Berezovsky and another v Edmiston & Company Ltd and another
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE FIELD,Mr Justice Field |
| Judgment Date | 26 July 2010 |
| Neutral Citation | [2010] EWHC 1883 (Comm) |
| Docket Number | Claim No. 2009 Folio 298 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 26 July 2010 |
[2010] EWHC 1883 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Portsmouth Combined Court Centre
Before: Mr Justice Field
Claim No. 2009 Folio 298
Timothy Howe QC, Tamara Oppenheimer and Craig Ulyatt (instructed by Addleshaw Goddard LLP) for the Claimants
Stephen Hofmeyr QC and N.G. Casey (instructed by Hill Dickinson LLP) for the First Defendant
David Allen QC and Michael Collett (instructed by Clyde & Co LLP) for the Second Defendant
Hearing dates: 21, 22, 23, 24, 25 & 28 June 2010
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Field:
Introduction
There are two principal issues to be decided in this trial. First, were the defendant yacht brokers the “effective cause” of the sale of the super yacht Darius by Petersham Holdings Limited (“Petersham”) to Paragon International Limited, the corporate vehicle of the Al Futtaim family of the UAE. Second, if the answer to the first question is “yes”, what sum is the first defendant (“Edmiston & Co”) entitled to be paid by way of commission.
The first claimant (“Mr Berezovsky”) is an extremely wealthy Russian businessman who was granted asylum by the UK Government on 10 September 2003. In the late 1990s, Mr Berezovsky began to use the services of the founder of Edmiston & Co, Mr Nicholas Edmiston, in connection with the purchase and/or sale of a number of motor yachts, including Streamsea (jointly with Mr Roman Abramovich), U.B.F., Thunder B, The Kiring, Tugatsu and EOL B.
Mr Edmiston founded Edmiston & Co in 1996. Before that, he had been with another firm of yacht brokers, Camper & Nicholsons International (“CNI”). Edmiston & Co is one of the leading super yacht brokers in Europe.
In early 2004, Mr Berezovsky entered into discussions with Fr. Luerssen Werft Gmbh & Co (“FLW”), a shipyard in Bremen, Germany, in respect of a proposed new build given the name Darius, a 110 metre (360 feet) super yacht. In these discussions, FLW was represented by its Managing Director, Mr Peter Luerssen (“Mr Luerssen”). Mr Berezovsky sought from and was given advice by Mr Edmiston on the Darius project. It is not clear what role, if any, Edmiston & Co played in introducing the project to FLW. Whatever be the true position, Edmiston & Co was paid a commission by FLW upon payment of the contract price. This arrangement was not disclosed by Edmiston & Co to Mr Berezovsky. It is the subject of separate proceedings intending to be brought by Mr Berezovsky which form no part of this trial.
On 7 October 2004, a contract for the construction of Darius was concluded (the “shipbuilding contract”) between FLW and Petersham, a Cayman Islands special purpose vehicle, ultimately owned by Mr Berezovsky. The contract price for the construction of the Yacht was €148,540,000, payable in instalments. Under clause 9 of the shipbuilding contract, FLW was entitled to terminate the contract if an instalment remained unpaid for 90 days and it had the right to elect whether or not to complete the Yacht. If FLW were to terminate the contract, it would come under an obligation to use its best endeavours to sell the Yacht (complete or incomplete as the case might be) on such terms as it considered appropriate.
Petersham failed to pay the fifth instalment, an event that led to amendments to the shipbuilding contract contained in a document entitled “Master Addendum”, dated 6 November 2007. Pursuant to the Master Addendum, FLW became entitled to terminate the shipbuilding contract if an instalment was outstanding for 45 days and Petersham was afforded the right to postpone the delivery date by up to six months, in which event FLW could claim for all consequential additional cost and expense; and if an instalment was outstanding, the right to terminate the contract was postponed for the same period by which the delivery date was postponed.
Shortly after the execution of the Master Addendum, the Darius suffered a flood. Water got in through the joints of a window set below the water line and caused extensive damage. Thereafter, Petersham refused to pay the sixth instalment arguing that it was not due by reason of the flood. FLW insisted, however, that if the sixth instalment were not paid by 11 January 2008, it would be entitled to terminate the shipbuilding contract under the Master Addendum. On 10 January 2008, Petersham extended the delivery date by six months, thereby extending the date by which the sixth instalment had to be paid to 28 May 2008.
