Rogachev v Goryainov

On 20 and 21 December 2018 the Claimant made his without notice application to Mr Justice Stewart. That application was supported by a draft generally endorsed Claim Form, by the Claimant’s first affidavit in draft and by a skeleton argument.

Under “brief details of claim”, the Claimant asserted, at paragraphs 1 to 3 and in summary terms, breach of a joint venture agreement made on or before 11 November 2014 concerning the acquisition of V177, alternatively breach of trust and dishonest assistance and/or knowing assistance to Pigmalion made in breach of constructive trust. The brief details of claim continued:

“4.

Interest on the US $10,953,170 paid by the Claimant to the Defendant on 11 November 2014 at the rate of 3% pa…

5.

Further or alternatively to 4, interest on damages, compensation or the amounts found under 1, 2 and 3.”

The claim form concluded by certifying that “the liquidated demand claimed against the Defendant (namely US $10,953,170) amounts to £8,658,510 and that the interest claim, namely US $900,860, amounts to £712,132, and the daily rate is £474.44”. This was the basis of the cause of action and claim as it was placed before Stewart J.

In his draft affidavit, subsequently sworn on 24 December 2018, the Claimant set out his own business background and the background to the dispute, referring to the initial proposal for a joint venture in 2013/2014. He went on to describe first V177, describing events between the summer and end of 2014, including the decision to register the shares in the name of the Defendant’s father and the payment of the US $10,953,070 made by Gerthing. He then gave brief details of the acquisition of the other four markets. Next he described events leading to the conclusion of the SHA.

In a further section, the Claimant addressed the breakdown of the joint business from August 2015 up to the meeting at STEP in November 2015. He stated that the

As regards the period from the end of December 2015 until September 2018, the Claimant stated merely that since early 2016 his team had periodically been in negotiations with a view to reaching a settlement, that he had had several personal meetings with the Defendant and that, most recently, Mr Sinitsyn and Mr Bukin were in contact in August 2018. “However, none of these exchanges has resulted in an amicable resolution”.

The affidavit continued that “at the end of September 2018” the Claimant had learned for the first time “completely by chance” that the Defendant “had put V177 on the market and, it appears, agreed a sale to [Lenta]”. He had discovered the advert on the property website at that point in time. He then went on to refer to the correspondence between himself and Lenta in early October 2018 and in early November 2018 (see paragraphs 42 and 44 above). He believed that the Claimant’s decision to sell V177 had been prompted by the letters before action which he had sent to New Heights in May and June 2018. He concluded:

“The decision was made behind my back, I believe, with the intention of placing this asset, or its value, beyond my reach.”

The affidavit concluded by referring to, and exhibiting, the notice of arbitration given at the end of October 2018 and by referring to his duty of disclosure, indicating that his lawyers would raise some theoretical issues, but as far as the facts were concerned, at no time had the Defendant ever denied his interest in V177.

In his skeleton argument for the hearing before Stewart J, Mr Coppel QC described the arrangements for V177 - effectively the V177 Agreement. He made passing reference to the other markets (including K25 and Usachevskiy), but repeatedly stated that it was not necessary to go into the detail of those projects, as being not relevant for present purposes. After stating that the Defendant had informed the Claimant that he wished to withdraw from the V177 venture (rather than the entire Joint Venture, as in fact accepted by the Claimant in his affidavit), the skeleton asserted that discussions petered out and agreement was not reached adding merely that “there have been sporadic meetings in the last 2-3 years”. There was no reference at all to events in 2016 and 2017, including the involvement of EY. No mention is made of the fact that the other sites have not been transferred to Agro Market.

In the skeleton it is asserted expressly and repeatedly, first that the Defendant had been “clandestinely” negotiating and “furtively arranging” the sale of V177 (in general and not just to Lenta), that this had been “dishonestly” “concealed” from the Claimant and that the Claimant had only discovered this by “chance”.

As regards good arguable case, the claim was said to be based on breach of the agreement made in 2013 or subsequently in 2014 (without distinguishing between the Joint Venture agreement and the specific V177 agreement) arising from the Defendant’s decision to organise the sale of V177.

The risk of dissipation was said to arise from four matters: first, “D’s clandestine dealings with V177”; secondly, the Defendant’s habit of arranging his affairs so as to conceal his personal connection with his assets; thirdly, the Defendant being in the process of winding up his interest in the joint venture; and fourthly, the Defendant’s willingness to resort to “criminal methods” in order to try and get the better of the Claimant in relation to the division of the Joint Venture assets.

As regards the timing of the application, the skeleton asserted that the catalyst for the application was the discovery in October 2018 that the Defendant was attempting to sell V177. As regards urgency and the need for applying without notice, it was stated that completion of the sale was thought to be imminent and that, if the Defendant learned of the proceedings, there was good reason to think that he might accelerate completion and/or find a way of receiving the sale proceeds which avoided the effects of the order.

