JSC Mezhdunarodniy Promyshlenniy Bank & Anor v Pugachev & Ors [2016] EWHC 248 (Ch)

Case No HC-2014-000262

(formerly HC14D02752)

[2016] EWHC 248 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Rolls Building, Fetter Lane

Date 12/02/2016

London EC4A 1NL

Before

MR JUSTICE MANN

Between

(1) JSC MEZHDUNARODNIY PROMYSHLENNIY BANKClaimants

(2) STATE CORPORATION “DEPOSIT INSURANCE AGENCY”Claimant

(1) SERGEI VIKTOROVICH PUGACHEVDefendant

(2) KEA TRUST COMPANY LIMITEDRespondents

(3) FINETREE COMPANY LIMITEDRespondent

(4) BRAMERTON COMPANY LIMITEDRespondent

(5) BLUERING COMPANY LIMITEDRespondent

(6) MARU LIMITEDRespondent

(7) HAPORI LIMITEDRespondent

(8) MIHARO LIMITEDRespondent

(9) AROTAU LIMITEDRespondent

(10) LUXURY CONSULTING LIMITEDRespondent

(11) VICTOR SERGEYEVICH PUGACHEVRespondent

IN THE MATTER OF JSC MEZHDUNARODNIY PROMYSHLENNIY BANK (NO. 1027739543798) AND IN THE MATTER OF THE CROSS-BORDER INSOLVENCY REGULATIONS 2006

Mr James Potts QC and Mr Ben Griffiths (instructed by Hogan Lovells International LLP)

for Claimants

Mr Stephen Auld QC and Ms Rachel Oakeshott (instructed by Mishcon de Reya LLP) for Defendant/Respondents

Hearing Hearing dates: 28 th& 29 th January, 1 st and 2 nd February 2016

Judgment

Mr Justice Mann:

Introduction

[1]This is an application by four of the defendants (numbers 6 to 9) in this matter to discharge an earlier worldwide freezing order originally made by the Court of Appeal (“WFO2”) on a successful appeal from a refusal made on a without notice application, and an application by the same defendants to resist the continuation of the order so far as it has been re-imposed on an inter partes basis in this Division. They are the 4 recently appointed trustees under certain discretionary trusts, succeeding defendants 2 to 5 in that respect. The order has been made under what is known as the Chabra jurisdiction, that is to say orders against a person who is not a defendant in the action to restrain dissipation of assets where the real defendant is said to have a sufficient interest in those assets to justify the making of the order, whether on the basis of some sort of proprietary interest or at least control. It will not be necessary for me to consider the limits of the Chabra jurisdiction on this application. Mr Auld QC argued the case for the defendants. Mr James Potts QC argued it for the claimants.

Factual background

[2]The factual background to this application is complex, and in the history there are a large number of interim applications. The relevant history can be distilled as follows.

[3]The first claimant is a Russian bank (“the Bank”), which is now insolvent. The second claimant is the governmental organisation tasked with overseeing that insolvency. Together those claimants make claims against the first defendant, Mr Sergei Pugachev (“Mr Pugachev”) who was one of the founders of the bank in the early 1990s. Putting it shortly, the claims made against him allege that he has made off with, or caused the loss of, a lot of the Bank’s assets. Proceedings were brought against him in Russia, commencing on 2nd December 2013 and, in earlier proceedings in this court, Mr Pugachev undertook to submit to the jurisdiction of the Russian court. On 25th April 2015 the court ruled in favour of the claimants and Mr Pugachev’s appeal from that judgment was dismissed on 24th June 2015. A further appeal was lodged and was dismissed on 1st October 2015. The effect of that is that there is an outstanding judgment against Mr Pugachev in the Russian court in the rouble equivalent of almost £800m.

[4]After the Russian proceedings were commenced, the claimants commenced proceedings in this jurisdiction invoking the jurisdiction to grant injunctions in aid of foreign proceedings, and on 11th July 2014 Henderson J granted a worldwide freezing order (“WFO1”) against Mr Pugachev in the sum of £1.17bn. As part of his asset disclosure Mr Pugachev disclosed that he was one of a class of discretionary beneficiaries under each of 5 trusts, namely The London Residence Trust, Kea Three Trust, Riviera Residence Trust, Wiltshire Residence Trust and Green Residence Trust. Mr Pugachev was ordered to produce the trust deeds and confidentiality orders were made in respect of various documents. There were then some further hearings to which I do not need to refer (at least for the moment), during the course of 2014.

[5]On 10th March 2015 Rose J made a without notice order for Ms Natalia Dozortseva to disclose certain information about the trusts, and making a passport order restraining her from leaving the jurisdiction until she had done so. She duly provided some further evidence, but spread across three witness statements and while under a passport order which required the delivery up of her passport pending the provision of the information. Ms Dozortseva is an associate of Mr Pugachev. The nature and closeness of that association is a matter of dispute. She says (in substance) that she advises him (she is a Russian lawyer) and to a degree acts for him, in an arm’s length relationship, but is not a close business associate. The claimants say that their business relationship is much more than that.

[6]In late June 2015 Mr Pugachev, who until then had resided in this jurisdiction, left the country and took up residence in France. In doing so he made use of a travel document which had not been surrendered pursuant to a previous passport order. That seems to be a flagrant breach of this court’s order, and is one of several things in the history of this matter (mainly relating to shortcomings in asset disclosure) which give the very firm impression that Mr Pugachev does not comply with court orders and court requirements when it suits him not to do so Since preparing this judgment in draft Rose J has ruled that it was a deliberate and serious breach of this court’s order. . He has apparently remained in France since then. He certainly has not come back into this jurisdiction, even to defend in person an application for his committal. He appeared there by video link. The only reason he has given for his leaving the jurisdiction is concerns for his personal safety, a point which is not particularly convincing. Ms Dozortseva left the next day.

[7]Following Mr Pugachev’s departure, the claimants made a without notice application to Rose J on 1st July 2015 for a search order. The order, which was granted, required Mr Pugachev to allow searches of 4 locations – two residential properties, the London offices of the 10th Respondent (“Luxury”) and a boat called MV Victoria (which left the jurisdiction despite orders which ought to have prevented it In a later hearing Rose J found that Mr Pugachev was not guilty of a contempt in relation to this departure. ). That order was continued on an inter partes return date by Henderson J on 9th July 2015. It affected the trustees of the disretionary trusts, as will appear, and was the background against which it was discovered by the claimants that there had been a change of trustees.

The events leading to WFO2 and this application

[8]In order to understand these events it is necessary to understand a little more about the detail of the discretionary trusts of which the 2nd to 9th Respondents were or are trustees. Where it is necessary to refer to those respondents I shall refer to them by the first word in their corporate names.

[9]I have identified the names of the 4 trusts above. Each is subject to New Zealand law. It is unnecessary at this stage of the narrative to complicate it by setting out of which trusts those companies were, or became, trustees; suffice it to say that until their removal in July 2015, Kea was a trustee of two and Finetree, Bramerton and Bluering were each the trustee of one. Each of those trustees was a New Zealand limited company and the shares were held, in varying proportions, by Mr William Patterson and his wife known as Ms Hopkins. Mr Patterson was and is a New Zealand solicitor, and he was also a director of each of the 4 companies. His wife was a director of two of them (Kea and Finetree), and Ms Dozortseva was a director of three (Kea, Bramerton and Bluering).

[10]It is not necessary to set out verbatim any of the terms of the trusts. A summary will suffice. Under the terms of the various trusts, Mr Pugachev and one of his sons (Victor, the 11th Respondent) are Protectors. Mr Pugachev is the first and main Protector. Victor has the powers of Protector if Mr Pugachev is under a disability which prevents him from exercising those powers. Among the powers given to the Protector are powers to appoint and remove trustees, and (in effect) a right of veto over distributions and investments. The Protector cannot, however, direct distributions under the terms of the various trust deeds, though clause 6.9 does give the Protector power to effect transfers of assets between trustees where that is necessary pursuant to an appointment of new trustees, and the Protector also has power to make certain directions as to the sale of properties which are be used for beneficiaries’ residences. The trusts are discretionary trusts, the beneficiaries being, in all cases, Mr Pugachev, with his children, grandchildren and present partner being variously beneficiaries of the various trusts. The precise details of that do not matter for the purposes of this application.

[11]WFO1 was served on, or notified to, those trustees on the trusts being identified. A dispute as to whether information should be given about the trusts was resolved (eventually by the Court of Appeal) in a decision that it should. There were various dealings between the claimants’ solicitors and the trustees from time to time, details of which, so far as relevant to this application, are referred to below. However, in July 2015 events unfolded of which the claimants were given no advance notice. They led to the application for the injunction which is the subject of the application before me. More is now known about those events than was known then, but it is said to be important to consider the application in its then apparent context. I shall therefore set out the knowledge as it unfolded rather than jumping straight to what is now known.

[12]When it was discovered that Mr Pugachev had left the jurisdiction the claimants obtained the search order referred to above. The order was obtained on 1st July, and was executed on 3rd July. The four former trustees had an interest in its operation because some of their information and files were stored in the subject premises. The former trustees instructed Farrers to deal with the claimants’ solicitors in relation to those matters, including a further hearing date for the application. Before that date arrived, on 24th July, and without any prior intimation of what was happening, Farrers informed the court and the claimants that their clients had received notification of their removal as trustees, and the appointment of the new trustees (identified) at 1pm that day. Mr Pugachev and Victor acted as Protectors under the trusts. No further explanation was given.

