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England and Wales High Court (Commercial Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> JSC VTB Bank v Skurikhin & Ors [2018] EWHC 3072 (Comm) (13 November 2018) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2018/3072.html Cite as: [2018] EWHC 3072 (Comm) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
| JSC VTB BANK (a company incorporated in Russia) |
Claimant |
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- and – |
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| (1) PAVEL VALERJEVICH SKURIKHIN (2) PIKEVILLE INVESTMENTS LLP (3) PERCHWELL HOLDINGS LLP |
Defendants |
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- and – |
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| (1) ZENO ALOIS MEIER (2) BEAT LERCH (3) CROWN CAPITAL HOLDINGS LIMITED (4) THE BERENGER FOUNDATION |
Respondents |
____________________
David Lord QC and Sebastian Kokelaar (instructed by Withers LLP) for the Fourth Respondent
The Defendants and the First to Third Respondents did not appear and were not represented
Hearing date: 2 November 2018
____________________
Crown Copyright ©
Mr Andrew Henshaw QC :
(A) INTRODUCTION
(B) FACTS
(1) VTB's claims against Mr Skurikhin
(2) Berenger and the Olympic trust
(3) The Receivership Application
(4) Subsequent events in relation to Mr Skurikhin, Berenger and Olympic
(C) VTB'S APPLICATION FOR SECURITY FOR COSTS
(1) VTB's application under CPR 25.12
(2) Whether VTB is the defendant to a claim for CPR 25.12 purposes
(3) Application to the present case
(4) VTB's alternative basis: CPR 3.1/inherent jurisdiction
(D) CONCLUSION
(1) VTB's claims against Mr Skurikhin
(2) Berenger and the Olympic trust
"the beneficiaries and the extent of their benefits shall be specified in regulations, which shall be issued by the Founder of the foundation. Other bodies (e.g. the Board of Directors of the foundation) or third parties, who need not be involved in the foundation, may be appointed therein to determine in the form of regulations the beneficiaries and the extent of their benefits".
(3) The Receivership Application
i) The authorities establish that a receiver by way of equitable execution may be appointed over whatever may be considered in equity as the assets of the judgment debtor, and in that context property subject to a trust or analogous foreign arrangement would be regarded in equity as the assets of the judgment debtor if he has the legal right to call for those assets to be transferred to him or to his order, or if he has de facto control over the trust assets.
ii) It was more likely than not that Mr Skurikhin had either (a) a right to call for the assets of Berenger to be transferred to him, or (b) de facto control of those assets, and so the membership interests in Pikeville should be considered in equity to be Mr Skurikhin's assets. It was therefore open to the court to appoint a receiver by way of equitable execution over them.
iii) It was just and convenient for equitable receivers to be appointed. The judge therefore appointed Mr Rubin and Mr Katz as receivers (the "Receivers") by way of equitable execution over the membership interests in Pikeville.
"The evidence of Dr Frommelt, part of which I have quoted above. In my judgment it is significant that an experienced Liechtenstein lawyer draws the conclusions: (a) that Mr Skurikhin or his agent is the mandatory to a mandate agreement with the board of directors / foundation council of the Berenger Foundation; (b) that Mr Skurikhin is likely to be able to instruct the board to transfer at least significant parts of the Berenger Foundation's interests in Pikeville into his own name; (c) that the reason why Mr Skurikhin and his family benefit from the Berenger Foundation is because he is in de facto control as a mandatory and its economic founder." (§ 49(6))
§ 1: The receivers are "[u]ntil further Order of the Court" appointed receivers by way of execution only over the membership shares and interests (including all dividends, bonuses, rights and other privileges arising from them) in Pikeville registered in the name of the First, Second and Third Respondents;
§ 4: The receivers are to hold those assets, and any assets of Pikeville which come into their hands, "to the Order of the Court";
§ 6: "The Receivers shall, within a reasonable period of the receipt of monies pursuant to the taking of any steps provided for herein to apply to Court for directions as to what is to become of the said monies".
§ 7: "Anyone served with or notified of this order may apply to Court at any time to vary or discharge this Order (or so much of it as affects that person), but they must first inform the Claimant's legal representatives. …"
§ 20: "The Claimant, the First and Second Defendants, the Respondents, the Receivers and any other person affected by this Order shall have permission to apply."
(4) Subsequent events in relation to Mr Skurikhin, Berenger and Olympic
"As a result of the steps taken by the Financial Manager in the Russian bankruptcy our client no longer has any direct or indirect beneficial interest in any of the assets of the Berenger Foundation, including the membership interests in Pikeville. Accordingly, the basis upon which the receivership order was originally made has now fallen away, and … there is no good reason why your clients should remain in office as receivers and administrators. Pikeville should now be returned to the control of its officers for the benefit of its members.
