Amendments to Statements of Case Learning the Hard Way: PJSC Tatneft v Bogolyubov and others [2016] EWHC 2816 (Comm)

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1 Amendments to Statements of Case Learning the Hard Way: PJSC Tatneft v Bogolyubov and others [2016] EWHC 2816 (Comm) Simon P. Camilleri * Associate, Fried, Frank, Harris, Shriver & Jacobson (London) LLP, London Amendments; Applicable law; Discharge; EU law; Freezing injunctions; Limitation periods; Statements of claim PJSC Tatneft v Bogolyubov and others 1 is an example of a mammoth piece of litigation which came to an end abruptly, only shortly after (in this case, eight months after) proceedings were issued. The claim brought by PJSC Tatneft ( Tatneft ), a Russian oil producer, against four businessmen from the Ukraine centred around allegations of a fraudulent scheme designed to extract money from a transaction between a Russian company, Kompaniya Suvar-Kazan LLC ( S-K ), and a Ukrainian oil refinery, PJSC Transnational Financial and Industrial Company Ukratnafta, which was said to be owned, in part, by at least two of the defendants. Tatneft brought the claim in Russian law (specifically, under art.1064 of the Russian Civil Code) as S-K s assignee. The value of the claim was substantial, amounting to some US$334.1 million plus interest. All four of the primary defendants (there were others, brought into the case as Chabra 2 defendants) challenged Tatneft s ability to have brought the claim in the first place: two of the defendants brought a jurisdictional challenge whereas the remaining two applied for reverse summary judgment. These applications were coupled with applications to discharge the worldwide freezing order which Tatneft had obtained in support of its claim. The jurisdictional and summary judgment applications were premised on a seemingly straightforward proposition: that Tatneft could not bring any claim against the defendants as the claims it sought to bring had not (or could not have been) assigned to it by S-K. This argument succeeded before Picken J and Tatneft s claim came to a swift end. What makes the judgment interesting, however, is not the sudden demise of Tatneft s claim. Rather, it is the fact that Picken J went on to consider various other issues raised by the defendants. These related to Tatneft s attempt to amend its claim to bring a further claim and to the attempts by the defendants to have the worldwide freezing order discharged. As reverse summary judgment had been given on Tatneft s claim and permission to serve out had been refused, it was not, strictly, necessary for Picken J to deal with either issue. As Picken J noted in respect of the application to discharge the worldwide freezing order, it obviously followed * simon.camilleri@friedfrank.com. 1 [2016] EWHC 2816 (Comm). 2 TSB Private Bank International v Chabra [1992] 1 W.L.R. 231; [1992] 2 All E.R

