England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Claim No HC-2014-000262 Court 5 Rolls Building 110 Fetter Lane London, EC4A 1NL
		10 July 2017

1. MR JUSTICE BIRSS: This is the day in these proceedings on which the evidence from the claimants was to be cross-examined to. That would have been the evidence of Mr Roberts, the solicitor with conduct of these proceedings. The opening speeches were heard last week. Actually, as it happens, although there was a possibility of Mr Roberts going into the witness box last week on Wednesday, it was more convenient for various reasons, which don't need to be gone back into, to have Mr Roberts start his evidence today.
2. The proceedings are enforcement proceedings, there was a long history to them and I will not rehearse all the history in this judgment.
3. What happened this morning is that at about 9.15 am or thereabouts (or maybe a bit later than that, 9.30) for a hearing due to start at 10.00, I received information that an application was to be made in court this morning. The application was made by Mr Samek QC who appears before me for Mr Pugachev, the first defendant.
4. Mr Pugachev is the first defendant. Hitherto Mr Pugachev himself has not taken part in this trial. The people who have taken part are the infant children of Mr Pugachev, who are the 12th, 13th and 14th defendants. They appear by their mother, Alexandra Tolstoy, who is their litigation friend. Mr Malek QC and his team represent them.
5. The claimants, I should say, are represented by Mr Smith QC and his team.
6. The application is to adjourn the trial. The reason for it is that it is said on Mr Pugachev's behalf that the jurisdiction of the court is not engaged in relation to Mr Pugachev at all, because the Judgment Regulation, that is to say Judgment Regulation (Recast) 1215/2012, has no application to these proceedings. That matters, says Mr Samek on behalf of Mr Pugachev, because the judgment in default entered by Henry Carr J on 22 February 2016 depended, submits Mr Samek, on the Judgment Regulation applying. Mr Samek says that permission to serve out of the jurisdiction was required but was never obtained. That also applies to an order for service I made last year.
7. At this stage I am in no position to rule on the merits of that argument. What I can say is that at least it appears that if Mr Samek is correct in all his arguments, then the submission that the jurisdiction in relation to Mr Pugachev is not engaged will follow and it will be right that Mr Pugachev has not been properly served with these proceedings.
8. As I say, at this stage it is impossible to rule on that matter, given that it is, I suppose, about one hour since this point has arisen.
9. The first and only question is whether to continue with the trial at least today.
10. Mr Smith and Mr Malek for the parties who were previously the only ones dealing with this trial both contend that the correct way forward is for me to continue the trial now and carry on and hear the evidence of Mr Roberts, and have Mr Malek cross-examine the witness.
11. As I say, that's the position of both Mr Smith and Mr Malek.
12. Mr Samek submits that I should not do that. He submits that I should call a halt to the trial now. He refers to a decision in WPP Holdings v Benatti [2007] 1 WLR 263 in an extract from a judgment of Buxton LJ at paragraph 84, referring to a point made by Toulson LJ; the point being that this matter engages Mr Pugachev's Article 6 rights, that is to say, his rights to a fair trial under the European Convention for the Protection of Human Rights and Fundamental Freedoms.
13. Mr Samek submits that, although it would be extremely inconvenient for the trial to stop now, the only real prejudice is one relating to costs; and they could always be dealt with at a later date.
14. Mr Samek submits that if one thinks about what might happen, if his submission is right that the court's jurisdiction in relation to Mr Sergei Pugachev is not engaged, let's imagine, then the following applies. The claimants will no doubt then apply for permission to serve Mr Pugachev out of the jurisdiction. Imagine that ultimately that application (or appeals or whatever) succeeds, and any challenge to the jurisdiction by Mr Pugachev fails, Mr Pugachev, submits Mr Samek, might wish to participate in this trial.
15. The trial relates to trusts which were set up by Mr Pugachev . When I say they were set by "Mr Pugachev," I say that without prejudice to some of the detailed issues in this case which don't matter for this application. Property was placed into the trusts, of which the children are currently at least some of the beneficiaries. One of the allegations that I have to decide in this trial if it is to go ahead is that these trusts are shams. There is also allegations under the Insolvency Act and other issues.
16. Mr Samek submits that it is directly in Mr Pugachev's interests to participate in these proceedings if he has been or is properly served. I had understood Mr Samek's submission to be that Mr Pugachev would wish to do so. However after giving this judgment orally Mr Samek clarified that he did not intend to submit that if Mr Pugachev was properly served he would want to participate and I have included this passage to reflect Mr Samek's submission.
17. Mr Samek submits that if the court proceeds now and ultimately comes to a decision without Mr Pugachev's participation, and Mr Pugachev is right that the jurisdiction is not engaged in relation to him, then the judgment will not be binding on him and will be a nullity. If the trial is not adjourned now but the matter ultimately proceeds in a way which Mr Pugachev is afterwards joined into the proceedings properly, if he's not already, and he wishes to participate, then there will be a need for witnesses to be recalled and there would be duplicative cross-examination and submissions, which would all have to be gone into.
18. As Mr Samek recognised, in my judgment rightly , that this ultimately is governed by the overriding objective in CPR Part 1, r1.1(1), which is to deal with cases justly and at proportionate cost.
19. That includes (s1.1(2)):