We consider that it is incumbent on your clients, as officers of the Court, to bring these highly material developments in the Russian bankruptcy proceedings to the attention of the Court, and to seek its directions. We should be grateful if you would confirm within 7 days of the date of this letter that your clients will make an application for directions, and that they will take no further action to realise any of the assets of Pikeville pending the outcome of that application."
i) the membership interests in Pikeville are not amenable to execution of the judgments obtained by VTB against Mr Skurikhin. Those interests belong beneficially to Berenger, and Mr Skurikhin does not have any interest in, or right to, the assets of Berenger. More particularly:
a) the factual basis for the Deputy Judge's decision, namely that Mr Skurikhin controlled Berenger through a mandate agreement, was incorrect. Each of Mr Meier, Dr Schurti and Mr Hanselmann confirm in their witness statements that no such agreement has ever existed, and that Mr Skurikhin was only ever a discretionary beneficiary of the foundation; and
b) Mr Skurikhin has in any event lost his status as a beneficiary of Berenger and Olympic since the making of the Receivership Order; and/or
ii) the Receivership Order serves no useful purpose because, as a matter of Liechtenstein law, Berenger's assets are not amenable to execution by a creditor of a discretionary beneficiary, even if that beneficiary holds a mandate agreement.
"The membership shares and interests in the Second Defendant are held on bare trust for the Fourth Respondent by the First, Second and Third Respondents. Those membership interests are not amenable to execution of the judgments obtained by the Claimant against the First Defendant because the First Defendant does not have any right to, or interest in, the assets of the Fourth Defendant. Further, or alternatively, the appointment of the Receivers serves no useful purpose because there is no property which can be reached either at law or in equity."
(C) VTB'S APPLICATION FOR SECURITY FOR COSTS
(1) VTB's application under CPR 25.12
"A defendant to any claim may apply under this section of this Part for security for his costs of the proceedings."
i) in respect of the Discharge Application, it is properly to be regarded as a "defendant" to a "claim" within the meaning of CPR 25.12(1);
ii) Berenger is resident out of the jurisdiction, but not resident in a Brussels Contracting State, a State bound by the Lugano Convention, a State bound by the 2005 Hague Convention or a Regulation State, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982; and/or
iii) Berenger is a body corporate and there is reason to believe that it will be unable to pay VTB's costs if ordered to do so.
i) VTB is not a defendant to a claim within the meaning of rule 25.12(1), and therefore does not have standing to make the application;
ii) condition (ii) is satisfied;
iii) Berenger has assets within the jurisdiction in the form of the membership interests in Pikeville, which are held by the members on bare trust for it. Pikeville owns the Italian properties, which were acquired for some €18 million. Berenger is also the ultimate beneficial owner of 55% of the shares in Miccros Limited, which lent the funds to Pikeville to purchase the Italian properties; and
iv) even if the court concludes that it does have jurisdiction to order security for costs in respect of the Discharge Application, the court should decline to exercise its discretion.
(2) Whether VTB is the defendant to a claim for CPR 25.12 purposes
"I have no hesitation, myself, in coming to an opposite conclusion. In my judgment the proceedings referred to in the rule, if they are not an action, are at least proceedings of the nature of an action and refer to the whole matter and not to an interlocutory application in some other proceedings. Were it otherwise, it appears to me that chaos would reign, for every time an interlocutory application was taken out by a defendant the plaintiff would be able to say, "The plaintiff is in the position of the defendant in this application and the defendant is in the position of the plaintiff. They are proceedings. Therefore I ought to have security for the costs of this application." One has only to examine that to see that it cannot have any foundation whatever."
Croom-Johnson LJ said at p. 1363C–D:
"As to the point on jurisdiction, it really proceeds upon the proper construction of R.S.C., Ord. 23, r. 1 , and I have no doubt myself that the purpose of that Order is that the proceeding, which is referred to there, is the proceeding as a whole, whether it is an action or something equivalent to an action …. The right to ask for security for costs under Order 23 , where the plaintiff is not resident within the jurisdiction, is purely devoted to people who are plaintiff and defendant in the proceeding as a whole."
"The natural meaning of the term 'plaintiff' in a context of litigation is the plaintiff in the proceedings as a whole or original proceedings. The definition in s. 225 should be construed in accordance with that natural meaning.