Finally, Mr Coppel QC addressed full and frank disclosure in the concluding part of his skeleton. In particular he referred to the fact that some time had been taken between learning of the “clandestine” attempt at sale and the making of the application. He also referred to the arbitration clause in the SHA.

The skeleton concluded that “in view of D’s dishonest concealment from C of his proposal to sell V177 and the imminence of that sale, there is a real risk that V177 will be sold very shortly and that the Claimant will take steps to put the proceeds of that sale beyond the reach of C unless a freezing order is made.”

The Claimant’s note of the hearing before Stewart J records that at the hearing the Judge expressly raised a particular concern about the period of delay since the Claimant first heard about the planned sale of V177. It is also clear from that note that the Judge was under the impression that the Claimant had become aware of that sale

The note further recorded that the Judge queried the amount of the freezing order and asked where the figure of £9.75 million came from. Mr Coppel replied that it was the amount paid for V177 converted to sterling, and then with interest since November 2014 and something for costs. The Judge reduced the figure to £9 million because of difficulties he saw with the interest claim.

The Freezing Injunction contains standard terms. The Defendant is restrained from removing from England and Wales, or in any way disposing of dealing with or diminishing the value of any of his assets wherever they are up to the value of £9 million. By paragraph 7, the prohibition expressly includes the net sale money of V177 “if it has been sold”.

The Freezing Injunction is a maximum sum order in the amount of £9 million. Implicitly the Claimant was asserting that he had a good arguable case to recover £9 million in damages/equitable compensation. This is addressed further in paragraphs 96 and 97 below.

The Claimant’s representatives have notified Lenta of the Freezing Injunction. The Defendant contends that, if the Freezing Injunction is maintained (or the Proprietary Injunction is granted), this has the potential to cause the sale to Lenta to fall through and this will cause substantial loss, particularly where substantial renovation works have been done at the site to Lenta’s specification; such renovation is unlikely to be acceptable to alternative purchasers.

Following notification to Lenta by the Claimant of the Freezing Injunction, a moratorium agreement was concluded between the Defendant and Lenta, temporarily suspending the obligations of the parties to the Preliminary Agreement and Lenta ceased undertaking all its works on the V177 site. Under the terms of that moratorium, unless the Defendant can provide Lenta with confirmation, within 6 months (i.e. by 28 June 2019), that the Freezing Injunction has been discharged or that the Freezing Injunction does not prevent the sale of V177, Lenta may unilaterally terminate the Preliminary Agreement, and in that event the parties shall bear no liability under the Preliminary Agreement.

Subsequently a number of variations to the Freezing Injunction have been agreed in correspondence. In particular, a variation to include the standard form “Angel Bell” exception allowing disposal of assets in the ordinary course of business. Secondly, a variation requiring the fortification of the Claimant’s cross-undertaking in damages,

On 29 January 2019, the Defendant’s solicitors wrote to the Claimant’s solicitors. In that letter the Defendant provided information about the Preliminary Agreement and the moratorium. They asserted that the Preliminary Agreement is an arm’s length transaction based on market value and that no prejudice would be suffered by the Claimant as a result of the sale continuing - the asset would be converted from property to cash. They invited the Claimant to agree to allow the sale to Lenta to proceed and offered to pay into an escrow account the sum of £9 million of the sale funds until the claim is resolved. That, they said, would provide more than adequate protection for the Claimant. The Claimant’s solicitors responded by letter dated 8 February 2019, stating that the Defendant’s assurances were insufficient. The Claimant would approve a sale of V177 on conditions, including a condition that the entire proceeds of sale were held in escrow by an agent reasonably satisfactory to the Claimant. Alternatively they proposed that the Defendant agree simply to share the proceeds of the sale. There was no further response from the Defendant to this counter-proposal.

In Particulars of Claim served only on 18 January 2019, the Claimant now sets out his case: as to agreement and breach, breach of trust, and relief, including in particular damages and compensation.

Paragraph 12 pleads that the following were express terms of the V177 Agreement as modified:

“a.

V177 would be acquired developed and operated as a market under the Joint Venture;

b.

D or his nominee would acquire V177;

c.

Pending the setting up of the Joint Venture’s corporate holding structure, title to V177 would be transferred to a corporate vehicle under the control of D;

d.

C and D would share the beneficial ownership of V177 equally;

e.

Once D had completed the acquisition of V177 and it had been transferred into the ownership of a new company within the Joint Venture, C would reimburse 50% of the total acquisition costs;

f.

D would fund and arrange the development of V177 as a market site and on completion of those works C would reimburse 50% of the development costs;

g.

