Gorbunova v Berezovsky (aka Platon Elenin) & Ors [2013] EWHC 76 (Ch)

Case No HC12BO4996[2013] EWHC 76 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 18/01/2013
Before
MR JUSTICE MANN
Between
Helena GorbunovaClaimant(1) Boris Berezovsky (also known as Platon Elenin)Defendant(2) Société d’Investissements France Immeubles (SIFI)Defendant(3) Ovaco AGDefendant(4) Comodo LimitedDefendant(5) LMC Trustees LimitedDefendant(6) Fotopark LimitedDefendant(7) Steelville LimitedDefendant(8) Mr Lev KrantDefendant
Robert Anderson QC and Sarah Haren (instructed by Mishcon de Reya) for ClaimantAnthony Trace QC and Thomas Grant (instructed by Addleshaw Goddard LLP) for DefendantHearing Hearing dates: 14 th and 15 th January 2013
JudgmentMr Justice Mann :
[1]This is an application by the defendant, Mr Berezovsky, to discharge an interim freezing order made against him on a without notice application at the behest of the claimant, Ms Gorbunova, on 20th December 2012. He does so primarily on the basis that the evidence and other material placed before the deputy judge who made the order (Mr Roger Wyand QC) did not comply with the procedural rules and other principles for the making of without notice applications, though he also has criticisms of the form and extent of the restraint. His application is made under the liberty to apply contained in the freezing order.

Background

[2]Ms Gorbunova was, until last year, the longtime partner of Mr Berezovsky, the by now well-known Russian emigré. There are two children of their relationship. She makes claims against Mr Berezovsky under the following heads. I describe the claims in outline only, and in some cases without any detail because of the confidentiality said to attach to the subject matter.(a) She says that Mr Berezovsky promised her that when the house in which they lived at Wentworth Park was sold (which it was, last year) he would procure that she received £5,000,000 from the proceeds of sale, and within two years he would buy a substitute home for her and the two children. In fact, when the moneys were to hand, Mr Berezovsky used them to pay various debts and she did not see any of it.(b) Mr Berezovsky claims to be the ultimate beneficial owner of two properties in the south of France. Those properties are held through a ladder of companies and trusts. Ms Gorbunova has also been told that she is a beneficiary under those trusts. She says that Mr Berezovsky has told her that she is the owner of the properties. She regards them as an important part of her financial security. A sale of those properties is being planned, and a purchaser identified. As a result of information received from the purchaser, and other investigations, and what she regards as the unreliability of Mr Berezovsky, Ms Gorbunova is fearful that she will not receive the proceeds of any such sale because Mr Berezovsky needs the money himself. She therefore fears that he will renege on his assurances.(c) In September 2012 Mr Berezovsky settled a claim that he was making against the estate and representatives of a Georgian man called Badri Patarkatsishvili. The terms of that settlement were confidential. Ms Gorbunova has been told in outline what those terms are, but apparently has not seen the settlement document. Because those terms are confidential I will not set out in this judgment what she knows about those terms, save to say that Mr Berezovsky has an entitlement under that settlement, part of which is deferred moneys. Mr Berezovsky promised Ms Gorbunova that she would receive certain of those moneys, subject to various matters which entitled Mr Berezovsky to retain some. In essence, she claims an interest in some future receipts. However, she alleges that Mr Berezovsky has agreed to pay his former wife some of the same moneys. Ms Gorbunova complains about this.(d) Ms Gorbunova asserts various claims that she says their children have against Mr Berezovsky under the Children Act 1989 which she issued in the Family Division on 11th January 2013. She produces no evidence at all in support of those claims. All she does is refer to the opinion of a QC as to the range of values of such claims in aggregate. In the interests of the children, I will not, and do not need to, set out that range here.[3]Ms Gorbunova makes claims of the following nature arising out of those outline facts. First, she claims an interest in the first three items of property. Second, she makes contractual claims so far as any of those items of property are not available to be paid to her in accordance with the agreements made and assurances given at least in relation to Wentworth Park and the litigation proceeds. The hearing before me, quite properly bearing in mind the issues involved, did not go into the merits of those claims, and assumed they were good for the purposes of the hearing. Nothing in this judgment reflects in any way on the merits of those claims, either in terms of their overall merits or in terms of the extent to which they are arguable. Those are matters for another day.[4]Basing herself on those claims, on 18th of December 2012 Ms Gorbunova applied for a freezing order against Mr Berezovsky and seven other defendants who, between them, are said to embody the chain of companies, trustees and Protectors having interests in, or control over, the French properties. The matter came before Mr Roger Wyand QC, sitting as a deputy judge of this Division. He heard the matter and apparently indicated that he would be minded to make an order, but there were certain matters relating to service out of jurisdiction and enforcement of the order abroad that needed to be dealt with. On 20th December junior counsel for Ms Gorbunova attended before the deputy judge again to deal with those matters, and the order was made.[5]I do not need to set out the full terms of that order. It suffices if I describe it as having the following elements:(i) Mr Berezovsky’s assets up to £200m were frozen.(ii) Mr Berezovsky and the various other defendants were restrained from dealing with the French properties without the consent of Ms Gorbunova.(iii) Mr Berezovsky was restrained from dealing with the net proceeds of sale of Wentworth Park or any property representing those proceeds.(iv) Mr Berezovsky was restrained from dealing with the proceeds or value of the settlement of the litigation.[6]The application was made without notice and Ms Gorbunova gave an undertaking that she would serve the order, the proceedings and application material “as soon as practicable”.