Accordingly, I reject Mr Gee's submission that by route of the definition of 'plaintiff' in s. 225 an impoverished corporate defendant who makes an application by interlocutory summons or motion in some other plaintiff's action thereby constitutes itself a 'plaintiff' which can be ordered to give security for the costs of its application under s. 726 , 'plaintiff' in s. 726 bears its ordinary meaning and that does not include a defendant which makes an interlocutory application."
and at p721:
"Mr Gee accepts, as I have mentioned, that the rule that a defendant cannot be ordered to give security when he has been brought before the court and is seeking to defend himself (as opposed to counterclaiming in respect of matters which go beyond his defence) would preclude a plaintiff from claiming security against a defendant, whether a foreign resident or an impoverished company, in respect of an application by that defendant to set aside or curtail a Mareva or other injunction obtained ex parte by the plaintiff. In my judgment, an application by the defendant for an inquiry as to damages under the cross-undertaking when the Mareva or other injunction has been discharged is likewise a mere matter of defence.
For this conclusion there are several reasons which are cumulative (or different aspects of the same point), viz: (1) the cross-undertaking is the price which the plaintiff has to pay for obtaining an injunction before the action can be finally tried and decided, (2) the damages under the cross-undertaking are not strictly damages but compensation to the defendant for loss suffered if it is subsequently established that the interlocutory injunction should not have been granted, and (3) there is no separate cause of action for the damages and it can only be enforced by application in the action in which the injunction was granted. See generally the observations of Neill LJ in Cheltenham & Gloucester Building Society v Ricketts [1993] 1 WLR 1545 at pp. 1550H–1552G. Therefore the general rule as to not awarding security for costs against a defendant is applicable."
"Had Parliament intended to confer power on the court to order security for costs against the applicant (whether a plaintiff or a defendant in existing proceedings) who makes an application to the court in the course of those proceedings, it would hardly have restricted the operation of the section to 'a plaintiff in an action, suit or other legal proceedings'."
At 724-725:
"Policy considerations support the same conclusion. The purpose of the jurisdiction to order security for costs is to prevent the injustice which would result if a plaintiff who was in effect immune from orders for costs were free to litigate at the defendant's expense even if unsuccessful. Such an order can be made only against a plaintiff; it cannot be made against a defendant. That is because a plaintiff institutes proceedings voluntarily. If he chooses to bring proceedings against an insolvent company with limited liability, he does so with his eyes open; he takes the risk that he may not recover his costs even if successful, but it is his own decision to take that risk. The defendant, however, has no choice in the matter. He is compelled to litigate or submit to the plaintiff's demands. He must be allowed to defend himself without being subjected to the embarrassment of having to provide security for the plaintiff's costs. This involves being free to take whatever steps and make whatever applications are necessary in order to enable him to defend the proceedings."
and at p727:
"It has long been firmly established by authority that the court cannot award security for costs against a defendant, and that in considering whether a party is a plaintiff or a defendant the court must have regard to the substantial and not the nominal position of the parties. The question in every case is whether the party against whom an order for security is sought is in the position of plaintiff in the proceeding in question."
"If attention is concentrated on the defendant's application to enforce the plaintiff's cross-undertaking in damages, the defendant certainly has the appearance of a plaintiff. It claims that it has suffered loss for which the plaintiff is responsible and it seeks compensation for that loss. If the plaintiff recognises that it is likely to be ordered to pay something, though not as much as the defendant claims, it can protect its position by making a payment into court. It certainly looks like a defendant. But as the cases which I have cited in this part of my judgment demonstrate, it is necessary to consider the whole litigation between the parties in order to determine which of them is really in the position of a plaintiff and which a defendant. If the proceedings are considered as a whole, then it is apparent that the parties have never exchanged roles, and that the defendant has done nothing to justify being treated as a plaintiff. …"
"As for the defendant, it has had no choice in the matter. It has done nothing beyond reacting to the steps which the plaintiff has taken against it. The plaintiff brought the proceedings; the defendant has been compelled to defend them. The plaintiff obtained an injunction against it which the defendant claims ought not to have been granted; the defendant has obtained its discharge. The defendant claims that the existence of the injunction caused it loss; it seeks to recover the loss. It seeks only to be restored, so far as compensation can achieve it, to the position it was in before the proceedings began. The defendant must counter-attack to recover ground lost by an earlier defeat, but it makes no territorial claim of its own; it cannot fairly be described as an aggressor."
"The trend of authority makes it plain that, even though a counterclaiming defendant may technically be ordered to give security for the costs of a plaintiff against whom he counterclaims, such an order should not ordinarily be made if all the defendant is doing, in substance, is to defend himself. Such an approach is consistent with the general rule that security may not be ordered against a defendant. So the question may arise, as a question of substance, not formality or pleading: is the defendant simply defending himself, or is he going beyond mere self-defence and launching a cross-claim with an independent vitality of its own?"
