JSC Mezhdunarodniy Promyshlenniy Bank & Anor v Pugachev & Ors

This is the start of a trial brought by the claimants. The first claimant is a Russian bank and the second claimant is a Russian insolvency agency responsible for dealing with insolvent banks. There are a number of defendants. The first is Mr Sergei Pugachev, who has been subject to a number of judgments and orders in this jurisdiction already. Mr Pugachev was the person behind the bank in question. He has also been described as an oligarch, a Russian oligarch. It is alleged that his wealth or a substantial part of it came as a result of him misappropriating funds from the Bank.

The Bank is now insolvent and a judgment in the Russian courts has been given against Mr Pugachev. A judgment in default has now been given in this jurisdiction against Mr Pugachev as well. The claims are very substantial. I believe something in the order of US $1 billion, although I think the sum was expressed in roubles.

This hearing is to deal with an application, essentially an enforcement application brought by the claimants. The application is against certain trusts which are alleged to be ineffective in various ways, the details of which don't matter. The trusts hold various items of property in this country and also in St Barts in the Caribbean. The trusts are said to be for beneficiaries which include the children of Mr Pugachev himself and their mother, Alexandra Tolstoy. The children are the 12th, 13th and 14th defendants.

The children are very young. Their ages are between about five and eight years old. They appear before me by their litigation friend, their mother.

Mr Smith QC appears for the claimants, instructed by Hogan Lovells, and Mr Malek QC appears for the 12th to 14th defendants, that is the children, instructed by Devonshires.

Mr Pugachev himself is playing no part in these proceedings, having fled the jurisdiction, been the subject of an finding of contempt of court and sentenced to the maximum period of two years in imprisonment. I understand, as best one can tell, that Mr Pugachev is currently in France. None of the other defendants are playing a part in these proceedings either.

The issue that I have to resolve at this very early stage in these proceedings relates to the position of the children and publicity.

The problem is that Ms Tolstoy's evidence deals with certain matters which Mr Malek submits mean that I should make an orders under CPR rule 32.13(2) which allows the court to direct that a witness statement or parts of it may not be open to inspection. Rule 32.13 provides as follows:

Mr Malek submits that there are passages in Ms Tolstoy's evidence about which I should make an order under this provision, bearing in mind the need to protect the interests of the three children. The passages relate to four topics (identified by paragraph and by topic) which are addressed below.

Mr Malek also submits that the court can and should direct that the evidence of Ms Tolstoy dealing with the four topics should be the subject of reporting restrictions at leastfor the time being. He submits that if the court makes those orders, that will be a sufficient protection for the interests of the children and as a result of which it will not be necessary for the court to sit in private to hear any of that evidence or submissions. Therefore no order under CPR rule 39.2 to sit private would be required.

I should say that I have heard Mr Malek’s application in private at leastfor the time being in order that it can be properly made and properly discussed.

Mr Malek submitted (and no one suggested otherwise) that the jurisdiction to make an order imposing reporting restrictions is in section 4(2) of the Contempt of Court Act 1982, which provides as follows:

However on reflection overnight (see V v T [2014] EWHC 3432 (Ch) Morgan J, the Practice Guidance: Interim Non-Disclosure Orders [2012] 1 WLR 1003 referred to there in paragraph 14, and H v News Group Newspapers Ltd Practice Note [2011] 1 WLR 1645 Lord Neuberger) it seemed to me that the correct way to approach this part of the application is not as an application under section 4(2) of the Contempt of Court Act 1982 but as an application to impose reporting restrictions under the inherent power of the court and/or a power conferred by the Human Rights Act in enacting Convention rights. The balance to be struck is between Convention rights to private and family life and the principles of open justice. I have added these references into this judgment which was delivered orally on the 4^th July.

The four topics in Ms Tolstoy’s evidence are as follows:

The evidence from Ms Tolstoy on that last topic includes allegations by her about the Particular Matters which I will not include here having regard to the interests of the children.

