Fiona Trust & Holding Corporation and 75 ors. v Yuri Privalov and 28 ors
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Andrew Smith |
| Judgment Date | 10 December 2010 |
| Neutral Citation | [2010] EWHC 3199 (Comm) |
| Docket Number | Claim no: 2005 Folio 534 Claim no: 2007 Folio 482 And in the part 20 proceedings between: Claim no: 2009 Folio 91 Claim no: 2009 Folio 281 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 10 December 2010 |
[2010] EWHC 3199 (Comm)
Mr. Justice Andrew Smith
Claim no: 2005 Folio 534
And in the part 20 proceedings between:
Claim no: 2007 Folio 482
And in the part 20 proceedings between:
Claim no: 2009 Folio 91
Claim no: 2009 Folio 281
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Andrew Popplewell QC
Dominic Dowley QC
Justin Higgo
Simon Birt
Fionn Pilbrow
Instructed by Ince & Co. for the Claimants in actions: 2005 Folio 534, 2007 Folio 482 and 2009 Folio 91.
Graham Dunning QC and Susannah Jones
Instructed by Stephenson Harwood for Mr. Dmitri Skarga
Steven Berry QC
Nathan Pillow
David Davies
Instructed by Lax & Co. for Mr. Yuri Nikitinand the Standard Maritime Defendants in actions: 2005 Folio 534, 2007 Folio 482 and 2009 Folio 91 and the Claimants in 2009 Folio 281 and the Part 20 claimants in 2005 Folio 534 and 2007 Folio 482. Simon Bryan QC and Jern-Fei Ng
(instructed by Stephenson Harwood) for Mr. Tagir Izmaylov
John Odgers and Ian Wilson
(instructed by CMS Cameron McKenna LLP) for H. Clarkson & Company Ltd.
Hearing dates:
, 2, 5, 6, 7, 8, 9, 12, 13, 14, 15, 16, 19, 20, 21, 22, 23, 26, 27, 28, 29 October 2009,
, 3, 4, 5, 6, 9, 10, 11, 12, 13, 16, 17, 18, 19, 20, 23, 24, 25, 26, 27, 30 November 2009,
, 2, 3, 4, 7, 8, 9, 11, 14, 15, 16, 17 December 2009,
, 2, 3, 5, 8, 9, 15, 17, 18, 22, 23, 24, 25, February 2010,
, 23, 24, 25, 26, 29, 30, 31 March 2010,
And 9 July 2010.
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.
Mr. Justice Andrew SmithIntroduction
| Introduction | para 1 |
| The parties | 7 |
| The trial | 35 |
| The claims | 47 |
| English domestic law | 51 |
| Russian domestic law | 78 |
| Private international law | 140 |
| Background | 182 |
| The hull no 1231 commission scheme | 318 |
| The schemes involving collusion with brokers for sales and purchases | 329 |
| The Sovcomflot Clarkson commissions scheme | 344 |
| The part 20 claim in the Fiona action | 550 |
| The Norstar commissions scheme | 574 |
| The NSC Clarkson and the Galbraith's commissions schemes | 591 |
| The Sawyer commissions scheme | 659 |
| The RCB scheme | 677 |
| The SLB arrangements scheme | 714 |
| The termination of the SLB arrangements scheme | 830 |
| The newbuildings scheme | 891 |
| The "Romea Champion" commission scheme | 1026 |
| The Sovcomflot time charters scheme | 1046 |
| The NSC time charters scheme | 1190 |
| The allegations that Mr. Skarga was dishonest | 1268 |
| The allegations that Mr. Izmaylov was dishonest | 1455 |
| Conclusions on the claims against Mr. Skarga and Mr. Izmaylov | 1485 |
| The case against Mr. Nikitin and the Standard Maritime defendants | 1488 |
| Relief against Mr. Nikitin and the Standard Maritime defendants | 1519 |
| The claims against unrepresented defendants | 1544 |
| Settlement monies | 1545 |
| The Southbank action | 1556 |
| Conclusions | 1563 |
This is the trial of four actions to which I shall refer as the Fiona action (claim 2005 folio 534), the Intrigue action (claim 2007 folio 482), the second Fiona action (claim 2009 folio 191) and the Southbank action (claim 2009 folio 281).
