New Century Media Ltd v Mr Vladimir Makhlay
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Carr |
| Judgment Date | 21 November 2013 |
| Neutral Citation | [2013] EWHC 3556 (QB) |
| Docket Number | Case No: HQ13X00932 |
| Court | Queen's Bench Division |
| Date | 21 November 2013 |
[2013] EWHC 3556 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon Mrs Justice Carr DBE
Case No: HQ13X00932
Mr Clive Wolman (instructed by Memery Crystal) for the Claimant
Mr Paul Stanley QC (instructed by Anthony Gold Solicitors) for the Defendant
Hearing dates: 5th, 6th and 7th November 2013
Introduction
New Century Media Limited ("NCM") is an independent communications consultancy. It acts mainly for corporate, city and political clients to achieve strategic communications and business objectives. It is owned by its chairman, Mr David Burnside.
In June 2012 NCM entered into a services contract with the Defendant, Mr Vladimir Makhlay (also sometimes referred to as Mr Vladimir Makhlai) ("Mr Makhlay") ("the contract"). Mr Makhlay is a prominent and wealthy retired Russian businessman. His background is in chemical production businesses in Russia. He came to the United Kingdom in 2005 seeking asylum, and was granted an investor visa on the basis of having assets of at least £1m in the United Kingdom. He was concerned about media coverage of his affairs here and in Russia and engaged NCM to provide him with high level strategic advice, covering all areas of media relations and public affairs activities. He also wanted to achieve full British citizenship.
The relationship between the parties subsequently broke down, leading NCM to issue proceedings against Mr Makhlay for debt and/or damages, interest and costs. Judgment in default on liability was entered on 18 th April 2013, with quantum to be assessed ("the judgment").
NCM has been represented by Mr Clive Wolman, and Mr Makhlay by Mr Paul Stanley QC. I am grateful to both counsel for their assistance.
The contract
On 20 th June 2012 Mr Burnside wrote to Mr Makhlay to confirm their " client consultancy relationship". He stated that NCM would provide high level strategic advice " on an annual contract with immediate effect at £75,000 per month, invoice monthly to be paid on 20th of the month (first payment on 20 th June 2012)". The letter asked Mr Makhlay to sign and return a copy of the enclosed letter.
The enclosed letter, also dated 20 th June 2012 and which Mr Makhlay duly signed, provided again for the provision of services "on an annual contract with immediate effect at £75,000 per month, invoiced on the first of every month and payable within 30 days. There will be a strategic review of activities in 6 months of contract commencement".
NCM's services were to include:
a) Personal discrete strategic counsel on confidential issue management and reputation management from Mr Burnside;
b) Personal introductions to an influential network of contacts that could assist Mr Makhlay in his strategic objectives;
c) Personal introductions to individuals within international business, finance, media and politics;
d) A specific premium lifestyle management service;
e) Support of the corporate objectives of TogliattiAzot Corporation, a Russian chemical business owned by Mr Makhlay (or at least a business in which he had an interest).
f) Vetting and due diligence on individuals and corporations to assist Mr Makhlay ahead of introductions and meetings;
g) Management support using NCM's network and understanding of the national governmental, regulatory and administrative systems, including support for Mr Makhlay's application for a British passport;
h) The making of recommendations about relevant philanthropic and partnership opportunities.
NCM assigned the following personnel to the contract:
a) Mr Burnside;
b) Alexander Nekrassov ("Mr Nekrassov Junior"), NCM's director of financial services, a specialist in crisis communication and issue management with particular experience of Russian clients. As will be seen below, his father was also a consultant to NCM;
c) Nicola Krafft, NCM's accounts director with experience of managing global financial and professional services clients;
d) Anton Samoylenko, an account executive with a specific focus on communications advice. He was appointed by NCM in June 2012 as a specialist staff member specifically to work on Mr Makhlay's matters.
Subsequent events
Mr Makhlay duly paid the monthly invoices for June, July, August and September 2012, each time in the sum of £75,000. At a meeting at NCM's offices on 18 th October 2012 NCM produced a three month action plan for management of Mr Makhlay's global reputation, along with two additional documents, one headed " Proposed office sites for Vladimir Makhlay" and one on philanthropic proposals. Minutes of the meeting were taken with action points listed.
