‘An extraordinary set of proceedings’—the Pugachev litigation

‘An extraordinary set of proceedings’—the Pugachev litigation

80273625_mlAlthough the trial judgment has yet to be handed down, Hannah Glover, a barrister at 3 Verulam Buildings, says the Pugachev litigation has given rise to a number of interesting interlocutory judgments.

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What is the Pugachev litigation about?

Mr Sergei Pugachev was formerly an oligarch and the owner of the largest private bank in Russia. The claimants, the relevant Russian state authority and the bank (now in liquidation), obtained a judgment in Russia against Mr Pugachev for misappropriating some £1bn of bank funds. The present claim (the Trusts Claim) forms part of the claimants’ attempts to enforce that judgment in England. Its purpose is to ‘bust’ a series of five New Zealand discretionary trusts said to hold assets worth £100m, which the claimants allege are properly held by Mr Pugachev beneficially.

Mr Pugachev currently lives in France, having fled the jurisdiction following the claimants’ previous enforcement efforts. He was sentenced to two years’ imprisonment for contempt in 2016, although none of that time has been served. See JSC Mezhdunarodniy Promyshelenniy Bank and another v Pugachev [2016] EWHC 192 (Ch), [2016] All ER (D) 111 (Feb) and JSC Mezhdunarodniy Promyshlenniy Bank and another v Pugachev [2016] EWHC 258 (Ch), [2016] All ER (D) 159 (Feb).

Trial of the Trusts Claim began on 4 July 2017 before Birss J and judgment is yet to be handed down, but the case has given rise to a number of interesting interlocutory judgments. Foremost among those are the following judgments concerning an application for adjournment of the proceedings made by Mr Pugachev some days into trial:

What did the court decide?

Having previously played no part in the Trusts Claim, Mr Pugachev issued an application to adjourn the proceedings shortly before the evidence was due to be given. He contended that the claimants had failed to obtain the necessary permission to serve the proceedings on him in France, with the result that the court lacked jurisdiction. He claimed, most likely dishonestly, as the court found, that he had not been aware of the Trusts Claim until May 2017.

The application was adjourned by Birss J on 10 July 2017 until evidence in the trial was complete. It was considered again on 13 July 2017. At this hearing the court imposed conditions on the application, namely that Mr Pugachev was to:

  • pay £60,000 on account of the claimants’ costs
  • in light of the worldwide freezing order granted against him, disclose the source of his funding for the application

The application was then heard on 26 July 2017. By this date Mr Pugachev had complied with the first condition but not the second. In the meantime, Mr Pugachev’s solicitors had come off the record, and in lieu of an application bundle Mr Pugachev provided documents directly to the court, together with material from a French notary. The court determined that the application would be adjourned until the handing down of judgment in the Trusts Claim, with liberty to apply to any party who wished to make representations.

What are the practical implications of these judgments—particularly in relation to the case management points that arose in dealing with these interlocutory applications?

The Pugachev litigation is, as Birss J pointed out in [2017] EWHC 1972 (Ch) (para [42]), ‘an extraordinary set of proceedings’ and several of the points canvassed in these judgments will be of little application where parties are represented and have the benefit of advice from English qualified lawyers. There are nevertheless some interesting general observations to be made from a case management perspective:

Applications to adjourn made during trial

Unsurprisingly, Birss J gave Mr Pugachev’s application to adjourn the trial immediately short shrift. He declared it would be a ‘monumental waste of costs…and, equally important, the court’s resources’ if the trial were to stop during cross-examination [2017] EWHC 1761 (Ch) (para [21]). That is particularly to be expected in circumstances where the applicant had been aware of the claim for a significant period of time.

Attaching conditions to applications

More unusual is the discussion in [2017] EWHC 1847 (Ch) of the circumstances in which the court will attach conditions to an application. The court refused to require Mr Pugachev to attend for cross-examination, referring to the general principle that such a condition would be ‘very much the exception rather than the rule’ [2017] EWHC 1847 (Ch) (para [44]). Birss J was however willing to require Mr Pugachev to put up security for the claimants’ costs, given his repeated breaches of court orders and to avoid prejudice to the claimants in responding to the application.

Dealing with litigants in person

Given Mr Pugachev’s solicitors had successfully applied to come off the record by the time the application was heard on 26 July 2017, the judgment at [2017] EWHC 1972 (Ch) contains useful guidance as to the court’s approach to litigants in person. Birss J noted that although Mr Pugachev was highly sophisticated, he at times ‘does things which naïve litigants in person often do’. It was relevant to the court’s decision not to dismiss the application outright that Mr Pugachev was attempting to communicate with the court and regarded the applications as important. Importantly, Birss J’s approach allowed Mr Pugachev the opportunity to make full submissions at a later date, preferably with the benefit of proper advice.

Dealing with contemnors

Finally, Birss J emphasised in [2017] EWHC 1972 (Ch) (para [52]) that although Mr Pugachev was an unpurged contemnor who ‘seems to have treated these proceedings and the court jurisdiction with little other than disdain’, and although there were strong grounds to believe that he had given dishonest instructions to his solicitors, he was nonetheless entitled to the due process of the court. This must of course be right.

 

Hannah Glover has a broad practice covering the full spectrum of commercial work undertaken in 3VB. Hannah is developing particular expertise in commercial litigation and banking and financial services. She appears unled in a wide range of matters in the High Court and county court. Prior to joining 3VB, Hannah was a lecturer in law at Pembroke College, Oxford and Wadham College, Oxford.

Interviewed by Kate Beaumont. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

 

 

 

 

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