12 December 2016

Expiry of BVI Claim Form defeats US$ 30 million claim and Worldwide Freezing Order

Two and a half years after VTB Bank filed a US$ 30 million claim in the BVI Commercial Court against Withers BVI client Alexander Katunin for enforcement of a Russian default judgment, the claim has been dismissed and the worldwide freezing order based upon it discharged, on the grounds that the validity of the Claim Form expired without it having been served.

The claim was filed and a freezing order and order permitting service in Russia was granted in May 2014. Under Eastern Caribbean Supreme Court Civil Procedure Rules (EC CPR) a Claim Form for service out of the jurisdiction must be served within 12 months, unless an extension is applied for during the period of its validity.

VTB Bank did not, however, attempt service in Russia. Instead, in July 2014, VTB Bank obtained an order for alternative service upon BVI companies that were thought to be beneficially owned by Mr. Katunin.

However, in June 2016, the alternative service order was set aside by the Court of Appeal (together with a determination of Commercial Court Judge Bannister that Mr. Katunin had submitted to the jurisdiction), by which time the validity of the Claim Form had expired, no extension of time for service having been applied for.

VTB Bank sought to further appeal to the Privy Council but failed to obtain the Court of Appeal’s permission on the grounds that its Motion for Leave was filed late and in October 2016 VTB Bank was refused Special Permission by the Privy Council on the grounds that its further appeal did not raise an arguable point of law of general public importance.

The case therefore came back to the Commercial Court in December 2016 on Mr. Katunin’s application to dismiss the claim and to discharge the freezing order. Mr. Katunin contended that VTB Bank could have sought a protective extension of time to serve the Claim Form whilst he was appealing the alternative service order, but had not done so. Once time to serve the Claim Form had expired, he submitted, it could not be extended retrospectively and accordingly the claim failed and the freezing order had to be discharged.

VTB Bank argued that, although EC CPR did not seemingly allow for an extension of time to serve a Claim Form once expired – unlike the position under the English CPR – the Court should be able to extend such time by virtue of its case management powers or exercise its discretion as an exceptional case to dispense with service altogether and to save its claim.

His Honour Mr. Justice Gerhard Wallbank decided otherwise. In delivering the coup de grace to the claim, the Judge held that EC CPR provided a strict regime as to the time for service of a Claim Form, did not permit an extension once expired, the Court’s case management powers should not be deployed to override those rules and, in the circumstances of the case, the Court should not exercise its discretion to dispense with service.

As a result, the Judge ordered the Claim Form to be set aside, the claim dismissed, the freezing order discharged and the question of damages and costs to be adjourned to a further hearing.

Alexander Katunin was represented by Niki Olympitis and Sara-Jane Knock of Withers BVI, acting with Justin Michaelson and Duncan Saunders of Fried, Frank, Harris, Shriver & Jacobson (London) LLP and instructing Stephen Rubin QC of Fountain Court Chambers.


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