[13]This unannounced and unexplained change of trustees, coupled with Mr Pugachev’s recent flight from the jurisdiction, shortcomings in his previous disclosure of assets and in compliance with orders requiring disclosure and delivery up, and other matters (including Ms Dozortseva's leaving the jurisdiction more or less at the same time as Mr Pugachev), led the claimants to fear dissipation of trust assets and induced them to apply without notice for a worldwide freezing order against the new trustees. The application was supported by a long affidavit from Mr Roberts (solicitor to the claimants) setting out the background to the application and the grounds for it. Between the date of that affidavit and the date of the hearing of the application in front of Rose J the claimants’ solicitors did a company search against the old trustees and found a record of Ms Dozortseva’s having apparently resigned her directorships of the old trustees on 14th July. Reference was made to that at the first instance hearing.

[14]The new trustees were revealed to be the 6th to 9th defendants. Each of the new trustees was a newly created New Zealand company, incorporated on 24th July 2015. The claimants investigated, and found that the directors of those new companies were a Mr Willem Smit, a Mr Benjamin Lenihan and Ms Dozortseva. They could not find out anything about Mr Smit (it later appeared that they would have found out more if they had looked under the anglicised version of his first name – William) and found out that Mr Lenihan was a New Zealand lawyer with a professed expertise in the law relating to fight sports (such as boxing). They took the view that he did not appear to be an experienced trustee or trust lawyer. According to his LinkedIn profile he was also an enrolled English solicitor but, as the evidence before the Court of Appeal later said, they could not find his name on the list of solicitors when they did an online search.

[15]As I have indicated, the claimants decided that the new situation was such that they should apply for freezing order relief against all the trustees. Previously they had apparently relied on notification of WFO1 to the trustees as providing some protection from dissipation of assets held by the trustees. Their application came on before Rose J on 30th July. By now the old trustees in New Zealand had started proceedings in New Zealand seeking directions as to the validity of their removal as trustees and the appointment of new trustees. These proceedings are heavily relied on by the new trustees in this application, and I deal with them in more detail below.

[16]Rose J refused the application, relying principally on the following points (I do not need to set out extensive passages from her judgment): i) If the claimants wished to establish that the assets were already caught by WFO1 (which was apparently now thought to be possibly the subject of dispute) then they could seek to establish that in an appropriate application later on. ii) She recorded that the claimants said that they could have relied on the directors of the former trustees not to act improperly, but that that could not be said of the new trustees. However, she found that there was not enough evidence before her to show that the new trustees were “particularly shady or particularly likely to act in an irresponsible way”. Some further information might come out of the New Zealand proceedings in due course. iii) There was a risk of conflict between a decision to grant a freezing order here and the ultimate decision in the New Zealand application. iv) It was not known why a decision had been taken to replace the trustees; again, that might be clarified by the New Zealand proceedings. v) The assets included luxury properties within this jurisdiction. They were not particularly liquid and she would not grant an ex parte freezing order in respect of property within this jurisdiction.

[17]The claimants decided to appeal to the Court of Appeal. The application for permission to appeal, and the appeal itself, were heard on 11th August. A reserved judgment was delivered by Bean LJ (Jackson and Ryder LJJ agreeing) on 14th August 2015. The judgment contains the following points relevant to the discharge application before me: i) Bean LJ accepted that there was a good arguable case that the assets held by the trusts were in reality the assets of, or under the control of, Mr Pugachev. The evidence showed that there was a good arguable case that Mr Pugachev was taking “every possible step to keep his assets out of the reach of the court” and the terms of the trust deeds and the change of trustees reinforced that conclusion. “The case appears to me to be a classic one for a Chabra order, made in the first instance without notice to either the defendant or the third party said to be acting on his behalf.” ii) The change of trustees, against the background of breaches of WFO1, supported the inference that the change was intended to ensure that the trustees complied with Mr Pugachev’s wishes and that therefore there was an increased risk of dissipation of the assets. He made the following remarks about the trustees which are particularly relevant to the discharge application before me: “As to [the directors of the new trust companies]: one of the directors of the original trustee companies was a Mr Patterson, who is accepted to be a leading New Zealand trusts lawyer. Mr Lenihan does not appear to be a solicitor of the same standing as Mr Patterson. Ms Dozortseva is a close business associate of Mr Pugachev and has herself been a party to placing misleading evidence before the court.” iii) There was no relevant delay in bringing the matter before the court. iv) He considered there was a risk of dissipation. He noted that it could not be assumed that the original trustees had already dissipated assets and they had recently said that they had not yet transferred trust assets to the new trustees. v) On the facts there was no relevant possibility of conflict with the New Zealand application, and a liberty to apply would fix any problem in that area. vi) Accordingly the appeal was allowed and WFO2 was made by the Court of Appeal.

[18]The Court of Appeal’s order provided for the injunction to be in effect pending a further hearing to take place in the Chancery Division in the week commencing 24th August 2015, which period was expressed to be the return date. That hearing took place before Snowden J on 27th August when the parties (apart from Victor) consented to the order continuing “until further order of the court”. Despite the fact that the respondents (by now defendants) had not had an opportunity to prepare orderly opposition, the matter was not adjourned to a date to be fixed with a view to an inter partes hearing. Rather, paragraph 32 provided for any challenge to the jurisdiction, or to the continuation of the order, to be mounted by 2nd October. That timetable was subsequently extended and the new trustees filed their application on 26th October 2015. Thus that part of the application which would normally be an application by the claimants to continue the order takes the form of an application by new trustees to end it, but nothing turns on that. The same considerations apply.

[19]Little needs to be said about the terms of WFO2. It contains the sort of freezing order restrictions that one would expect, up to a sum a little over £1.17bn, together with obligations to prevent companies which are assets of the trusts and which are non-trading companies from dealing with their assets. There is the usual exception for the cost of getting legal advice and representation, and for disposals in the ordinary course of trading activities, and also for expenditure on normal trust and (where appropriate) corporate running costs. In addition, Mr Pugachev and Victor were restrained from exercising their powers as Protectors, and the trustees were prohibited from exercising some of their powers as trustees in relation to the appointment of trustees and Protectors. I do not need to refer to the other provisions of the order.

[20]There are a lot of other facts which are relevant to the applications before me, but I have not tried to fit them into the short chronology above. I will set them out as and when they become relevant in the context of the points made on the applications before me.

The applications before me

[21]The new trustees (but not Mr Pugachev or Victor) mount two applications. The first is an application to discharge the original order for non-disclosure, and not to re-impose it. The second, assuming the failure of the first, is an application to discontinue the injunction on the grounds that it can now be seen, with the benefit of the trustees’ evidence and argument, that there is no case for continuing it because the evidence of risk of dissipation is insufficient. It is in fact submitted that it should never have been granted in the first place had the matter been properly put before the court.

[22]The discharge application presents the procedural oddity that I am asked, in effect, to discharge an order made by the Court of Appeal. Normally the High Court cannot do that. However, both sides agreed that this was the correct, and sensible, court to consider that application. It is apparent enough to me that the Court of Appeal impliedly authorised this court to hear such applications when it effectively remitted questions of further continuance to this court in its order. I therefore entertained the application without intending any discourtesy to, or presumptuous behaviour towards, the Court of Appeal.

[23]The discharge for non-disclosure application has to be dealt with in the context of the application as it was presented and the evidence that was available then. Much additional evidence has been filed since then, but when considering the non-disclosure it is appropriate (at least on the facts of this case) to consider the then existing state of the material, though subsequent matters may go to whether any non-disclosure should lead to discharge, re-imposition or non-re-imposition of the injunction. I shall therefore take that discharge application first, before turning to the application to discharge the injunction on the basis of all the material now known.

Discharge for non-disclosure

[24]The principles relating to non-disclosure in a without notice application were sufficiently set out by in an earlier judgment in this litigation –

[2014] EWHC 4336

at paras 68-77. There was no material dispute about the principles, and I do not propose to set them out again.

[25]The grounds relied on in this application were not set out in the application notice. Nor were the grounds clearly and concisely articulated and confined in the supporting witness statements. In the circumstances the claimants sought a schedule of grounds relied on, which was forthcoming after an application was issued seeking its production. 10 matters were relied on. Mr Auld, in his written submissions, referred to two more, which were not foreshadowed until the production of those submissions. Mr Potts addressed these last two even though he had not had an opportunity of putting in evidence on them (though he relied on that lack of opportunity as well as addressing them on their merits). Mr Auld did not address submissions, either written or oral, to all of the grounds, but did not abandon any of them. I shall deal with them all.

[26]Ground 1. It is alleged that the claimants failed to bring to the attention of the court material information relevant to the claimants’ allegation that the trusts are shams. The claimants are said to have relied on the point that the trusts were shams, and did not inform the court that at a previous hearing before Hildyard J (on the occasion of the cross-examination of Mr Pugachev as to his assets)

the judge noted that sham had not been advanced and counsel responded:

“No, not yet… We have always reserved, we may in due course, but we wanted to find out more information”

. Between that date and the hearing in the Court of Appeal the claimants are said to have advanced no new evidence to support any claim of sham and failed to bring the earlier comments to the attention of the court.

[27]Mr Auld supported this ground in his oral submissions. He said that to the extent that the allegation of sham was being relied on, the defendants were entitled to have a proper explanation given to the court. The affidavit in support of the freezing order application did not mention sham though paragraph 46 of the supporting skeleton argument did raise a case of sham, as did paragraph 37.1. The failure to point out that the claimants were not relying on sham before Hildyard J was significant, and ought to have been disclosed.

[28]I find that this ground is misconceived and fails as a ground. It was quite clear to both Rose J and the Court of Appeal that a form of argument based on sham was indeed being advanced. There is no inconsistency between that position and the position apparently adopted at the earlier hearing, much less an inconsistency which needed to be brought to the attention of the court. At the earlier hearing there was a clear reservation of position, and the later stance of the claimants on the freezing order application was clearly within that reservation. I agree with Mr Potts that not only does this allegation fail, it should never have been made.

