Fiona Trust & Holding Corporation and 75 ors. v Yuri Privalov and 28 ors

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMr. Justice Andrew Smith
Judgment Date10 Dec 2010
Neutral Citation[2010] EWHC 3199 (Comm)
Docket NumberClaim 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

[2010] EWHC 3199 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

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

Between:
Fiona Trust & Holding Corporation and 75 ors.
Claimants
and
Yuri Privalov and 28 ors.
Defendants
Yuri Nikitin and anr.
Pt. 20 Claimants
and
H. Clarkson & Company Ltd
Pt. 20 Defendants
and between:
Intrigue Shipping Inc. and 50 ors.
Claimants
and
H. Clarkson & Company Ltd. and 8 ors.
Defendants
Yuri Nikitin and anr.
Pt. 20 Claimants
and
H. Clarkson and Company Ltd.
Pt. 20 Defendants
and between:
Fiona Trust & Holding Corp. and 9 ors.
Claimants
and
Dmitri Skarga and 3 ors.
Defendants
and between:
Southbank Navigation Ltd. and 6 ors.
Claimants
and
H. Clarkson and Company Ltd.
Defendants

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:

1

, 2, 5, 6, 7, 8, 9, 12, 13, 14, 15, 16, 19, 20, 21, 22, 23, 26, 27, 28, 29 October 2009,

2

, 3, 4, 5, 6, 9, 10, 11, 12, 13, 16, 17, 18, 19, 20, 23, 24, 25, 26, 27, 30 November 2009,

1

, 2, 3, 4, 7, 8, 9, 11, 14, 15, 16, 17 December 2009,

1

, 2, 3, 5, 8, 9, 15, 17, 18, 22, 23, 24, 25, February 2010,

22

, 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 Smith

Introduction

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

1

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).

2

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.)

3

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.)

4

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.)

5

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.

6

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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