Between:
JSC Commercial Bank Privatbank
Appellant
and
(1) Igor Valeryevich Kolomoisky
(2) Gennadiy Borisovich Bogolyubov
(3) Teamtrend Limited
(4) Trade Point Agro Limited
(5) Collyer Limited
(6) Rossyn Investing Corp
(7) Milbert Ventures Inc
(8) Zao Ukrtransitservice Ltd
Respondents
[2019] EWCA Civ 1708
Before:
Lord Justice David Richards
Lord Justice Flaux
and
Lord Justice Newey
Case No: A3/2018/3110
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
MR JUSTICE FANCOURT
[2018] EWHC 3308 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Pannick QC, Andrew Hunter QC, Tim Akkouh, Christopher Lloyd and Adam Al-Attar (instructed by Hogan Lovells International LLP) for the Appellant
Mark Howard QC, Michael Bools QC, Alec Haydon QC and Ben Woolgar (instructed by Fieldfisher LLP) for the First Respondent
Daniel Jowell QC, Matthew Parker and Richard Eschwege (instructed by Enyo Law LLP) for the Second Respondent
Sonia Tolaney QC, Thomas Plewman QC and Marc Delehanty (instructed by Pinsent Masons LLP) for the Third to Eighth Respondents
Hearing dates: 22–25 July 2019
Approved Judgment
Lord Justice NeweyLord Justice David Richards, Lord Justice Flaux and
Preliminary
Introduction
1
This is the judgment of the Court to which each member of the Court has contributed.
2
PJSC Commercial Bank Privatbank (the Bank) appeals against the order of Fancourt J dated 4 December 2018 whereby he declared that the court had no jurisdiction to try the claim brought by the Bank in these proceedings against the first, second and sixth to eighth defendants, stayed the proceedings against the third to fifth defendants and set aside service of the claim form and particulars of claim on the sixth to eighth defendants, and (subject to appeal) discharged a worldwide freezing order earlier granted against all the defendants restraining each of them from disposing of assets with a value of up to US$2.6 billion.
3
The appeal raises a number of issues. The first is whether article 6(1) of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 2007 (the Lugano Convention) is subject to a requirement that a claim brought against a defendant in the courts of that defendant's domicile must not be brought for the sole object of joining a defendant domiciled in another Convention state and, if so, whether the present proceedings were brought against the third to fifth defendants with the sole object of joining the first and second defendants. The second is whether, assuming the answer to one of the questions under the first issue is in the negative, the court has jurisdiction to stay proceedings brought against defendants in accordance with the Lugano Convention and the Recast Brussels Regulation on grounds of lis alibi pendens in favour of proceedings in a non-Convention state (a third state) and, if so, whether the judge was wrong to hold that, if it had arisen, he would have exercised his discretion to stay the proceedings. The third is whether the judge was wrong to stay the proceedings against the sixth to eighth defendants on grounds of forum non conveniens and to set aside service of the proceedings on them. This largely turns on the first and second issues.
4
The judge decided all these issues against the Bank and gave permission to appeal on those issues. We refer to them respectively as Grounds 1 to 3.
5
The Bank seeks permission to appeal on three further issues. They arise only if the judge was wrong on all or some of Grounds 1 to 3. The further issues concern (i) the quantum of the worldwide freezing order, (ii) whether there was material non-disclosure of relevant matters to the court on the initial, without notice, application for the worldwide freezing order and, if so, whether the judge was wrong to hold that he would on this ground have discharged the order and refused to re-grant it and (iii) whether the judge failed to give sufficient reasons for his decisions on certain points. The judge refused permission to appeal on these issues, which we refer to respectively as Grounds 4 to 6. On the Bank's renewed application to this Court for permission to appeal, Patten LJ adjourned consideration of the application to the hearing of the appeal of Grounds 1 to 3. Lord Pannick QC, on behalf of the Bank, told us that the points arising under Ground 6 were sufficiently dealt with under Grounds 4 and 5 and that Ground 6 would not therefore be separately pursued. We have heard full argument on Grounds 4 and 5.