[29]Ground 2. This is a claim that the claimants failed to bring to the attention of the court material information relevant to the claimants’ allegation that the trusts were controlled by Mr Pugachev, in that a year previously solicitors acting for the trustees (Farrer & Co) offered an undertaking to inform the claimants a suitable period in advance of making any distribution from the trusts to Mr Pugachev, identifying its amount and where it was to be paid. That offer of an undertaking was said to undermine the claimants’ case that Mr Pugachev controlled the trusts at that time or that there was any real risk of dissipation.

[30]The undertaking was given in the context of inter-solicitor correspondence about the concerns of the then trustees about disclosure which Mr Pugachev was required to make under WFO1 about the trusts. The trustees considered the disclosure to be inappropriate and threatened an application to discharge those parts of the order (which they ultimately made, and on which they ultimately failed). In the course of prior negotiations their solicitors (Farrers) suggested a regime which would remove “any possible need for the provision to your clients of the information”. On behalf of the trustees, in a letter dated 26 August 2014 they offered an undertaking to inform the claimants “a suitable period in advance of making any distributions from the Trusts to Mr Pugachev that such distribution is to be made, identifying its amount and where it is to be paid.” That undertaking was to remain in effect until judgment in the Moscow proceedings was given.

[31]Mr Auld submitted that to make no reference to this undertaking in the material and submissions in support of the without notice application was a serious non-disclosure. It was a matter capable of going to the question of the integrity of the trustees and the likelihood of their dissipating trust assets and ought to have been shown to the court.

[32]I do not accept that submission. There are at least two reasons why, by the time of the without notice application, that offer of an undertaking had lost any potency it once might have had. First, it was an undertaking given by the original trustees, and not by the new trustees. It was the appointment of new trustees, and fears as to what they might do, that triggered the without notice application. Second, it covered only distributions made in favour of Mr Pugachev, and not other forms of distribution or dissipation which might be made – for example, distributions in favour of other beneficiaries, or moving assets around in a way which might make them less accessible. For those reasons the undertaking itself did not properly address the question of risk of dissipation in the circumstances of the without notice application, and those shortcomings mean that in the circumstances its non-disclosure was not material. It was to some extent historic, given by the wrong people and did not cover the right sort of transactions. It said nothing about the likelihood of future dissipation in the new circumstances and was not something which needed to be disclosed.

[33]Ground 3. This complaint is that the claimants failed to bring to the attention of the court another indication of posture given to Hildyard J at Mr Pugachev’s previous cross-examination. In the course of the hearing Hildyard J noted that the claimants did not really invite him to draw a conclusion that any of the assets were instantly or otherwise subject to the control of Mr Pugachev. To that, the claimants’ counsel responded “… whether or not they are [is] something that will have to be debated on another occasion”.

[34]This point was not developed in the supporting skeleton argument before me, but Mr Auld supported it in oral argument. His point on this was that nothing relevant had changed in relation to the underlying facts but in the without notice application a positive case of a serious degree of control was by then being put forward. He said that the evidence showed that Mr Pugachev did not have control of any of the assets. The claimants should have gone farther and said how it was he was said to have had control.

[35]These submissions confuse two things. The first is whether there was adequate evidence of control before the courts considering the without notice application. The Court of Appeal decided that there was, and it is no function of this court to reconsider that particular question as at that particular time. The question of whether there is now sufficient evidence of control is a point which arises when considering the merits of continuing the injunction, and I shall deal with it below. The second is whether, as at the date of the without notice application, the apparent change of stance on the part of the claimants is something that ought to have been drawn to the attention of the court. That is a non-disclosure point. I cannot see any case at all for any requirement to do so. As with the point relating to sham dealt with above, the claimants had reserved their position at the time, and had decided to adopt a positive one in the without notice application. In the circumstances of this case, I completely fail to see why that development of thinking should be drawn to the attention of the court on the without notice application. There may be other cases where it should, but coming off the fence on a reserved point, in this case and in those circumstances, is something which did not need to be drawn to the court’s attention. If the point had been mentioned I consider that the court would have been puzzled as to why it was being referred to, since it can have had no bearing at all on the decision that the court had to reach. Once again, I agree with Mr Potts that this is a point which should not have been made.

[36]Ground 4. Three of the properties owned by one of the trusts are London houses over which restrictions had been registered at HM Land Registry, so they could not have been sold or transferred without notice to the claimants. This fact was not drawn to the attention of the courts.

[37]The point is accurate in terms of there being restrictions – the properties were covered by restrictions which were registered pursuant to WFO1. Two of the properties (which seem to be adjacent, judging by their addresses) were held by a company within but lower down the trust structure; the other was held directly by the trustees. It is, however, not right to say that there was no reference at all to this fact in the material. The affidavit in support of the original application was an affidavit of Mr Roberts. It was, in itself, extensive, running to 68 pages. On page 29 there is a heading “Risk of Dissipation/Urgency” and on the next page, within paragraph 97, he draws attention to the fact that the trust company and property holding company were included in Schedule B to WFO1, and goes on:

“whilst this means that the Claimants have the benefit of having registered restrictions with the Land Registry, this does not preclude a transfer of the shares in [the company].”

[38]There was therefore, in the evidence, reference to the restriction. Mr Auld says that that is not sufficient. He described it as a “glancing reference” and an important point which merited more than a reference of that quality. Even if in theory one property could be disposed of by selling the shares in the company which owned it (a point made by Mr Potts), that would have required a degree of dishonesty on the part of the trustees which was not to be anticipated.

[39]Mr Potts relied on the disclosure to which I have just referred, and the fact that the Court of Appeal was invited to read, and confirmed that it had read, Mr Roberts’ affidavit. He submitted that the fact that two properties within the trusts were subject to restrictions was not material to the question of whether a freezing order should be granted over all the assets, especially where one of the properties was held by a company whose shares could be sold and there was cash within some of the trusts which needed to be caught by the freezing order.

[40]I agree with Mr Auld that the existence of restrictions over material assets, which would stand in the way of disposals, is a relevant matter to a court considering whether to grant a freezing order. I also agree with him that where something falls to be disclosed pursuant to the disclosure obligation on a without notice application, that obligation is not fulfilled by burying the point within a mass of material which the court reads. The obligation of disclosure involves both the disclosure of relevant material, and a manner of disclosure which, in the circumstances, is commensurate with its significance. Since it is plain that there was a reference to the restrictions in the affidavit, it becomes relevant to consider whether, in the circumstances, that was sufficient or whether it was an insufficient “glancing” reference.

[41]I consider that it was sufficient. The point is akin to the question of illiquidity of assets. A risk of dissipation is less in relation to illiquid assets, so points going to illiquidity are relevant. They will need to be disclosed if they are not obvious. In the present case, both Rose J and the Court of Appeal plainly had in mind the illiquid nature of some of the assets. Rose J herself had adverted to the fact that the two properties were “not particularly liquid assets” and said that she would certainly not grant an ex parte freezing order in respect of property in this jurisdiction. Bean LJ expressly referred to this conclusion in paragraph 36 of his judgment and expressly disagreed with it. He was therefore well aware of the illiquidity point. It is therefore apparent that the existence of restrictions on the register would have made no difference to either decision even if the court had not noticed their existence (which is unlikely). That does not determine whether the point ought to have been disclosed or not, because the test of disclosability is not whether it would, in fact, have made a difference, but whether it was a point going against the relief sought which the court needed to be made properly aware of, both as a point and as to its significance. However, the force and effect of the presence of restrictions, as a point, is lessened where there is an illiquidity point in any event. In the circumstances I consider that the disclosure by Mr Roberts was adequate. I do not think that the presence of restrictions is something that should have been flagged up in a more prominent way either in the evidence or in submissions. In coming to this conclusion I also bear in mind the fact that these two properties were only part of the overall assets which were to be caught by the then intended order. That lessens further the overall significance of the presence of restrictions.

[42]Ground 5. In this claim (which appears in the schedule of non-disclosure but which was not elaborated in any way either in Mr Auld’s skeleton argument or his oral submissions) the new trustees complain that “the Claimants did not set out the explanation provided by [Mr Pugachev] for why he urgently left England” during the currency of his passport order. This is said to go to the question of whether there was a risk of dissipation.

[43]It is true that part of the case of the claimants in saying that there is a risk of dissipation involves allegations about the unreliability of Mr Pugachev, and that his fleeing the jurisdiction in breach of his passport order is a matter which is said to go to that unreliability. In his affidavit, Mr Roberts said (in Appendix 2, entitled “Background”:

“43. On 6 July 2015, Mr Pugachev served his Sixth Affidavit (which was also unsworn) in which he admitted that he had indeed left the jurisdiction in breach of the Passport Order (purportedly due to concerns about his personal safety).”

In paragraph 46 he went on to refer to the scepticism expressed by Rose J at an earlier hearing (not the without notice application) about the genuineness of his professed fears for his personal safety. This material was expressly referred to in the skeleton argument placed before Rose J, and that skeleton argument was also before (and read by) the Court of Appeal. So there was reference to his reasons given for leaving in the material before the courts.

[44]In the absence of any development of this point in submissions, it is unclear to me what the real complaint about it is. There is no justifiable complaint about a complete absence of reference to the reasons for Mr Pugachev leaving the jurisdiction, and no developed complaint that the identification of his expressed reasons for doing so was somehow incomplete. In the circumstances I reject this point.

[45]Ground 6. This complains about an incomplete and unfair reference in the skeleton argument before the Court of Appeal to Ms Dozortseva having “left the jurisdiction at the same time as Mr Pugachev fled”. It is said that that reference is unfair because it fails to make a reference to her third affidavit, which pre-dated the application to Rose J, in which she explained her reasons for travelling to France at the time that she did. Mr Auld accepted that this point was of limited significance but said that to make the statement made in the skeleton argument without providing her explanation “piles on the prejudice”.

