Fili Shipping Company Ltd v Premium Nafta Products Ltd; Fiona Trust & Holding Corporation v Privalov
| Jurisdiction | England & Wales |
| Judge | THE HON MR JUSTICE MORISON,MR JUSTICE DAVID STEEL,Mr Justice David Steel,MR JUSTICE ANDREW SMITH |
| Judgment Date | 22 July 2008 |
| Neutral Citation | [2006] EWHC 2583 (Comm),[2006] EWHC 758 (Comm),[2008] EWHC 1748 (Comm),[2007] EWHC 39 (Comm),[2007] EWHC 1217 (Comm) |
| Docket Number | Case No: 2005 FOLIO 534,Case No: 2005 Folio 534,Case No: 2005/534,2005 Folio 534 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 22 July 2008 |
[2006] EWHC 2583 (Comm)
The Hon Mr Justice Morison
Case No: 2005/534
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Mr Julian Flaux QC, Mr Philip Jones QC, Mr Justin Higgo and Ms Jennifer Haywood (instructed by Ince & Co) for the Claimants
Mr Graham Dunning QC and Mr Jern-Fei Ng (instructed by Howes Percival) for the Second Defendant
Mr Gordon Pollock QC, Mr Nicholas Hamblen QC and Mr Vernon Flynn (instructed by Lawrence Graham) for the Third to Seventeenth and Nineteenth Defendants
Hearing dates: 25–27 July 2006
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.
The Hon. Mr Justice Morison:
This judgment contains the reasons for the decisions which I reached on the various applications before me. I gave my decision orally last week. The essence of the dispute between the various parties related to the issue whether the disputes should be arbitrated rather than litigated. That question itself raised a number of issues about rescission and avoidance of contracts. Some of the applications are what might be called, more or less routine, such as adding parties and permission to serve out. I have dealt with the arguments on the issues as the arguments were presented to me, in more or less detail as appropriate.
This case started off with one defendant: Mr Privalov. The essence of the case against him is that he acted in breach of his duties as the head of the second claimants, FML who are owned by the first claimants, Fiona, who are in turn owned by Sovcomflot, who are a Russian entity owned by the Russian State and own and, through Fiona, operate one of the largest commercial shipping fleets in the world. Fiona operates through one ship companies and Claimants 3 – 12, and 14 – 27 are some of them. Claimant 13 is a company incorporated to receive commissions arising out of Fiona's ship building transactions; claimant 28 is Sovcomflot and Claimant 29 is a Swiss company whose business was to act as chartering agent for Sovcomflot. The present applications do not concern claimants 30 to 78. Another contested application arises out of Fiona's application to amend to make claims on behalf of these companies against persons named as defendants 23 – 29.
The essence of the claims made in the part of the action with which this judgment is concerned centres on the activities of three named individual defendants, Mr Privalov, Mr Skarga, the second defendant, and Mr Nikitin the third defendant and one individual, Mr Borisenko, who is explicitly referred to but is not joined as a defendant. This latter individual is still acting on behalf of Sovcomflot, in a senior capacity.
What is alleged by the claimants is that the third defendant, Mr Nikitin, who conducts his shipping business through one ship Liberian and Cypriot companies which are controlled through the fourth Defendant, itself a BVI company, called Standard Maritime, paid bribes to Mr Privalov, Mr Skarga [who was at one time the Director General of Sovcomflot and director of Fiona and FML] and Mr Borisenko in order to procure advantageous commercial terms for his own fleet at the expense of Sovcomflot's business.
The applications before the Court
(1) the application by the Claimants and the 22 nd to 29 th Proposed Claimants:
(a) for permission to amend paragraphs 56 to 65 of the Re-Amended Claim Form in the form set out in exhibit "SWS6–1" to the sixth affidavit of Mr Stuart Wayne Shepherd and for permission to amend the Amended Particulars of Claim by adding paragraphs 297.1 to 297.49 in the form set out in exhibit "SWS6–2" to the sixth affidavit of Mr Shepherd ("the time charter claims");
(b) for permission to add the 22 nd to 29 th Proposed Claimants as parties to the proceedings;
(c) for permission to add the 20 th to 22 nd Proposed Defendants as parties to the proceedings;
(d) for permission (if required) by the 22 nd to 29 th Proposed Claimants to serve proceedings out of the jurisdiction; and
(e) for permission (if required) by the Claimants to serve proceedings out of the jurisdiction on the 20 th to 22 nd Proposed Defendants.
