Ingrid Burke, RAPSI
Boris Berezovsky, a storied tycoon who fled from Russia at the turn of the millennium after a rapid fall from grace, has found himself in the High Court of Justice once again, this time at the receiving end of a massive freeze order sought by long-time ex-girlfriend Yelena Gorbunova.
Since winning a grant of asylum in the UK in 2003, Berezovsky has become a fixture in the High Court, having been on both ends of a series of high-profile legal disputes. In one such instance, he lost a $5 billion claim against fellow oligarch Roman Abramovich last August.
On December 20, 2012, a freeze order was issued against Berezovsky without notice. The order had been sought two days prior by Gorbunova, who is the mother of two of Berezovsky’s children. The order extended to Berezovsky and seven other defendants with interests in or control over two of the properties at issue in this case.
Berezovsky objected to the order, alleging that the evidence which had served as its basis had failed to comply with the protocol for formulating a without-notice freeze order.
Gorbunova asserts various claims, including interests in three properties, and contractual claims pending the unavailability of one such property. Notably, Friday’s judgment doesn’t go to the merits of these claims, which will be dealt with at a later date.
According to Gorbunova, Berezovsky had promised her £5 million from the sale of their shared home in Wentworth Park. He had further promised to buy a new home for Gorbunova within two years of its sale. According to the judgment, the home was sold last year. Gorbunova claims that Berezovsky used the proceeds to pay off various debts, and thus failed to uphold his promises to her.
Albeit through a web of companies and trusts, Berezovsky also owns two properties in southern France. Gorbunova claims that Berezovsky has told her in the past that the properties belonged to her, and that she has thus viewed them as “an important part of her financial security.”
A sale of these French properties is currently in the works, but Gorbunova fears – based on Berezovsky’s “unreliability” – that she won’t see any of the proceeds from the sale.
Notably, Gorbunova wouldn’t be the first person to attest to her ex-lover’s poor reliability record in the High Court. In delivering the judgment in the Berezovsky v. Abramovich case last summer, the presiding judge described Berezovsky in the following terms: “On my analysis of the entirety of the evidence, I found Mr. Berezovsky an unimpressive, and inherently unreliable, witness, who regarded truth as a transitory, flexible concept, which could be moulded to suit his current purposes.”
Beyond these property claims, Gorbunova alleges that she is owed part of a confidential settlement reached in September between Berezovsky and the estate of his deceased business partner Badri Patarkatsishvili.
Finally, she claims that their children have various claims against Berezovsky arising under the Children Act of 1989. The presiding judge refused to consider these claims “[i]n the interests of the children,” citing a lack of supporting evidence.
Freeze order: the relevant terms
The freeze order issued against Berezovsky on December 20th included the following among its terms: a freeze on up to £200 million worth of his assets; a restraint on further dealings by Berezovsky and the other defendants with the French properties; a restraint on further dealings with the proceeds of the Wentworth Park property by Berezovsky; and a restraint on further dealings with the proceeds of the Patarkatsishvili settlement by Berezovsky.
Berezovsky objected to the freeze order on limited terms without prejudice to a more complex range of objections that he is currently preparing. Thus while he claims to have “very substantial grounds for challenging the order because of a breach of duty of full and frank disclosure and on the merits and on other grounds,” the present judgment was limited to issues of whether the evidence in initially presented by Gorbunova was sufficient to warrant a without-notice freeze order application.
His challenge rests mainly on four points: 1) the material presented by Gorbunova was insufficient – in both technical and quality terms – to justify a without notice application; 2) even taking Gorbunova’s word for the claims asserted, there was “insufficient evidence of a risk of dissipation;” 3) the order covered the same claims twice by applying to an aggregate sum of £200 million as well as various restraints on the properties at issue; and 4) Gorbunova failed to serve Berezovsky with the relevant documents in a timely manner.
On the basis of these claims, Berezovsky sought to have the order discharged or modified.
Berezovsky’s attorney had argued that insufficient proof of urgency had been presented so as to justify the without-notice order, but Judge Mann held that this was beside the point. According to the judgment, “[u]rgency… in the sense of there being no time to give notice, cannot be said to be a basis for going without notice in this case.” He added, however, that “urgency was not actually being urged on the judge as the basis on which a without notice application was being made.”
Judge Mann thus focused on two key issues: the existence of sufficient evidence of a relevant risk of dissipation to justify an application for a freeze order, and a determination of its quality so as to justify a without-notice freeze order.
Discussing the existence of such evidence, Judge Mann holds that Gorbunova’s evidence is partly satisfactory to justify a freeze order: “The evidence thus far demonstrates a tendency of Mr. Berezovsky, when under financial pressure, to promise one thing in relation to particular assets… and then to do another. He promises money and then either spends it all, or does so having promised it, or part of it, to someone else.” However, the judge was not satisfied that Gorbunova had adequately conveyed the likelihood that Berezovsky’s general tendencies would be applied to her specific situation.
As to the quality of the evidence in connection with justifying a without-notice freeze order, Judge Mann was satisfied with the evidence that given notice, there would have been significant risk of dissipation.
Formulating this conclusion, Judge Mann let it be known that his lack of credibility during the Abramovich trial was coming back to bite him: “The scope of [the risk to Gorbunova’s promised property] and his propensity to go so far as giving dishonest evidence in pursuit of a claim against another in the Abramovich proceedings, coupled with his use of obscure offshore structures to hold the French Properties, which can be easily manipulated by him for his own purposes, means that there is a risk that he would week to manipulate matters in a manner so as to deprive Ms. Gorbunova of her putative entitlements were he given the opportunity to do so. One does not set up trust structures such as those affecting the French Properties in the interests of transparency.”
Judge Mann further held that any breach that may have been present in the time taken by Gorbunova in delivering notice of the order to Brezovsky was undeserving of sanctions in the form of a discharge of the freeze order.
Judge Mann found the £200 million sum stipulated in the original freeze order to be flawed due to its inclusion of Gorbunova’s claim under the Children’s Act 1989.
Furthermore, the evidence provided by Gorbunova was insufficient to justify relief in the amount of the cost of a new house. He added: “Ms. Gorbunova’s evidence is that the £5m bird has already flown, and if that is right then there will be no funds on which any injunction can bite, though there should be some disclosure about this. So far as the other assets are concerned, there are, ostensibly at least, assets. There should be a restraint on dealing with the two extant assets and appropriate disclosure in relation to them.”