[46]In her third affidavit Ms Dozortseva explains that she travelled to France to meet French legal counsel responsible for a criminal case that Mr Pugachev had filed and for which his presence was requested (para 12) and that she could not provide an address for herself because she was in the process of relocating. In his affidavit in support of the freezing order application, Mr Roberts said:

“Ms Dozortseva left the jurisdiction on 24 June 2015, the very same day that Mr Pugachev is believed to have fled. Ostensibly, she says that she travelled to France in order to attend a meeting (Dozortseva 3/4 and 12), but she has also described herself as being ‘in the process of relocating’.”

Accordingly, Mr Roberts’ evidence clearly sets out Ms Dozortseva’s professed reasons for leaving and even provides a cross-reference. That is a clear disclosure of what she had said (which is all that the claimants could have known) in material which was before the court and which the court confirmed it had read. The material appears in an Appendix which describes the individuals involved in the case.

[47]In the light of that actual disclosure, the question becomes whether or not the reference in the skeleton argument is, in the circumstances in which it is likely to be read, an unfair one because the duty of disclosure requires the claimants to have repeated the reason she gave. I have no hesitation in saying that it is not an unfair reference in the circumstances. This is not a case of something plainly disclosable being buried in the depths of extensive material. The overall material put before the court was indeed extensive, but the point is not particularly buried, and the skeleton argument does not give the unfair impression that she has not advanced an explanation. An applicant for without notice relief does not have to spell out in the skeleton, in the same terms, everything of relevance which appears in the affidavit in support. In this case, providing the short account of her evidence (which itself is very short) in the place in which it appeared in Mr Roberts’ affidavit is perfectly sufficient disclosure, even though his affidavit is long and the material is in an Appendix.

[48]Ground 7. This is a complaint that the claimants failed to bring to the attention of the court the fact that one particular trust, which held a particular property (not in the UK) would be paralysed by the dual operation of the bar on the Protector from exercising his powers and the provision of the trust deed which required the written consent of the Protector to making investments or distributions.

[49]Mr Potts pointed out that this claim was not developed either orally or in Mr Auld’s skeleton argument, and was not readily comprehensible. I agree with the both observations. Disposals of the property were prevented by the injunctive provisions of WFO2 – that was its very purpose. In those circumstances it would seem to me to be unnecessary to point out other practical bars to disposals (assuming proper compliance by the Protector and the trustees). This point fails.

[50]Ground 8. An order of Peter Smith J, made on 14 August 2014, contained an elaborate regime under which some of Mr Pugachev’s considerable ordinary living expenses could be advanced to him by loan by Kea, on certain conditions as to disclosure. The details do not matter for present purposes. Under this non-disclosure claim the new trustees complain that the claimants failed to bring to the attention of the court the fact that the regime implemented by this order was being materially changed because Kea “was being replaced by the Tenth [respondent]”. It is said there was no evidence before the court as to why this change was necessary, appropriate or just in the circumstances.

[51]Once again, Mr Auld did not develop this submission. It is correct that Peter Smith J put in place the regime to which I have referred. By the time of the application for WFO2 Mr Pugachev had given evidence to the effect that his only source of money had become a French bank account (thereby apparently indicating that Kea had dried up as a source). That was known to the claimants. There had apparently been no payments to Mr Pugachev from Kea since November 2014. It became apparent over time that Mr Pugachev was in fact drawing monies from the 10th defendant (“Luxury”). The regime imposed by Peter Smith J apparently therefore appeared of less significance.

[52]Notwithstanding that, the application for WFO2 included, in the order, permission for Luxury to spend a reasonable sum on or towards Mr Pugachev’s ordinary living expenses (amongst other things) provided that the source should be identified and the limits should not exceed those set out in the order of Peter Smith J (which is referred to in terms). Attention was drawn to this in paragraph 130 of the skeleton argument placed before Rose J.

[53]In all those circumstances it is not at all apparent what this non-disclosure claim is all about. It is not clear to me what else could usefully have been said. I reject this claim. I add, for the sake of completeness, that evidence from the new trustees that has been given since WFO2 demonstrates that, in any event, Kea would seem to have run out of money to pay Mr Pugachev. Since this is material which post-dates the application, it is not strictly relevant to the scope of any wrongful non-disclosure, but in any event it is not necessary for me to take it into account.

[54]Ground 9. The evidence in support of the application made observations about the background and apparent qualities of the directors of the new trustees (Mr Smit and Mr Lenihan). In relation to Mr Lenihan Mr Roberts said that Mr Lenihan described himself as “Enrolled Solicitor of the Supreme Court of England and Wales” on his LinkedIn page, but that he does not “appear on the Law Society’s database”. This is said by the new trustees to be an apparent attempt to suggest that Mr Lenihan was making a dishonest claim as to his professional qualifications. The imputation was said to be wrong. The true position was that he was indeed enrolled as a solicitor, but he does not hold a practising certificate. His position as a properly enrolled Solicitor would have been apparent had the claimants undertaken a physical search of the records at the Law Society, where his name does indeed appear. This is said to have been a significant failure to have made a necessary and proper enquiry which led in turn to the filing of misleading evidence.

[55]It appears that the new trustees are correct in what they say about the status of Mr Lenihan, and that his true status would have been apparent from an in-person physical search of the records. I agree that the presentation of the evidence does indeed suggest a question-mark raised over Mr Lenihan as to what his qualifications really were. Any misleading statement about that would, in the circumstances of this application, have been a material mis-statement. Similarly, any non-disclosure would be capable of being serious.

[56]The principal defence of the claimants in this respect is that what was said was justifiable on the evidence they had, and any failure to go further was not culpable so as to be the sort of failure to enquire which infringes the full disclosure obligations. Mr Roberts, in a further witness statement, has said that the database which was searched was a reference to the Law Society’s “Find a solicitor” database. Mr Lenihan is not listed there (because he does not hold a practising certificate). He points out that the Solicitors Regulatory Authority itself advises that “to check whether an individual or firm of solicitors is regulated by us, search the law society’s ‘Find a solicitor’… tool”. That is relied on as the step which was taken (though it is not suggested that enquiries were made of the SRA before conducting the search). The claimants therefore submitted that they conducted reasonable enquiries for the purposes of making their statement, and that conducting a further search of the full manual records of the roll was not reasonably required at the time.

[57]This point comes down to a determination as to whether the sort of proper enquiries which are required under the duty of disclosure required the claimants to send someone to inspect the full roll of solicitors, having got a nil return from the publicly available database. With hindsight, and knowing what the issues now are, it can certainly be seen that it would have been a good idea. However, in the circumstances I have come to the conclusion that it was reasonable to rely on the publicly available database in trying to find out something about Mr Lenihan. It must be borne in mind that no prior indication was given of the appointment of new trustees. I have the strong impression that if there had not been ongoing communications over the search order, the claimants would not have been informed until rather later than they were. Having been so informed, it was reasonable to take swift steps to find out what was happening, and whether it might imperil the effectiveness of the then existing freezing order regime. In those circumstances the distinction between the publicly available database and the full list of “enrolled” solicitors would be understandably overlooked. In the circumstances I do not think it was culpable that the claimants did not make the further search which hindsight can now demonstrate might have been advisable. That means that there was no breach of the duty of disclosure.

[58]Ground 10. This non-disclosure claim takes the last point further. It relies on the fact that in their skeleton argument in support of the application to the Court of Appeal the claimants positively relied on the fact that Mr Lenihan appeared to have held himself out as a solicitor despite not appearing on the Law Society’s database. The skeleton went on:

“In this regard the Judge clearly erred as she referred to Mr Lenihan being a solicitor in this jurisdiction without referring to the fact that this appeared to be incorrect.”

That is apparently a clear statement that he was not actually a solicitor, from which the court was obviously entitled to draw adverse inferences. It is said that this compounds the non-disclosure referred to in Claim 9.

[59]I agree that this statement, being wrong, is potentially more significant than the matters raised in Claim 9. If it had been known to be false then it would be worse than a non-disclosure. The explanation for it is the explanation that I have referred to under Claim 9. It was not known to be false. It was false because a full enquiry had not been made. Whether or not this infringes the obligation to give proper disclosure depends on the culpability of the failure to make a full enquiry. For the reasons that I have already given, I do not think that that failure is sufficiently culpable.

[60]In any event, I note that this factor was not perhaps as important as it might at first sight appear to be. In the Court of Appeal Bean LJ referred to Mr Lenihan in one sentence in paragraph 33 of his judgment, when dealing with the question of whether or not the replacement of the trustees was a significant change. He indicated that he accepted the submissions of the claimants that the timings and the change of the trustees, with other matters, supported the inference that the change was intended to ensure that the trustees complied with the wishes of Mr Pugachev and that therefore there was an increased risk of dissipation of the assets. He went on “As to their directors: one of the directors of the original trustee companies was a Mr Patterson, who is accepted to be a leading New Zealand trusts lawyer. Mr Lenihan does not appear to be a solicitor of the same standing as Mr Patterson.” He does not say that he does not appear to be a solicitor; he refers to his standing. Therefore it does not appear that his Lordship thought he was being told that Mr Lenihan was not a solicitor at all. That, of itself, does not mean that there was no culpable non-disclosure, but it does severely reduce the practical impact of what was actually said.

[61]In the circumstances I do not think there was any culpable failure to make proper enquiries, and therefore there was no culpable non-disclosure. If there had been, I would not have held it was significant enough to justify a discharge of the order.

[62]Additional ground 1. This is a point raised only in Mr Auld’s skeleton argument and not in the specified grounds. It is a claim that the claimants failed to bring to the court’s attention the fact that Swiss bank accounts belonging to the trusts were already frozen in 2013 and therefore were frozen at the time of WFO2. The only evidential basis for this is one sentence in a witness statement of Mr Smit which was intended to reply to evidence of Mr Roberts dealing with the applications before me. So it was not in the first round of evidence intended to support the non-disclosure claim. The sentence is simply a statement to the effect of that which I have just set out. It occurs in a section of the witness statement which is expressly intended to address the unlikelihood of dissipation, though Mr Smit tacks on a sentence saying that this was a material fact not disclosed to the court at the without notice hearings.

