Lolita Vladimirovna Danilina v (1) Vladimir Anatolevich Chernukhin
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Cockerill |
| Judgment Date | 19 January 2018 |
| Neutral Citation | [2018] EWHC 39 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000117 |
| Date | 19 January 2018 |
[2018] EWHC 39 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURT
OF ENGLAND AND WALES (QBD)
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building
London EC4A 1NL
Mrs Justice Cockerill
Case No: CL-2017-000117
Graham Chapman Q.C. and Tom Ford (instructed by Byrne & Partners) for the Claimant
Jonathan Crow Q.C. and James Weale (instructed by Clifford Chance) for the First and Second Defendants
Iain Pester (instructed by PCB Litigation) for the Third Defendant
Hearing dates: 8 December 2017
Background
The applications before me are for security for, respectively, the First and Second Defendants' costs and the Third Defendant's costs. They arise in relation to a claim brought by the Claimant, Mrs Danilina, which has been listed for a four-week trial at the end of 2018, jointly with another action with which it has extensive factual and legal overlap.
The factual background to these claims and to this application can be found in more detail in the judgments of Teare J at [2017] EWHC 3052 (Comm) and Miss Sonia Tolaney QC (sitting as a Deputy Judge) at [2017] EWHC 2740 (Comm).
For present purposes I need only recite the following facts, which give context to the arguments contained in this judgment.
The current proceedings are proceedings which are related to and have been joined with arbitration proceedings which involve a dispute between the well-known wealthy Russian businessmen Mr Chernukhin and Mr Deripaska. It concerns companies called Navigator Equities Limited (i.e. the Second Defendant); and Filatona Trading Limited which were joint venture vehicles. Under a Shareholders Agreement dated 31 May 2005 (“the SHA”) each of the companies held 50% of Navio Holdings Limited, which in turn held the parties' stake in TGM, the owner of a valuable real estate site in central Moscow.
At the heart of the dispute is the position of Ms. Danilina, who was named as party to the SHA and described as the beneficial owner of Navigator. She was at the time in a close relationship with Mr Chernukhin. It is the case of Mr Chernukhin that she was, to the knowledge of Mr Deripaska, a nominee for Mr Chernukhin. Her case is that she was indeed the beneficial owner of Navigator and a party to the SHA in her own right.
In 2009 a dispute between Mr Chernukhin and Mr Deripaska resulted in, according to Mr Chernukhin, a forcible takeover of TGM's business premises by Mr Deripaska on 14 December 2010. Thereafter, there emerged a proposed deal whereby Mr Deripaska would buy out Mr Chernukhin's interest for US$100 million. But that deal never took place. Mr Chernukhin commenced arbitration proceedings in London pursuant to the terms of the SHA.
Mr Deripaska disputed that Mr Chernukhin was party to the SHA and hence that the tribunal had jurisdiction. This preliminary issue was determined by a very experienced tribunal (J. William Rowley QC, Christopher Symons QC (presiding) and Michael Brindle QC) (“the Tribunal”) in an Award dated 16 November 2016 (“the First Award”). The Tribunal held that Mr Chernukhin was party to the SHA and that Mr Deripaska had put forward a case which he knew to be untrue. The Tribunal also held that Navigator itself had the right to claim relief for the alleged breaches of the SHA.
Following the First Award, Mr Deripaska and Filatona issued proceedings pursuant to s.67 of the Arbitration Act 1996 as against Navigator, Mr Chernukhin and Navio on 14 December 2016 (“the s.67 proceedings”).
These current proceedings arise against the further background of two agreements dated 23 December 2016 and known as the Loan Agreement and the Option Agreement. Under their terms Mr Deripaska agreed to pay Ms. Danilina US$2 million in consideration of Ms. Danilina (i) producing evidence in support of Mr Deripaska's case in the arbitration; (ii) not cooperating with Mr Chernukhin; and (iii) instituting proceedings against Mr Chernukhin for the purpose of establishing that Ms. Danilina, not Mr Chernukhin, was the beneficial owner of Navigator. Mr Deripaska agreed to finance those proceedings. In the event that Ms. Danilina established title to Navigator he promised to pay her a further $10 million for her share of Navigator.
These proceedings (“the Danilina Proceedings”) were then commenced in this court on 22 February 2017. Since July 2017 it has been ordered that the two actions be managed together.
