Tugushev v Orlov & Ors (No. 2)

An applicant for without notice relief must make reasonable enquiries into known potential defences and present material facts fairly. Claimed forgetfulness does not excuse a failure to investigate matters directly relevant to such a defence. Serious non-disclosure may justify discharging a freezing order. Permission to serve out may warrant a different, proportionate response.

A freezing order requires solid evidence of a real risk of unjustified asset dissipation. Dishonesty, offshore structures and an ability to borrow against assets do not themselves establish that risk. The nature of the assets and the defendant’s conduct after learning of threatened litigation require cumulative assessment. Asset stability may inform whether risk exists; delay does not neutralise an independently established risk.

Alexander Tugushev alleged conspiracies to deprive him of his shareholding in AA and his claimed interest in the Norebo Group, a fishing business built up by Vitaly Orlov. Bryan J had granted Tugushev a worldwide freezing order against Orlov and permission to serve out of the jurisdiction without notice. In the earlier jurisdiction judgment, Tugushev v Orlov and others [2019] EWHC 645 (Comm), Carr J held that jurisdiction existed through Orlov’s English domicile and, alternatively, that permission to serve out should be granted. Orlov’s renewed application for permission to appeal that judgment was pending.

At the resumed hearing, Orlov sought discharge of the orders for alleged breaches of full and frank disclosure. His complaints included the presentation of Tugushev’s fraud conviction, statements concerning share ownership upon entering Russian public office, and parallel Russian criminal proceedings. Recently discovered documents showed declarations and correspondence signed by Tugushev concerning his corporate interests. The court also considered whether a real risk of dissipation justified continuing or re-granting the freezing order, whether its operation was oppressive or excessive, and whether Tugushev should be permitted to seek asset-freezing relief in Russia.

Held, the worldwide freezing order would be set aside and discharged, without re-grant. The service out order concerning the AA conspiracy claim would be set aside and re-granted on terms as to costs.

1. The duty of full and frank disclosure required fair presentation and reasonable enquiries into anticipated defences. It applied equally to freezing orders and permission to serve out. The existence and authorship of the newly discovered declarations and letters were undisputed, although their ultimate significance remained for trial. They were plainly material to Orlov’s defence. Tugushev’s asserted lack of recollection did not excuse his failure to investigate that known defence before categorically denying it. His failure constituted reckless disregard of the duty, although intentional concealment could not properly be found on an interlocutory basis.

2. That serious breach justified discharge of the freezing order. Its monetary limit being based on the Norebo conspiracy claim did not isolate it from non-disclosure concerning the AA conspiracy. The claims informed the overall merits assessment, and the alleged AA misappropriation had also supported the asserted dissipation risk. Subsequent dismissive denials aggravated the position. The remaining complaints, including the presentation of the conviction and alleged knowledge of fresh Russian criminal proceedings, established no further material breach.

3. Freezing relief required solid evidence of an objectively assessed real risk of unjustified dissipation. Such a risk was absent on the fuller inter partes evidence. Most of Orlov’s wealth comprised shares in a substantial operating business, worth considerably more than the claim. Regulatory restrictions, lender protections, practical obstacles and his attachment to the business materially constrained disposal or devaluation. Borrowing capacity established a possibility rather than a real risk. The accepted good arguable merits case, alleged manipulation of court proceedings and historical offshore arrangements did not overcome that assessment.

4. Orlov’s failure to dissipate assets despite years of threatened litigation was relevant to identifying whether risk existed. It was not being used to neutralise an established risk. Ras Al Khaimah Investment Authority v Bestfort Development [2017] EWCA Civ 1014, which concerned delay after risk had been established, was therefore distinguishable.

5. The service out order required a proportionate response specific to the affected AA claim. Refusing re-grant could prevent that claim proceeding in an otherwise appropriate jurisdiction and separate it from the Norebo claim. The interests of justice favoured re-grant, with Tugushev paying the costs of the service out application relating to the AA claim. It was also accepted that permission to serve out concerning the contractual claim fell to be set aside.

6. The court added that, even on the hypothetical basis of a borderline dissipation risk, this non-disclosure background would require a clear and compelling case for reimposition. Material new developments or fresh evidence could support a later freezing application. The oppression submissions required no determination and had not persuaded the court. The application concerning freezing relief in Russia did not arise.

• Court of Appeal: Orlov’s renewed application for permission to appeal the earlier jurisdiction judgment was pending. No appellate determination was recorded.
• High Court (Commercial Court): In Tugushev v Orlov and others [2019] EWHC 645 (Comm) , Carr J upheld jurisdiction on the basis of Orlov’s English domicile and alternatively granted permission to serve out. She refused permission to appeal.
• High Court (Commercial Court): Bryan J had previously granted the worldwide freezing order and permission to serve out without notice. The return hearing took place on 30 July 2018. The present judgment determined the subsequent non-disclosure and continuation applications.