[63]Mr Potts complained, with justification, that his clients had not had an opportunity to deal with this evidence in its own witness statements since it emerged only in reply evidence. It would be unfair to allow the new trustees to rely on it. I agree. He also pointed out to earlier evidence from Ms Dozortseva which referred to the accounts, but not to their being frozen, and to evidence which was said to suggest that the money in the accounts had been reduced so the accounts could not have been frozen.

[64]I find that this is not a point which the new trustees should be allowed to take in the light of the manner in which it was raised, and in any event the evidence is insufficient to support it.

[65]Additional ground 2. This point emerged only from Mr Auld’s skeleton argument. Ms Dozortseva had supplied trust information against an undertaking to pay her reasonable costs of doing so. She claimed the sum of almost £88,000. It is alleged that the claimants were arguably in breach of that undertaking because they had not paid under it by the time of the without notice applications, and that a failure to disclose that was culpable because it was relevant to submissions in the without notice hearings as to whether the claimants ought to fortify their cross-undertaking in damages.

[66]This point was not properly foreshadowed either in the schedule of non-disclosure or indeed in the evidence, and on that ground alone the new trustees should not be allowed to take it. It is not advanced in a way which makes the underlying facts apparent, nor the relevance to the debate on fortification. To that extent I do not really understand it either. Mr Potts told me, in submissions, that the position was that Ms Dozortseva had asked for her large sum, and had been offered £35,000 in June. That offer had not been accepted, but it was accepted shortly before this hearing. If and insofar as that is accurate it could well mean that there was no breach of the undertaking, but I do not propose to go farther into the point.

[67]Mr Auld also advanced some general points against the appropriateness of making a without notice order. Some of them amounted to submissions to the effect that the Court of Appeal ought not to have made the order on the material that it had. That, of course, is not a submission which he can make to this court. The Court of Appeal made its order, and I do not sit on appeal from that court. However, he also made some general submissions to the effect that if the matter had been correctly put before the Court of Appeal it would not have made the order. He submitted that if that court had been directed to the correct question, which was whether short notice given to the trustees would risk dissipation within that period of short notice, then the answer would have been shown to be No and the order would not have been made.

[68]This is, as I have observed, a form of non-disclosure allegation, I suppose, but once again it did not appear in his schedule. This generalised way of putting the matter was therefore not foreshadowed and the claimants did not have a proper opportunity to deal with it. In any event, having considered it, I do not consider that it is plain, or plain enough, that a different slanting of the application was either appropriate or would have achieved Mr Auld’s desired result. Furthermore, if there had been something in it I would have had to have considered whether it merited discharge with no re-imposition of the injunction. Further disclosures have revealed that there would have been more to be said in favour of a risk of dissipation, as appears below.

Conclusions on non-disclosure

[69]I therefore conclude that the new trustees’ attack on the injunctive relief on the footing of non-disclosure fails.

The continuation or discharge of the injunction on the merits

[70]It is therefore necessary to move on to consider whether the injunctions should be continued on the merits. This aspect of the application, as presented at court, took the form of Mr Auld making submissions as to why there were no proper grounds for imposing the injunction, with Mr Potts replying in order to justify it and explain why Mr Auld was wrong. I think it is important to bear in mind the burdens and to reflect that setting out my deliberations on the point. Mr Auld does not bear the burden of demonstrating why a granted injunction should be discharged. This is, in substance, the hearing of an inter partes application for continuation, even though the history of the matter has reversed the burden of actually applying. It is therefore for Mr Potts to make good his case for an injunction – he bears that burden. I bear that firmly in mind.

[71]Having said that, it is not necessary for Mr Potts to demonstrate anything much about the jurisdiction. As I have indicated, his application for an injunction is based on the Chabra jurisdiction and Mr Auld did not mount any material challenge as to the applicability of that jurisdiction on the facts of this case. He opened by accepting that the key point in this application was whether there was sufficient evidence of a risk of dissipation and that is the main point which was addressed. As well as lying at the heart of the injunction claim, it is capable (on the facts of this case) of going to the Chabra jurisdiction because Mr Pugachev’s ability and propensity to control goes to both risk of dissipation and whether there was a sufficient connection (to use a neutral word) for Chabra purposes. All relevant points were in the event addressed under the heading of dissipation, and I shall deal with them there, as did Mr Auld.

[72]This part of the judgment requires the consideration of more facts and other material than those available at the time of the without notice application. I next set out some of the facts that have occurred, or which have become apparent, since then.

The New Zealand proceedings and material emerging from them

[73]I have referred above to proceedings started in New Zealand prior to the without notice application. They were proceedings brought by the old trustees (the 2nd to 5th defendants) seeking directions as to whether they were validly removed and the new trustees validly appointed. Nothing much had happened in them at the date of the without notice hearings.

[74]The bulk of what is now known about them appears from a judgment of Heath J delivered on 2nd October 2015, following a hearing on 28th September. The claimants were apparently invited to participate, but declined to do so (the new trustees opposed their being given the opportunity). They were therefore not privy to the material placed before the court. Since then they have asked for copies of the material, and the old trustees consented to its being made available. However, the new trustees did not, at first citing (unconvincingly) a confidentiality order made in relation to the court file, and then before me citing the need to keep the affairs of the trust confidential, especially from the claimants bearing in mind their interest in pursuing Mr Pugachev. Accordingly that material, which would probably have been of assistance in assessing the full significance of some of Heath J’s findings, was not available to me.

[75]Paragraph 5 of the judgment records that a measure of agreement had been reached between the two sets of trustees. However, the judge took the view that he should consider the validity of the removal independently. This was no doubt a proper course, though it probably reflects that this was not a hard fought hearing with all issues fully ventilated. The judgment goes on to set out a small part of the history of the application and various relevant provisions of the trust deeds.. Section (iii) bears the heading “The original trustees’ concerns”. Paragraph 27 records Mr Patterson’s view that, on their face, the removal and appointment documents were valid and effective. If Mr Pugachev was not “under a disability”, he had power to act as Protector; if he were under a disability Victor was authorised to do so.

[76]Paragraph 28 records Mr Patterson’s fundamental concern as being whether the Protector’s power to remove trustees was a fiduciary power that had been exercised improperly in the circumstances. Paragraph 29 records that Ms Dozortseva was removed from office on 14th July. That fact was not previously known to the claimants, who had believed (based on their searches of the register) that she had resigned. As I understand it, they will not have known about her removal, as opposed to her purported resignation, until seeing the judgment of Heath J.

[77]The following paragraphs provide little more detail as to that removal, which has become a significant plank in the case of the claimants on this application. The judge records that on reading a judgment of David Richards J given in this jurisdiction on 30 October 2014 (in favour of the disclosure of trust information) Mr Patterson and his co-director wife appreciated that the activities of the original trustees would come under intense scrutiny and they sought advice. They also wished to comply with obligations cast upon them by the trust disclosure order made in this jurisdiction, and felt that Ms Dozortseva was not assisting them to obtain information from either Mr Pugachev or Victor. Notwithstanding their concerns, there was apparently little in the way of correspondence between them and Ms Dozortseva. On 19 June 2015 Mr Pugachev sent an email to the trustees asking for a full report of all actions taken by them as directors of the trustees for the period from 11 July 2014, and copies of various documents. He said he was requesting the information in his capacity as Protector, and he insisted firmly on having it. (The fact that this came from Mr Pugachev in an email renders curious a later assertion by Mr Patterson that he did not have an up-to-date email address for Mr Pugachev).

[78]Mr Patterson sent an email to Ms Dozortseva asking why the request had been made and reiterating advice he had received from senior counsel in New Zealand that Mr Pugachev was no longer a Protector. In the words of the judgment:

“Ms Dozortseva was coy in her response, suggesting that it may relate to a renovation project for one of the properties. She made it clear that Mr Sergei Pugachev, despite that advice received by Mr Patterson and Ms Hopkins [his wife], did not accept that he was no longer the Protector of the New Zealand Trust.”

The advice received was apparently that Mr Pugachev had ceased to hold office as Protector because WFO1 meant he was under a disability within the meaning of the trust deeds.

[79]Paragraph 37 of the judgment records the reasons given by the Pattersons for removing Ms Dozortseva as director of the three trustee companies of which she was a director. It reads:

“37. On the basis of their conclusion that Ms Dozortseva ‘had ceased to act properly as a director [of the original trustees] and that she was acting’ in the interests of Mr Sergei Pugachev ‘to the potential detriment of the [New Zealand Trusts] beneficiaries as a whole’, Mr Patterson and Ms Hopkins resolved, on 14 July 2015, to exercise powers as shareholders of the original trustees to remove Ms Dozortseva as a director of each. That left Mr Patterson and Ms Hopkins in control of the original trustees.”

[80]Paragraph 38 records the signature of the removal instruments on 24 July 2015. Mr Patterson and Ms Hopkins took further advice and he deposed to his concerns that Mr Pugachev risked bankruptcy and in due course it might be asserted that assets settled by Victor were transferred at the direction of Mr Pugachev and were in truth Mr Pugachev’s assets. They were also concerned that a subsequently appointed trustee in bankruptcy would look to recover assets lost to Mr Pugachev’s estate. In the circumstances, the potential exposure of the old trustees induced them to defer to the court on the question of whether the assets they held could be transferred to replacement trustees.