Once the Joint Venture’s corporate structure had beenset up, D would procure the transfer of the registered ownershipof V177 to a new holding company within the new corporatestructure;

h.

C and D would share 50:50 in the profits from V177, whether recurrent or on realisation;

i.

D would hold 50% of all the sums received by him from the operation or sale of V177 for the account of C or C’s nominee and would procure the same result in respect of such sums received by his corporate vehicles or nominees;

j.

the V177 Agreement would be governed by English

law.” (emphasis added)

Paragraph 15 of the Particulars of Claim further pleads certain implied terms of the V177 Agreement. In particular paragraph 15 d. alleges as follows:

“Pending the transfer of the registered ownership of V177 to a new holding company within the new corporate structure, D would not seek to dispose, or procure the disposal, of V177 without the full knowledge and prior consent of C.”

The Claimant, at paragraphs 19 to 24, alleges the following breaches of the terms of the V177 Agreement:

After pleading the alternative claim in trusts/equity, at paragraph 30 the Particulars of Claim set out the Claimant’s claim for damages/relief, alleging that:

“by reason of D’s breaches of contract and/or trust and/or fiduciary duty and/or equity and/or dishonest assistance, C has suffered loss and damage and/or is entitled to equitable compensation to be assessed.”

At paragraph 31 the Claimant claims a number of declarations and/or injunctions including a declaration that the Claimant is the beneficial owner of a 50% share in V177 and that he is entitled to a 50% share in the profits and that 50% of any sums received from the operation or sale of V177 is held on trust for the Claimant or the Claimant’s nominee. The Claimant further claims injunctions, including (at subparagraph e), the following final injunction:

“Pending transfer of the registered ownership of V177 to a new holding company owned by Agro Market, D is not permitted to seek to dispose, or procure the disposal, of V177 without the full knowledge and prior consent of C.”

However the Claimant does not seek an order requiring the transfer of V177 to Agro Market or a new holding company. (The Claimant’s case as to the intended transferee – Agro Market or a holding company owned by Agro Market – is not consistently stated.)

I have been referred to a number of authorities, including Taylor v Van Dutch Marine Holdings Ltd [2017] EWHC 636 (Ch) at §10; National Bank Trust v Yurov [2016]

Certain general principles can be summarised as follows:

As regards the duty of full and frank disclosure, in Alliance Bank v Zhunus [2015] EWHC 714 (Comm), at §66 Cooke J summarised the content of the duty as follows:

“(1)

The duty on the applicant in such circumstances goes beyond merely identifying points of defence which might be taken against him, important though that is.

(2)

The applicant has to show the utmost good faith, identifying the crucial points for and against the application and not rely on general statements and the mere exhibiting of numerous documents.

(3)

The applicant has to investigate the nature of the claim asserted and the facts relied on before applying, and has to identify any likely defences. He has to disclose all facts which reasonably could or would be taken into account by the Court. The duty is not restricted to matters of fact but extends to matters of law.

(4)

The applicant also has a duty to investigate the facts and fairly to present the evidence.

(5)

There is a high duty to draw the Court's attention to significant factual, legal and procedural aspects of the case.

(6)

Full disclosure has to be linked with fair presentation. The judge has to have complete confidence in the thoroughness and the objectivity of those presenting the case for the applicant.

(7)

It is the undoubted duty of counsel to draw to the judge's attention weaknesses in his case and to make sure the judge understands what might be said on the other side even if the judge says he has read the papers.”

Additional principles include the following:

As regards the consequences of failure to make full and frank disclosure, the Court has a discretion whether or not to discharge an order obtained ex parte and whether or not to grant fresh injunctive relief: see summary in Brinks Mat Ltd v Elcombe [1988] 1 WLR 1350 at 1357C-F, stating, in particular, that, whilst it is not for every omission that the injunction will automatically be discharged, whether immediate discharge is justified depends on the importance of the fact for the issues which were to be decided by the judge on the application. The applicant’s ignorance of the particular fact or failure to perceive its relevance may be an important consideration, but it is not decisive because of the duty on an applicant to make all proper enquiries and to give careful consideration to the case being presented. Where there is non-disclosure of a material fact, whilst discharge is not automatic, it would only be in exceptional circumstances that a court would not discharge an order where there has been deliberate non-disclosure or misrepresentation: Congentra AG v Sixteeen Thirteen Marine SA [2008] EWHC 1615 (Comm) at §§62-63.

In order to found a claim for a freezing injunction, the applicant must establish:

As regards delay in applying for a freezing injunction, relief is often denied where the applicant has pursued his rights in a dilatory fashion. In particular where there are or have been discussions or negotiations over a period of time, that will be a relevant consideration.