Mr Smith, who appears for the claimants, argues as follows. First, he submits that while this is primarily a matter between the defendants and the court, the trial should proceed in public.

Second he emphasises the importance of open justice. This is an important factor which of course I have very well in mind.

Third, however, Mr Smith submits that while information relating to the Children Act proceedings and information relating to the Particular Matters referred to above are things which could properly be made the subject of the orders that I am asked to make, the other material in Ms Tolstoy's evidence is not of a sufficient character that I should make an order as sought by the defendants.

I was referred to a translation of an article in a Russian magazine which contains an interview with Ms Tolstoy. Mr Smith is right that in the interview Ms Tolstoy does refer to some of the matters which are topics which, if I accede to Mr Malek's order, relate to the relationship between Ms Tolstoy and Mr Pugachev and the way it broke down. They are matters which, if I accede to Mr Malek's application, would be within the restrictions that I am asked to impose.

All the same however, as Mr Malek points out, the material in the Russian magazine does not include the references to the Particular Matters or the Children Act proceedings and that is partly one of the reasons why Mr Smith accepts that those would be appropriately covered.

I start by reminding myself first of the importance of open justice. It is a very important principle that court proceedings in this jurisdiction are heard in public to the greatest degree possible, if that can be done. CPR Rule 39.2 provides for the general rule that a hearing is to be in public. Nevertheless restrictions can be and are imposed in appropriate circumstances. One of the factors which is mentioned as one of the possible exceptions to a public hearing in CPR Part 39 itself relates to the protection of the interests of children.

I also have well in mind that the interests of children are mentioned specifically in rule 32.13 as a ground for restricting the inspection of parts of or the whole of a witness statement. The interests of children will also be an example of the kind of interest which may well justify reporting restrictions of some kind in an appropriate case under the jurisdiction I am asked to exercise in that respect.

Both Mr Smith and Mr Malek submitted, in my judgment rightly, that the interests of children referred to must include their emotional well-being. The three children in this action are attending school in London at the moment. The real concern that Mr Malek has on behalf of his clients, the children, is the possibility that the sort of information that has been referred to would be picked up by other children or by parents, for that matter, of friends or other children attending the schools and be put to the children themselves. This would risk damaging the emotional well-being of the three defendant children.

Mr Malek submits that the fact that there is an article in the Russian language which traverses similar ground is not a reason why restrictions should not be imposed, at least at this stage in these proceedings, since realistically that sort of information is not likely to reach people in London without their making much more effort than they would ordinarily be expected to make, in order to find it. Therefore, there is, Mr Malek submits, a real purpose and value in the order he seeks.

I will make the order sought by Mr Malek. It seems to me that it is an appropriate order to make at this stage in the proceedings. I am satisfied that it is the way I can protect the interest of the three children in these proceedings as best the court can, balancing the importance of justice to be done in public with the protection of those interests. The order will allow the entire trial to take place in public.

I recognise that in making this order, at least at this stage in the proceedings, I will be restricting the access of third parties to some of the evidence given by Ms Tolstoy here which is the same as information which is in the public domain in Russian in a Russian magazine. I also recognise the obvious close relationship between these proceedings and Russia. Nevertheless it seems to me, having regard to the interests of these young children and the fact that they are attending school in London right now, that it would be appropriate, in the exercise of the powers I have, to make that order at this stage.

I emphasise that I am making the order at this stage. It may well be that once these proceedings have come to an end that it would be appropriate to make a different order and the matter can be reviewed. I will also include an express permission to apply. The permission applies not just to the parties to these proceedings, but to anybody else, in particular any member of the press.

I am not encouraging applications from the press to lift these reporting restrictions, but it is appropriate to include an express facilitate to allow for such an application. If a well-founded application comes before the court, then it will need to be dealt with.

This approach seems to me to be the way to balance the interests of the children with the interests of justice in public. I do not think the judgment needs to refer to the paragraph numbers in Ms Tolstoy’s witness statement. The parties know which they are. I will not read them out.

That is the order.