On 14 May 2008, FLW sent an invoice for €23,890,421.93, representing the seventh instalment. If this sum were to remain unpaid for 45 days, i.e. by mid-July 2008, FLW would have the right to terminate the contract. Petersham also had to pay the sixth instalment by 28 May 2008. Mr Berezovsky was in a difficult situation. He did not have the ready means to pay the shipbuilding contract instalments as they fell due, and if he failed to pay any of them by the due date, he stood to lose at least a substantial part of his investment in the Yacht, namely the instalments totalling €118,000,000 he had paid towards the contract price. Mr Berezovsky therefore decided to try to sell the Yacht as a vessel in the course of construction, whilst at the same time trying to find financing for the balance of the contract price. On 14 May 2008, he had a meeting with Mr Edmiston, attended by his (Mr Berezovsky's) personal assistant, Mr Michael Cotlick. Mr Berezovsky's difficulties over the sixth and seventh instalments were discussed and Mr Edmiston was made aware that if the dispute with FLW were not resolved by mid July 2008, Mr Berezovsky could lose control of the Yacht to FLW. Mr Edmiston told Mr Berezovsky that he thought that a net price of €300,000,000 (i.e. net of commission and other expenses) could be achieved and Mr Berezovsky asked him to begin marketing the Darius on a discreet basis with a view to realising a net price of €300,000,000, but with no approaches to be made to Russian nationals. Mr Edmiston understood that Edmiston & Co were being appointed as a selling broker on a non-exclusive basis. Nothing was said about the applicable rate of commission, but it is common ground that an oral brokerage contract was concluded between Edmiston & Co and Mr Berezovsky and Petersham, if not at this meeting, then in the course of the following days, so that if Edmiston & Co can establish that they were the effective cause of the sale of the Darius, they are entitled to a reasonable commission.
Mr Edmiston reported what happened at the meeting on 14 May 2008 to his son Jamie (who managed Edmiston & Co.'s London office), and to another of his senior brokers, Chris Cecil-Wright. The search was on for a buyer and given Mr Berezovsky's difficulties with FLW, Edmiston & Co had to be ready to move quickly. To this end, they began to assemble details of the Darius, including particulars of the specification, drawings, renderings (artists’ impressions), photographs and a model, to assist in marketing the yacht. It is common practice for a broker to “badge” this sort of material with its own name and logo to assist in establishing that it was the particular broker who brought about the introduction that led to the sale. And this is what Edmiston & Co did. It “edmistonised” all of the promotional material it intended to use in the marketing of the Darius.
In early June 2008, Mr Edmiston received a telephone call from Mr Merle Wood, a yacht broker based in Florida, USA. Mr Wood had learned from a wealthy client, Mr David Geffen, that a friend of his was interested in buying a luxury super yacht and Mr Wood was calling to ask Mr Edmiston whether the Darius' 377 ft sister ship, the Pelorus, was for sale. Mr Edmiston told him that it was not but went on to ask him to assist in finding a buyer for Darius.
Mr Wood has worked as a yacht broker for almost 30 years. He set up the second defendant (“MWA”) in 1988 and has grown its business to the point that it is now one of the leading international super yacht brokers in the US. Mr Wood and Mr Edmiston have worked together many times over the years. In some instances, Mr Edmiston's firm was primary broker and MWA a sub-broker and in others the roles have been the other way round. When the two firms act jointly, there is rarely if ever a written contract. Instead, Mr Edmiston and Mr Wood rely on their mutual trust and respect. Such is the closeness of their relationship, they speak to each on the telephone almost every day, sometimes more than once. They also frequently correspond by email.
The appointment of sub-brokers at the super yacht end of ship broking is common, especially where a principal broker is exclusively appointed under a Central Agency Agreement (a “CAA”), the expectation here being that the central broker will market the listing through a network of sub-brokers. Edmiston & Co were not engaged to sell Darius under a CAA; their appointment, as I have said, was on a non-exclusive basis. However, there was no prohibition imposed on them against using sub-brokers and it has not been argued that their appointment of MWA as a sub-broker in the sale of the Darius disentitles them from a commission, or that steps taken by MWA to procure a sale of the Darius cannot be relied upon by Edmiston & Co in support of their claim that they were the effective cause of the sale of the Yacht.
Mr Wood passed on details of the Darius to Mr Geffen for onward transmission to his friend who was looking for a large yacht. In the meantime,...
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