The basis of the present application

[7]Mr Berezovsky claims to have very substantial grounds for challenging the order because of a breach of the duty of full and frank disclosure and on the merits and on other grounds. However, he acknowledges that such an application will take some time to prepare and, in particular, a significant amount of time to hear (perhaps a matter of days), so that application cannot be speedily mounted. However, he also claims to have a good reason for having the order set aside on the basis that the material before the deputy judge was not sufficient to justify an urgent, without notice application. As will appear, he complains that the application and its supporting documentation did not comply with the letter of rules and practice directions, and the facts of the case were not sufficient to bring it within that exceptional class of cases in which an applicant is entitled to proceed without notice.[8]That application is said to be much shorter than the more substantive application, and therefore Mr Berezovsky sought to bring it on in the applications court. It was asserted on behalf of Mr Berezovsky that it could be dealt with within the time allowed for such applications. It is plain that that always was a completely hopeless prospect. The application required the court to have a grasp of a significant amount of detail and that was best dealt with by pre-reading. Pre-reading alone took over two hours. The hearing of the substantive application then took over 3 ½ hours, and that is without a further significant amount of time spent determining the question (not at all straightforward) as to whether or not the application should be heard in private. It should never have been presented to the application court as one which was appropriate for it. Mr Berezovsky might have taken the view that it was urgent; I can see why he did. But his lawyers should have been more aware of the likely length of time necessary to hear it. Fortunately for him, I was available to take the matter outside the applications court list.

Privacy matters

[9]Mr Berezovsky wished to have this application accompanied by what amounted to total privacy. He proposed that the proceedings be anonymised, that the hearing should take place in private and that all sorts of strictures should be added to the order preventing disclosure. On the day before the substantive hearing of the matter I ruled against the application that the listing be anonymised. At the hearing itself I ruled that it should take place in private because of confidentiality issues affecting some of the evidence and the interests of the children, but that the matter would be reviewed after the delivery of this judgment.

The basis of Mr Berezovsky’s application

[10]As indicated, on this occasion Mr Berezovsky confined himself to limited objections on the material submitted to the judge, without prejudice to his potential more widely-based application. He takes the following points:(i) There was insufficient material to justify a completely without notice application, both in terms of technical shortcomings in the evidence and in terms of the quality of the evidence.(ii) There was insufficient evidence of a risk of dissipation to justify a freezing order, even taking Ms Gorbunova’s evidence at face value.(iii) The order is wrong in that it provides for an aggregation of the £200m frozen amount and for the restraint of each of specified items of property. That was giving cover for the same claims twice over. If anything, it should have contained only proprietary restraints.(iv) The claimant is in breach of her undertaking to serve the documentation as soon as reasonably practicable. The order was obtained on 20th December 2012. It was not served until 4th January 2013.[11]All these points are said to mean that the injunction should be discharged. Alternatively, if the only valid objection is that in (iii), the order ought to be modified so that it is no longer a general freezing order but merely freezes particular assets.