"It must be borne in mind that the design of the rules is to protect a defendant (or a claimant placed in a similar position by a counterclaim) who is forced into litigation at the election of someone else against adverse cost consequences of litigation."
"…an application which, although interlocutory in form, raised issues as to the rights of the parties which were in substance independent of the issues in dispute in the parent action would, in their Lordships' opinion, normally constitute in substance "proceedings"…" (§ 26)
and:
"The applications to reverse the liquidators' rejection of the appellants' proofs of debt require the court to determine whether, and if so to what extent, Bancredit Cayman Ltd was indebted to the appellants at the commencement of the winding up. … These are applications to determine the substantive, as opposed to merely procedural, rights of the would-be creditors in the winding up. The cause or matter (to use a neutral term) in which these applications are made is the winding up. But the only issue raised for decision by the winding up application was whether Bancredit should be placed in liquidation. The winding up order did not and could not resolve any issue as to the state of indebtedness between individual creditors and the company. Each creditor's submission of a proof of debt and the liquidators' response to that proof provided a new factual platform on the basis of which new substantive issues between individual creditors and the liquidators might arise. The commencement of litigation to resolve these issues would, in my opinion, constitute the commencement of "proceedings" for the purposes both of section 74 and of Order 23." (§ 27)
i) it was the settled practice of the court not to order security for costs against a defendant in relation to any steps which are reasonably necessary to enable him to resist a claim brought against him;
ii) in general, a discrete order for security will not be made in relation to what is in substance an interlocutory application; and
iii) as a general rule, the court must look at the substance of the application, as opposed to its strict form.
"In my judgment, viewed in the light of these principles, the applications in the present case were originating applications falling within the expressions I have just quoted. They brought before the court issues which were not previously before the court, and which would not otherwise have been before the court; and, although brought in the context of a winding up ordered by, and under the ultimate supervision of, the court, these applications were essentially free-standing. The applications arose because of Bancredit Cayman Ltd's insolvency and because of a dispute as to whether that company was genuinely indebted to the appellants (as they claimed and the liquidators denied) or to other claimants (as the liquidators claimed and the appellants denied). The winding up proceedings merely provided the forensic framework in which the applications were made, or the procedural launch pad from which the applications were issued. Indeed, in his engaging submissions, Mr Lowe QC realistically accepted that the applications were in substance originating proceedings. This concession must be right given that these applications would admittedly be originating proceedings if this was a voluntary or creditors' winding up and all the facts were otherwise identical."
The court therefore concluded that the applications made under the Insolvency Rules were in substance originating applications, and that security for costs should be granted.
"… in my judgment, the application to set aside the recognition order is part and parcel of the proceeding or claim that was commenced by [the liquidator] when he applied for the recognition order. The set aside application cannot be regarded as free-standing, entirely separate from the order which it seeks to challenge. Whether or not the [managers] were defendants to [the liquidator]'s claim or proceeding at the moment it was initiated, they have certainly become defendants now that they challenge the making of the recognition order. They should not be deprived of the status of defendants for the purposes of the security for costs jurisdiction by the fact that [the liquidator] failed to mention what he knew about the troubled history of DSL at the ex parte hearing before the registrar. [The liquidator] must have realised that his subsequent application under section 236 against the [managers] would be stoutly resisted, rightly or wrongly, on the grounds on which they now rely. Subject to the points on the exercise of my discretion which I discuss below I consider that I have jurisdiction to order security for costs against [the liquidator]." (my emphasis)
(3) Application to the present case
i) Berenger was not a defendant to the claims brought by VTB against Mr Skurikhin, and was simply added as a party to the Receivership Application;
ii) the Receivership Application was heard more than three years ago, and Berenger opted to take no part in it despite having been served with the application;
iii) the issues determined by the Deputy Judge in the Receivership Application are now res judicata and/or it is an abuse of process for them to be raised again in the Discharge Application;
iv) Berenger is in substance asking the court to rehear the Receivership Application. If it had appealed the Receivership Order (which was the only proper way to challenge the decision of the Deputy Judge), VTB would have been entitled to security for costs under CPR 25.15; and
v) whilst the Receivership Order provided at paragraph 7 that anyone served with it could apply at any time to vary or discharge the order, that was to provide for a material change of circumstances, for example the bankruptcy of or misconduct by the Receivers. It did not permit the rehearing of matters already fully argued at an inter partes hearing.
i) The Receivership Application was initiated by VTB, against Berenger (among others), and in the context of proceedings commenced by VTB. It was made for the purpose of enabling VTB to enforce the judgments it has obtained against Mr Skurikhin, against assets held by Berenger. Berenger did not choose to become a party to the application or the proceedings.
ii) The Discharge Application is in substance a defensive measure, by which Berenger seeks in effect to be removed from the proceedings and to regain control of its assets.