(2) the application by the Claimants and the 22 nd to 29 th Proposed Claimants to restrain the 21 st and 22 nd Proposed Defendants from continuing the arbitration proceedings that have been commenced before Mr Mark Hamsher in respect of charterparties relating to the vessels "FILI", "AZOV SEA", "TROPIC BRILLIANCE", "IZMAYLOVO", "ROMEA CHAMPION", "LIGOVSKY PROSPECT", "NEVSKIY PROSPECT" and "ANICHKOV BRIDGE" ("the arbitration");
(3) the application by the 3 rd to 17 th and 19 th Defendants and the 20 th to 22 nd Proposed Defendants for the proceedings against the 20 th to 22 nd Proposed Defendants (insofar as they concern the dispute as to the entitlement of Owners to rescind the aforementioned charterparties and/or the arbitration agreements contained therein, and the validity of any such rescission) to be stayed pursuant to section 9 of the Arbitration Act 1996; and
(4) the application by the 2 nd to 17 th and 19 th Defendants and the 20 th to 22 nd Proposed Defendants for the proceedings in respect of the time charter claims to be stayed pending determination by award in the arbitration.
The additional claims which fall for consideration are what are happily called the 'time charter claims'. For the purpose of adding these claims there need to be additional claimants [Nos. 22 – 29] and additional defendants.[Nos. 20 – 22]. Hence the application for permission to amend includes an application to join additional claimants and defendants.
It is the claimants' case that the chartering of the vessels to companies controlled by Mr Nikitin forms part of a dishonest conspiracy to injure the claimants' business by unlawful means and that these claims are simply a part of the general claim to that effect: it is but one part of a pattern of corrupt activity in which Mr Skarga and Mr Nikitin have been engaged. It is alleged that this corrupt activity spanned a period from 2001 to 2005 and involved diversion of commissions from Fiona to Nikitin companies to the tune of about US$32 million; a deception whereby Fiona was tricked into paying an additional US$3.4 million in relation to a debt owed to RCB, a Russian Bank; un-commercial sale and leaseback arrangements with Nikitin companies and others involving 8 vessels and a claim for compensation for US$14.03 million in respect of the entry into the sale and leaseback transactions and for US$71,672,596 in respect of the termination of the sale and leaseback transactions; the exercise by Nikitin companies and tohers of a series of shipbuilding options and the acquisition of shares in Fiona companies holding the benefit of shipbuilding contracts, all of which were said to have been obtained at no or no proper consideration, leading to a claim of US$172 million; and the surrender of rights owned by Fiona companies to Nikitin companies at a substantial undervalue [US$64 – 77 million]. In pursuit of the conspiracy it is alleged that documents were forged, in the sense that they were backdated and purported to be made when they were not in relation both to a release of security acquired by Fiona for no consideration and to a service contract with Mr Privalov.
Mr Nikitin and Mr Privalov are resident within this jurisdiction. The claimants have arrived at a settlement with Mr Privalov and, apparently also with Mr Borisenko, both of whom are helping the claimants to unravel what they consider to be a massive fraud on the Sovcomflot business.
The primary objection to the joinder of the time charter claims is that all the charters were on a Shell Time Form with an arbitration clause and the claims, if permitted should be stayed under section 9 of the 1996 Act or the court should stay them pending arbitration under its case management powers. The relevant clause is this:
"41(a) This charter shall be construed and the relations between the parties determined in accordance with the laws of England.
(b) Any dispute arising under this charter shall be decided by the High Court in London to whose jurisdiction the parties hereby agree.
(c) Notwithstanding the foregoing, but without prejudice to any party's right to arrest or maintain the arrest of any maritime property, either party may, by giving written notice of election to the other party, elect to have any such dispute referred … to arbitration in London, one arbitrator to be nominated by Owners and the other by Charterers, and in case the arbitrators shall not agree to the decision of an umpire, whose decision shall be final and binding upon both parties. Arbitration shall take place in London in accordance with the London Maritime Association of Arbitrators, in accordance with the provisions of the Arbitration Act 1950, or any statutory modification or re-enactment thereof for the time being in force.
(i) A party shall lose its right to make an election only if:
(a) it receives from the other party a written notice of dispute which
(1) states expressly that a dispute has arisen out of this charter;
(2) specifies the nature of the dispute; and
(3) refers expressly to this clause 41(c)
(b) it fails to give notice of election to have this dispute referred to arbitration not later than 30 days from the date of receipt of such notice of dispute.
……………………………………………..
(d) It shall be a condition precedent to the right of any party to a stay of any legal proceedings in which maritime property has been, or may be, arrested in connection with a dispute under this charter, that that party furnishes to the other...
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