Berezovsky v Abramovich
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Stanley Burnton,Lord Justice Laws |
| Judgment Date | 23 February 2011 |
| Neutral Citation | [2011] EWCA Civ 153 |
| Docket Number | Case No: A3/2010/0944 & A3/2010/1744 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 February 2011 |
[2011] EWCA Civ 153
The Honourable Sir Anthony Colman
(Sitting as a Deputy High Court Judge)
Before: the Right Honourable Lord Justice Laws
The Right Honourable Lord Justice Longmore
and
The Right Honourable Lord Justice Stanley Burnton
Case No: A3/2010/0944 & A3/2010/1744
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
Mr Andrew Popplewell QC, Ms Helen Davies QC & Mr Daniel Jowell (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) for the Appellant
Mr Laurence Rabinowitz QC, Mr Richard Gillis QC, Mr Simon Colton & Mr Sebastian Isaac (instructed by Addleshaw Goddard Solicitors LLP)) for the Respondent
Hearing dates: 11 th, 12 th, 13 th, 14 th, 17 th & 19 th & 21 st January 2011
Lord Justice Longmore:
Introduction
In this interlocutory appeal Mr Berezovsky asserts that he once had a disposable interest in a Russian oil and gas company called Sibneft and in a Russian aluminium company called Rusal. He claims that, although Mr Abramovich had the legal title to the shares in Sibneft, he (Mr Berezovsky) was intimidated by threats emanating from Mr Abramovich into disposing of his interest in Sibneft to companies controlled by Mr Abramovich at an undervalue and he now seeks to recover his loss as compensation for the tort of intimidation. He also claims that, although Mr Abramovich had legal title to the shares in Rusal, Mr Abramovich in breach of fiduciary or contract duty disposed of a large number of shares to companies controlled by Mr Oleg Deripaska, thus rendering his remaining shares much less valuable than before. He seeks to recover this loss as compensation for the alleged breaches of duty.
Mr Berezovsky originally asserted that his interest in Sibneft, like his interest in Rusal, was a beneficial interest arising from the terms of the arrangement by which Mr Abramovich came to have legal title to the shares in Sibneft. After receiving Mr Abramovich's defence that the arrangement made was between Russian citizens in Russia, was governed by Russian law and Russian law does not recognise the concepts of a trust or a beneficial interest, he applied for permission to amend his particulars of claim to delete the words "trust" and "beneficial interest" and their equivalents and to assert merely that he had an interest arising from a joint activity or other (sui generis) agreement with Mr Abramovich which still gave him a right to sue for intimidation if such interest was sold at an undervalue by reason of Mr Abramovich's threats.
The arrangements in relation to Rusal were allegedly made at the Dorchester Hotel in London and are said to have included an implicit agreement or understanding that Russian law was not to apply because the shares were to be held off shore. Mr Berezovsky's allegation that the shares were held on trust for him beneficially is therefore still maintained together with an assertion that the arrangement relating to them was impliedly governed by English or British Virgin Islands law. Mr Berezovsky also wishes to assert by a late amendment that there was an express as well as implied agreement that the arrangements were to be governed by English law.
The judge gave permission to make both these amendments and refused to grant summary judgment in favour of Mr Abramovich and to dismiss the claim. There is now an appeal.
Since the tort of intimidation is at the heart of the Sibneft case it is as well, at this stage, to set out the essential ingredients of that tort as stated by Lord Denning in Morgan v Fry [1968] 2 QB 710,724C
"there must be a threat by one person to use unlawful means (such as violence or a tort or a breach of contract) so as to compel another to obey his wishes; and the person so threatened must comply with the demand rather than risk the threat being carried into execution. In such circumstances the person damnified by the compliance can sue for intimidation."
The parties have agreed that it is implicit in this definition that the threatener must intend that his threats be acted on by the person threatened. They have also agreed, for the purpose of these interlocutory proceedings, that it is arguable that the means to be used need not necessarily be unlawful, if they can be categorised as "illegitimate" whatever that may precisely mean. (It is pointed out that, in defining the crime of blackmail, section 21 of the Theft Act requires only that there be an "unwarranted demand with menaces" and it is then said that the law of tort should not be kinder to the defendant than the criminal law). That is a debate into which this court does not need to enter. For the purposes of this case therefore the essential ingredients of the tort of intimidation are:—
1. a threat by the defendant (D) to do something unlawful or "illegitimate";
2. the threat must be intended to coerce the claimant (C) to take or refrain from taking some course of action;
3. the threat must in fact coerce C to take such action;
4. loss or damage must be incurred by C as a result.