The “without notice” point - the law

[12]Mr Trace QC, who appeared for Mr Berezovsky, took me to a number of provisions in the rules relating to without notice applications and to a number of cases stressing the exceptional nature of a without notice hearing and the requirements to be fulfilled if a proper without notice hearing is to be held, and going to what those requirements are.[13]He started with CPR 23.7(1)(b), which provides that at least three days’ notice should be given of any application. He also accepts, however, that there are exceptions, and he draws attention to CPR PD 23 paragraph 3 which refers to that possibility and sets out a number of situations where that may be done, including where there is “exceptional urgency”, and “where the overriding objective is best furthered by doing so”. CPR 25.3(1) in terms provides that an interim remedy can be granted:
“… Without notice if it appears to the court that there are good reasons for not giving notice.”
[14]Mr Trace laid particular emphasis on CPR 25.3(3) which provides:
“If the applicant makes an application without giving notice, the evidence in support of the application must state the reasons why notice has not been given.”
It was a large part of his case before me that the evidence of Ms Gorbunova fell short in that respect. I shall deal in due course with the extent to which that is correct.[15]Mr Trace then set about demonstrating how authority had set out further principles to be applied and elaborated on them.[16]In Re First Express Ltd [1992 BCLC 824 Hoffmann J set out the basic principle at page 828e:
“It is a basic principle of justice that an order should not be made against a party without giving him an opportunity to be heard. The only exception is when two conditions are satisfied. First, that giving him such an opportunity appears likely to cause injustice to the applicant, by reason either of the delay involved or the action which it appears likely that the respondent or others would take before the order can be made. Secondly, when the court is satisfied that any damage which the respondent may suffer through having to comply with the order is compensatable under the cross-undertaking or that the risk of uncompensatable loss is clearly outweighed by the risk of injustice to the applicant if the order is not made.”
[17]The main point in issue in this application is the first of those two conditions. It should be noted (as pointed out by Mr Anderson QC, who appeared for Ms Gorbunova) that the first of those conditions contains two alternatives – either the matter has to be so urgent that there is no time to give notice to the other side, or it has to be a case where giving them notice will defeat the purpose of the injunction, usually by them doing hastily that which the injunction seeks to enjoin.[18]Mr Trace drew attention to the fact that in that case the sanction for non-compliance with the relevant requirements led to the discharge of the without notice order, leaving it to the applicant to make an inter partes application if he thought fit – see page 831f. I note that it is true that that is what happened in that case, but the “disciplinary purpose” of taking such a course was said to be failure to comply with the non-disclosure rule, not a failure to satisfy the requirements of a without notice application. Nonetheless, I accept that such a sanction might be appropriate in the case of an application which is improper in the sense that it ought not to have been made without notice.[19]Moat Housing Group-South limited v Harris [2006] QB 606 developed this theme a little: “63. As a matter of principle no order should be made in civil or family proceedings without notice to the other side unless there is a very good reason for departing from the general rule that notice must be given. Needless to say, the more intrusive the order, the stronger must be the reason for the departure.” (per Brooke LJ)[20]Mr Trace submitted that a freezing order of the kind made against Mr Berezovsky was highly intrusive, requiring a very strong reason for departing from the normal rule of hearings being notice. That is true to an extent, but, in terms of freezing orders, there is nothing significantly more intrusive about the order made against Mr Berezovsky when compared with other freezing orders that are made in these courts with increasing frequency. It is of course the case that freezing order applications generally have to be made with particular care because of the damage and disruption that can be done to the commercial and private interests of the objects of the orders, but at times Mr Trace, both in the substance of his submissions and in the style in which they were delivered, suggested that the sort of freezing order that was sought against Mr Berezovsky was particularly onerous or intrusive, over and above what one might call the more familiar applications, and so was deserving of a particularly high standard and quality of evidence. I do not accept such a submission. The application made against Mr Berezovsky was, of course, very serious, and the amount involved was very great. However, I do not think that the application itself, of its nature, was something which raised the evidential requirements to a much more elevated state than they are in other freezing order cases.[21]The next submission of Mr Trace was based on Thane v Tomlinson [2003] EWCA Civ 1272, in which it was held that it should not be thought to be absolutely automatic that freezing order applications would be heard without notice. The case also emphasised the importance of complying with CPR 3.4. Peter Gibson LJ said:
“25. I return then to the other requirements of the Practice Direction. Section 3.4 provides: “where an application is made without notice to the respondent, the evidence must also set out why notice was not given.”
That requirement was again not obeyed when Mr Black’s witness statement was prepared. There is nothing in his witness statement to indicate why notice was not given. Again, Mr Blackett-Ord’s answer was to refer us to the judgment of the judge as an explanation. The judge does not deal with that point at all. … 28…Mr Blackett-Ord submitted that it has now become the practice for parties to bring ex parte applications seeking a freezing order by pointing to some dishonesty, and that, he says, is sufficient to enable this court to make a freezing order. I have to say that, if that has become the practice, then the practice should be reconsidered. It is appropriate in each case for the court to scrutinise with care whether what is alleged to have been the dishonesty of the person against whom the order is sought in itself really justifies the inference that that person has assets which he is likely to dissipate unless restricted.”[22]Mr Trace points to evidential shortcomings in this respect. He also relies on the following statement by Sir Anthony Evans:
“36. Counsel says that it is normal practice to apply ex parte for an order of this sort, and he said also that it is common for no notice to be given. I am sure that may be right – I do not suggest that it is not – because the very nature of a freezing order, for the reasons he explained, is that it may be necessary to apply without notice, hence the importance of paragraph 3.4 of the Practice Direction, which requires an explanation of the reason why no notice has been given in a particular case. I would be very surprised to hear that it is common or normal practice to make an application without notice and at the same time to disregard the rules which expressly cover that situation. If that is common, and it appears to have happened here, then I sincerely hope that this judgment will do something to bring that practice to an end.”
[23]Mr Anderson pointed out that this case was one of a post-judgment freezing order and was one in which one of the parties had an opportunity to appear but the other did not. That is correct, but it makes no difference to the principles stated.[24]In CEF Holdings Ltd v Mundey [2012] FSR 35 Silber J had to consider the effect of various shortcomings in disclosure and shortcomings in procedure. He emphasised the importance of complying with the requirements for making without notice applications when he concluded that there were “some serious lessons to be learnt”, including: “(a) remembering that without notice applications should only be granted in very limited circumstances, which are where to give notice would enable the defendant to take steps to defeat the purpose of the injunction, such as in the case of many search or freezing injunctions, or where there is some exceptional urgency, which means literally there is no time to give notice… (b) appreciating that in every application for an injunction sought without any or any proper notice, it is prudent to include a statement supported by facts explaining fully and honestly why proper notice could not have been given. A bland statement that the defendant might do something if warned is unlikely to satisfy this requirement without some particulars in support;” (paragraph 255). Mr Trace drew from this the importance of complying with notice requirements save in exceptional cases. He also drew attention to the word “would” in (a), suggesting that it had a connotation of a high degree of inevitability of steps being taken to defeat the order, which is absent in the present case. In my view, while Silber J is clearly indicating that proper notice should be given, he is not moving the law on. He is not indicating some high level of inevitability. In his paragraph (a) he is, in my view, expressing in his own words what Hoffmann J had said in First Express. It is no doubt a salutary reminder, but it is not new. It should also be noted that freezing orders are treated there as paradigm cases in which it is likely, by their very nature, that giving notice will give a defendant an opportunity to thwart the order by moving assets before it is made. That is plainly right, and has to be borne in mind in considering the evidence in this case. In (b) he is indicating the need for proper evidence. Bland, unsubstantiated statements will not do. A statement, accompanied by particulars, might.[25]Part of Mr Trace’s case was that it was necessary to distinguish between two different things if a freezing order application was to be made without notice. The first is evidence of dissipation, and second is evidence which justifies applying without notice. He is technically right about that, but they are obviously closely allied. The nature of the act which it is sought to restrain will, in the vast majority of cases, make it appropriate to apply without notice (though it is not automatic). That point is demonstrated by Legal Services Commission v Lonsdales Solicitors [2012] EWHC 3311 (QB), cited by Mr Anderson. At paragraph 55 Popplewell J said:
“55. I turn finally to the complaint that the application was made without notice. There is nothing in this point. If, as I have concluded, there was a real risk of dissipation, this was clearly an application which could properly be made without giving Mr McKay an opportunity to undertake such dissipation. It is said that because the application was prepared prior to the weekend and only made on a Monday, notice could have been given after banking hours on the Friday. However, even that would have allowed Mr McKay some time on the Monday and whilst the application was waiting to come on to have undertaken such activity as he might have been minded to undertake by way of dissipation of his assets if, for example, the £75,000 had already been transferred from the office account and was a sum that he was waiting to deal with. In the circumstances, I do not regard the Commission as being subject to legitimate criticism for having made the application without notice.”
[26]This is a demonstration of the fact that it may be apparent from the form of the relief sought, against its background, that the applicant is justified in applying without notice so as to deprive the respondent of the opportunity of defeating the order in advance. Mr Trace sought to distinguish this on the footing that there was a strong prima facie case of dishonesty in the causes of action. It is true that that was a feature of the case, but the underlying point that I have just made remains.