iii) Berenger does not seek any positive relief or finding against VTB in the nature of a counterclaim or comparable to the relief sought by the creditors in GFN. It does not, adopting the words of Millett LJ in CT Bowring, make any territorial claim of its own.
iv) Berenger's application has no independent vitality of its own, and is simply part and parcel of the claim or proceeding commenced by VTB in the form of the main action and/or the Receivership Application, in the same way as the set-aside application in Dalnyaya was part and parcel of the recognition application proceedings.
v) Berenger's application does not in any relevant sense raise issues that were not previously before the court. The issue remains whether the Receivership Order was properly made and/or should continue to stand. That is not altered by the facts that the application (a) has been made late, (b) raises matters that could have been argued before the Deputy Judge when the Receivership Application was originally made or (c) raises matters that have arisen subsequently. None of those matters alters the fundamental point that the Discharge Application does not raise issues going beyond the scope of the questions raised by the Receivership Application and Receivership Order themselves, i.e. whether Berenger's assets should in equity be regarded as belonging to Mr Skurikhin. Specifically as to point (c), as Berenger points out, if Mr Skurikhin had already been removed as a beneficiary at the time of the hearing before the Deputy Judge then that would plainly have been a proper basis for resisting the receivership application, and it could not have been said that Berenger was advancing a claim with an independent life of its own. It would be strange if the fact that the circumstances have altered since the making of Receivership Order were to convert Berenger from a defendant into a claimant.
vi) It may be the case that the provision in paragraph 7 of the Receivership Order – for any party to be able to apply at any time to vary or discharge it – was primarily intended to cater for changes of circumstances. However, (a) Berenger's case is in part (and, it submits, primarily) based on a change of circumstances, viz the removal of Mr Skurikhin as a discretionary beneficiary of the trusts, and (b) paragraph 7 is not in its terms confined to changes of circumstances. It is therefore, at least arguable that Berenger has standing to make the Discharge Application without seeking to appeal from the Receivership Order (which would of course have put Berenger at risk of a security for costs order under CPR 25.15).
vii) I also see some force in Berenger's point that the only reason Berenger has found itself in the position of applicant in the Discharge Application is that VTB, as the applicant for the order, and/or the receivers as officers of the court, have not themselves returned to court for directions as they were invited to do in Withers' letter of 12 January 2018. In Speedier Logistics & Ors v Aardvark Digital & Anr [2012] EWHC 2776 (Comm) Eder J at § 25 referred to "the continuing duty on a claimant who has sought the exercise of the court's discretion on a certain basis" and said: "If that basis changes, it seems to me important, as a matter of principle, that the claimant does revert to the court to inform the court of the position. The main reason for that is that the exercise of the court's discretion was originally on a particular basis and, if that basis changes, it seems to me, as a matter of principle, that the court must be informed of that change in the ordinary circumstances" (and see, to similar effect, § 32). I would accept that VTB has a reasonable argument that there has in fact been no relevant change in circumstances – see further below – but equally it is arguable on behalf of Berenger that there has been such a change, and thus that VTB itself and/or the receivers should themselves be in the position of applicants.
viii) I deal below with VTB's specific points about res judicata and abuse of process.
i) a receiver by way of equitable execution may be appointed over whatever may be considered in equity as the assets of the judgment debtor (§§ 38 and 45);
ii) property subject to trust or analogous foreign arrangements would be regarded in equity as assets of a judgment debtor if he has the legal right to call for those assets to be transferred to him or to his order, or if he has de facto control of the trust assets in circumstances where no genuine discretion is exercised by the trustee over those assets (§§ 39 and 45);
iii) the question was therefore "whether the Court is satisfied that Mr Skurikhin either has a legal right to call for the assets of the Berenger Foundation to be transferred to him or to his order, or has de facto control over the assets of the Berenger Foundation" (§ 46);
iv) "at this stage of the proceedings this question has to be answered on the balance of probabilities" (§ 47);
v) on the material before him, the judge was satisfied that it was more likely than not that Mr Skurikhin had either a right to call for the assets of the Berenger foundation to be transferred to him, or de facto control of those assets (§ 48); and
vi) it followed that the membership interests in Pikeville, which the members themselves say are held as nominees for the Berenger foundation, should be considered in equity to be Mr Skurikhin's assets, with the result that it was open to the court to appoint a receiver over them (§ 50).
i) the provisions in §§ 4 and 6 (referred to in § 24 above) for the receivers to hold the assets and their proceeds to the order of the court, and to apply to the court for directions as to what is to become of the monies; and
ii) the provisions in §§ 7 and 20 for application to discharge or vary the order.