2 298 Civil Justice Quarterly from the fact that there was no serious issue to be tried that there could not be a good arguable case, with the result that the worldwide freezing order would have to be discharged. 3 However, both the analysis of Tatneft s application to amend its particulars of claim and the defendants applications to discharge the worldwide freezing order raise issues which are of general interest. They are considered here in some detail. Regarding the defendants applications to discharge the worldwide freezing order, Picken J appears to have felt compelled to provide some commentary on the discharge application and the principles underlying the application for (and discharge of) freezing orders, given the amount of effort the parties had put in to debating those very same issues. 4 The (admirably brief) summary of the key principles is of great assistance to anyone who regularly applies for or, indeed, faces the prospect of discharging a freezing order. 5 It is also of use to those who wish to understand the concepts behind freezing orders and their application. With respect to the principles concerning a risk of dissipation, the judgment s analysis of the authorities 6 emphasises the point that where fraud is alleged and established by the claimant to the appropriate standard, a finding that there is a risk of dissipation almost inevitably follows, regardless of what was said by Peter Gibson LJ in Thane Investments v Tomlinson. 7 The appropriate standard is the good arguable case, absent the Canada Trust Gloss (i.e. that the party must show that he has a much better argument on the material available) 8 which applies where a party wishes to serve process outside of the jurisdiction. 9 As the good arguable case is a somewhat low threshold to meet 10 (indeed, as was accepted by Picken J, it is perfectly possible for the judge to conclude, at the interlocutory stage, that both sides have a good arguable case 11 ), where an allegation of fraudulent conduct is established to this (low) standard, a finding of a risk of dissipation will almost inevitably follow. One might suggest that the judgment provides an indication of where the real and sustained attack on a freezing order must lie. It is not in good arguable case or, indeed, in the issue of whether there is a risk of dissipation. Rather, it is in the issue of whether a claimant must be punished for a material non-disclosure in obtaining the order, if such a non-disclosure exists. With respect to Tatneft s attempt to amend its claim, it was accepted by Tatneft that if it were forced to calculate limitation on its amended claim from the date on which permission to amend was, hypothetically, to be given, the (amended) claim would be time barred. 12 Tatneft, however, appears to have argued that the amended claim was simply a further particularisation of its existing claim, such that it was 3 [2016] EWHC 2816 (Comm), at [107] and [110]. 4 See above at [107]. 5 The summary is found in the judgment at paragraphs [107] to [133]. 6 [2016] EWHC 2816 (Comm) at [111] to [118]. 7 [2003] EWCA Civ Canada Trust Co. and others v Stolzenberg and others (No. 2) [1998] 1 W.L.R. 547, per Waller LJ at 555; [1998] 1 All E.R Kazakhstan Kagazy plc v Arip [2014] EWCA Civ 381; [2014] 1 C.L.C. 451, at [25] per Longmore LJ and [63] to [68] per Elias LJ. 10 As stated by Mustill J (as he then was) in Ninema Maritime Corp v Trave Schiffahrtsgesellschaft GmbH & Co KG [1983] 1 W.L.R ; [1984] 1 All ER 398, in order to establish a good arguable case, the claimant must be able to show that his case is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than a 50% chance of success. 11 [2016] EWHC 2816 (Comm) at [110]. 12 See above at [86].

3 Notes 299 in the discretion of the Court to allow the claim to be amended. 13 Although, for this reason, Tatneft s application to amend was expressly made under CPR 17.1(2)(b) (relying on the Court s discretion to permit amendments to statements of case), 14 it appears to have been the case that the issue of whether CPR r.17.4 could be relied upon to save Tatneft s amendments, even if they constituted a new claim made out of time, was also open for consideration. 15 Picken J held that reliance on CPR r to relate any new and amended claim back to the date of the original and unamended claim was not open to Tatneft. The reason for this was that it was accepted that the choice of law element of the claim, leading to the determination that Russian law applied, was governed by the Rome II Regulation. 16 As CPR r only applied to foreign limitation periods which had expired under the Foreign Limitation Periods Act 1984 and as s.8 of that Act excludes its application where a choice of law is determined by virtue of either the Rome I 17 or Rome II Regulation, there was simply no scope for the argument that Tatneft could relate a new but arguably time-barred claim back to the date on which it brought its original claim. 18 Although there was little discussion of the point in the judgment, the effect of this finding is significant: if the applicability of a foreign law in English proceedings (including a foreign limitation period) is determined by reference to the Rome II Regulation (or, indeed, the Rome I Regulation), the rule in CPR r that a party may amend his new claim, even if it is arguably brought out of time, where that claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings, simply does not apply. As a result, the party seeking to amend must be able to show that his amendments are, to use the words of Peter Gibson LJ, simply a mere further instance or particular of the case as already pleaded. 19 If he cannot, as Tatneft found to its detriment, then there is no scope (and indeed no power in the Court) for the amendment or amendments to take place. There is no doubt that the conclusion reached by Picken J on the applicability or otherwise of CPR r is correct. However, as the route to reaching this conclusion is not necessarily straightforward (and is not detailed to any significant extent in the judgment), it is worth considering the issue in a little more detail. The first point to note is that CPR r provides that it applies where a period of limitation has expired under, either (i) the Limitation Act 1980 (the 1980 Act ); (ii) the Foreign Limitation Periods Act 1984 (the 1984 Act ); or (iii) any other enactment which allows such an amendment, or under which such an amendment is allowed. The effect of s.1 of the 1984 Act is to extend the applicability of a foreign choice of law to the issue of limitation. 20 However, s.1 also provides that 13 See above at [86]. 14 See above at [88]. 15 See above at [87] to [88]. 16 Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II). 17 Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I). 18 [2016] EWHC 2816 (Comm) at [88] to [89]. 19 Savings Investment Bank Ltd (in Liquidation) v Fincken (Statement of Claim) [2001] EWCA 1639 at [32] 20 Traditionally, the English courts treated the issue of limitation as procedural and would, therefore, apply English limitation periods to foreign law actions, irrespective of what was said by the lex causae: see Iraqi Civilians v Ministry of Defence (No 2) [2016] UKSC 25; [2016] 1 W.L.R. 2001, per Lord Sumption at [1].