Mr Berezovsky’s case on the without notice point

[27]Having set out the principles applicable, and the parties’ submissions on them, I now turn to their relevance in this case.[28]Mr Trace sought to make much of the point that there was no reason to suppose that Mr Berezovsky was about to take steps to frustrate Ms Gorbunova’s claims by some form of dissipation of assets so as to justify the application. To use a word much used by Mr Trace at the hearing, there was no evidence that any dissipation was “imminent”. He went through the evidence to demonstrate that there was nothing to suggest that Mr Berezovsky was about to, or in some cases even could, take particular steps in relation to any of the identified assets so as to dispose of them. There was no direct evidence of urgency, nor any inference of urgency to be drawn from the evidence despite the fact that the supporting affidavit of Ms Gorbunova contained a section titled “Urgency”.[29]The section on “Urgency” in Ms Gorbunova’s affidavit reads as follows:
“Urgency 42. Because of the imminence of the sale of the French Properties and because Boris has been wholly unreliable in honouring any of his promises or agreements with me, this application is urgent. I am of course conscious that this application is made shortly before a holiday period and that any order made could require the defendants to take steps and provide information at a time when officers, employees and legal advisers may be away. I should stress that this timing is not of my making but is a response to the conduct of Boris and the other defendants. 43. For the reasons apparent above there is a real risk of dissipation and no notice has been given to the Defendants of this application.”
[30]In the course of his submissions, Mr Anderson accused Mr Trace of conflating the two bases on which a without notice application might be made – urgency and risk of defeating the purposes of the order. That, to a degree, was a fair point, but it might be said that the fault was first demonstrated in the two paragraphs of the affidavit which I have just set out.[31]In the course of his submissions Mr Anderson said that the true basis of the application’s being made without notice was the second of those factors. He did not seek to justify the application on the basis of urgency in the sense that there was no time to give Mr Berezovsky an opportunity to appear. In those circumstances this point is in part a redundant one, but I will deal with it briefly.[32]Urgency (“imminence”), in the sense of there being no time to give notice, cannot be said to be a basis for going without notice in this case. It might be a reason for Ms Gorbunova applying when she did, but it did not justify a without notice application. On the evidence, the sale of the French Properties cannot be said to have been imminent. While paragraph 26 of Ms Gorbunova’s affidavit says that Mr Berezovsky told her that he was in financial difficulties and the French Property “had to be sold immediately” because a creditor was asking for “security for their loan”, she was told that in the middle of September. She has been talking about the sale with Mr Beresovsky for some time. Her own evidence reveals that her solicitors have been in contact with “the prospective purchaser”, and various attendance notes of conversations with him are exhibited. They demonstrate that a number of steps have to be gone through before a sale can be effected, including dealing with charges on at least one of the properties, and it does not appear that it is right to say that completion of the sale is “imminent”. To that extent paragraph 42 of the affidavit is inaccurate.[33]However, having said that, it does not appear that the deputy judge was in any way misled by that into thinking that the sale was imminent or that the application was made without notice on that basis. The transcript of the hearing below reveals leading counsel for Ms Gorbunova (Mr Henry Legge QC) taking the judge to the exhibit with the attendance notes from which it would be apparent that the sale was not imminent, albeit that the reference made at the hearing to the attendance notes was not in the context of considering that point. However, at a later stage in the hearing, when considering the form of the order and the extent to which it could hamper a sale of the French property, Mr Legge is recorded as having said the following:
“We had exactly those concerns [about hampering a sale]. If one can put it this way, the sale is imminent in the sense that there is a vendor or and a buyer, but it looks as if it may be quite difficult. There is the issue of the charges to be addressed. There are various other issues that need to be addressed. If the property is to be sold for £220 million, then I cannot believe that my client would be objecting to it.”
[34]Looking at the matter in the round, it seems clear enough to me that urgency was not actually being urged on the judge as the basis on which a without notice application was being made. Nor, on a fair reading of paragraph 42 of the affidavit, can it be said that there is any suggestion that it was. That paragraph is designed to justify timing rather than the without notice aspect of the application.[35]For the sake of completeness, I should say that none of the other matters complained of demonstrated great urgency in relation to them, or in relation to anything else. No relevant moneys are due to come in from the litigation settlement for the time being, and the Wentworth moneys have come and gone (on the evidence so far).[36]Mr Anderson is therefore entitled to make the point that urgency was not the basis for the without notice character of the application. So while Mr Trace is entitled to say that there is no real case based on urgency, that is beside the point. Mr Anderson is entitled to say that the real foundation for the without notice character was a risk of the order being defeated if notice was given. He points to paragraph 43 of the affidavit as making that point. Whether or not the evidence is sufficient to justify that and to comply with the rules is the matter to which I now need to turn. That, in my view, is the real point in this area of the case.[37]In order to comply with the rules, the affidavit should set out the reasons for seeking to make the application without notice. Paragraph 43 is the paragraph which refers to the point. Mr Trace says that this short statement (“bland”, in the terminology of Silber J) is not enough. It is precisely the sort of generalised statement which the rules and the authorities do not allow. The claimant has done no more than pay lip service to the rule that reasons must be given in the affidavit.[38]If that sentence was all there was I would agree with Mr Trace. But it is not all that there was. As Silber J said, a bland statement unsupported by particulars would not suffice. However, this sentence (paragraph) does not fall into that category. It contains a cross-reference to the preceding material, and refers to the risk of dissipation. True it is that the sentence seems to elide the questions of dissipation and the need to go for a without notice hearing, and does not in terms set out that the reason for applying without notice is a fear that giving notice will allow an opportunity to defeat the order. However, the cross-reference, and the reference to the risk of dissipation, is in my view sufficient to allow one to look at the preceding evidence and see whether there is evidence of a risk of dissipation, and whether that evidence is of sufficient character to justify the conclusion that it is the sort of case which demonstrates that further dissipation will take place if notice is given. That is the sort of exercise implicit in the formulation of Popplewell J in LSC v Lonsdales (above). Any judge sitting in this Division will know that freezing orders are likely to be exemplars of the relevant category of without notice applications, and although I would accept that the formulation and technique adopted in Ms Gorbunova’s affidavit is not the clearest or most desirable compliance with the rule, it is in my view sufficient in principle, and if there is a technical non-compliance with the rule I would be prepared to waive it if the facts alluded to are clear enough.