"(1) That there is evidence indicating that assets including those in the Berenger Foundation structure are the product of Mr Skurikhin's transfer of his assets out of Russia in an attempt to make them difficult to trace and/or judgment proof. A journalistic article by an individual appointed to carry out an audit of at least some of the SAHO group companies, Mr Valeriy Lebedinskiy, describes how Mr Skurikhin has transferred assets outside Russia, into companies which are "well-camouflaged and are being controlled via a special 'intermediate layer' being Swiss attorneys Beat Lerch and Zeno Meier…" It mentions that certain of these assets are held through Crown, and, inter alios, Pikeville. "All these companies were founded to laundry (sic) monies withdrawn from Russia". The article continues: "Pavel Skurikhin is a very careful man, he had several years to thoroughly hide his assets from bailiffs.
(2) There is no doubt that Mr Skurikhin is closely associated with assets which are and have been held subject to the structure involving Berenger Foundation and Pikeville. Important assets of Pikeville are used for the sole benefit of Mr Skurikhin and his wife. This includes the Italian properties which are apparently leased rent free to Mr and Mrs Skurikhin; and the money loaned to Paradis de Beauté Srl.
(3) The extreme coyness of the members of Pikeville in revealing the ultimate controlling party of the LLP, coupled with Pikeville's involvement with companies associated with Mr Skurikhin, namely Sibinvestproject JSC, AL.PA Srl and SAHO Group ZAO, supports an inference that it is Mr Skurikhin who exercises ultimate control.
(4) The directors of the Berenger Foundation have produced no evidence to show that the foundation's directly or indirectly held assets are not under Mr Skurikhin's control
(5) Mr Skurikhin has signally failed to provide proper disclosure of his assets, or produce the documents which he has been ordered to produce. He has failed to produce any documentation which would indicate that he is not in control of the assets of the Berenger Foundation, and has not appeared to be examined on his asset position. In circumstances in which Burton J, on the material before him, inferred that Mr Skurikhin did indeed have control of the assets of the Berenger Foundation, it was clearly for him, if the inference was not to continue to be drawn, to produce evidence that he did not. No material has been adduced, however, which begins to contradict the inference drawn by Burton J.
(6) The evidence of Dr Frommelt, part of which I have quoted above. In my judgment it is significant that an experienced Liechtenstein lawyer draws the conclusions: (a) that Mr Skurikhin or his agent is the mandatory to a mandate agreement with the board of directors / foundation council of the Berenger Foundation; (b) that Mr Skurikhin is likely to be able to instruct the board to transfer at least significant parts of the Berenger Foundation's interests in Pikeville into his own name; (c) that the reason why Mr Skurikhin and his family benefit from the Berenger Foundation is because he is in de facto control as a mandatory and its economic founder." (§ 49)
"The defendants are seeking a rehearing on evidence which, or much of which, so far as one can tell, they could have adduced on the earlier occasion if they had sought an adequate adjournment, which they would probably have obtained. Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter. The fact that he capitulated at the first encounter cannot improve a party's position."
See also Orb v Ruhan [2016] EWHC 850 (Comm) at [82].
i) the grounds for the Discharge Application are ones that could have been pursued by Berenger at the inter partes hearing on 13 July 2015 before the Deputy Judge;
ii) more than three years have passed since the Receivership Order was made and the receivers have expended much time and cost in realising Pikeville's assets, including bringing proceedings in Italy in relation to the Italian properties. There has also been unexplained delay since the events of June 2017 alleged to constitute a change of circumstances: and in reality the Discharge Application appears to have been triggered by the proceedings in Italy in mid 2018;
iii) the assets of Pikeville are already subject to the control of the court because under § 6 of the Receivership Order, after realisation of the assets, the receivers are required to apply to the court for directions as to what is to become of the monies; and
iv) the Discharge Application was issued by Withers on behalf of Berenger only months after Withers had contended on behalf of Mr Skurikhin that the basis for the Receivership Order had fallen away. The natural inference is that Mr Skurikhin is directing Berenger to bring the Discharge Application, despite his continued failure to remedy his contempt of court.
i) although some of the grounds for the Discharge Application could in principle have been pursued by Berenger at the inter partes hearing on 13 July 2015 before the Deputy Judge, (a) Berenger's evidence is that it lacked sufficient funds to do so at the time, having only latterly obtained funds from a beneficiary of the Olympic trust to pursue the application, and (b) in any event, the "real point" underlying the application, namely the change of circumstances regarding Mr Skurikhin's interest in the trusts, did not exist at that time;
ii) the same point applies as to the passage of time since the Receivership Order was made;
iii) as to the lapse of time since the resolutions removing Mr Skurikhin as a discretionary beneficiary were made in June 2017, the proceedings in Russia relating to his bankruptcy were not concluded until the Supreme Court's decision of April 2018, and it was reasonable for Berenger to take some time to obtain funds and enter into correspondence. In any event, any delay amounts at most to a matter of months, and does not come close to amounting to an abuse of process; and
iv) Mr Skurikhin is not making the application and no longer has an interest in the trusts; whilst members of his family continue to do so, that is not to the point: VTB's judgment can be enforced only against assets belonging to Mr Skurikhin. The position might be different if there could be shown to have been a transfer at an undervalue.
