Fiona Trust & Holding Corporation and Others v Yuri Privalov and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Andrew Smith |
| Judgment Date | 03 October 2014 |
| Neutral Citation | [2014] EWHC 3102 (Comm) |
| Docket Number | Case No: 2005-534 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 03 October 2014 |
[2014] EWHC 3102 (Comm)
Mr Justice Andrew Smith
Case No: 2005-534
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Steven Berry QC and Nathan Pillow (instructed by Lax & Co LLP) for the 3 rd, 4 th, 14 th 15 th, 16 th and 17 th Defendants
Michael Brindle QC, Dominic DowleyQC andJustin Higgo (instructed by Ince & Co) for the Claimants
Hearing date: 28 July 2014
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.
Introduction
In this judgment I adopt the abbreviated forms used in my judgment delivered on 10 December 2010 after the trial of these proceedings, [2010] EWHC 3199 (the "December 2010 judgment").
The applicants seek directions for an assessment of compensation to be paid under undertakings given to the court when it made freezing orders against them and other defendants. The claimants resist the application on the grounds (i) that the court should exercise its discretion not to enforce the undertakings because of conduct of or attributable to the applicants, and (ii) that the applicants have not shown a sufficient case that they suffered loss that should be compensated.
I do not need in this judgment to give a detailed explanation of the claims in the proceedings, and it is sufficient for present purposes to cite this description of the relevant schemes from paragraph 47 of my December 2010 judgment:
"The schemes between defendants that are said to be corrupt … are these:
i) The "Sovcomflot Clarkson commissions" scheme, by which between 2001 and 2004 it was arranged that Clarkson should act as brokers for the Sovcomflot group, to buy and sell ships and should pay "commission" upon the purchases and sales to Mr. Nikitin or at his direction. It is said that as a result the Standard Maritime defendants and other companies … have been paid over $30 million, ….
ii) The "Tam commissions" scheme, whereby, when in 2001 the Sovcomflot group were buying in the so-called "Athenian transaction" (which was itself one of the purchases comprised in the Sovcomflot Clarkson commissions scheme) six ships which were being built by Hyundai Heavy Industries ("HHI"), address commissions paid by HHI amounting to $1.2 million were diverted to Milmont.
iii)….
iv) ….
v) The "RCB" scheme, whereby, as the claimants allege, in 2001 Mr. Nikitin arranged for Meino to acquire a debt owed (or said to be owed) by the Sovcomflot group to the Russian Commercial Bank Ltd. ("RCB"), and Mr Skarga was party to arranging for the debt to be discharged on terms that improperly benefited Mr. Nikitin. The claim in respect of this scheme is about $3 million.
vi) The "SLB arrangements" scheme, whereby in 2002 the Sovcomflot group sold eight vessels, the Arbat vessels, to Standard Maritime defendants upon terms that they were to be leased back to the sellers on bareboat charters and re-purchased at the end of the charter periods. It is alleged that these arrangements (the sale and leaseback or "SLB" arrangements) were uncommercial and designed to benefit Mr. Nikitin and the Standard Maritime defendants at the expense of the Sovcomflot group. The compensatory damages claimed in respect of this scheme are some $17 million, and there is also a claim for an account of profits.
vii) The "termination of the SLB arrangements" scheme, whereby in 2004 the Standard Maritime defendants sold the eight Arbat vessels which were the subject of the SLB arrangements, and Sovcomflot were paid $20 million for their rights in respect of them. It is alleged that this was inadequate compensation for the rights that Sovcomflot relinquished. The claimants' primary compensatory claim is for some $159 million, and there is also a claim for an account of profits.
viii) The "newbuildings" scheme, whereby in 2003 and 2004 Sovcomflot entered into agreements with HHI and Daewoo Shipbuilding Marine Engineering Company Ltd. ("Daewoo"), and contracted to buy ships by way of newbuildings and acquired options to buy other vessels. It is alleged that they allowed some of the Standard Maritime defendants to acquire the benefit of options for no proper consideration, and also to acquire the benefit of contracts with HHI (by acquiring the vehicle companies who had entered into newbuilding contracts) at an undervalue. This gives rise to claims of some $212 million.