"... so far as practical—

ensuring the parties are on an equal footing;

saving expense;

dealing with the case in ways which are proportionate to [amongst other things]:

the amount of money involved;

the importance and complexity of the case;

the financial position of each party;

ensuring that it is dealt with expeditiously and fairly;

allotting to it an appropriate share of the court's resources, while taking into account the need to allot resources to other cases; and.

enforcing compliance with the rules, practice directions and orders."

20. The question, and the only question, is whether I should proceed with this trial at this stage. I should say that I have well in mind that Mr Pugachev has been found to be in contempt of court by Rose J and sentenced to the maximum term of 2 years imprisonment and has not purged his contempt. Both Mr Malek and Mr Smith submit that I should take the course which Mr Samek described as adjourning Mr Samek's application sine die. I think that Latin tag was used but it is one which I frankly never really understood. But it substance is means adjourn the application it generally, off to come back at some unspecified future time. It is clear this morning that I should not take that course. The defendants in these proceedings, Mr Malek's clients and the claimants, Mr Smith's clients, need time to look at the application but that does not mean that the application simply should be kicked into the long grass.
21. However, on the other hand, I am quite satisfied that it would be a monumental waste of costs, including the costs of the parties currently before me, and, equally important, the court's resources, if this trial was to stop right now. It seems to me that bearing in mind the overriding objective and all the factors I've mentioned, the most proportionate way of dealing with the situation this morning is to continue the trial now.
22. That is inevitably at some risk. That is risk not only as to costs, but as to wasting time, wasting the parties' time and wasting the court's time. It may ultimately mean that at some future date, some other things have to happen; there may have to be more cross-examination with Mr Pugachev, or his representatives having an opportunity to put questions to witnesses that I will hear. But it is manifest that I should not accede to the application this morning to stop this trial now. However, what I must do is make sure that this application is not allowed to sit undealt with for any length of time
23. What I propose to do is the following.
24. This trial will continue. It will continue, as I've said, at risk of the parties inevitably incurring costs which may need to be dealt with in some unusual way in future, but that is the best way of achieving justice. I will review with counsel, and that includes Mr Smith, Mr Malek and Mr Samek, the position of Mr Samek's application at the start of proceedings the day after tomorrow. That is Wednesday morning. That gives Mr Smith and Mr Malek's teams just over a day or nearly two days to at least have a chance to look at this properly and think about what they wish to say, having had a chance to look at it.
25. It would be quite wrong -- I am probably repeating myself -- to just kick that application off into the long grass. I've said that before. Equally well, I want to keep a grip on these proceedings and that seems to me to be the best way to do it.
26. I will hear the parties in relation to that application before court, if necessary at 9.30 in that morning, if it's not otherwise inappropriate. We will just have to see where it takes us. That allows for the possibility that a different course is taken in future after Wednesday morning, which is, I know, what Mr Samek seems to want, but it will also allow both Mr Smith and Mr Malek's teams a chance to investigate exactly what they think about these claims, and what should be done.
27. That is the way this trial will proceed.