The Defendant applies to discharge the Freezing Injunction on the following grounds:

The Claimant contends that it is just and appropriate to continue the Freezing Injunction:

By way of background, the Claimant’s case now is that the parties have not reached a concluded settlement for the termination of the Joint Venture, and that, in the absence of such a settlement, the terms of the framework Joint Venture agreement and the specific V177 agreement remain in place. Under those terms, the parties are 50:50 joint beneficial owners of V177 and the Defendant remains under an obligation to procure the transfer of V177 to Agro Market, and pending such transfer, not to deal with V177 without the Claimants’ consent.

The Defendant’s case is that, whilst final documentation was not completed, the parties had agreed in principle in January 2017 under the 2017 Plan. It was agreed which of the markets would be left in the ownership of which of the parties and that there would be a balancing payment of US$10 million by the Defendant to the Claimant. The Defendant would retain V177, Usachevskiy and K25. On that basis, the Defendant alleges that the Claimant has no continuing interest in V177 at all. Alternatively if, as the Claimant argues, there was no final binding agreement as to the division of the assets, then, in any event, the Defendant remains free to sell V177. Upon the sale of V177 the Defendant would be required to account for the proceeds of sale, in a final winding up of the Joint Venture. On such a winding up, the Claimant would equally be required to bring into account the value of the assets within the overall Joint Venture which are in his ownership and/or control. Since the value of those assets is at least equal to the value of V177, then following the taking of that account, the Claimant would have no outstanding claim for sums due to be paid by the Defendant to it. The 50% interest which the Defendant has in the assets and revenues which are owned and/or controlled by the Claimant would more than overtop the 50% share of the proceeds of sale of V177 to which the Claimant would be entitled.

Should the Freezing Injunction be discharged for non-disclosure?

In my judgment, when making the without notice application to Stewart J, the Claimant failed adequately to comply with his duty of full and frank disclosure, as that duty is explained in Alliance Bank (see paragraph 77 above).

The application to Stewart J was predicated on two prominent assertions: first, that the Claimant only discovered that the Defendant was seeking to sell V177 (in general)

First, the Claimant’s own Kommersant notice dated 5 February 2018 indicates that he was clearly aware, several months before September, that the Defendant was or might well be seeking buyers of V177 or was at the least marketing V177. This knowledge at that time is confirmed by the fact that when the Claimant wrote specifically to Lenta in October 2018, he wrote in very similar terms and referred to, and enclosed, the Kommersant notice itself. Whatever the position as regards first discovery of the specific proposed sale to Lenta, the Claimant was aware back in February 2018 of the Defendant seeking to market V177 generally and further that he was not acting clandestinely then or subsequently. Whilst the Kommersant notice was within the bundle of papers submitted to the Stewart J, it was only to be found as an attachment to a letter, which itself was only an exhibit to the affidavit (i.e. in the middle of the 16 pages of the 28^th exhibit). It was not drawn to the Judge’s attention. In this regard, the Claimant failed to comply with the approach set out in Alliance Bank, point (2) and Lawer: see paragraphs 77 and 78(2) above. (I add that, by contrast, I consider that the Claimant’s 10 December 2015 letter was sufficiently in the past, and prior to other relevant events, so as to justify not being referred to in the context of the Claimant’s knowledge as at the date of the application).

Secondly, as regards the advert placed on the Russian property website from April 2017 onwards, there is no evidence to suggest that the Claimant had actual knowledge either in April 2017 or at the date of the application before Stewart J of the fact of the advert having been placed in April 2017. However, that fact was discoverable by more careful inquiry on the part of the Claimant, both at the time when the Claimant became aware of the advert in September 2018 and by the time of the application to Stewart J. In this regard, the Claimant did not fulfil his duty to investigate the facts fully: Alliance Bank, (3) and (4). Had it been discovered by such more detailed inquiry and thus disclosed to Stewart J, the Claimant would not have been able to tell the judge that the Defendant had been acting “clandestinely”. Thus the Claimant ought to have known that the Defendant was not acting “clandestinely”.

Thirdly, and of great significance, is the fact that the Claimant, at the hearing before Stewart J, failed to correct the Judge’s impression that the Claimant had only found out about the sale in mid-November, when in fact he had, even on his own case, found out at the end of September, some six weeks earlier. At the hearing itself, counsel did not draw to the judge’s attention this weakness in the Claimant’s case: Alliance Bank, (7). Delay (of apparently five weeks) in making the application was an issue which concerned the Judge when deciding whether to grant the Freezing Injunction. Had he been aware that the delay was in fact at least 11 weeks, this might well have influenced his decision. In particular, the Judge might have concluded that there was no justification for the application having been made without notice. It was certainly a material fact, a misunderstanding of which the judge proceeded upon. That the true position could be found in the affidavit and the Claimant’s skeleton is not relevant, given the overriding effect of what was actually discussed as the oral hearing before