ix) The "Sovcomflot time charters" scheme, which relates to agreements that were made between 2001 and 2004 whereby certain of the claimants hired eight vessels to Standard Maritime defendants on time charterparties and also granted options to extend the period of hire of some of them. The charterparties and options are said to have been designed, at least in some cases, to benefit the Standard Maritime defendants and correspondingly to have been to the disadvantage of the claimants. The claimants claim some $219 million in respect of these allegations.
x) …"
I upheld the claims against Mr Nikitin in this action in respect of the Sovcomflot Clarkson commissions scheme and the Tam commissions scheme I rejected the claims in respect of the RCB scheme, the SLB arrangements scheme, the newbuildings scheme, the termination of the SLB arrangements scheme and the Sovcomflot time charters scheme. The claimants appealed against my judgment, but the appeal was dismissed by the Court of Appeal on 26 March 2013. An application for permission to appeal to the Supreme Court was refused. The applicants sought directions for an enquiry as to what should be paid under the cross-undertakings on 4 February 2011, but by agreement between the parties the application was not pursued until the appellate process was concluded.
On 31 August 2005 Simon J made a worldwide freezing order against (inter alios) the applicants Mr Nikitin, Standard Maritime, Titanium, Pendulum, Accent and Severn in respect of assets up to a value of $225 million. The then claimants all gave an undertaking in these conventional terms: "If the court later finds that this order has caused loss to the respondent and decides that the respondent should be compensated for that loss, the applicants will comply with any order the court may make". The order was continued with immaterial changes by orders on 7 and 15 September 200The 2005 orders specifically provided that, while dealings by the relevant defendants "in the ordinary and proper course of business" were permitted, this did not cover the sale or purchase of vessels (including vessels under construction), the sale or purchase of shares in any company or corporation or the grant of security over vessels or shares. In response to these orders Standard Maritime provided security in the sum of $208.5 million, the balance being provided by a charge over Mr Nikitin's house.
These 2005 orders were based mainly on an affidavit dated 31 August 2005 and sworn by Mr Stuart Shepherd, a partner in Ince & Co, the claimants' solicitors. In it he said that Fiona and its subsidiary companies had been the victims of a conspiracy to defraud them, which had been perpetrated by and through Mr Privalov, Mr Skarga, Mr Nikitin and Standard Maritime, and which comprised the Tam commissions scheme, the SLB arrangements scheme, the newbuildings scheme and the termination of the SLB arrangements scheme, and as a result they had suffered losses at a "conservative estimate" of "well in excess of $200 million". As I have said, the claims about these schemes were mostly rejected at trial: the claimants succeeded only in respect of a claim against Mr Nikitin and Milmont about the Tam commissions scheme in the sum of $1.2 million (and interest thereon). Mr Shepherd had quantified the other claims as follows: the SLB arrangements scheme at some $3.39 to $6 million, the newbuildings scheme at some $167.7 million and the termination of the SLB arrangements scheme at some $65.24 to $76.94 million.
On 21 May 2007 David Steel J made a worldwide freezing order against (inter alios) the applicants Mr Nikitin, Standard Maritime, Remmy and Henriot. The same 21 claimants and 55 other claimants who had been joined in the proceedings gave undertakings in the same terms as those of the 2005 orders. David Steel J's 2007 order was in respect of assets to the value of $377 million in the case of Mr Nikitin, $315,583,119 in the case of Standard Maritime, $174,724,038 in the case of Remmy and $142,413,974 in the case of Henriot. It did not include the specific prohibition about the sale and purchase of vessels or shares or the granting of security that was in the 2005 orders, but it was not suggested before me that the applicants could reasonably have conducted such dealings despite the 2007 order without the court's sanction.
The application for the 2007 order was supported by further affidavit evidence of Mr Shepherd. By now the claimants had introduced claims in respect of the RCB scheme, the Sovcomflot time charters scheme and the Sovcomflot Clarkson commissions scheme, and they had increased the amount that they claimed in respect of the SLB arrangements scheme, the newbuildings scheme and the termination of the SLB arrangements scheme. As I have said, of these claims only that in respect of the Sovcomflot Clarkson commissions scheme, which were against Mr Nikitin and Milmont, succeeded at trial, and it succeeded in the sum of some $16 million (the liability being reduced by what the claimants had recovered under a settlement with Clarksons).
The effect of the 2007 order was to freeze (in addition to the $208.5 million of security already provided by Standard Maritime) $262 million in bank...
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