VTB Bank PJSC v Firtash

On an application concerning continuation of a freezing order, the court determines the relief actually sought and does not decide an unpleaded challenge to the underlying claim. A proposed Land Registry restriction is unsuitable where its operation would be uncertain or impose an unreasonable burden on the Land Registry. An applicant seeking fortification must show a good arguable case that the order will cause loss, an adequate causal link, and an intelligent estimate of the likely loss. Proof on the balance of probabilities is unnecessary at this interlocutory stage. The court may order substantial fortification where those requirements are met.

VTB Bank obtained a freezing order in support of proceedings brought in Cyprus against Mr Firtash. The order was continued and amended, and included a restriction affecting the title to 8 Cottage Place. Mr Firtash applied for the freezing order to be discharged and replaced by a bespoke Land Registry restriction, for steps to procure release of a French mortgage, and for fortification of VTB’s undertaking to be increased from £100,000 to £10 million.

The court first determined the scope of the application. It treated the application as seeking replacement of the freezing order by a restriction, rather than discharge on the basis that VTB lacked a good arguable case or that there was no real risk of dissipation. The central issues were whether the proposed restriction was viable, whether the French mortgage should be released, and whether additional fortification was justified.

1. Scope of the application. The application was confined to replacing the freezing order with a restriction over 8 Cottage Place. The court would not determine whether VTB had a good arguable case for the Cyprus claim. That issue had not been properly advanced, prepared or supported by tailored submissions.
2. Proposed restriction. The proposed bespoke restriction required VTB’s consent, not to be unreasonably withheld or delayed. The evidence indicated that the Land Registry might find its operation insufficiently straightforward and an unreasonable burden. The Defendant provided no evidence to contradict that assessment. The restriction was therefore not a viable alternative, and the freezing order remained in place.
3. Delay and security. Although the absence of a detailed Cyprus statement of claim after a substantial period was remarkable and unsatisfactorily explained, the evidence did not establish that VTB had failed to progress the proceedings promptly and without unnecessary delay. The freezing order required VTB to seek directions if the frozen assets exceeded the value of the Cyprus claim; it did not require immediate release of property. The evidence did not show that Cottage Place alone would provide sufficient protection, having regard to possible other creditors. Release of the French mortgage was therefore refused.
4. Fortification. Applying the principles stated in Energy Venture Partners v Malabu Oil & Gas Ltd [2014] EWCA Civ 1295, the Defendant had to show a good arguable case of loss caused by the freezing order and provide an intelligent estimate of that loss. The court was not required to decide the loss on the balance of probabilities. The Defendant established a good arguable case that the order caused increased financing costs and threatened a reduced or lost sale of Cottage Place. The claimed loss was conservatively estimated and exceeded £10 million. Additional fortification of £10 million was ordered.