NRC Holding Ltd v Danilitskiy & Anor, Court of Appeal - Chancery Division, June 20, 2017, [2017] EWHC 1431 (Ch)

Resolution Date:June 20, 2017
Issuing Organization:Chancery Division
Actores:NRC Holding Ltd v Danilitskiy & Anor
 
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Case No: HC-2014-001987

Neutral Citation Number: [2017] EWHC 1431 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Date: 20 June 2017

Before :

Robin Dicker QC

(sitting as a Deputy High Court Judge)

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Between :

Defendants/Respondents

(4) OPAL STEM LIMITED

Respondent

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Alexander Milner (instructed by Withers LLP) for the Claimant

David Lord QC and Richard Bowles (instructed by Setfords Solicitors) for the Fourth Respondent

Hearing dates: 26th and 27th April 2017

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JudgmentRobin Dicker QC (sitting as a Deputy High Court Judge):

  1. On 4 January 2016, the Applicant (``NRC'') obtained judgment in default against the First Defendant (``Mr Danilitskiy'') in the sum of US$5,000,000 plus interest and costs. Mr Danilitskiy did not defend the claim and has not taken any steps to set aside the judgment, although it appears that he is aware of it.

  2. NRC seeks to enforce the judgment by way of a charging order over a property at 3 Holly Lodge, London W8 (the ``Property'') which it contends is beneficially owned by Mr Danilitskiy. On 3 June 2016 an interim charging order was made by Master Teverson. NRC now seeks to have that interim order made final.

  3. The application is opposed by the Fourth Respondent (``Opal Stem''), a BVI company which is the legal owner of the Property. Opal Stem contends that the Property is beneficially owned not by Mr Danilitskiy but by Opal Stem itself, and that it is, in turn, beneficially owned and controlled by Ms Polina Maltseva (``Ms Maltseva''). Ms Maltseva is Mr Danilitskiy's elder daughter.

  4. The issue for the Court is whether the Property is beneficially owned by Mr Danilitskiy, as NRC contends, or by Opal Stem. Both NRC and Opal Stem submit that the answer to that issue depends on the facts. However, they disagree how that issue should be answered.

    Procedural background

  5. NRC is incorporated in Cyprus and is the holding company for a number of business interests ultimately owned by Mr Alexander Lebedev.

  6. On 29 May 2014, NRC issued proceedings against Mr Danilitskiy in respect of a series of frauds which NRC claimed had been committed by Mr Danilitskiy in 2008 whilst he was a shareholder and manager of NRC. NRC alleged, in short, that Mr Danilitskiy had procured payments totalling some US$ 5 million to be made by NRC to companies which he controlled, including the Second and Third Defendants. NRC alleged that the payments were made without any commercial justification, in breach of Mr Danilitskiy's duties to NRC and dishonestly.

  7. The claim form was issued on 29 May 2014 and served on Mr Danilitskiy on about 30 June 2015. Mr Danilitskiy having failed to acknowledge service, judgment in default was entered by Master Bowles on 4 January 2016.

  8. On 23 December 2015, shortly before judgment in default was entered, NRC brought separate proceedings in Cyprus against Mr Danilitskiy and various companies in relation to a number of further payments, totalling around US$ 120 million, which it alleged had been made on the instructions of Mr Danilitskiy between 2004 and 2009 and which NRC contended were also made in breach of duty and dishonestly.

  9. NRC applied for a worldwide freezing order against Mr Danilitskiy which was granted by the Cyprus court on 29 December 2015.

  10. On 26 January 2016, Henderson J granted an injunction on an application by NRC in support of the proceedings in Cyprus, restraining Mr Danilitskiy and Opal Stem from disposing of or dealing with the Property, the existence of which had come to NRC's knowledge. The injunction was continued by Henry Carr J on 10 February 2016.

  11. On 26 April 2016 Opal Stem wrote to NRC's solicitors, Withers, asserting that Mr Danilitskiy did not own and, to the best of its knowledge, had never owned the Property legally or beneficially. On 29 April 2016, Withers replied noting the assertion but saying that Opal Stem had not provided any evidence to support its contention and commenting that the Court had previously accepted that NRC had a good arguable case that Mr Danilitskiy had a beneficial interest. On 23 May 2016 Opal Stem replied enclosing a copy of its share register, which indicated that Mr Danilitskiy had never owned shares in it, and an affidavit by Ms Maltseva which stated that she was and is the full legal and beneficial owner of the shares in Opal Stem, having acquired such shares in late 2015 and early 2016. The letter omitted to mention, amongst other things, either that Mr Danilitskiy was originally the ultimate beneficial owner of Opal Stem or that Ms Maltseva was Mr Danilitskiy's elder daughter.

