Fiona Trust & Holding Corporation and Others v Dimitry Skarga and Others (First Respondent) Yuri Nikitin and Others (Second to Twentieth Respondents)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Rimer,Lord Justice Tomlinson |
| Judgment Date | 26 March 2013 |
| Neutral Citation | [2013] EWCA Civ 275 |
| Docket Number | Case No: A3/2011/0935 & 0936 |
| Court | Court of Appeal (Civil Division) |
| Date | 26 March 2013 |
[2013] EWCA Civ 275
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEENS BENCH DIVISION, COMMERCIAL COURT
MR JUSTICE ANDREW SMITH
2005 FOLIO 534 and 2009 FOLIO 191
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Longmore
Lord Justice Rimer
and
Lord Justice Tomlinson
Case No: A3/2011/0935 & 0936
and
Michael Brindle QC, Dominic DowleyQC andJustin Higgo (instructed by Ince & Co) for the Appellants
Graham Dunning QC, Susannah JonesandLouis Flannery (instructed by Stephenson Harwood LLP) for the First Respondent
Steven Berry QC and Nathan Pillow (instructed by Lax & Co) for the Second to Twentieth Respondents
Hearing dates: 4 th and 5 th March 2013
As Lord Templeman observed in AG for Hong Kong v Reid [1994] 1 AC 324, 330H "Bribery is an evil practice which threatens the foundations of any civilised society". In English law remedies for bribery are extensive and draconian. Thus English law will permit a claimant employer or principal whose employee or agent has been bribed to recover:
i) the amount of the bribe from both the person bribed and the briber, regardless of the question whether any loss has been suffered by the claimant;
ii) the amount of any loss following the bribe, it being (probably) presumed both that loss has occurred in at least the amount of the bribe and that any subsequent transaction created by the employee or agent was caused by the bribe; and
iii) (perhaps more controversially) where the employee or agent is a fiduciary, the amount of any relevant profit made and received as a result of any such transaction following the bribery, causation from the bribery again being presumed.
It is no defence to any of these claims for either the briber or the person bribed to say that the bribery was not dishonest or that they did not think that the bribery was wrong.
These claims have all been held to be claims in tort, even though some of them can also be categorised as contractual (if against the employee or agent) or restitutionary or perhaps (in relation to iii) above) an equitable claim for breach or dishonest assistance in breach of fiduciary duty. Authority for the above propositions can be found in Mahesan S/O Thambiah v Malaysia Housing Society [1979] AC 374, Bowstead and Reynolds, Agency (19 th ed. 2010) Article 49 and Novoship (UK) Ltd v Mikhaylyuk [2012] EWHC 3586 paras. 512–526, in which an appeal is apparently pending and which the above brief summary is not intended to prejudice.
Russian law is less draconian. A claimant can recover any loss caused to him by the bribe from either the briber or the person bribed. The bribe itself is not recoverable if no loss has been suffered. There seems to be no principle of accounting for any profit. It also may be a defence that the defendant did not act dishonestly, whatever that may precisely mean.
At a trial which took 76 days before Andrew Smith J there were bribery allegations which were pleaded as claims in tort and were only part of a much more substantial claim mounted by numerous claimants (including the leading Russian shipping companies Sovcomflot and Novorossiysk Shipping Co ("NSC") and various of their subsidiary companies) against Mr Yuri Nikitin and a number of companies which he controlled. That claim included allegations that Mr Nikitin had dishonestly conspired with the Director-General of Sovcomflot, Mr Dimitry Skarga, and the President of NSC, Mr Tagir Izmaylov, to enrich themselves by entering into highly profitable contracts with the claimants. Those contracts included purchases of vessels, sale and leaseback arrangements and time charterparties. Almost all of these numerous contracts had provisions for English law and/or English jurisdiction. There were also claims for knowing receipt of sums properly belonging to the claimants and claims for dishonestly procuring or assisting in breaches of trust or fiduciary duty on the part of Mr Skarga and Mr. Izmaylov, who were also sued in their own right. Those claims failed because the judge held that there was no conspiracy or relevant dishonesty and because the transactions, entered into with the claimants, were not caused by any relevant breach of duty and were all entered into at market rates so that the claimants had, in the event, suffered no relevant loss. Those findings are not now challenged but the result is that the bribery claims, which were also made, have assumed a greater prominence on appeal than they had perhaps at trial.