[39]The real question is therefore whether, on the evidence in the preceding parts of the affidavit (the “reasons apparent above”), this is a case in which the relevant point can be made out. I turn to that. The relevant evidence can be summarised as follows:(i) Ms Gorbunova sets out the purchase of Wentworth Park by the Elena trust, and a document indicating that she and Mr Berezovsky were in 2006 treated by the trustees as entitled to the benefit of the property while alive and unless and until the trustees were made aware of any wishes of intentions to the contrary. She signed documents in connection with a remortgage and a postponement of rights of occupation. At the end of 2011, when Mr Berezovsky was planning a sale, he told her that if a sale took place she would get a sum of cash and ultimately a similar house of her choosing. On this basis she signed the letter of postponement. A few months later she signed other documents (including the contract of sale) allowing the house to be sold, after receiving a promise that she would be paid £5m on sale and a reassurance that after 2 years Mr Berezovsky would buy “a house for me and the children in the UK similar to Wentworth Park”. The house was sold in April 2012, but she was told for several months that the proceeds had not been received. Then in September she was told that the proceeds had been paid to repay loans and to pay lawyers’ fees. Thus Mr Berezovsky has promised an interest, and then reneged on that promise and, apparently, did not inform her promptly of what he had done.(ii) Next Ms Gorbunova turns to the claim in relation to the litigation settlement deed. In December 2011, in a text message, Mr Berezovsky said he would split “everything” equally as a sort of clean break agreement at a time when the relationship was deteriorating. In March 2012 he signed a deed promising her one third of the recoveries from various sets of litigation, including the Patarkatsishvili litigation. Then in September 2012 the settlement of that litigation came up. Mr Berezovsky agreed with Ms Gorbunova that she would receive the second tranche of moneys to come under a settlement agreement, subject to a retention of moneys for legal fees. She was given to understand that this tranche would take perhaps a year to come in. This agreement is said to be recorded in a letter drafted by Mr Berezovsky’s solicitors, with a further manuscript addition by Mr Berezovsky. In reliance on this agreement Ms Gorbunova gave a confirmation which the litigation counterparties were seeking as part of the settlement. Having thus signed, Ms Gorbunova subsequently discovered that Mr Berezovsky had already agreed with his former wife, as part of their divorce settlement, that he would give her 30% of the proceeds of anything recovered from the same litigation.(iii) So far as the French Properties go, Ms Gorbunova says that she was told they were hers, for her and the children, as long ago as 1997. This assertion was repeated over the years. In due course she signed a document giving Mr Berezovsky’s mother the right to live in them. She received assertions from Mr Berezovsky that he had left her the properties in his will. In the summer of 2012 she was asked to agree to a sale of the properties, and in their frequent discussions (daily, apparently) she told him she would not agree. In reliance on these assertions she believed she was financially secure and did not take other steps that she might otherwise have taken in order to secure her financial future, and she performed other acts to her detriment, details of which do not matter for present purposes. The position in relation to these properties is complicated by the intricate manner in which the beneficial interest is held, through various companies and trusts, and Ms Gorbunova says there are reasons for thinking that the true ownership may not be quite as the documents suggest. There are charges affecting those properties too.(iv) A further short section deals with certain distributions from the trusts which are not germane to the present point.(v) There then follows a section headed “Risk of dissipation”. It starts by setting out Ms Gorbunova’s belief as to property that Mr Berezovsky may have (she does not know of much) and then deals with the prospective sale of the French properties. In her solicitors’ dealings with the purchaser the latter is recorded as saying that she is “not safe” in relation to one but safer in relation to the other. The attendance note reads that he said she was more safe “(in relation to ownership etc)” in relation to the one rather than the other. She does not know what he means by this. However, I note that one can see from the attendance notes which she exhibits that the purchaser has some knowledge of Mr Berezovsky and his affairs. Ms Gorbunova refers to a belief that the French Properties are being sold in order to realise funds for Mr Berezovsky because he is realising the remaining assets at his disposal “and to safeguard what assets he has from his creditors. If unrestrained the likelihood is that the proceeds of sale of the French Properties will be put beyond my reach.”(vi) There then follows a section (still within the “Risk of dissipation” section) setting out findings made in litigation between Mr Berezovsky and Mr Roman Abramovich in a judgment delivered last year by Gloster J in which she found Mr Berezovsky to be an unreliable and sometimes dishonest witness who would say almost anything to support his case, and a finding that Mr Berezovsky relied on an arrangement in which he was interested and which she found to be a sham.(vii) Last in that section is a short passage dealing with correspondence that has taken place between Ms Gorbunova’s solicitors and lawyers for trustees, or former trustees, of one or other of the French Properties. The correspondence contains an indication that one of the properties will not be sold without due notice to her solicitors, but she sets out reasons why that is not satisfactory. She claims that she has received no confirmation about intentions in relation to the other. There was a debate between counsel about the effect of what she was told about this, conducted in correspondence with me after the hearing. I do not propose to develop that. Furthermore, she claims she has received indications that one of the properties has been transferred from one trust to another.[40]Two questions arise in relation to this evidence. First there is the question of whether there is sufficient evidence of a relevant risk of dissipation to found an application for a freezing order, and second, if there is, whether its quality, together with any other relevant evidence, is sufficient to justify a without notice application on the footing that it can be seen to demonstrate a risk that the order would be frustrated if notice were given of the application.