(4) VTB's alternative basis: CPR 3.1/inherent jurisdiction
"(2) Except where these Rules provide otherwise, the Court may - …
(f) Stay the whole or part of any proceedings or judgment either generally or until a specified date or event;
…
(m) take any other step or make any other order for the purpose of managing the case and furthering the overriding objective…
(5) The court may order a party to pay a sum of money into court if that party has, without good reason, failed to comply with a rule, practice direction or a relevant pre-action protocol."
"36… In my opinion, on the natural meaning of rule 3.1(2)(f) and (m) the court had jurisdiction to grant a stay on terms that Mr Ali secure costs of future proceedings. Thus, for example, the court has power under paragraph (2)(f) to stay the whole or part of any proceedings until a specified event. I see no reason why, as a matter of jurisdiction, that should not be a payment into court by the respondent to the application. Thus, naturally construed, on an application by A for a stay, the rules give the court power to order a stay until a specified event, namely a payment into court by B. The court also has power under paragraph (2)(m) to make any further order for the purpose of furthering the overriding objective. That too would provide jurisdiction for such an order…
37. As I see it, that power is independent of the power conferred by rule 3.1(5) , which gives the court a separate and free-standing power to order a party to pay a sum of money into court if that party has, without good reason, failed to comply with a rule, practice direction or a relevant pre-action protocol. That conclusion seems to me to be supported by rule 3.1(6A), which expressly recognises that a party may pay money into court following an order either under paragraph (3) or under paragraph (5).
38. I would not therefore accept Mr Cranston's submission in so far as it seeks to limit the jurisdiction of the court. …
"23. Assume, then, that in a given case the court concludes that an order for security would not unfairly deprive the party concerned of his ability to litigate the dispute. Should such an order then be made? In addressing this question it is right to bear in mind that under the new rules it is not just the claimant against whom an order for security for costs can be made; it can also be made against the defendant. Under the old rules, of course, it was only the defendant who could be ordered to pay money into court, principally in proceedings for summary judgment, as a condition of his being allowed to defend the claim. That payment in was not, of course, in respect of costs, but rather to provide some security for the claim. But if, as a condition of pursuing an unpromising defence, it is appropriate to secure the claim, why not also the claimant's costs of advancing the claim? And if that, why is it not at least as appropriate to require someone advancing an unpromising claim to secure the defendant's costs. He, after all, has chosen to involve the defendant in litigation and the defendant has no option but to concede the claim or incur costs in resisting it. Such no doubt was the thinking underlying the new rule 24.
24. Now, it is clear, the court has an altogether wider discretion to ensure that justice can be done in any particular case. Obviously relevant considerations, besides the ability of the person concerned to pay, will be (a) his conduct of the proceedings (including in particular his compliance or otherwise with any applicable rule, practice direction or protocol), and (b) the apparent strength of his case (be it claim or defence). And these considerations, of course, are expressly reflected in the new rules governing the court's power to order payment into court: rule 3.1(5) dealing expressly with compliance, rule 24 with the probabilities or otherwise of success.
25. That, however, is by no means to say that the court should ordinarily penalise breaches of the rules and the like by making orders for payment into court under rule 3.1(5) . Quite the contrary. The one case drawn to our attention in which this question has been considered — Buckley J's judgment in Mealey Horgan plc v Horgan (transcript 24 May 1999, briefly reported in The Times, 6 July 1999), to which reference is made in paragraph 3.1.5 of the Annual Practice — held that it would be inappropriate to order a defendant to give security as a penalty for failure to serve witness statements in time when that had prejudiced neither the trial nor the claimant. Buckley J suggested, however, that such an order might be appropriate if "there is a history of repeated breach of timetables or of court orders or if there is something in the conduct of the party which gives rise to suspicion that they may not be bona fide and the court thinks the other side should have some financial security or protection". That seems to me to point the way admirably: a party only becomes amenable to an adverse order for security under rule 3.1(5) (or perhaps 3.1(2)(m)) once he can be seen either to be regularly flouting proper court procedures (which must inevitably inflate the costs of the proceedings) or otherwise to be demonstrating a want of good faith — good faith for this purpose consisting of a will to litigate a genuine claim or defence as economically and expeditiously as reasonably possible in according with the overriding objective.