The Alleged Facts
(1) Background
Much of this is controversial but, since it is the defendant who has applied for summary judgment, the facts alleged by Mr Berezovsky must be taken to be true. Until 30 th October 2000 Mr Berezovsky was a successful businessman with extensive commercial interests, including a company called ZAO LogoVaz and a 50% interest in ZAO ORT-KB which in turn owned 38% of OAO-ORT, a Russian public television company ("ORT"), another channel called TV6, three Russian newspapers and a 21.5% interest in OAO Siberskaya Neftyanaya Kompaniya, a Russian oil and gas company ("Sibneft").
In addition to his business activities, Mr Berezovsky had been heavily involved in Russian politics. He had been a strong supporter of and on good terms with President Yeltsin and had been Deputy Secretary of the Russian Security Council (October 1996 to November 1997), Executive Secretary of the Commonwealth of Independent States, the CIS, which was the successor umbrella organisation to the Soviet Union (April 1998 to April 1999) and an elected member of the Duma from 1999 until July 2000.
The television company, ORT, had been part-privatised by Presidential Decree in December 1994, as a result of which 49% of that company was sold to the private sector, including a substantial proportion to Mr Berezovsky with the result that Mr Arkadi Patarkatsishvili ("AP"), who was a close business associate of Mr Berezovsky, became First Deputy General Manager. ORT's television channel was the leading Russian television channel. By 1998 Mr Berezovsky and AP had acquired control of the entire privatised 49% of ORT through ZAO ORT-KB and LogoVaz. Mr Berezovsky to some extent used the channel operated by ORT ("Channel One") as his political mouthpiece.
President Yeltsin resigned on 31 st December 1999 and Vladimir Putin, then Prime Minister, took over control of the country; after he won the ensuing presidential election, Mr Putin was inaugurated as President on 7 th May 2000. Although Mr Berezovsky had supported Mr Putin for the Presidency, he subsequently openly criticised the government's policies in the media and in August 2000 publicly declared his intention to form a movement of "constructive opposition" to President Putin's administration.
On 12 th August 2000 the Russian submarine KURSK was tragically lost in the Barents Sea and all the crew perished. Channel One was highly critical of the government's handling of the disaster. At a meeting in Moscow with a Mr Alexander Voloshin, Chief of the Presidential Administration, which took place later in August 2000, Mr Berezovsky was informed that President Putin wished to take control of the management of ORT and that Mr Berezovsky should therefore surrender or procure the surrender of ORT-KB's and LogoVaz's shareholdings to the state or to an acceptable body and if he failed to do so, he "would end up like Vladimir Gusinsky". Mr Gusinsky, who controlled a private television network (NTV), had on 13 th June 2000 been arrested and imprisoned on charges of fraud. Three days later he was released and the charges were dropped upon his signing an agreement to sell his shareholding in the company controlling NTV. In the European Court of Human Rights in Gusinsky v Russia Application 70276/01, this use of Mr Gusinsky as a commercial bargaining counter by the Russian Government was subsequently condemned as a serious violation of Articles 5 and 18 of the European Convention on Human Rights.
In the course of the August meeting with Mr Voloshin, Mr Berezovsky asked to meet President Putin. Mr Putin then saw Mr Berezovsky on the following day, repeated the demand for the transfer of the shares, stated that he wished to manage ORT personally and confirmed that Mr Berezovsky would be imprisoned if he did not agree.
Shortly after this meeting AP, Mr Berezovsky's associate, was required to meet President Putin and was told that the President wished Mr Berezovsky and AP to "clear out" of ORT and that he must negotiate to sell the shares. A price was subsequently offered to AP but Mr Berezovsky refused to sell and in September 2000 he made a public announcement that, in order to preserve the independence of ORT from the government, he would put the shares into a trust. His relations with the President got worse and on 30 th October 2000 he felt compelled to leave Russia and went to France. The envisaged trust was never created.
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