Boris Abramovich Berezovsky v Roman Arkadievich Abramovich
| Jurisdiction | England & Wales |
| Judgment Date | 28 June 2010 |
| Neutral Citation | [2010] EWHC 1511 (Comm) |
| Date | 28 June 2010 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2007 Folio 942 |
[2010] EWHC 1511 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: The Hon Sir Anthony Colman
Case No: 2007 Folio 942
Richard Gillis QC and Simon Colton (instructed by Addleshaw Goddard) for the Claimant
Michael Brindle QC, Helen Davies QC and Andrew Henshaw (instructed by Skadden) for the Defendant
Hearing date: 20 May 2010
FINAL JUDGMENT ON COSTS
This Judgment is concerned only with the incidence of costs incurred in connection with the Defendant's applications to strike out the claim and/or for summary judgment dismissing the claim and with the Claimant's applications to re-amend the Particulars of Claim and to amend the Reply.
For the reasons given in the main judgment the Defendant's applications were dismissed and the Claimant's applications were substantially allowed.
This judgment on costs should be read in conjunction with my main judgment. In so far as it has been necessary to evaluate the strength of the Defendant's applications in relation to the developing and fluctuating state of the Claimant's pleadings in the course of 2009 I have applied those principles identified in the main judgment. They are not repeated in this judgment.
The arguments of counsel on the costs issues are helpfully summarised in their respective skeleton arguments. It is unnecessary to repeat them here.
The total amount of costs said to have been incurred by both parties from, and referable to, the issue of RA's application to strike out is the astonishing figure of £10.6 million. Of that RA is said to have incurred £3.7 million and BB is said to have incurred £6.9 million. Although both parties accept that some significant part of these costs has been incurred in the carrying out of work on factual and expert evidence and documents which would have had to be done in the preparation of this case for trial and therefore does not represent costs thrown away, there can be no doubt that a significant part of the total sum has been incurred exclusively in the cause of and in respect of the prosecution of the strike out application and the countervailing application to amend and re-amend BB's pleadings.
Accordingly, this is not one of those cases where it would be appropriate for this court to support its cost order with minimal, if not perfunctory, reasons, for not only are the costs extremely large but the issues as to the appropriate incidence of costs are unusually complex.
It is first necessary to investigate the development of BB's pleadings in the face of the strike out application, for, although that application eventually failed, it did so on the basis of the Particulars of Claim and Reply in their ultimate form, which was very different from their form at the time when RA first launched the strike out application. As a matter of principle, although a defendant who successfully defeats such an application is normally entitled to an order for costs which reflects his success, where that success would not have been achieved had it not been for emergency surgery to the pleadings after the issue of the defendant's application and, a fortiori, only a relatively short time before the hearing, the claimant cannot expect to recover costs which he has uncured in trying to protect the uncured pleading or to expect that a claimant should not be recompensed in respect of his costs in attacking that uncured pleading.
The application to strike out (by which reference I also include the application for summary judgment) was issued on 14 th November 2008. It was supported by a witness statement of Mr Mitchard QC and an expert report on Russian Law by Mr Rozenberg.
The Amended Particulars of Claim to which that application was directed alleged as follows:
(i) Approximately 86% of the issued shares in Sibneft had by December 1998 been acquired by entities on behalf of BB, AP and RA.
(ii) Under the 1996 Agreement it was orally agreed between BB, AP and RA that all the shares held by BB and RA would be transferred legally to RA or to entities controlled by him and that BB and AP could continue beneficially to own the shares so transferred “which would be held on trust for them by RA” with the effect that BB and AP could continue to be entitled to dividends and to any other payments made by Sibneft to its beneficial owners on the basis of the percentage split of 50% RA and 25% each BB and AP agreed under the previous so-called 1995 Agreement.
(iii) By about August 1997 the 1996 Agreement had been implemented and BB's and AP's respective shareholdings had been transferred to RA or to companies owned or controlled by him with the “beneficial ownership” of that shareholding “held on trust” by RA for BB and AP.
