Filatona Trading Ltd v Navigator Equities Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Teare,Mr. Justice Teare |
| Judgment Date | 07 February 2019 |
| Neutral Citation | [2019] EWHC 173 (Comm) |
| Docket Number | Case No: CL-2016-000775 Case No: CL-2017-000638 Case No: CL-2018-000121 Case No: CL-2017-000117 |
| Court | Queen's Bench Division (Commercial Court) |
[2019] EWHC 173 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Mr. Justice Teare
Case No: CL-2016-000775
Case No: CL-2017-000515
Case No: CL-2017-000638
Case No: CL-2018-000121
Case No: CL-2017-000117
Justin Fenwick QC, Andrew Clutterbuck QC, Lucy Colter and Michael Bolding (instructed by Reynolds Porter Chamberlain LLP) for the Claimants in the first action
Graham Chapman QC, Tom Ford and Felix Wardle (instructed by Byrne and Partners LLP) for the Claimant in the second action
Jonathan Crow QC, John Machell QC, James Weale and Fraser Campbell (instructed by Clifford Chance LLP) for the First and Second Defendants in both actions
Iain Pester (instructed by PCB Litigation LLP) for the Third Defendant in the second action
Hearing dates: 26, 27, 28, 29 November 2018 3, 4, 5, 6, 10, 11, 12, 13, 17, 18, 19, 20 December 2018 16, 17, 18 January 2019
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.
CONTENTS
| INTRODUCTION | 1 |
| Approach to the evidence | 10 |
| The witnesses | 17 |
| Mrs. Danilina | 18 |
| Mr. Deripaska | 21 |
| Mr. Chernukhin | 27 |
| Witnesses called by Mr. Deripaska | 35 |
| Witnesses called by Mr. Chernukhin | 42 |
| Peripheral witnesses | 53 |
| THE TGM CLAIM | 63 |
| The nature of the issue on the TGM claim | 63 |
| The circumstances of Mr. Chernukhin and Mrs. Danilina by 2001 | 66 |
| Mr. Deripaska | 83 |
| The purchase of shares in TGM in 2002 | 84 |
| The investment opportunity and the initial approach to Mr. Deripaska | 84 |
| The reason for investing in TGM | 91 |
| The purchase of shares in TGM | 93 |
| Absence of a formal joint venture agreement | 96 |
| Subsequent contact between the parties | 104 |
| Negotiations in 2004 | 111 |
| Navigator Equities Limited and The Compass Trust | 124 |
| Mr. Chernukhin's departure from Russia | 136 |
| The SHA | 137 |
| Events of 2005–06 | 142 |
| Changers to the corporate structure in October 2005 | 142 |
| The meeting in London in December 2005 | 146 |
| The Settlement Reconciliation Act | 152 |
| The purchase of shares by Navio Holdings Limited | 153 |
| Provisional assessment of joint venture partners as at mid-2006 | 154 |
| Reporting to Mr Chernukhin | 181 |
| The end of Mr. Chernukhin and Mrs. Danilina's relationship and the establishment of the Sanderson Trust | 182 |
| The dispute over the management of TGM | 218 |
| Attempts to replace Mr. Kokorev as General Director of TGM | 218 |
| The 3 February 2010 Supervisory Board meeting | 230 |
| The Stewarts Law letter dated 1 March 2010 | 237 |
| The takeover of TGM | 242 |
| Buy-out negotiations between Mr. Deripaska and Mr. Chernukhin | 253 |
| Inferences from later events | 267 |
| The Sanderson Trust and Foxglove Holdings Limited | 268 |
| The formal demands to replace Mr. Kokorev as General Director of TGM | 272 |
| The Stewarts Law letter dated 1 March 2010 | 273 |
| Mr. Chernukhin's refusal to provide proof of his ownership of Navigator during the buy-out negotiations | 274 |
| Matters which support Mr. Chernukhin's case | 275 |
| Lies and late disclosure | 279 |
| Factual conclusions in the TGM claim | 283 |
| The legal issue in the TGM claim: interpretation of the SHA | 286 |
| Disposal of the TGM claim | 320 |
| THE FAMILY ASSETS CLAIM | 324 |
| Governing law of the alleged 2007 agreement | 325 |
| Discussion of the Family Assets claim | 342 |
| Disposal of the Family Assets claim | 366 |
| SECTION 68 CHALLENGES | 370 |
| The buy-out award challenge | 372 |
| The oppression challenge | 381 |
| The valuation challenge | 385 |
| CONCLUSIONS | 389 |
INTRODUCTION
This litigation concerns a valuable site in Central Moscow which is, indirectly, the subject of a Shareholder Agreement dated 31 May 2005 (the “SHA”). The issue is whether Vladimir Chernukhin, who is not named as a party to the SHA is in fact party to the SHA as a disclosed principal of Lolita Danilina, who is named as a party to the SHA. Mr. Chernukhin and Mrs. Danilina had been in a relationship; it is Mr. Chernukhin's case that she was a named party because she was acting as his nominee or agent. She disputes that she was his nominee or agent and has commenced an action before this court seeking a declaration that she was party to the SHA and that he was not. This is the “TGM claim”, TGM being an abbreviation of the name of the textile company OJSC Trekhgornaya Manufaktura (“TGM”), which occupied the valuable site in Central Moscow to which the SHA related. In addition, she has a further claim arising out of what she claims to have been an agreement between her and Mr. Chernukhin in 2007 for the division of their assets after their relationship had come to an end. Mr. Chernukhin denies that there was any such agreement. I refer to that as the “Family Assets claim”.
