On 8 November 2016, judgment was delivered in PJSC Tatneft v Bogolyubov and others [2016] EWHC 2816 (Comm). In his judgment Picken J provided a detailed review of the meaning of a "good arguable case" and "risk of dissipation" in the context of a worldwide freezing order ("WFO") and fraud claims.

Facts

The claim was brought by Tatneft, one of the largest oil producers in Russia, owned by the Government of Tatarstan, Russia against four Ukrainian businessmen in relation to their involvement with oil delivered in 2007 to the Kremenchug oil refinery in Ukraine. The payment obligation to Tatneft was governed by a complex contractual chain involving a number of intermediary companies and Tatneft's case, was that each of the Defendants took part in a dishonest scheme to misappropriate substantial sums of money.

Proceedings had originally been brought in both the Republic of Tatarstan and in Ukraine but the Ukrainian court prevented the enforcement of a judgment in Tatarstan and recoveries were therefore limited to assets in Russia. In March 2016, Tatneft commenced proceedings in the High Court as the purported assignee of one of the parties to the contractual claim and obtained a WFO against the Defendants. The claim advanced by Tatneft was governed by Rome II pursuant to which the applicable law was Russian law.

The WFO prohibited each of the four defendants from disposing of or dealing with their assets up to a limit of US$380 million, comprising US$334.1 million by way of damages, US$34.3 million as interest and US$11.5 million to cover incurred pre-action costs.

At the hearing before Picken J, the following applications were before the court:

  1. an application by Tatneft to amend its Particulars of Claim after the expiry of a foreign limitation period;

  2. an application by all four Defendants for the discharge of the WFO on the basis that the claim did not amount to a “good arguable case” and/or that there was an insufficient “risk of dissipation”;

  3. an application by the First and Third Defendants for summary judgment or an order striking out the claim;

  4. an application by the Second and Fourth Defendants to set aside the order for service out of the jurisdiction on the basis that there was no serious issue to be tried on the merits of the claim against them.

Judgment

In summary, Picken J refused Tatneft permission to amend its Particulars of Claim, upheld the Defendants' applications to set aside service and for summary judgment and allowed the applications for discharge of the WFO.

Amendment of Particulars of Claim

The pivotal issue before the court on Tatneft's application for permission to amend was its assertion that its claim arose out of the existing claim and particularised the existing claim which was time barred under Russian law but did not introduce a new claim. CPR 17.4.(2) enables the court to allow an amendment which effect is to add or substitute a new claim if the new claim arises out of substantially the same facts as an existing claim. The original claim was predicated on the wrongful diversion of monies but the proposed amendments relied on a purported assignment which was a different claim and introduced a new cause of action which was time barred under Russian law. The court therefore concluded that the proposed amendment had no real prospect of success and permission to amend must therefore be refused.

"Good arguable case"

In reviewing the authorities on the meaning of "good arguable case", the judge surmised "having decided that there is no 'serious issue to be tried', it is impossible to conclude that the 'good arguable case' test has been met". In consequence, Picken J therefore granted the application to discharge the WFO.

"Risk of dissipation"

While Picken J had found that there was no "good arguable case", he nevertheless went on to provide a helpful overview of the case authorities as to what is needed to show a sufficient "risk of dissipation" in the context of fraud claims. In considering the authorities on risk of dissipation, Picken J noted that the purpose of a WFO is to restrain a defendant from evading justice by disposing of assets otherwise than in the ordinary course of business, and that not every general allegation of dishonesty will be sufficient to justify an inference that there is a real risk of dissipation.

The judge therefore concluded that, had he formed a different view on the merits of the case (and thus as to the satisfaction of the "good arguable case" test), in view of the nature and scale of the alleged fraudulent scheme combined with Tatneft's thwarted efforts to recover the monies, he would have concluded that Tatneft had established a sufficient risk of dissipation.

Comment

This case provides a useful review of the authorities in the context of freezing orders when considering the "good arguable case" and "risk of dissipation" tests although its conclusion that CPR 17.4(2) has no application to claims governed by Rome II, is likely to have been foreseeable.