(iv) From about August 2000 RA informed AP that the interests of BB and AP in Sibneft could be expropriated by the Government in view of the Kremlin's knowledge of BB's and AP's “beneficial interests” in Sibneft. From this AP inferred (as RA intended) that he and BB should sell their beneficial interests in Sibneft to him or face the consequences.
(v) BB and AP therefore agreed to sell their beneficial interests in Sibneft to RA for US$1.3 billion, the price insisted on by RA at the Munich Airport meeting in May 2001.
(vi) Sale of those beneficial interests was implemented by means of the Devonia Agreement dated 12 June 2001 under which it was recited inter alia that BB and AP were beneficial owners of the Sibneft shares to be sold, that RA held such shares as nominee in trust for and on behalf of BB and AP and that BB and AP were aware that Devonia intended to transfer the beneficial interests in the shares to RA or his companies and that the price for those interests was to be paid in instalments, completing on about 20 March 2003.
(vii) RA's conduct amounted to intimidation and was unlawful and illegitimate because inter alia it amounted to threats to act in gross breach of trust and/or in breach of fiduciary duty, in as much it was flagrantly inconsistent with his “duty as a trustee”.
(viii) BB's and AP's interest in Rusal would be held on trust of them by RA as agreed at the Dorchester Hotel meeting on 14 th March 2000 and the disposal without their consent by RA of shares in Rusal in which he and/or they had an interest was a breach of RA's duty to them as trustee under a trust in respect of the Rusal shares, such trust being governed by English Law, alternatively British Virgin Islands law.
On 26 th June 2008 RA served his Defence in which he denied the existence of any arrangement between BB, AP and RA for the transfer to RA of any shares in Sibneft as alleged by BB with regard to the 1996 Agreement and indeed that BB had any interest in Sibneft, except possibly, which was not admitted, to the extent that he had an interest in PK-Trast which had a very limited indirect interest in Sibneft shares owned or indirectly controlled by Firma Sins and OOO Firma Latis. Further, the Defence pleaded that the existence of any such trust as was relied on by BB would be governed by Russian law under which the concept of a trust did not exist. Consequently, BB and AP could have had no beneficial interests in any Sibneft shares transferred to RA. There was therefore no interest that could be expropriated, no interest that could be sold to RA and no interest that, but for such sale, could have been sold to any third party. Whereas it was conceded that RA had paid $1.3 billion to BB, this payment was made “in recognition of the political assistance and protection which BB had provided in respect of the creation of Sibneft” and not pursuant to the Devonia Agreement of which RA knew nothing prior to the commencement of these proceedings and which did not accurately record the nature of any transaction between BB, AP and RA.
The Defence further pleaded that, even on BB's own pleaded case, what RA had said to AP about expropriation of BB's interest in Sibneft could not amount to any threat or to a threat of the use of unlawful means by RA or by any person under RA's control or for who he acted as agent. Further, a threat to act in breach of trust and/or fiduciary duty was insufficient to amount to a threat of unlawful means for the purposes of the tort of intimidation.
The Defence also relied on the non-justiciability of BB's allegations on the grounds of act of state, comity and/or Sovereign immunity.
As to Rusal, RA denied that BB and AP had entered into any agreements with him under which BB and AP had any interest in Rusal. Alternatively, there was no concept of trust in Russian Law and since any such trust in respect of interests in Rusal must have been governed by Russian Law, BB and AP could have had no beneficial interests in Rusal and RA could have owed them no fiduciary duties with regard to the disposal of shares in Rusal to Mr. Deripaska. In any event, all BB's claims for breach of trust, breach of fiduciary duty and breach of contract by RA were time-barred under Russian Law.
BB's Reply was served on 2 nd October 2008.
While admitting that the concept of a trust did not exist in Russian Law, and that no such beneficial interest could be created, it pleaded that the 1996 Agreement gave rise to a trust not governed by Russian Law but by English Law. Alternatively, if the relationship between the parties was governed by Russian Law, BB was entitled under Russian Law to restitution of the Sibneft shares transferred to RA or to entities owned or controlled by him by an action in Russian Law under which no such concept existed to declare the attempted trust...
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