  12. On 3 May 2016, NRC applied for a charging order over Mr Danilitskiy's beneficial interest in the Property.

  13. An interim charging order was granted by Master Teverson on 3 June 2016. The hearing to determine whether that order should be made final was due to take place on 13 July 2016. However, shortly before, Opal Stem instructed solicitors and served evidence in opposition to the application. On 12 July 2016, Master Bowles directed a hearing to determine whether NRC had a realistic prospect of establishing that Mr Danilitskiy had a beneficial interest in the Property.

  14. That hearing took place on 17 August 2016 before Deputy Master Lloyd. Opal Stem relied on a witness statement from Ms Maltseva and two witness statements from Victoria Usacheva (``Ms Usacheva''), who had been appointed a director of Opal Stem on 18 January 2016. In response, NRC relied on, amongst other things, a witness statement of Simon Chadwick (``Mr Chadwick''), a solicitor employed by Withers. Having set out the evidence, on the basis of which NRC contended that the Property was beneficially owned by Mr Danilitskiy, Mr Chadwick drew attention to the fact that Opal Stem had not adduced any evidence from Mr Danilitskiy, commenting that, in circumstances where, on Opal Stem's case, his daughter faced the prospect of possible loss of a property which she claimed belonged to her, one might reasonably have expected Mr Danilitskiy to give evidence.

  15. Deputy Master Lloyd held that NRC had a realistic prospect of establishing that it was entitled to a final charging order, and referred in his judgment, amongst other things, to the fact that Mr Danilitskiy had not provided any evidence. He gave directions for the trial of the application, including directions for disclosure and for service of further witness statements.

    The law

  16. Mr Milner for NRC referred to Prest v Petrodel Resources Limited [2013] UKSC 34 where Lord Sumption said at [52]:

    ``Whether assets legally vested in a company are beneficially owned by its controller is a highly fact-specific issue. It is not possible to give general guidance going beyond the ordinary principles and presumptions of equity, especially those relating to gifts and resulting trusts. But I venture to suggest, however tentatively, that in the case of the matrimonial home, the facts are quite likely to justify the inference that the property was held on trust for a spouse who owned and controlled the company. In many, perhaps most cases, the occupation of the company's property as the matrimonial home of its controller will not be easily justified in the company's interest, especially if it is gratuitous. The intention will normally be that the spouse in control of the company intends to retain a degree of control over the matrimonial home which is not consistent with the company's beneficial ownership. Of course, structures can be devised which give a different impression, and some of them will be entirely genuine. But where, say, the terms of acquisition and occupation of the matrimonial home are arranged between the husband in his personal capacity and the husband in his capacity as the sole effective agent of the company (or someone else acting at his direction), judges exercising family jurisdiction are entitled to be sceptical about whether the terms of occupation are really what they are said to be, or are simply a sham to conceal the reality of the husband's beneficial ownership.''

  17. The parties also referred to a number of other authorities, including the judgment of Hoffmann LJ in Arab Investment Syndicate v Hiseman (unreported, 15 February 1994) and, more recently, the decision of Phillips J in JSC BTA Bank v Solodchenko [2015] EWHC 3680 (Comm), in which the decision in Prest v Petrodel Resources Ltd was considered and applied. I will return to consider the law to the extent necessary when dealing with the facts.

    The parties' cases

  18. NRC contends that Mr Danilitskiy is the beneficial owner of the Property. Its principal case is that the circumstances in which the Property was initially acquired were such as to have given rise to a resulting trust in favour of Mr Danilitskiy and that at no stage did he divest himself of that beneficial interest.

  19. Opal Stem denies that Mr Danilitskiy acquired a beneficial interest when the Property was initially acquired and contends that, even if he had done so, he no longer has such an interest, any such interest having ceased following the acquisition of the share in Opal Stem by Ms Maltseva in late 2015 and early 2016.

    The evidence

  20. NRC relied on witness statements from Ashley Messick (``Ms Messick''), a corporate investigator, and Eleni Polycarpou (``Ms Polycarpou''), a Special Counsel employed by Withers, together with the witness statement of Mr Chadwick, to which I have already referred. Ms Messick was cross-examined on her statement by Mr Lord QC for Opal Stem.

  21. Opal Stem relied on the witness statements by Ms Maltseva and Ms Usacheva, to which I have already referred, together with further witness statements from each of them dated 10 February 2017, along with a witness statement by Simon Conroy (``Mr Conroy''), a solicitor...

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