The Fiona action and the second Fiona action are brought by OAO Sovcomflot ("Sovcomflot"), a Russian ship-owning and ship-operating company, and subsidiaries of Sovcomflot. They allege that Mr. Dmitri Skarga, a former Director-General of Sovcomflot, and Mr. Yuri Nikitin embarked on a course of dishonest conduct between about the end of 2000 and 2004, whereby companies in the Sovcomflot group entered into transactions which benefited Mr. Nikitin and companies associated with him and were against the interests of the Sovcomflot group. They say that among those who were engaged with Mr. Nikitin and Mr. Skarga in this conduct were Mr. Yuri Privalov, the Managing Director of Fiona Maritime Agencies Ltd. ("FML"), an English company which is the second claimant in the Fiona action and is now called Sovcomflot (UK) Ltd., and from some time in 2002 Mr. Igor Borisenko, then the Executive Vice-President and Chief Financial Officer of Sovcomflot. (In this judgment I often use the term "Sovcomflot" to refer to the group of companies and not only to OAO Sovcomflot, without distinguishing the individual companies unless it matters.)
The Intrigue action is brought by JSC Novorossiysk Shipping Company ("NSC"), another Russian ship-owning and ship-operating company, and by subsidiaries of NSC. The claimants' allegations are similar to those in the Fiona actions in that it is said that between about 2002 and 2004 Mr. Tagir Izmaylov, a former President of NSC, and Mr. Nikitin, sometimes with Mr. Privalov's assistance, dishonestly entered into transactions which were against the interests of the NSC group and profitable to Mr. Nikitin and companies associated with him. (Again, I often use the term "NSC" to refer to the group and not only to the parent company.)
In the Fiona action Mr. Nikitin and one of his companies, Milmont Finance Ltd. ("Milmont"), a company incorporated in the British Virgin Islands ("BVI"), have brought proceedings under part 20 of the Civil Procedure Rules ("CPR") against H. Clarkson & Sons Ltd. ("Clarkson") in which they claim that Clarkson are liable to them for sums in respect of business that they handled for companies in the Sovcomflot group. There is a similar part 20 claim against Clarkson in the Intrigue action in respect of business handled for companies in the NSC group. In the Southbank action, companies controlled by Mr. Nikitin (the "Southbank claimants") bring claims against Clarkson on the basis that, if (as the claimants in the Fiona action allege) Clarkson, when acting as brokers upon certain ship purchase agreements, received from the shipyards sums by way of address commissions, then they are liable to account to the Southbank claimants for those sums attributable to the purchases which they made. (When I refer in this judgment to "the claimants", I do not include the Southbank claimants.)
As Mr. Andrew Popplewell QC, who represented the claimants, made clear when he opened the case, the claims are pursued against the defendants upon the basis that they were dishonest. In the two Fiona actions, their only case against Mr. Skarga is that he acted dishonestly in breach of his duties in relation to the various transactions into which the Sovcomflot group entered with Mr. Nikitin and companies associated with him, and their only case in the Intrigue action against Mr. Izmaylov is that he acted dishonestly in breach of his duties in relation to the various transactions entered into by the NSC group with Mr. Nikitin and his companies. No claim is pursued on the basis that Mr. Skarga or Mr. Izmaylov acted honestly in relation to the relevant transactions but in breach of contractual, fiduciary or other duties. As far as concerns the claims against Mr. Nikitin and corporate defendants with whom he is associated and to whom I shall refer as the "Standard Maritime defendants" (an expression that I shall define more specifically below), the claimants' case generally depends upon them showing both (i) that Mr. Skarga or, as the case might be, Mr. Izmaylov acted dishonestly in relation to the transaction in question, and (ii) that Mr. Nikitin acted dishonestly in relation to the transaction and through him the relevant corporate defendants acted dishonestly. The only exceptions to this are to the "commissions claims", an expression that I shall explain below. In the case of the commissions claims, the claimants' case depends upon them establishing that Mr. Nikitin acted dishonestly, but not necessarily upon showing dishonesty on the part of Mr. Skarga or Mr. Izmaylov. The claimants pursue an alternative case that, even if Mr. Skarga and Mr. Izmaylov were not dishonest in relation to the commissions claims transactions, Mr. Nikitin and the relevant Standard Maritime defendants are liable because they dishonestly colluded with Mr. Privalov or the brokers involved in the transactions or dishonestly assisted them to act in breach of their duties.
The defendants deny that they engaged in any dishonest or improper dealings. Mr. Nikitin and the Standard Maritime defendants accept that, when Mr. Skarga and Mr. Izmaylov were in office as the Director-General of Sovcomflot and the President of NSC respectively, they entered into transactions with the Sovcomflot and NSC groups that proved to be very profitable, but they say that this was because Mr. Nikitin invested heavily in shipping when others did not do so, and he profited from his shrewd business acumen and the sustained strength of the shipping market, which many had not foreseen. They also accept that they received payments from Sovcomflot's and NSC's brokers, namely Clarkson, Galbraith's, Norstar and Mr. John Sawyer, but say that they were legitimate and proper payments. Mr. Skarga and Mr. Izmaylov say that the impugned transactions were entered into in the proper course of business, and in the case of Sovcomflot, in particular, in accordance with the...
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