4 300 Civil Justice Quarterly s.35 of the 1980 Act, which bundles up several issues to do with limitation, applies to issues of foreign limitation. By incorporating s.35 of the 1980 Act into the 1984 Act, the limitations on when a claim can be amended to apply to an arguably time barred claim found in s.35(3) (5) of the 1980 Act also apply to foreign limitation periods. Section 35(4) makes clear that the English Court can only allow an arguable time-barred claim if the conditions set out in s.35(5) are satisfied. These conditions, in effect, form the basis of CPR r Section 8 of the 1984 Act, however, provides that where a foreign choice of law is determined by either of the Rome I or Rome II Regulations, section 1, among others, does not apply. Section 8 also provides that the English Court s power to disregard a foreign limitation period does not apply. 22 The effect is that s.35 of the 1980 Act does not apply and, in essence, neither does CPR r The combined effect of s.35 of the 1980 Act and ss.1 and 8 of the 1984 Act is slightly confusing, as it elides two distinct issues. The first issue is the scope of application of a foreign law where it applies in English proceedings. The second issue is that of the amendment of pleadings, out of time. The simple fact that a foreign law is determined by reference to the Rome II (or, indeed, Rome I) Regulation, with that foreign law being said to include any applicable law on limitation, 23 should have no effect on the distinctly procedural question of whether a statement of case can be amended. 24 But that is the combined effect of those sections, with the result that an amendment made out of time which seeks to introduce a new foreign law claim, simply cannot be permitted by the Court if the issue of choice of law has been determined by reference to either Rome I or Rome II. This does not mean that the effect of the amendment cannot be felt in the proceedings: the claimant still has the opportunity to commence fresh proceedings, on the basis of the new foreign claim. 25 But he will not be able to rely on the earlier point in time of the original proceedings for the purposes of avoiding any applicable time bar. Rather, such a claimant will have to pin his hopes either on establishing that the limitation period has not expired as a matter of the relevant foreign law or on showing that the foreign law concerned contains a rule whereby the limitation period can be extended or suspended and that that rule applies. 26 But this is a much more significant struggle than simply relating back the new claim to the earlier point in time. The decision in Tatneft is a lesson in pleading, as well as a lesson in procedure. It shows that one must think carefully, when bringing a claim, about how and when to supplement or otherwise change one s pleaded case. It shows that limitation is an issue which must be taken seriously and, where the Rome I or Rome II 21 Although it has been said that the rules in CPR r.17.4 are, in fact, more restrictive than those found in section 35: Lord Justice Jackson et al (eds) The White Book Service (London: Sweet & Maxwell, 2016), Vol 2 paras However, both the Rome I (art.21) and Rome II (art.26) Regulations contain a similar, albeit more stringent, power to disregard a foreign law where its application would be manifestly incompatible with the public policy (ordre public) of the forum. 23 Rome I, Article 12(d) and Rome II, Article 15(b). 24 This is particularly so, given that both Rome I and Rome II exclude from their scope issues of procedure: see Article 1(3) in each Regulation. 25 Ballinger v Mercer Ltd [2014] EWCA Civ 996; [2014] 1 W.L.R. 3597, per Tomlinson LJ at [32]. 26 As a matter of Russian law, for example, the limitation periods contained in the Civil Code can either be suspended or restored if the conditions in arts 202 or 205 are satisfied.

5 Notes 301 Regulations are concerned, which has the potential to quite dramatically shift the dynamic of a case.