26. Similarly it is not to be thought that an order for security for costs will be appropriate in every case where a party appears to have a somewhat weak claim or defence. The last thing this judgment should be seen as encouraging is the making by either side of exorbitant applications for summary judgment under rule 24.2 in a misguided attempt to obtain conditional orders providing security for costs. On the contrary, the court will be reluctant to be drawn into an assessment of the merits beyond what is necessary to establish whether the person concerned has "no real prospect of succeeding" and the occasions when security for costs is order solely because the case appears weak may be expected to be few and far between."
"40. Those principles show that the power to order security for costs in a case of this kind should be exercised with great caution. The correct general approach may be summarised as follows:
i) it would only be in an exceptional case (if ever) that a court would order security for costs if the order would stifle a claim or an appeal;
ii) in any event,
a) an order should not ordinarily be made unless the party concerned can be shown to be regularly flouting proper court procedures or otherwise to be demonstrating a want of good faith; good faith being understood to consist (as Simon Brown LJ put it) of a will to litigate a genuine claim or defence (or appeal) as economically and expeditiously as reasonably possible in accordance with the overriding objective; and
b) an order will not be appropriate in every case where a party has a weak case. The weakness of a party's case will ordinarily be relevant only where he has no real prospect of succeeding.
41. That approach seems to me to be consistent with that of Field J in Reed v Oury, although he was there considering, not a possible condition that security for costs be imposed, but a condition that previous orders be satisfied. In that context he said in paragraph 24 that if, having regard to a party's conduct overall, a party has acted very oppressively or very unreasonably, it may be appropriate to stay his claim conditionally or unconditionally or strike it out or order a payment into court. That is a high test.
42. A similar approach should to my mind be adopted before imposing a condition that a party should only be permitted to proceed with a claim or an appeal by providing security for costs, unless the case falls within CPR rule 25.13, which this does not. I would accept Mr Cranston's submission that merely to act unreasonably in a sense other than that identified above should not in general be sufficient to make an order which will have the effect of depriving the party concerned of access to the courts.
43. These principles have been recently considered in this court by Peter Gibson LJ (with whom Mance LJ and Hale LJ agreed) in CIBC Mellon Trust Co v Mora Hotel Corp NV [2002] EWCA Civ 1688, [2003] 1 All ER 564 In paragraph 38 of his judgment Peter Gibson LJ referred both to Olatawura v Abiloye and to Reed v Oury and said that both those authorities suggest that it is only appropriate for the court to exercise its powers under CPR Part 3 to require a payment into court in limited circumstances and that the court should not do so in the absence of a want of good faith on the part of the party against whom the order is sought. Peter Gibson LJ added:
"That consideration is reinforced by the greater significance, since the Human Rights Act 1998 came into force, which the court attaches to not impeding access to justice.""
"bearing in mind that the court may release such undertakings altogether, it must be entitled to impose terms on parties seeking to enforce them, in whatever way appears to be just in the circumstances; and some form of security for costs may be an appropriate requirement in some cases… I prefer not to seek to define the limits of the court's discretion in this or other cases, save that – as already mentioned – its scope is in my view wider than the inherent jurisdiction to deal with abuses of the court's process."
"questions such as whether and if so when it is possible or appropriate to order security for costs against a defendant who brings a counterclaim or defends by way of set-off, whether and if so when security can be ordered in the context of a committal application, or in connection with an application to set aside a compromise of an action, and whether the decision of the Court of Appeal in C T Bowring & Co (Insurance) Ltd v Corsi Partners Ltd [1994] 2 Lloyd's Rep 567 was correct".
i) the nature of the Discharge Application is plainly an abuse of process: it is an attempt to argue matters that should have been pursed before the Deputy Judge at the hearing on 13 July 2015, more than 3 years after the Receivership Order was made and after much time and cost has been expended by the Receivers in realising Pikeville's assets;
ii) there is no evidence to suggest that the third party funding Berenger's Discharge Application is unable to provide security for costs or, therefore, that security for costs would stifle the Discharge Application; and
iii) there is very strong evidence that Berenger will not be able to comply with any costs award against it: Mr Schurti and Mr Meier explain in their witness statements that the reason Berenger did not take part in the hearing of 13 July 2015 was that it did not have sufficient resources at that time to instruct English solicitors and counsel, and that the funds for the Discharge Application have been made available by a beneficiary of Olympic. Therefore, on Berenger's own evidence, it is unable to fund the Discharge Application from its own resources. VTB will therefore be seriously prejudiced if security for costs is not granted.