[81]Paragraph 40 records that counsel for the new trustees relied on affidavit evidence from Mr Pugachev, Victor, Ms Dozortseva and Ms Tolstoy (Mr Pugachev’s partner) as demonstrating that Mr Pugachev and Victor acted as they did because of a loss of trust and confidence in Mr Patterson and Ms Hopkins following the “unexpected” removal of Ms Dozortseva as a director of the original trustees. Apparently they emphasised that, until her removal, the New Zealand trusts had operated satisfactorily, and Mr Pugachev complained of a lack of consultation before the removal of Ms Dozortseva.

[82]Paragraph 41 is a paragraph relied on by Mr Auld:

“41. There is nothing in the evidence to establish that the Pugachev interests have sought to influence or control Ms Dozortseva’s activities, directly or indirectly. Ms Dozortseva’s removal as a director was seen, as Mr Sergei Pugachev put it: ‘as an ‘unwarranted and impulsive course of action by Mr Patterson’ as a result of which he had ‘lost confidence in Mr Patterson and his ability to act appropriate as a director’ of the original trustees.”

[83]Paragraph 43 records that Heath J had received affidavit evidence from the three new directors. “43. On the face of it, all are qualified persons to act as directors of the replacement trustees and, except for the concerns expressed by Mr Patterson in relation to Ms Dozortseva’s involvement, do not appear to be under the influence of Mr Sergei Pugachev. 44. I must accept the affidavit evidence of the witnesses to whom I have referred. They have not been cross-examined on their affidavits and there is nothing to suggest that there is anything inherently implausible about their evidence. Whether or not a different conclusion might have been reached if their evidence had been tested by cross-examination, I cannot say.”

[84]That apparent finding as to the probity of the new directors (and Ms Dozortseva) was one of the main points made by Mr Auld as demonstrating the fitness, probity and reliability of the new trustees. I note at this stage of this judgment that it is, in the circumstances, not a particularly strong finding. There was no cross-examination of the deponents, and it is not apparent that any party was advancing a case of unfitness against any of those three individuals. In the light of that, it is not surprising that the judge made the finding that he did, and he himself obviously realised the limitations of his finding when he refers to an absence of cross-examination and where that logically left him. I do not consider that this statement has the full force and effect contended for by Mr Auld.

[85]There is then a section devoted to considering whether the Protectors’ powers are fiduciary which concludes that in any event such a power has to be exercised for proper purposes. Paragraph 53 concludes:

“53. Based on the uncontested evidence of Messrs Sergei and Victor Pugachev, there is no reason to suggest that the Protector’s power to remove the original trustee was exercised improperly.”

I shall return to the strength and significance of that observation, and similar findings, in due course.

The funding arrangement

[86]In the jargon of this case this is the title given to an agreement entered into between the new trustees and Mr Pugachev very shortly after they took office, and pursuant to which a substantial sum of money was paid to Mr Pugachev’s attorneys before being recalled. The existence of this transaction is something heavily relied upon by the claimants.

[87]Mr Pugachev claims to have a substantial claim against the Russian state in respect of certain of its activities in relation to his affairs. It is substantial in both amount and scope. He says that he can enforce this claim via international arbitration. The new trustees were appointed on Friday, 24 July 2015. On Monday, 27 July 2015 Mr Pugachev and the sixth defendant (Maru) (and the trust of which Maru is the trustee) entered into an assignment of the benefit of part of the proceeds of that arbitration if and when it is successful. Under the document Mr Pugachev assigns to the trust “as an assignee for purposes hereof” 2.5% of the net proceeds of the arbitration that are actually awarded to and recovered by Mr Pugachev up to a maximum amount of $20m, and the repayment of capital disbursed by the trust as a disbursement under the agreement. For its part the trust agreed to make funds available to Mr Pugachev to fund litigation costs, in the sum of $800,000 and some further sums described as “Maintenance Payments”. Maru is said to guarantee the obligations of the trust under the agreement. This is a curious division of responsibilities and assignment on the trust side of the deal, because Maru is the trustee and the trust has no separate legal identity, but nothing turns on that.

[88]The agreement is a long and not straightforward document. It was signed by Mr Pugachev, by Mr Smit as “director of the trustee” and for Maru, and by Ms Dozortseva in a position which suggests that she was adding her signature to Mr Smit’s on behalf the trustee/trust. Annexed to that agreement is a letter from US lawyers (King & Spalding) setting out the terms of their engagement by Mr Pugachev. It is heavily redacted in the version before me; even the date on it is redacted, but it is apparent from the agreement itself that the date is probably 10 June 2015. It is signed by Mr Pugachev, and next to his signature there is something which looks like a redacted signature block, but it is impossible to tell what it really is. I would add that it is prima facie understandable that some information in this letter would be redacted in this copy because it involves a retainer to pursue a dispute against the Russian state, and the claimants probably have a close association with the state in the context of this litigation.

[89]On 13th August 2015, two days after WFO2 and after it had been served on or notified to the new trustees, Maru gave written notification of an intention to pay $800,000. After a reference to the proceedings the notice reads:

“Pursuant to paragraph 14(1) of the Order of Lord Justice Jackson, Lord Justice Ryder and Lord Justice Bean dated 11 August 2015, we notify you about the unanimous approved payment of certain legal costs which will be paid from the Wiltshire Residence Trust funds as permitted. The total partial payment [sic] for which this message serves as notification is USD 800,000 in accordance with applicable Court orders.”

It bears the signature of Mr Smit. The paragraph of the order referred to is the normal paragraph permitting the subject of a freezing order to spend reasonable moneys on legal costs.

[90]The next day Messrs Hogan Lovells for the claimants asked the trustee (as they were entitled to do) where the monies were to come from. They asked again on 18th August. A response came from Mishcon de Reya, on behalf of the trustee, saying that the monies related to costs for King & Spalding, and indicating that the monies had already been paid from an account held in London and managed by a separate company known as known as Oakhill. In a letter of 20th August Hogan Lovells took the point that the normal form of order did not permit the payment of the legal fees of third parties and that the payment of the $800,000 therefore represented a serious prima facie breach of the freezing order.

[91]The new trustees then decided to try to regularise the position, if it needed it. They applied to the court for a determination that on the true construction of WFO2 the payment of $800,000 was permitted; alternatively they sought (inter alia) permission, under the order, so to apply it. The matter came before Nugee J, and he delivered two judgments, one on 5 November 2015 and one on 6 November 2015. By the time of the hearing the trustees were no longer contending that they could pay the money under the normal “legal expenses” permission, and he rejected further arguments that they were entitled to pay it as some form of trading activity or ordinary trust expenditure.

[92]In his second, rather longer, judgment Nugee J set out some of the history of the matter, including references to the New Zealand proceedings. He commented (justifiably, in my view) that a particular limited part of Mr Patterson’s evidence provided for the English proceedings had not been as forthcoming as it might have been as to who was and who was not the settlor under the New Zealand trusts. The new trustees were also applying for permission to make certain payments in favour of Mr Pugachev for his living and legal expenses. Nugee J dealt with those first. He refused the application on various grounds, including the fact that the application was really for the benefit of Mr Pugachev and he ought to have made it for himself; insufficient evidence had been given as to what other sources of support might be available for Mr Pugachev; and that there was no reason to suppose that Mr Pugachev would be able or willing to provide evidence of the quality that would satisfy the burden of persuasion which would lie upon him, as the proper applicant, to induce the court to make the variation of the order that was sought. For what it is worth, he expressed scepticism as to the extent to which the new trustees were actually at arms length with Mr Pugachev, though he accepted that he did not need to reach any conclusion about that. He did, however, say that he had no confidence that Mr Pugachev was willing to be forthcoming about his actual assets. So far as the request to allow the payment of $800,000 was concerned, he refused this on essentially the same grounds which he did not re-articulate. He further rejected the submission that the payment should be allowed because the new trustees were contractually obliged to make it, having entered into the funding arrangement. He noted that (as was apparently the case) the new trustees had not actually placed the arrangement before the court, so it was not possible for him to assess the assertion that there was a contractual obligation. He was further not satisfied that in any event the payment would be a proper payment, noting that the arrangement appeared on its face to involve a breach by Mr Pugachev of WFO1.

[93]Meanwhile the monies in the hands of the attorneys to whom they had been paid became covered by an undertaking which prevented their application in legal expenses, and eventually the monies were repaid by those attorneys to the new trustees.

The case for maintaining the freezing order

[94]As I have already observed, the principal debate in this area was whether there was sufficient evidence of a risk of dissipation, particularly in the light of the fact that the assets were subject to trusts.

[95]Mr Potts, for the claimants, relied principally on the following points in support of his submission that, despite the apparent absence of a direct holding of the relevant property by Mr Pugachev, there was nonetheless a serious risk of dissipation because of a risk that the trustees were not in truth sufficiently independent and because, in practice, Mr Pugachev was apparently able to exercise a real degree of control over their decisions. An outline of his points is as follows: i) The history of this matter shows Mr Pugachev to be unreliable and untrustworthy. He had avoided making full disclosure, had broken court orders (and in particular the passport order, which had enabled him to go abroad when he should not have done so) and had been generally evasive. ii) Protestations of openness made for and on behalf of both the old and new trustees were inconsistent with their conduct – for example, the challenge by the old trustees to orders that they should disclose trust assets, and the circumstances in which the claimants were told of the change of trustees. iii) Contrary to the submission of Mr Auld, the trusts did not demonstrate a straightforward property holding structure in which most of the property was real property. The structure showed, in some cases, layers of corporate holdings in various offshore places. Furthermore, the directors of some of those offshore companies were not the same as the directors of the new trustees; they were individuals who had a real connection to Mr Pugachev. iv) The new trustees (or more precisely the directors of the new trustees) were not as obviously independent as they would have this court believe. This was particularly the case with Ms Dozortseva who was closer to Mr Pugachev than she actually said and who had herself demonstrated unreliability and evasiveness in compliance with her disclosure obligations. The execution of the search order referred to above revealed that the trusts were administered from the same London office as one or more non-trust companies which made money available to Mr Pugachev, with papers relating to the various trusts held in such ways as did not demonstrate a sufficient degree of independence the one from the other, or any of them from Mr Pugachev. v) The circumstances of, and reasons given for, the appointment of new trustees demonstrates a real desire on the part of Mr Pugachev to control the trustees, and the willingness of the new trustees to enter into the funding arrangement and pay the $800,000 supports an inference that they are more likely to do his bidding. Mr Potts drew attention to the fact that the new trustees did not make a Beddoes application before making the application which ended up in front of Nugee J. vi) All in all, the picture was not one of genuinely separate trusts, but was one in which Mr Pugachev, who had shown himself to be unreliable and unwilling to comply with court orders, was seeking to control purportedly independent discretionary trustees, and that there was a real prospect that he would seek to do so and achieve that objective.