Finally, I consider that the Claimant’s account of the significance of the other three markets being in his control, of the fact that they too were required to be, but had not been, transferred to Agro Market and of the course of the negotiations, particularly from end of December 2015 until September 2018, was not sufficiently full and frank. There was no reference at all to the 2017 Plan or to the suggestion (at least) that agreement had been reached “in principle” or that as a result EY had been instructed to draw up documentation. The failure to mention these facts meant that the Judge did not have a full picture of the likely defence and/or counterclaim which the Defendant would raise to the claim (Alliance Bank, (1) and (3)) or how the Defendant came to be marketing V177 for sale. By failing to present the full course of the negotiations, this is likely to have given a false impression of a heightened risk of dissipation.

In these circumstances, in my judgment the statements in the affidavit and skeleton argument that the Defendant had been negotiating “clandestinely”, that the sale to Lenta had been discovered “by chance” and that the Claimant was “unaware of a potentially legitimate explanation” were misleading and did not represent a fair presentation of the facts as they were, or ought to have been known, to the Claimant.

As to effect of these failures to disclose, first, I consider that the relevant facts were material to the issues before Stewart J and to his decision. Secondly, in the exercise of my discretion, I conclude that the Freezing Injunction should be discharged. The facts which were not disclosed or not fairly presented were centrally important to key issues (of knowledge, delay and risk of dissipation) which fell to be decided by Stewart J. Even if, in some respects, the Claimant or his representatives might not have been aware, or appreciated the full significance, of some of these matters, that does not mean that the Injunction should not be discharged, given the duty to make proper inquiries. Moreover, even if the non-disclosures and misrepresentations could not be characterised as “deliberate”, they showed at the least a high degree of lack of care, and in some aspects, recklessness.

Should a freezing injunction be granted afresh?

In the light of the foregoing conclusion, I consider whether I should grant freezing injunctive relief afresh.

It is common ground that, to support a freezing injunction, the applicant’s underlying cause of action must be for a monetary claim, and thus that he must establish a good arguable case for such a monetary claim. That this is so is inherent in the very purpose of a freezing injunction: to preserve assets to allow enforcement of a monetary judgment.

In the present case, the Claimant makes no clear case that he has an arguable claim against the Defendant for a monetary sum. First, as regards the claim in the claim form there was no explanation before Stewart J as to the basis of this amount claimed, save for the fact that the Claimant had contributed US $9 million more to the joint

Although not clearly explained in the claim form, it now appears clear that that figure was based on the amount of US $10,953,170 paid by way of loan from Gerthing to Shannon on 11 November 2014 and thus, at that time, was a claim in substance for restitution/recovery of that payment. However, the factual and legal foundation for a claim in this amount and on such a basis has never been explained, and is not now pursued. There can be no basis for a claim for damages in respect of the November 2014 payment – the payment was a loan – there is no allegation that the loan was induced by misrepresentation or the loan monies misapplied. Thus, the basis of the underlying claim placed before Stewart J was misconceived.

Secondly, the claim now put forward in the Particulars of Claim is one for damages or equitable compensation. That in turn must be based on loss caused by some breach of duty (contractual or equitable). The primary claim now is for damages for breach of contract, and in particular for breach of the obligation to transfer V177 to Agro Market (paragraph 12 g). In oral argument, Mr Coppel explained that the loss caused by that breach is the Claimant’s loss of property rights under the terms of the SHA. However, as Mr Coppel accepted, that alleged loss is inconsistent with the Claimant’s continued assertion that he still retains property rights in V177. It is wholly inconsistent with the pleaded claim (in paragraphs 12 d and 15 d) that pending transfer to Agro Market - and with the relief sought (in paragraph 31) - the Claimant retains a 50% proprietary interest in V177. It follows that, on the Claimant’s own pleaded case, the breach of the obligation to transfer to Agro Market does not extinguish the alleged pre-existing beneficial interest and loss arising from that breach cannot be the loss of a proprietary right. It is also inconsistent with his claim based on constructive trust, which is predicated on continuing beneficial property rights. Moreover, as V177 has not yet been sold, there is no monetary loss from the breach alleged at paragraph 15 d. Any breach has not yet caused any monetary loss because the Claimant has not lost any proprietary interest arising from the alleged breach.

Essentially the Claimant is putting forward, at one and the same time, mutually inconsistent allegations: (1) that he has lost proprietary rights in V177 and (2) that he retains propriety rights in V177 justifying the grant of a proprietary injunction. Regardless of whether this is a permissible approach, in circumstances where V177 has not yet been sold the Claimant has not been able to articulate any cogent basis for an accrued claim for damages or other monetary compensation. Accordingly, the Claimant cannot establish a good arguable case for a monetary claim. For this reason alone, I refuse the application for a fresh freezing injunction.