6
We are agreed that the Bank's appeal should be allowed. We are also agreed on all the issues raised by the appeal, save in one respect. On the issue of principle arising under Ground 1 (see paragraph [3] above), the majority (David Richards and Flaux LJJ) are agreed that article 6(1) is not subject to a sole object condition, for the reasons set out in this judgment. Newey LJ takes a different view, which he sets out in a separate judgment. This difference has no effect on the outcome of the appeal, because we are all agreed that the judge's finding that the present proceedings were brought with the sole object of joining the first and second defendants to these English proceedings cannot stand.
Background facts
7
The Bank is incorporated under the laws of Ukraine and has its head office and principal operations in Ukraine. It was founded in 1992 by, among others, the first and second defendants, Igor Kolomoisky and Gennadiy Bogolyubov. They became, if they were not already, the majority shareholders, with direct and indirect holdings varying between 80% and almost 100% between 2006 and 2016. They sat on the Bank's supervisory board until 2016 and it is the Bank's case, which for present purposes is not denied, that as regards the key decisions relevant to these proceedings they controlled the Bank. The Bank grew to become one of Ukraine's largest banks. By 2016, it had 30 regional offices and 2,445 high street branches in Ukraine, and a branch in Cyprus. It provided services to more than 20 million customers, just under half the population of Ukraine.
8
The Bank was nationalised in December 2016, following a declaration that it was insolvent by the National Bank of Ukraine. Mr Kolomoisky and Mr Bogolyubov, and the other members of the supervisory board, were dismissed and replaced by a new management team.
9
It is common ground that, for the purposes of the Lugano Convention, Mr Kolomoisky and Mr Bogolyubov are, and were at the date of the commencement of these proceedings, domiciled in Switzerland.
10
The third to fifth defendants are companies incorporated in England (the English Defendants). The sixth to eight defendants are companies incorporated in the British Virgin Islands (the BVI Defendants). All the defendants accept, for the purposes of the applications before the judge and this appeal, that there is a good arguable case that the English and BVI Defendants were at all material times owned and/or controlled by Mr Kolomoisky and Mr Bogolyubov.
The proceedings
11
On 19 December 2017, at the conclusion of a full day's hearing and after a day's pre-reading, Nugee J granted a worldwide freezing order (the WFO) against the defendants for up to US$2.6 billion on a without notice application. The application was supported by a very substantial affidavit (Lewis (1)) sworn by Richard Lewis, a partner in the Bank's solicitors.
12
The claim form was issued on 21 December 2017 and subsequently served, together with particulars of claim, on the English Defendants and the BVI Defendants.
13
The WFO was continued, with amendments not material to this appeal, without prejudice to the right of the defendants to apply to the court to challenge the court's jurisdiction and to vary or discharge the WFO. The defendants issued such applications, which were heard by Fancourt J over five days in July 2018 with subsequent written submissions and some further evidence, leading to the order under appeal.
The Bank's claim
14
It will be necessary to look in detail at the claim as formulated by the Bank in its particulars of claim and in the evidence filed on the applications below.
15
In general terms, the Bank alleges that Mr Kolomoisky and Mr Bogolyubov orchestrated the fraudulent misappropriation of over US$1.9 billion from the Bank. The precise amount is alleged to be US$1,911,877,385, but for convenience we will refer to it as US$1.9 billion. The Bank believes that the total amount misappropriated by or at the behest of Mr Kolomoisky and Mr Bogolyubov is likely to run to many billions of US dollars, but the claim in the present proceedings is confined to US$1.9 billion.
16
The Bank alleges that this misappropriation was achieved through loans by the Bank (the Relevant Loans) to some 46 companies (the Borrowers), all incorporated in Ukraine and controlled by Mr Kolomoisky and Mr Bogolyubov. The Relevant Loans were made over a period of 17 months between April 2013 and August 2014 in either US dollars or Ukrainian Hryvnias. For convenience, we will refer to all payments in US dollars. The terms of each loan provided that it was advanced for the purpose of financing the Borrower's “current activities” and that it would be secured by a “Pledge Agreement”.
17
The Borrowers entered into supply agreements with some 35 companies (the Suppliers), all of them incorporated outside Ukraine and most of them in offshore jurisdictions. The Bank alleges that the Suppliers were controlled by Mr Kolomoisky and Mr Bogolyubov and that the supply agreements were bogus. They were for the supply of wholly unrealistic quantities of commodities and industrial equipment and were never intended to be performed. Their terms were uncommercial, and in particular provided for the pre-payment of the entire purchase price...