[96]As against that, Mr Auld submitted, in outline, as follows: i) The whole existence of the trusts, and their terms, pointed against any dissipation. They were genuine discretionary trusts, and their terms prevented any relevant control on the part of Mr Pugachev. ii) It was not in Mr Pugachev’s interests to exercise control over the assets so as to reduce them to his own ownership because that would be to make them potentially available to the claimants, which he would not want. iii) The present trustees were respectable and responsible individuals and there was no good evidence to suggest otherwise. They would act properly, conscientiously and in compliance with court orders. There was nothing “dodgy” about the trustees, the trusts or the individual directors of the new trustee companies. The trusts themselves could be policed in a respectable jurisdiction with a reputable court system (New Zealand). iv) The trustees had historically complied with orders. There has been no dissipation by the trustees in the past, and no reason to suppose that that would change in the future. They had been appropriately transparent in relation to their accounts of the trust assets. It was significant that for a considerable period of time since WFO1 the claimants had not thought it necessary or appropriate to apply for freezing order relief against the trusts. One could compare the originally disclosed trust assets with the current situation and see that there had been no dissipation. There was no evidence that the new trustees had immediately set about doing anything which would amount to a dissipation, despite the fact that some weeks elapsed between their appointment and the grant and service of WFO2. v) The past and present individual directors had explained that the relationship between them and Mr Pugachev, and Ms Dozortseva and the rest of them, was such that neither Mr Pugachev nor Ms Dozortseva sought to apply any degree of influence or pressure, and in the case of Ms Dozortseva she was never more than one of three directors and was not in a position to compel the taking of any particular steps. The suggestion that Mr Pugachev had somehow put in stooges in place of Mr Patterson and his wife was unfounded. vi) The fact, if it be a fact, that Mr Pugachev has behaved badly is not sufficient to found an order freezing the trust assets. vii) The funding arrangement, and the events surrounding the payment of the $800,000, did not evidence a risk of dissipation. The evidence showed that the trustees immediately made sure that the funds paid to the lawyers were frozen and an undertaking given for their return if necessary. They procured the return of the money when it was necessary to do so. If the funding arrangement itself was in breach of an injunction it was only a breach of WFO1, which was granted long before the new trustees were appointed. One should forgive the new trustees for not spotting that the counterparty (Mr Pugachev) was in breach of the order. viii) There was nothing sinister in this appointment of the new trustees, or its circumstances. Mr Auld relied particularly on the findings of Heath J in support of this proposition. ix) There was no explanation for what he described as the delay in making the application. The trusts had been known about for well over a year and yet no application had been made. x) Mr Auld made other points which were, in effect, elaborations or variations of the above principle points. I have taken into account all his submissions.

[97]In my view Mr Potts is correct in most of his submissions and in his conclusion that there is a real risk of dissipation and a real case for saying that Mr Pugachev will successfully seek to assert some control over the trustees so as to procure disposals of trust assets which will somehow put them beyond reach of creditors, and in particular the claimants. I have reached this conclusion for the following reasons.

[98]I start with the event which was the obvious trigger for applying for WFO2, namely the appointment of the new trustees. Until then the trusts were apparently in the hands of trustees whose principal hand was Mr Patterson, who is accepted as being a reputable New Zealand trust solicitor. Although Mr Pugachev had shown himself to be an unreliable individual when it came to disclosing his assets and obeying court orders about disclosure and not leaving the jurisdiction (which breaches were, on their face, serious) the claimants would have been justified in coming to the conclusion prior to the change of trustees that it could not be demonstrated that Mr Pugachev would seek to interfere in the affairs of the trusts so as to bring about dissipation is which would be contrary to the principles underlying WFO1, and achieve success. The likelihood of his personally dissipating assets, coupled with his failure to comply with court orders, would not, of themselves, give rise to a risk of dissipation of trust assets.

[99]The trusts were, on their face, discretionary trusts and the trustees did not include Mr Pugachev himself. However, it is not true to say that the trusts were somehow straightforward real property-holding trusts with a transparent structure. Some property was held directly, but three of the five trusts hold property through shares in other offshore companies, and the directors of those companies were not the same as the directors of the principal trustee companies. No doubt that sort of structure is something that the trustees are entitled to put in place, but if it happens it cannot be described as a fully transparent structure.

[100]When it comes to the terms of the trusts themselves, Mr Pugachev has no right to direct the disposition of any trust property, though he has the right to direct the sale of assets which were owned as residences. If there were a sale, then the proceeds would be held subject to the trusts, and he had no particular power of direction over them. He did, however, as Protector have a right of veto over distributions and over investments. More importantly for present purposes, he had full powers to appoint and dismiss trustees. He was therefore in a position, should he wish to do so, to make strong representations to the trustees as to what they should do, and to dismiss and replace them if they did not comply with his wishes. If he did not like what they had done, similarly he could appoint new trustees who could unscramble the deed. That seems to have been what happened when Miss Dozortseva was dismissed. In that way he could be in a position to bring about disposals and distributions should he wish them to happen.

[101]That of itself is not sufficient to give rise to a risk of dissipation in the present case. However, what happened in July demonstrates that there is, to put it at its lowest, a very good arguable case for saying that that is indeed what Mr Pugachev was attempting to achieve. In July 2015 the then trustees were engaged in dealing with the search order of the premises from which they were apparently administered. In the middle of that process, and unannounced, their solicitors informed the claimants of a change of trustees in terms which suggested some surprise on their part. It transpired that the reason for the removal was said to have been a loss of confidence in the apparently respectable New Zealand directors, associated with their removal of Ms Dozortseva as director. Her re-emergence as a director of the new trustees might be thought to demonstrate Mr Pugachev’s apparent insistence that she remain involved, despite the views of the apparently respectable New Zealand trustees that she was not appropriate to be a director viewed from the point of view of the beneficiaries as a whole.

[102]The claimants invite me to find that the removal of the old trustees and the appointment of the new was indeed Mr Pugachev seeking to assert control over the trusts so as to make sure that the trustees did his bidding. The new trustees rely heavily on the judgment of Heath J as demonstrating the propriety of the act and the absence of anything sinister. This is an important point.

[103]There is no doubt that Heath J made some findings that are ostensibly inconsistent with the case that the claimants seem to make – see, for example, the finding referred to at paragraph 85 above. . He found no evidence that the appointment was motivated by anything improper and ruled the new appointment valid. He also found that there was no evidence to establish that the “Pugachev interests” had sought to exercise influence or control, and that the new trustees did not appear to be under the influence of Mr Pugachev. However, the nature of the proceedings, the participants, the evidence and the apparent procedure need to be borne in mind. This was not adversarial litigation in which questions of control and independence were being tested by parties with contrary interests. The old trustees do not appear to have been advancing a positive case in this respect. They wanted the blessing of the court, and it appears that they did not argue strongly (if at all) against the new trustees. The extent to which they were taking points (or not taking them) can be judged from the fact that despite their approach Heath J considered he had to consider the correctness of the new appointment – see his paragraph 5, referred to above. He makes it plain that he reached his decision on the evidence that he heard, and (crucially) without cross-examination of the deponents. It is not even known by the claimants or this court what evidence he did actually receive, other than those parts referred to in his judgment. Accordingly, while his judgment is entitled to full respect, it cannot be realistically taken as deciding the sort of points that arise on this hearing, because those points were not obviously canvassed or probed by any person, let alone a person with a real interest in doing so. Accordingly, Heath J’s findings do not materially assist Mr Auld’s case.

[104]New trustees were appointed about whose new directors nothing adverse is positively known. Mr Smit has a cv which shows a proper professional career, and Mr Lenihan is a solicitor in New Zealand about whose respectability there has been no direct challenge. However, his main professed expertise is not the administration of trusts in the same way that Mr Patterson’s was. Little is known about how he came to be appointed. It is said that a New Zealand solicitor ought to be a trustee of New Zealand trusts, and he was identified as a candidate by a solicitor colleague (whose precise identity is not known). It is not known what particular attributes were attractive to Mr Pugachev, and it is not known how keen the enquiries were. It is certainly not been said that the enquiries were extensive.

[105]So far as Mr Smit is concerned, there is no evidence as to how he came to be involved. Mr Auld said on instructions that one of his former employers was approached by someone on behalf of Mr Pugachev to find a replacement trustee, and that Mr Smit was arrived at in that way, but who that person was making the enquiry, what was said and when this happened is not known. In the circumstances of this case, and bearing in mind the fact that it could be anticipated that such matters would be of significance in this application, that omission certainly does not help Mr Auld’s case.