As to risk of dissipation, the first and most important ground relied upon by the Claimant is the suggestion that the Defendant has been acting “clandestinely”. However on the evidence now before me I am not satisfied that the Defendant has been acting “clandestinely” in seeking to sell V177 either generally, or specifically to Lenta. The Defendant was openly and publicly advertising the offer for sale between April 2017 and February 2019. Further the fact that the Defendant holds interests through other individuals or companies, as does the Claimant, does not of itself lead to an inference of seeking to conceal assets. The suggestion that the Defendant is in

For these reasons, I would not have been satisfied that there is a real risk of dissipation of assets or that the Defendant would be likely to deal with his assets so as to render enforcement more difficult.

The only issue that caused me some pause for thought is the fact that the Defendant did not respond to the Claimant’s suggestion, in the letter of 8 February 2019, of payment into an escrow account. However in fact the Defendant on 29 January had made an offer to pay at least half the proceeds of the sale to Lenta into an escrow account. That offer was, in my judgment, inconsistent with a suggestion of a risk of dissipation, particularly in circumstances where there is nothing to suggest that the sale price to Lenta is at an undervalue or other than a fair price reached at arm’s length.

I further accept that, given the Claimant’s ownership and/or control of three of the other four markets and their income streams - which formed part of the Joint Venture - even if the Claimant could show an arguable claim for a monetary judgment relating to V177, that ownership and/or control of the Defendant’s interest in those other sites, would provide substantial security for any such judgment. This is a factor which would weigh in the balance against the grant of a freezing injunction.

For these reasons I decline to grant a freezing injunction afresh.

In his skeleton dated 18 March 2019 for the hearing on 20 March 2019, the Defendant expressly “stressed” that the Claimant had not sought, and was not seeking, an injunction, aimed at a specific asset, preventing the sale of V177 to Lenta or to protect the proceeds of such sale. Mr Nash repeated the point at the outset of the oral hearing. Despite this, neither at the outset of the hearing nor during the course of argument, was an application for such an injunction made. However, at the very end of his oral submissions Mr Coppel for the first time indicated that, if the Freezing Injunction was not to be continued, the Claimant would seek a proprietary injunction. At that point, as the Defendant pointed out, no formal application had been made.

Then almost two weeks later, on 2 April 2019 the Claimant issued and served its further application notice, purportedly “to regularise the application made at the hearing”. That application notice was stated to be supported merely by the evidence already before the court in relation to the Freezing Injunction. I then made directions for the service of further written submissions by the parties, pursuant to which the Claimant served written submissions, as did the Defendant, together with Mr Bukin’s second witness statement. The application was therefore very much an afterthought.

In his second witness statement, Mr Bukin describes in detail his involvement since 2017 in the renovations of V177 and the transaction with Lenta - both general renovations required to V177 (incurring costs of US $400,000) and construction works required specifically by Lenta (US $940,000), and expenses for maintaining V177 since autumn 2015, running to almost US $2.1 million.

He goes on to explain that, in the event of Lenta unilaterally terminating the Preliminary Agreement, in the face of a continuing injunction from the Court, then under the terms of the moratorium the Defendant will not be reimbursed for expenses which he has already incurred for the renovation. Moreover in any event, if the Court were to proceed to grant the Proprietary Injunction, there is a risk that Lenta may insist on all the liability provisions of the Preliminary Agreement. Although to date Lenta has shown understanding and cooperated on issues arising from the grant of the Freezing Injunction, Lenta itself may be up for sale and its new owners may take advantage and terminate the Preliminary Agreement, if an injunction remains in place. Finally he adds that if the Agreement with Lenta is terminated, it will be extremely difficult for the Claimant to find a new buyer for V177.

The claimant for an interim proprietary injunction must establish the following three elements, namely that: (1) there is a serious issue to be tried on the merits (2) the balance of convenience is in favour of the grant of an injunction and (3) it is just and convenient to grant the injunction. This is the conventional American Cyanamid approach to an interim injunction and differs from the approach to a freezing injunction. There is no need to show any risk of dissipation of assets, and an injunction may be granted in the face of a delay which would be such as to lead to the refusal of a freezing injunction: see Madoff Securities International Ltd v Raven

