of the case including (a) the nature of the case which the applicant is making when he makes the application; and (b) the order for which application is made and the probable effect of the order on the defendant … and (c) the degree of legitimate urgency and the time available for the making of inquiries …".
In the recent Pugachev case, Mann J explained as follows:
"171. The obligation to anticipate defences in pursuit of the obligation to make full and frank disclosure is very important … An applicant for without notice relief has actively to consider what points of defence might be taken by the defendant and put them before the court. That is a fundamental requirement, and safeguard.
172. In making an assessment as to whether a point of defence is sufficiently obvious, one must guard against assuming that any point that has occurred to the defence lawyers ought to have occurred to the claimants' lawyers. The obligation to disclose does not require that every potential point be flushed out. Nevertheless there is an obligation to look at things from a defendant's point of view and anticipate defences which are obvious and those which require some thought but are nonetheless plain enough (as arguable defences) when thought about …."
"… where facts are material in the broad sense in which that expression is used, there are degrees of relevance and it is important to preserve a due sense of proportion. The overriding objectives apply here as in any matter in which the Court is required to exercise its discretion.
I would add that the more complex the case, the more fertile is the ground for raising arguments about non-disclosure and the more important it is, in my view, that the judge should not lose sight of the wood for the trees.
In applying the broad test of materiality, sensible limits have to be drawn. Otherwise there would be no limit to the points of prejudice which could be advanced under the guise of discretion."
As Males J put it in the National Bank Trust case at , it is only "those trees which are of particular importance" which merit close scrutiny in a discharge application.
"a. A fact is material if it is one which the judge would need (or wish) to take into account when deciding whether to make the freezing order.
b. Failure to disclose a material fact will sometimes require immediate discharge of the order. This is likely to be the court's starting point, at least when the failure is substantial or deliberate.
c. Nevertheless the court has a discretion to continue the injunction (or to impose a fresh injunction) despite a failure of disclosure; although it has been said that this discretion should be exercised sparingly, the overriding consideration will always be the interests of justice.
d. In considering where the interests of justice lie, it is necessary to take account of all the circumstances of the case including (without attempting an exhaustive list) (i) the importance of the fact not disclosed to the issues which the judge making the freezing order had to decide; (ii) the need to encourage proper compliance with the need for full and frank disclosure and to deter non-compliance; (iii) whether or to what extent the failure to disclose was culpable; and (iv) the injustice to a claimant which may occur if an order is discharged leaving a defendant free to dissipate assets, although a strong case on the merits will never be a good excuse for a failure to disclose material facts.
e. The interests of justice may sometimes require that a freezing order be continued, but that a failure of disclosure be marked in some other way, for example by a suitable order as to costs."
A similar approach had previously been described by Christopher Clarke J (as he then was) in Millhouse Capital UK Ltd v Sibir Energy plc  EWHC 2614 (Ch),  BCC 475 at  and . In the next paragraph, , Christopher Clarke J said this:
"The obligation of full disclosure, an obligation owed to the court itself, exists in order to secure the integrity of the court's process and to protect the interests of those potentially affected by whatever order the court is invited to make. The court's ability to set its order aside, and to refuse to renew it, is the sanction by which that obligation is enforced and others are deterred from breaking it. Such is the importance of the duty that, in the event of any substantial breach, the court strongly inclines towards setting its order aside and not renewing it, so as to deprive the defaulting party of any advantage that the order may have given him. This is particularly so in the case of freezing and seizure orders."
"Under Article 15 of the RCC, S-K is entitled to recover the full amount of the debt that Avto owed it but which it failed to pay due to the unlawful acts pleaded above, namely the USD 439.4 million in oil monies less the USD 105.3 million recovered by way of enforcement of the decision of the Arbitrazh Court of the Republic of Tatarstan dated 28 August 2008 (which S-K subsequently paid to Tatneft under the Suvar-Tatneft Commission Agreement), in total USD 334.1 million."
Mr Adkin QC pointed out that the UAH amounts which Tatneft itself states in the Particulars of Claim were paid by UTN to Taiz and Tekhnoprogress, when converted to US Dollars, equate to US$193.1 million in the case of Taiz (the equivalent of UAH 1.47 billion, as pleaded in paragraph 64) and US$101.1 million in the case of Tekhnoprogress (as pleaded in paragraph 69). Added together, the sums come to US$294.2 million. This is the figure which, on Tatneft's own case, as Mr Adkin QC points out, Avto did not receive from Taiz and Tekhnoprogress and, accordingly, did not pass on to S-K. Once the amount recovered in execution of the Tatarstan Judgment, US$105.3 million, is taken into account, the US$294.2 million figure reduces to US$188.9 million. That, Mr Adkin QC submits, ought to be the amount which is claimed in these proceedings, rather than the US$334.1 million to which reference is made in paragraph 86 of the Particulars of Claim and which formed the basis of the application for an order at the level of the Worldwide Freezing Order which Tatneft obtained at the hearing before Teare J.
(1) Mr Kolomoisky's and Mr Ovcharenko's applications for orders setting aside the order permitting service out on them succeed on the basis that there is no 'serious issue to be tried' on the merits of the claim against them.
(2) Mr Bogolyubov's and Mr Yaroslavsky's applications for summary judgment succeed on the basis that Tatneft's claims against them have no 'real prospect of success'.
(3) Tatneft's application to amend the Particulars of Claim is refused.
(4) Each of the Defendants' applications seeking the discharge of the Worldwide Freezing Order succeeds.