[106]Mr Lenihan says that he was approached on the 21 July 2015 (a Tuesday) and asked if he would be a trustee. By Friday 24th July he had accepted appointment and had been appointed. That appears to be quite a short timescale for a would-be trustee to decide whether he wished to accept an appointment of trusts which were potentially as complex as the present ones, but in any event that is the timescale in this case and is not, by itself, a badge of anything being wrong. However, what happened next is something which does give rise to a question-mark over the genuine independence of the new trustees. On 27th July they entered into the funding arrangement. On any footing the litigation which the trustees were being invited to contribute towards, and to take a share of the proceeds of, was complex litigation and it would seem that a conscientious consideration of the wisdom of spending such a large amount of money on that litigation would be a big decision which would require a lot of consideration with appropriate advice. It might occur to some trustees that it would be wise to seek the directions of the court. To decide to enter into such arrangements in the three days between appointment and the decision is a very rushed timescale. Looking at it realistically, the complex assignment document is unlikely to have been drafted within that period (which included a weekend) and is likely to have been on the stocks before. One highly plausible inference is that the funding agreement was being discussed before the appointment, leading to the next possible inference that the trustees were appointed because they had indicated they would, when appointed, be prepared to enter into it. Mr Lenihan cannot have considered it before 21st July (when he was first approached) and it is far from plain that he will have had time to give proper independent consideration to all that he would need to know about the trusts and then about the litigation underlying the funding agreement, and the wisdom of the agreement itself, in the six days between his being approached and the signature of the funding agreement. All that is material which would support an inference that the trustees were appointed because they would enter into the funding agreement, which itself, if a justified inference, is strong material supporting the assertion that they were prepared to do Mr Pugachev’s bidding. Of course, I make no positive finding to that effect; that would not be appropriate on the present application, nor is it necessary. It is sufficient for present purposes to find, as I do, that it is evidence justifying the inference which Mr Potts seeks to draw from it.

[107]The independence and care of the new trustees is also called into question by the fact that the funding arrangement was, at least prima facie (and probably more than that) a breach by Mr Pugachev of WFO1. Since drafting this section of this judgment I have seen the judgment of Rose J (8th February 2016) on an application to commit Mr Pugachev for various contempts. I note that she makes a positive finding that Mr Pugachev was in breach of WFO1 in entering into the funding arrangement (paragraph 167), and that she also makes a finding that the appointment of Maru was to ensure that there were trustees who would be willing to enter into the funding arrangement (paragraph 162). It was not suggested on behalf of new trustees that they did not know of WFO1 (and Ms Dozortseva was plainly aware of it because she

[108]had been closely involved in a lot of consequential matters arising out of it for many months). So one of the first acts of the new trustees was to assist in an apparent breach of an English court order. For present purposes that does not inspire confidence.

[109]Next, the new trustees paid the $800,000 out of trust funds in breach of WFO2 with which they had by then been served. They should have specified where it was to come from, but did not do so until two requests to that effect, and by then they had paid it. Even if the trustees had thought that “investment” (one of the trustee’s word) of that money in the arbitration was within the permission given by the usual “legal expenses” provision in a freezing order (which was at best highly doubtful, and which they did not pursue in front of Nugee J), the order was plain enough in saying that they had to provide its source before it was spent.

[110]These matters suggest that the new trustees were, at a very early stage, very keen to enter into this complex transaction. There is no suggestion that they took independent advice. It is clearly material which supports the inference that they were entering into the transaction because Mr Pugachev wanted it to be entered into. See previous footnote Mr Auld’s attempt to mitigate the effect of this by relying on the fact that the new trustees procured that the monies were covered by an undertaking to repay, and procured its repayment, does not do anything to weaken that inference. Nor do I accept his submission to the effect that entering into a transaction which would be a breach of WFO1 on the part of their counterparty is something which would understandably have passed them by and which should be given very limited significance. They must have known that they were walking into a complex situation, and one would have expected them to pay proper attention. If they were not paying proper attention then that once again strengthens the inference which Mr Potts seeks to draw from all this.

[111]Mr Auld is, of course, entitled to rely on the considerable swathes of evidence in which both old and new trustees profess their integrity and independence. Mr Lenihan and Mr Smit both say that they are independent and would not be pushed around by Mr Pugachev. Nor would they be overly influenced by Ms Dozortseva who was, after all, only one of three directors of each of the companies. (Mr Auld positively relied on the fact that she was not a director of one of the four former trustee companies as a badge of non-influence by Mr Pugachev, but I do not think that that is a reliable badge of any such thing.) It was said that she could be outvoted if the two other directors thought fit. That is technically true, but it does not really address the point. It is not said that Mr Pugachev had somehow put in place his own “staff” as directors. The case is more subtle than that. It is said that the new trustees would be expected to do his bidding because if they did not they would be removed, and that that is in fact what happened to the old trustees. I accept that that is a plausible inference from the facts as currently known. Technical voting powers do not have much to say about that. Nor are the protestations of independence of as much weight as Mr Auld would submit. There is material for saying that their first act (entering into the funding arrangement) contradicts the evidence. I note the evidence but consider that objective facts are more important than those subjective protestations.

[112]Mr Auld made much of the fact that they had been no apparent risk of dissipation, justifying an intervention by the claimants, for the long period leading up to July 2015, and no evidence of dissipation by the new trustees in the period between their appointment and WFO2. In part he relied on this as a “delay” submission. This submission misses the real point and, in any event, is very arguably wrong in relation to the new trustees. It misses the point in that the case of the claimants relies on events which only start in July 2015. They do not seek to make a case of a risk of dissipation in relation to the old trustees. The risk is said to have manifested itself when new trustees were appointed. Accordingly the preceding period (save insofar as it relates to the constants of Mr Pugachev and Ms Dozortseva) is not relevant. This is not a case in which the claimants had their evidence of a risk of dissipation for months and months and delayed acting. It is a case in which the risk only presented itself (or presented itself sufficiently clearly) on a change of circumstances in July 2015. Furthermore, it is not true to say that there was no dissipation by the new trustees when they took office. While it is true to say that there is no evidence that they immediately embarked on a wholesale distribution or reorganisation which would amount to dissipation, they did enter into the funding arrangement and pay the $800,000 more or less immediately on taking office. The latter act is very arguably a dissipation.

[113]The presence of Ms Dozortseva provides some sort of arguable link between Mr Pugachev and the trustees, and his apparent insistence on her remaining a director is something that can be relied on in support of an inference that he wishes to retain control over the trusts and their assets. I have already adverted to the fact that she technically has no control. It is also right to say that the extent to which she is an arm’s length adviser, as opposed to someone much more closely associated with Mr Pugachev, is something which is very much in dispute in these proceedings. There is, however, a case for challenging her insistence that she is an arm’s length adviser. It took her three goes and a passport order before she gave some disclosure that was required of her. She left the jurisdiction at almost exactly the same time as Mr Pugachev did. It is true that she explains this on the footing that she was “relocating”, but the manner in which she presents her evidence, and the pattern of her evidence, makes that questionable. Again, I do not have to make positive findings about the detail of this. It is sufficient to note, as I do, that it is material which challenges her assertions of independence and which supports a case that the trustees may well do Mr Pugachev’s bidding rather than being entirely independent trustees capable of resisting, and willing to resist, what he wants when appropriate.

[114]Mr Auld’s submission that the very structure of the trusts points very firmly, if not conclusively, against the prospect of Mr Pugachev controlling the assets rather misses the point that is made against him. The point is not that the structure actually allows and entitles him to give directions. The point is that a combination of the structure (which gives him rights as a Protector), the propensities that he is said to have demonstrated to conceal assets and, where possible, to have them applied for his purposes, the circumstances of the change of trustees and what the trustees then did all point towards de facto, not de iure, control. Mr Potts’ point is that despite the structure Mr Pugachev is, on the facts, capable of exercising control. I find that there is a very good case for saying that that is accurate.

[115]As narrated above, Mr Potts sought to make something of the fact that some of the directors of companies down the property-holding chain from some of the trustees were individuals associated in varying degrees with Mr Pugachev, and he suggested that this would give Mr Pugachev an opportunity to start controlling the assets at a level lower than the trustees. He relied on detailed evidence which drilled down into that structure, identified individuals and then sought to explain how it was that those individuals had an association with Mr Pugachev. It does appear from that evidence that some of the directors are individuals with some sort of connection to Mr Pugachev. The connection seems to be demonstrated in relation to at least some of them. One of the directors is Victor, from whom Mr Pugachev claims to be estranged. I note that Rose J declined to find that this estrangement did not exist despite inconsistencies in the evidence – paragraph 122. However, in the light of conclusions that I have reached without that evidence, I do not find it necessary to go on to consider in detail the nature of their respective connections and the likelihood of their complying with the will of Mr Pugachev. The main response of the new trustees to this evidence was that all the individuals had been in place for some significant time before now and there was no suggestion that they had participated in any prior dissipation. As to that, I will merely observe that, once again, it ignores the point, which is that what seems to have brought the risk of dissipation to light is what Mr Pugachev started doing in July 2015. It is not necessary for me to consider the force of the point further.

Conclusion on the risk of dissipation

[116]In the light of the foregoing I find that, contrary to the submissions of Mr Auld, there is a real risk of dissipation in this case, based on the real possibility that Mr Pugachev has put in place trustees whom he would seek to influence and in respect of whom there is a very serious risk that they will give effect to that influence. There was no other material challenge to the continuation of the injunction, so there is nothing further for me to deal with. Accordingly, the application to discharge WFO2 fails and will be dismissed.

Post-script

[117]As appears from the footnotes above, since preparing this judgment I have seen a copy of a judgment given by Rose J on 8th February 2016 in which she has found Mr Pugachev guilty of various breaches of orders in this case. I have not considered the detail of the judgment. I have just noted the particular points referred to in the footnotes and the list of matters in respect of which Mr Pugachev was found to have been at fault. Those findings in no way undermine my conclusions, and insofar as they would demonstrate the unreliability of Mr Pugachev they support them; but I would have reached the same conclusions without seeing any of them.

Cited in 1 later judgment

Khan, R (on the application of) v Secretary of State for the Home Department 2016