As regards the balance of convenience, this involves considering first the adequacy of damages for the claimant, if interim relief is refused. (I note that some authorities seem to suggest that adequacy of damages and balance of convenience are separate stages). If damages are adequate for the claimants, the injunction will not be granted. Only if they are not adequate does the court go on to consider the adequacy of damages for the defendant, if interim relief is granted. If damages are not adequate for the defendant either, then the court goes on to consider the balance of convenience and which course is less likely to cause “irremediable prejudice”. See National Commercial Bank Jamaica Ltd v. Olint Corp [2009] UKPC 16 at §§16-17. Contrary to the Claimant’s submission, these passages in Olint Corp are not authority for the proposition that where the “serious issue” threshold has been cleared in a claim to particular property, it is in reality unlikely that the court will find that the applicant would be just as well off with an action in damages, should the property be dealt with pending trial. Rather the correct proposition is that once the position has been reached that the claimant shows a sufficiently arguable case for a proprietary remedy, the court will more readily afford that claimant with interim remedies by way of injunction and disclosure orders: Madoff at §140, citing Republic of Haiti v Duvalier [1990] 1 QB 202 at 213-214. Not to do so might (but not necessarily will) cause the irremediable damage as referred to in Olint Corp. Accordingly, in considering the second stage, it remains necessary to consider the adequacy of damages as a remedy, for one or both parties: see for example Sukhorchin v van Bekestein [2014] EWCA Civ 399 at §18.

Once it has been shown that the balance of convenience favours the grant of a proprietary injunction, it is extremely unlikely that the court would say that it was not just and convenient to grant the injunction: Madoff §141.

Finally, as to whether a party should provide fortification for its cross undertaking in damages, Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2014] EWCA Civ 1295 establishes that three requirements must be satisfied:

In making his further application, the Claimant nevertheless maintained his primary position that the Freezing Injunction should be continued and maintains his primary case that the Defendant is liable to the Claimant for damages and/or equitable compensation in a sum not likely to be less than 50% of the amounts used to acquire and develop V177. However he now seeks, in the alternative, an injunction restraining the Defendant from transferring ownership or control or otherwise dealing with or diminishing the value of V177 or Pigmalion, without the Claimant’s prior written consent. The basis of this alternative injunction is said to be a proprietary right, alternatively a contractual right.

As regards the steps to be established, first, there is at the least a serious issue to be tried that the Claimant is 50% beneficial owner of V177 on the same proprietary bases as put forward in support of the claim for the Freezing Injunction (see paragraph 83(1) above). The essential factual allegation is that, even whilst held by Pigmalion, the beneficial ownership of the V177 is to be shared between the Claimant and the Defendant. The Claimant points to the final relief sought in the action: including namely a declaration as to his beneficial ownership of V177 and a final injunction restraining the Defendant from disposing or dealing with V177, pending the transfer of V177 to a new holding company owned by Agro Market.

In a somewhat opaque passage in written submissions, the Claimant claims that, in the alternative to his damages claim, he has a beneficial interest in V177, albeit that he “would only take … beneficial ownership of V177 if D kept his promise with regard

Secondly, as regards balance of convenience, in addition to relying upon the proposition which I have already considered in paragraph 110 above, the Claimant relies on the proposition that delay does not have the significance as it does in relation to a conventional freezing injunction because the applicant is not seeking to establish a risk of dissipation.

Thirdly, the Proprietary Injunction here is just and convenient: the Defendant alone has been guilty of clandestine dealings; the Defendant is defiant in his assertion that V177 is his to deal with as he pleases, and the Defendant has shown himself prepared to act wrongfully in order to achieve his goals, relying upon the alleged taking by force of Usachevskiy market and K25 in November 2015.

Finally, in the further alternative, the Claimant seeks the Proprietary Injunction on the basis of his contractual (as opposed to proprietary) rights on normal American Cyanamid principles. This formulation is based on the alleged contractual obligation upon the Defendant not to dispose of V177 pending transfer to Agro Market, as set out in paragraph 15 (d) the Particulars of Claim.The balance of convenience favours grant of this injunction, most particularly because it requires the Defendant only to obtain Claimant’s consent to dealing with V177 and the Claimant has made it clear that he will not oppose a mutually beneficial sale.

By way of preliminary, the Defendant submits that the application for the Proprietary Injunction is an afterthought and the evidence before the Court (which was directed towards the application for a freezing injunction) is less than complete.

As to serious issue to be tried, the Defendant, for limited present purposes, does not dispute that the Claimant can establish a serious issue to be tried as to whether he has a proprietary interest in, or a contractual right in relation to, V177. However the correct question is whether there is a serious issue to be tried in respect of the claim to an injunction at trial, which claim the interim relief is sought to protect. Effectively the final relief sought is an injunction requiring transfer of V177 to Agro Market and this amounts to specific performance of the Defendant’s obligations. Under the principle of mutuality established in Price v Strange [1978] Ch 337 at 367-368, the Court will not compel a defendant to perform his obligations if it cannot, at the same time, ensure that any unperformed obligations of the claimant will be specifically performed, unless, perhaps, damages would be an adequate remedy to the defendant for any default on the part of the claimant. In the present case, on the Claimant’s own case that there has been no binding agreement to terminate the Joint Venture, the Claimant is equally under an obligation to transfer the other markets to Agro Market. The Claimant has not offered any undertaking in respect of those markets and wishes to leave himself free to deal with those sites. There is evidence that he is seeking to sell and not being fully open relation to the receipts of M1. In those circumstances the Court should refuse the interim injunctive relief the Claimant seeks in respect of V177 without the Claimant offering undertaking so as to ensure that by the time of trial he has not prevented there being mutuality. No such undertaking has been offered.