The substantive arbitration hearing took place in March 2017. In a further Award dated 20 July 2017 (“the Second Award”) the Tribunal held that Mr Deripaska had acted oppressively towards Mr Chernukhin and ordered Mr Deripaska to buy out Mr Chernukhin's interest in Navio for $95,181,285.
In these proceedings there are two sets of issues. The first set of issues overlaps with those in the s. 67 proceedings. But Mrs Danilina also brings claims (known as “the Family claim”) based on allegations that, in or around 2007, when her relationship with Mr Chernukhin ended, she and Mr Chernukhin agreed that assets accumulated during the course of their relationship and regarded as family assets would be divided as agreed between them. It is Mrs Danilina's case that she and Mr Chernukhin agreed that Mr Chernukhin would implement this agreement (“the 2007 Agreement”), and that she had mistakenly understood and was led to believe that he was (at least partly) performing this agreement through the creation of a trust (“the Sanderson Trust”); when in fact he did not do so. Mrs Danilina makes claims for breaches of trust, contract and fiduciary duty as against Mr Chernukhin.
It follows that the claims in this action are worth many millions of dollars.
Security for Costs: the context
Pursuant to CPR 25.13(2), the court “may make an order for security for costs” if:
“it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and
(i) one or more of the conditions in paragraph (2) applies …”
For present purposes the relevant sections of paragraph (2) are as follows:
“(a) the claimant is–
resident out of the jurisdiction; but
not resident in a Brussels Contracting State, a State bound by the Lugano Convention, a State bound by the 2005 Hague Convention or a Regulation State, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982 …
(f) the claimant is acting as a nominal claimant, other than as a representative claimant under Part 19, and there is reason to believe that he will be unable to pay the defendant's costs if ordered to do so”.
The Defendants say that an order for security for costs, effectively in the full amount of the anticipated costs of the action, is appropriate here under either or both of these heads.
The “Resident out of the jurisdiction” head
There is no dispute that the jurisdictional hurdle in sub-section (a) is satisfied in this case.
In relation to that sub-section, the Defendants drew my attention to the following points from the White Book at 25.13.6.
Firstly they concede that in general, security for costs under this head is fixed by reference to the additional costs associated with enforcing against the claimant's assets based outside of a Convention jurisdiction: Nasser v United Bank of Kuwait [2002] 1 WLR 1868 (CA). However, that starting point can be departed from. For example in De Beer v Kanaar & Co (No. 1) [2001] EWCA Civ 1318; [2003] 1 WLR 38, at [73], and [89] – [91]. It was there said that where there has been a lack of probity on the part of the claimant and there was a “risk” that an order for costs would be difficult or impossible to enforce, then it may be appropriate to award security representing the entirety of the defendant's estimated costs. In the context of enforcement in Russia, there are no relevant treaties as to enforcement in place.
Secondly they remind me that formal evidence is not always required in order to prove the obstacles or difficulties of enforcement which may arise ( Nasser paragraph 64). Whilst there must be some proper basis for considering that such problems exist, the court will take note of obvious realities.
Thirdly there is the question of the appropriate test. On this they rely on the judgment of Gloster LJ in Ras al Khaimar Investment Authority v Bestfort Developments LLP [2016] EWCA Civ 1099 [2017] CP Rep 9 resolving the controversy which had previously surrounded this issue. This establishes (see paragraph 77) that an applicant seeking an order for security on the basis that he would face obstacles or additional burdens in enforcing an order for costs against the respondent, is not required to prove that such obstacles or additional burdens are “likely”; instead the threshold test the evidence has to satisfy is one of “real risk”.
The Defendants also relied heavily on the portion of the White Book commentary at p 809 which cites Simaan v Pilkington Glass [1988] 2 WLR 761 as authority for the proposition that the court “must” take into account the prospects of success. This, they submitted, authorises and indeed requires me to consider the merits of the application.
My attention was also drawn to the judgment of Gross J (as he then was) in Texuna International Ltd v. Cairn Energy [2004] EWHC 1102 (Ch):
“23(ix). As to the applicant for security demonstrating the risk (Nasser, at [67]) of additional obstacles to or burdens of enforcement in a country outside the zone, evidential requirements will necessarily depend on the facts of the individual case: Nasser, at [64]. Satellite litigation is undesirable so that in some cases the Court will no doubt be content to take notice of obvious realities or to draw commonsense...
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