Also interested in the TGM claim is Oleg Deripaska, who was, undoubtedly, party to the SHA. Indeed, he and Mr. Chernukhin have already arbitrated the dispute between them as to whether Mr. Chernukhin was party to the SHA. The arbitration tribunal held that Mr. Chernukhin was party and has ordered that Mr. Deripaska pay Mr. Chernukhin some $95 million in respect of the latter's shareholding. Mr. Deripaska has challenged the jurisdiction of the arbitration tribunal, saying, as he said before the tribunal, that Mr. Chernukhin was not party to the SHA.
Thus, because the TGM claim is central to both Mrs. Danilina's claim and to Mr. Deripaska's arbitration challenge, they have been tried together. Mrs. Danilina was not party to the arbitration and so is not bound by the arbitration award. Mr. Deripaska is bound by it, but may challenge the jurisdiction of the arbitration tribunal pursuant to section 67 of the Arbitration Act 1996. The challenge is not an appeal from the decision of the arbitration tribunal. It is a re-hearing.
Vadim Kargin is a further defendant to the TGM claim. Mrs. Danilina seeks damages against him arising out of (i) an alleged agency agreement pursuant to which Mr. Kargin was to procure the incorporation of an off-shore company to hold her interest in TGM and (ii) an alleged conspiracy with Mr. Chernukhin to injure Mrs. Danilina by unlawful means.
On the central issue in the TGM claim, namely, who was party to the SHA, the court has heard conflicting evidence from, on the one hand, Mrs. Danilina and Mr. Deripaska, and from, on the other hand, Mr. Chernukhin. It is difficult to avoid the conclusion that one side has given evidence which it must know to be untrue. The arbitration tribunal, who did not hear evidence from Mrs. Danilina, rejected the evidence of Mr. Deripaska and accepted the evidence of Mr. Chernukhin. The arbitration tribunal also did not have the benefit of certain documents which have been disclosed in this case but were not disclosed in the arbitration.
Shortly after the arbitration tribunal had decided that Mr. Chernukhin was party to the SHA and that the tribunal therefore had jurisdiction to consider his claim, Mrs. Danilina and Mr. Deripaska entered into an Interest Purchase Option Agreement pursuant to which Mrs. Danilina's beneficial interest was to be purchased by Mr. Deripaska for the sums of $2 million (payable in four instalments) and $10 million in the event that Mrs. Danilina secured “confirmation of title” to her beneficial interest by 31 December 2020. Mrs. Danilina was to commence “ownership proceedings” by 31 December 2017. The proceedings commenced by her in this court are those “ownership proceedings”. By a Loan Agreement Mr. Deripaska also agreed to lend her $3 million in respect of the costs of such proceedings. In addition, and pursuant to the Interest Purchase Option Agreement, Mrs. Danilina undertook to assist Mr. Deripaska in his arbitration with Mr. Chernukhin and not to communicate with or provide any information to Mr. Chernukhin.
The agreement between Mr. Deripaska and Mrs. Danilina is said by Mr. Chernukhin to be dishonest and corrupt, being, it is said, a perversion of the course of justice by making a payment in exchange for evidence. Mrs. Danilina denies dishonesty and corruption and has said that Mr. Chernukhin's failure to give proper disclosure in relation to the Family Assets claim until he was ordered to do so was itself a dishonest attempt to prevent the disclosure of relevant documents. Mr. Deripaska has also said that Mr. Chernukhin obtained the arbitration award in his favour by the giving of dishonest evidence.
Thus, this litigation has been, it need hardly be said, aggressively fought on all sides. It falls to the court to determine where the truth lies.
In addition to the issues of fact there is an issue of law, namely, whether the terms of the SHA preclude Mr. Chernukhin from enforcing the SHA as a disclosed principal. Finally, there are, in the event that the s.67 jurisdictional challenge fails, challenges to the award on the grounds of alleged serious irregularities pursuant to s.68 of the Arbitration Act 1996.
Approach to the evidence
In resolving the stark conflicts of evidence in this case I have sought to adopt the approach described by Robert Goff LJ (as he then was) in The Ocean Frost [1985] 1 Lloyd's Reports 1 at...
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