As regards adequacy of damages, there is no presumption that in an interim proprietary injunction the court will find damages not to be adequate; the Claimant has not addressed the question whether damages would be an adequate remedy in respect of the Proprietary Injunction being sought. First, the Claimant has not given up his claim for a freezing injunction as being his primary claim. That claim must be a claim based on a claim for damages and thus the Claimant himself must regard that as an adequate remedy. Secondly, the Claimant’s interest in V177 has no value independent of its monetary value and there is no evidence of difficulty in valuing V177. It is difficult to understand why the Claimant would not be compensated by an award of damages/equitable compensation calculated by reference to what has been spent and/or the open market value of V177.

As to the balance of convenience, first, the Proprietary Injunction would not impose any corresponding restraint upon the Claimant; secondly the injunction seeks an absolute bar on disposal, and not relief designed to preserve half its value. The latter is the most that could be sought in view of the breakdown in the commercial relationship between the parties; thirdly the Claimant has security for his claim by way of his ownership and/or control of the other Joint Venture sites. The evidence as to the value of those sites is limited, but that is a consequence of the fact that the Proprietary Injunction has been made late and after the evidence had closed. Finally the balance of prejudice is in favour of not granting the Proprietary Injunction. There is a very substantial risk of irremediable prejudice to the Defendant if the sale to Lenta to goes off, as shown by Mr Bukin’s second witness statement.

Finally relief should be refused because the cross undertaking offered by the Claimant is insufficient: first, because the fortification offered is wholly insufficient in amount. The evidence of Mr Bukin in his second statement is relied upon to show that the grant of an injunction would cause substantial loss. The Defendant has spent in total a further US $5 million on V177 since its acquisition. Secondly, the Claimant has offered no undertaking that he will not sell the other assets of the Joint Venture.

As regards the first stage, as the Defendant accepts, there is a serious issue to be tried that the Claimant has proprietary rights in V177. Moreover I do not accept that the fact that the Claimant has not offered an undertaking to preserve the other sites over which he has control negates the finding of a serious issue to be tried. Whilst it is correct that the question is whether there is a serious issue to be tried on whether the Claimant will be entitled to a final injunction, contrary to the Defendant’s contention, the Claimant is not seeking a final injunction that V177 should be transferred to Agro Market (or another “holding company”). The final injunction he seeks is an injunction preventing dealing with or disposal of V177 pending transfer to Agro

As regards the second stage, balance of convenience, I consider first whether damages would be an adequate remedy for the Claimant:

In any event, as regards damages as a remedy for the Defendant, in the event that at trial it turned out that interim restraint had not been justified, on the basis of the evidence of the Defendant himself and of Mr Bukin there is at least a real risk that an interim injunction will jeopardise the sale to Lenta, and in that event, will cause the Defendant some considerable financial loss. Whilst that may be quantifiable, the amount of such loss is likely to be significantly greater than the £100,000 currently paid into an account, by way of fortification for the Claimant’s cross-undertaking in damages. I am satisfied that the Defendant’s evidence meets the requirements set out in Energy Venture and that fortification of the cross-undertaking in a substantially greater amount would be required, if the Court were to consider the grant of a Proprietary Injunction. Despite the filing of Mr Bukin’s further evidence, the Claimant has not responded by offering any further fortification. This is a further reason for me to decline to grant the Proprietary Injunction.

Finally, whether as part of the balance of convenience or at the third stage of “just and convenient”, I do consider that delay is a relevant factor in the present case. On his own case, the Claimant has been aware of the proposed sale to Lenta since last September. However it has taken almost 6 months for the Claimant to seek an injunction which in terms seeks to restrain dealings with V177. The Freezing Injunction did not in terms seek such relief, but rather was directed, inter alia, to the proceeds of sale of V177. That delay may not be as significant in the case of a proprietary injunction which seeks the return of a specific asset. However here, where what is sought to protect is a 50% interest in the value of the property, I consider that delay remains a relevant consideration.

For all these reasons, the further application for a Proprietary Injunction is dismissed.

In the light of the conclusions in paragraphs 93, 104 and 128 above, the Freezing Injunction is discharged; and the Claimant’s applications for a fresh freezing injunction and for a Proprietary Injunction are dismissed.

I will hear submissions in due course as to the appropriate terms of an order and matters consequential upon these conclusions.