[41]In my view, so far as the risk of dissipation is concerned, the evidence goes part way towards some form of freezing relief but not as far as Ms Gorbunova needs in order to get what I will call full freezing order relief as opposed to partial relief in the form of freezing certain assets. The evidence thus far demonstrates a tendency of Mr Berezovsky, when under financial pressure, to promise one thing in relation to particular assets (the Wentworth Park proceeds and the litigation settlement proceeds) and then to do another. He promises money and then either spends it all, or does so having promised it, or part of it, to someone else. Having, on Ms Gorbunova’s evidence, done that in relation to those two pieces of property, there is in my view a risk that it will happen in relation to a third, namely the French Properties, particularly bearing in mind what the purchaser has said about the safety of Ms Gorbunova, the failure to respond to a request for assurances about sale and uncertainty about the trustee position, and Mr Berezovsky’s apparent need for funds. Findings about Mr Berezovsky’s unreliability and dishonesty in the witness box add weight to this.[42]However, I do not think that this evidence goes so far as to establish serious and strong evidence that there is a risk that Mr Berezovsky will dissipate his assets generally in order to keep them away from being able to satisfy Ms Gorbunova’s claims should she establish them. It is one thing to paint a picture of a debtor under pressure who is parting with assets (albeit promised to others) to satisfy other creditors (Mr Berezovsky’s wife and litigation costs creditors). It is another to seek to paint a picture of a man who will take more general steps to frustrate a particular creditor, whether or not particular moneys are required elsewhere. Ms Gorbunova’s evidence paints the first picture but not the second. That has become apparent now that the evidence has been subjected to more vigorous scrutiny as a result of an inter partes hearing. It is apparent from the skeleton arguments and transcripts first time round that this particular distinction was not focused on.[43]The second question is the extent to which that evidence of a propensity to dissipate, and the other evidence, is sufficient to back a case for a without notice hearing on the footing that to give notice of the application would defeat the purpose of the order by giving Mr Berezovsky an opportunity to dissipate in advance. It follows from my finding about the quality of the evidence that it cannot back such a case so far as the case depends on a general propensity to dissipate as opposed to a propensity to promise one thing about particular properties and deliver another (or deliver nothing). So the question becomes whether the evidence in relation to the particular items of property justifies an averment or a case to the effect that, if given notice, Mr Berezovsky will do something in relation to those items of property. On balance, and despite the vigorous submissions of Mr Trace, I think that they do. On the evidence, Mr Berezovsky is a man under financial pressure. It is likely that he will feel a more pressing need to satisfy creditors than satisfy Ms Gorbunova. There is a risk (which, if the evidence is correct, is a serious risk) that he would apply property promised to Ms Gorbunova for other purposes. The scope of that risk, and his propensity to go so far as giving dishonest evidence in pursuit of a claim against another in the Abramovich proceedings, coupled with his use of obscure offshore structures to hold the French Properties, which can be easily manipulated by him for his own purposes, means that there is a risk that he would seek to manipulate matters in a manner so as to deprive Ms Gorbunova of her putative entitlements were he given the opportunity to do so. One does not set up trust structures such as those affecting the French Properties in the interests of transparency. Mr Trace sought to say that there was nothing that Mr Berezovsky could have done to that end had he been given the proper three clear days’ notice, particularly in relation to the French Properties where it is said to be apparent, on the evidence, that a sale simply cannot be achieved as quickly as that. He may be right about a sale, but changing the offshore structures to make life more difficult for Ms Gorbunova would probably be no more than the act of a few pen strokes. This prospect was drawn to the attention of the deputy judge by Mr Legge – see page 55 of the transcript for 18th December. Similarly, while some of the fruits of the litigation are not in Mr Berezovsky’s hands, and are unlikely to be available for some time, he could easily dispose of his interest in them in very short order, as indeed he has done already in giving an interest to his wife (if he has – I am judging this only on the evidence before me, which Mr Berezovsky has not had time to meet). He therefore has opportunity, and he has motive. I think the whole picture is one of sufficient risk of Mr Berezovsky taking pre-emptive steps so as to justify an application without notice on the footing that he would otherwise seek to frustrate the order in advance. That evidence is sufficiently cross-referenced in paragraph 43 of the affidavit of Ms Gorbunova to comply with the rule.[44]Mr Trace bolstered his case by pointing out that this particular justification was not relied on in either written or oral submissions before the deputy judge. Save for one element, that appears to be true. That one element is a reference to the need to make an application without notice as being justified by the risk of otherwise defeating the object of the exercise, made by junior counsel when she returned to the deputy judge on 20th December (see page 7 of the transcript). However, a closer scrutiny of the context of that reference shows that it is being made in the context of the application for permission to enforce outside the jurisdiction, so it is a reference to not serving that application, not the application for the freezing order. However, the exchange really reveals what one would expect, which is that the judge was live to the point generally, as one would expect. It exchange was simply:
“MS HAREN: … Finally, there is the fact of whether the application without notice is justified. To give notice of the application would, potentially, defeat the object of the exercise. THE DEPUTY JUDGE: Yes”
THE DEPUTY JUDGE: Yes”[45]That is all. It demonstrates that the judge was aware of the point in relation to the application before him, and must have been aware of the point 2 days before in relation to the main application. That, of course, is no excuse for not putting into an affidavit material which the rules require, and making a proper case, but it does support the view that the matter was, at the very least, in the minds of all those involved.[46]I therefore find that there was a justification for going without notice, and that there was a sufficient statement in the evidence of that justification to make the matter clear enough, though not a justification for the full scope of the relief obtained. It follows that the order should not be discharged in whole on that basis, but it also follows that the order cannot survive in its current form. This latter point is one to which I will return at the end of this judgment.