The judge found two instances of bribery of Mr Skarga by Mr Nikitin. These were (1) payment for holidays enjoyed by Mr Skarga and his family (often in the company of Mr Nikitin) and (2) payment of sums due on a credit card which Mr Nikitin allowed Mr Skarga to use. The worth of these bribes was less than $350,000. It is also said that there was a third instance of bribery which the judge ought to have found but failed to find, namely the payment of about $100,000 towards the purchase of a dacha by Mrs Skarga. The judge's findings were the subject of challenge but this judgment means that that is something which we do not need to decide.
The claimants could, no doubt, have claimed the amount of these bribes in an action in restitution against both Mr Nikitin and Mr Skarga and, indeed, the other defendants. They did not do that but they did claim that they had suffered loss and the amount of the bribes was part of that loss. They also claimed that, by reason of the bribes, both Mr Nikitin and Mr Skarga must account for all the profit that Mr Nikitin and his companies made from various transactions entered into between them and the claimants.
In these circumstances it becomes crucial to determine whether the torts relied on are governed by English law or Russian law. The Judge has found that the relevant transactions were not entered into as a result of the bribes, and that the claimants have in fact suffered no loss as a result of the bribes. If Russian law is applicable, the bribery claims must fail. If English law is applicable it is said that there is an irrebuttable presumption that the transactions were entered into as a result of the bribes and a further irrebuttable presumption that there is loss in, at least, the amount of the bribes. The judge, holding that Russian law was applicable, dismissed the bribery claim.
The relevant law to be applied for determining issues relating to tort is set out in sections 11 and 12 of the Private International Law (Miscellaneous Provisions) Act 1998 ("the Act"). Section 11 states the "general rule" as follows:-
" (1) The general rule is that the applicable law is the law of the country in which the events constituting the tort or delict in question occur.
(2) Where elements of those events occur in different countries, the applicable law under the general rule is to be taken as being—
(a) for a cause of action in respect of personal injury caused to an individual or death resulting from personal injury, the law of the country where the individual was when he sustained the injury;
(b) for a cause of action in respect of damage to property, the law of the country where the property was when it was damaged; and
(c) in any other case, the law of the country in which the most significant element or elements of those events occurred."
Section 12 states a secondary rule that may displace the general rule:
"If it appears, in all the circumstances, from a comparison of—
(a) the significance of the factors which connect a tort or delict with the country whose law would be the applicable law under the general rule; and
(b) the significance of any factors connecting the tort or delict with another country,
that it is substantially more appropriate for the applicable law for determining the issues arising in the case, or any of those issues, to be the law of the other country, the general rule is displaced and the applicable law for determining those issues or that issue (as the case may be) is the law of that other country.
(2) The factors that may be taken into account as connecting a tort or delict with a country for the purposes of this section include, in particular, factors relating to the parties, to any of the events which constitute the tort or delict in question or to any of the circumstances or consequences of those events."
There is thus a two stage process when it is necessary to determine the applicable law of "issues relating to tort" to use the phrase in section 9(1) of the Act. First one has to decide in which country the events constituting the tort in question occurred which, in a case other than that of personal injury or damage to property, is to be the country in which the most significant element or elements of the tort occurred. The general rule is that the law of that country is to be the applicable law. If, however, it appears from a comparison of the significance of the factors connecting a tort with that country and the significance of any factors connecting the tort with another country that it is substantially more appropriate for the applicable law to be the law of that other country, the general rule is displaced. The applicable law is then that of the other country.
Section 11
For the purpose of section 11, therefore, the focus is on the events constituting the tort of bribery. The Judge (para 70) adopted the definition of bribery given by Slade J in Industries & General Mortgage Co v Lewis [1949] 2 AER 573 at page 575G saying:-
"English law...
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