The effect of a breach of undertaking – the law

[47]The next attack on the order came from an alleged breach of the undertaking to serve as soon as practicable. Mr Trace pointed out that breaches of undertakings given in a freezing order were serious and, in an appropriate case, could lead to the discharge of an order which was obtained without notice. He relied on Flightwise Travel Services Ltd v Gill [2003] EWHC 3082 (Ch) (Neuberger J):
“28. Thirdly, it is important that undertakings given by an applicant, effectively in return for which the freezing order is granted, are complied with, and if they are not that there is a good explanation as to why. The fact that there is a failure to comply with an undertaking given by the applicant to the court, in return for which the injunction was granted, is a potentially serious matter and may, in appropriate circumstances, justify the discharge of the injunction. Bearing in mind the nature and effect of a freezing order, and the fact that it is granted initially ex parte, an applicant should be in no doubt that the court will regard any failure to comply with an undertaking given in the freezing order itself is seriously viewed. Of course, if the breach of the undertaking does not cause the respondent, or anyone else, any damage that would be a mitigating factor. But it does not discharge the gravity of failure to comply.”
[48]Mr Anderson, understandably, did not dispute those principles. I was also shown authorities which were said to demonstrate circumstances in which judges reflected on whether a breach should or should not bring about a discharge. Those are cases on their facts and I do not need to refer to them.[49]I therefore proceed on the footing that a breach of an undertaking is capable of justifying a discharge of the order if it is serious enough and if the circumstances otherwise warrant it. It is not an automatic consequence, but undertakings are serious and ought to be complied with.

The alleged breach of undertaking – the facts

[50]The nature of the undertaking is apparent. The order was obtained on 20th December in final form, but the injunction material was not served until 4th January 2013. Mr Trace’s point at its simplest is that there is no reason why Mr Berezovsky could not have been served the same day that the order was obtained; he, at least, was not served as soon as practicable. It would have been entirely practicable for him to be served on that day.[51]There was some evidence on this before me. There is a witness statement of Ms Claire Broadbelt, a partner in Mishcon de Reya, the solicitors acting for Ms Gorbunova, served for the purposes of the hearing before me. She says that it was always the intention of the claimant to serve all eight respondents simultaneously. Had there not been simultaneous service, it was perceived that there was a risk that unserved respondents would get wind of the injunction and deal with assets (effectively, the French Properties or assets in the intervening corporate structure) before they were served. The respondents other than Mr Berezovsky were foreign companies or, in the case of the eighth defendant, a foreign individual. The claimant was at the time unsure of the whereabouts of the eighth defendant. That added complexities in that documents had to be translated into various languages and, in the case of service in Gibraltar on Gibraltar defendants (the 5th and 7th defendants) procedural steps had to be taken in the Gibraltar courts in order to affect valid service them. Those steps could not be taken in Gibraltar until 2nd January 2014 (in a hearing which went over to the next day) because the courts were closed over Christmas. All that meant that service on all defendants simultaneously could not be affected until 4th January, when it was actually affected.[52]This was foreshadowed in the debate before the deputy judge. Page 52 of the transcript for 18th December shows that Mr Legge told the judge that they were going to serve everyone at the same time and that it might be difficult to serve the “Gibraltar entities”. Gibraltar lawyers at that stage had not been instructed. Mr Legge indicated a hope that everyone would be served before Christmas, but said that Gibraltar lawyers had not by then been instructed (in order to prevent premature leaking). By 20th December, when the matter was placed back before the deputy judge by junior counsel, it was apparent that service before Christmas would not be achieved because her skeleton argument pointed out that the necessary translation of documents alone would take until at least Christmas Eve. Her skeleton goes on to say:
“In reality therefore service is unlikely to be affected before the New Year.”
[53]What has therefore happened is that the order was made on the footing (albeit not expressed in the order itself) that all defendants would be served together (as was known to the judge making the order) and practicalities intervened with the effect that that was not capable of achievement before 4th January 2013. There is nothing to suggest that service on all defendants together could practicably have been achieved before it was done, so the question becomes whether the undertaking to serve as soon as practicable in fact required Ms Gorbunova to serve the defendants as and when she could.[54]I do not think that it does. The basis on which the order was made was plain. It was made on the footing, known to the judge, that all defendants would be served at the same time, and that was a legitimate and sensible objective. The judge knew that that was going to happen, and he knew why. He accepted it, and there is nothing which suggests that he did not accept that there would be a delay until the New Year. The undertaking has to be read in that light. In the circumstances there was, in my view, no breach of the undertaking.[55]If I am wrong in that, and if there was a technical breach because Mr Berezovsky could have been served immediately even if others had to wait, then I would certainly hold that that breach would not be sufficient to justify a discharge of the order. Mr Trace described the breach as “egregious”. That is, on any footing, a vast overstatement. Undertakings should, of course, be complied with, but if there was a breach in this case it was unintentional, for understandable reasons, and in pursuit of a legitimate procedural end which was known to the judge who made the order. The consequences of the breach are not serious, in the circumstances. No defendant has been put at any disadvantage by service being later than it might have been. That, of course, does not excuse a breach of undertaking, but as Neuberger J observed it goes to mitigation, and therefore to sanction. All that would make any breach far from egregious. But whatever adjective one seeks to apply, it would not be a breach deserving the disciplinary sanction of a discharge of the order.

The scope of the order

[56]My findings in relation to the risk of dissipation require a reconsideration of the scope of the amount frozen. Mr Berezovsky’s assets have been frozen to the extent of £200m, and the particular assets identified above have been frozen in addition. I asked Mr Anderson why that was, and in particular how the £200m figure was arrived at. He explained that the large figure was arrived at by assuming wrongful disposals of the various assets to the tune of the full claims that Ms Gorbunova would have in relation to them. That would give rise to a contractual claim, including a claim to the value of a new house to the same value as Wentworth Park (£25,000,000). It also claims a figure for the claim made for the children under the Children Act 1989.[57]That last point raises an immediate flaw in the order as drafted. If there is a claim under that Act it should be made in the proceedings in which the claim is made. That is not these proceedings. Ms Gorbunova has no claim under that Act in these proceedings. If there is to be a freezing order in respect of that claim that it must be made in appropriate proceedings in the Family Division. In any event, there is absolutely no evidence to justify such a claim. There is a mere assertion that a QC has advised that there is claim worth a sum which is between two figures (which again I will not set out in this judgment). This claim should never have been part of the freezing order. I would also add that the contractual claim, so far as it includes a sum based on the value of some future-purchased house, is hardly strong enough to justify freezing order relief, because the evidence does not present a particularly strong contractual claim at all, and so far as it does it does not appear that Ms Gorbunova would be entitled to the entire interest in the house in any event.[58]So I turn to the rest of the large frozen sum. I have found that the evidence demonstrates a sufficient degree of likelihood that Mr Berezovsky will take steps in relation to particular assets to frustrate Ms Gorbunova’s claim to those assets. I have not found that he has demonstrated a tendency to take steps in relation to his assets generally to frustrate any consequential contractual claims she may have. In those circumstances it would be wrong to freeze his assets generally. The assets which should be frozen should be those which are at risk. In the circumstances those assets are the three assets in which Ms Gorbunova has been promised or in which she has been assured an interest – £5m out of the Wentworth Park proceeds, the relevant part of the litigation settlement proceeds and the French Properties. Ms Gorbunova’s evidence is that the £5m bird has already flown, and if that is right then there will be no funds on which any injunction can bite, though there should be some disclosure about this. So far as the other assets are concerned, there are, ostensibly at least, assets. There should be a restraint on dealing with the two extant assets and appropriate disclosure in relation to them.[59]During the course of submissions Mr Trace proffered various undertakings should I be satisfied that the order should continue in some form. His skeleton argument proffered an undertaking on behalf of all the defendants to the effect that no sale of the French Property would take place at a sum less than a particular amount and that the net proceeds of sale would be remitted to Mr Berezovsky’s solicitors’ client account to be held pending further order of the court. During the course of argument he indicated that he did not in fact act for any of the defendants (for these purposes) other than Mr Berezovsky, but he did say that it had always been made clear that Mr Berezovsky was ultimately beneficially entitled to all those proceeds, or at least could control their destiny, and could therefore procure that the moneys were deposited with the solicitors. Mr Trace also proffered an undertaking that, as and when the litigation settlement moneys to which Ms Gorbunova has her claim are received, they too would be paid to his solicitor’s client account pending further order of the court. I am prepared to entertain further argument as to whether undertakings in that sort of form are appropriate, or whether further injunctive relief is appropriate against some or all of the defendants in order to obtain the more limited aims which I have held to be proper so far as freezing assets is concerned.[60]There will also have to be further argument as to the scope of the disclosure, if any, which should accompany the new form of relief.[61]Finally, and for the sake of completeness, I deal with one further point relied on by Mr Trace as justifying there being no form of freezing relief. Evidence put in by Mr Berezovsky indicated that one or both of the directors of a company in the French Property structure have said they would resign if a freezing order were made. (There was some equivocation as to whether it was one or two directors, but I assume for present purposes that it is the whole board, whether one or two.) It is said that that would imperil a sale because it would take time to appoint a replacement or replacements. I give this factor no weight whatsoever. I cannot begin to imagine why a director would take such a view (while at the same time acknowledging that the order would be complied with, which the director is said to have done), but if that is the directors’ personal stance they are entitled to adopt it. What they are not entitled to do is somehow to use that odd stance to induce the court not to make the order. If a consequence of my order is that directors resign, then so be it. I find it very hard to believe that they cannot be speedily replaced (or speedily enough replaced) should it be necessary to do so, but even if that is not the case the odd views of the directors cannot be expected to trump an otherwise justifiable freezing order.

Postscript

[62]In view of the possible public interest in this judgment in the event that it is published (which has yet to be decided) it must be stressed that the application proceeded on the basis of Ms Gorbunova’s evidence alone. That evidence has not yet been tested, and it is to be anticipated that Mr Berezovsky will vigorously contest the claim, dispute a lot of the evidence and advance evidence of his own. A proper and fair reporting of this judgment must make all that clear and must not report it as if final findings have been made.

Cited in 1 later judgment