On the same day Mr Makhlay wrote a letter asking for progress reports against each area of service to be provided, as set out in the contract. He also suggested that he had been misled by NCM into changing his law firm. He said that he saw no need for philanthropic activity at that point.
The next invoice (dated 20th October 2012) went unpaid. On 22 nd October 2012 another meeting took place. NCM provided a progress report and a quarterly activity report. The accusations that Mr Makhlay had made were rejected in a covering letter handed to Mr Makhlay.
On 24 th October 2012 Mr Makhlay wrote to say that he carefully reviewed NCM's documents. He had come to the conclusion that all of the themes in the documents had lost their relevance " for today". He went on:
" In this regard, I propose to terminate and null the contract and issued power of attorneys between the New Century Media and myself, Vladimir Makhlay, from October 21 st 2012."
He asked for return of all his documentation without transfer to any third party.
On the same day Mr Burnside asked Mr Makhlay to reconsider, expressing sadness at receipt of Mr Makhlay's letter. He questioned the advice that Mr Makhlay was receiving from his previous advisers.
The November and December 2012 invoices went unpaid. In response to the November 2012 invoice Mr Makhlay's representative stated that she had been informed that all work between the parties had " finished". On 7 th December 2012 Mr Burnside chased Mr Makhlay for a response to his letter of 24 th October 2012. He stated that he wanted to continue advising him. He pointed to Mr Makhlay's continued contact with those to whom he had been introduced by NCM, and other achievements reached. He asked to meet to discuss the way forward.
On 20 th December 2012 solicitors for NCM wrote seeking payment of the then outstanding £150,000. The January 2013 invoice went unpaid.
On 7 th February 2013 solicitors for NCM wrote to Mr Makhlay setting out the background, contending that it was not open to Mr Makhlay unilaterally to terminate the agreement before one year had elapsed, and stating:
" In the circumstances, your conduct, culminating in your unlawful purported termination of the Agreement and continuing failure to make payment to our client of sums due, clearly amounts to a repudiatory breach of contract. We hereby notify you that this repudiatory breach is accepted by our client, bringing the Agreement to an immediate end."
The letter went on to claim loss and damage in the sum of £602,145.80, and requested payment within 14 days. I have not been shown any response to that letter.
The Particulars of Claim and default judgment
Proceedings were commenced on 1 st March 2013. After an extension of time Particulars of Claim were filed and served on 21 st March 2013. The Particulars of Claim stated, amongst other things,:
a) that it was an express term of the contract that the contract was for a fixed period of one year, with a strategic review of activities six months from commencement (paragraph 5);
b) that there was no provision for early termination (paragraph 6);
c) that there were implied conditions and/or terms of the Agreement that Mr Makhlay:
i) would take all necessary steps to co-operate with NCM;
ii) would reimburse NCM for all expenses reasonably incurred by NCM on behalf of Mr Makhlay in the performance of its obligations under the contract (paragraph 7);
d) that NCM duly performed its obligations under the contract (paragraph 9);
e) that Mr Makhlay breached the contract by failure to co-operate and by purporting to terminate the contract by his letter of 24 th October 2012 (paragraphs 11, 12, and 13);
f) such repudiatory breaches were not initially accepted but were not waived (paragraphs 14 and 15);
g) however in continued and/or further repudiatory breach Mr Makhlay failed to pay sums due from 20 th October 2012 onwards and failed to co-operate (paragraph 16);
h) Mr Makhlay's repudiatory breaches were accepted by NCM on 7 th February 2013 (paragraph 18).
No defence or acknowledgment of service having been served, on 5 th April 2013 NCM requested entry of a default judgment, which judgment was entered on 18 th April 2013, as set out above. No attempt has been made at any stage to set aside the default judgment under CPR r.13.3 or otherwise.
The result is that there is a final and conclusive judgment on liability in NCM's favour on the basis of the Particulars of Claim.
Schedule of loss and counter-schedule
NCM claimed the following:
a) In respect of unpaid invoices for the monthly fee from October 2012 to January 2013: £300,000;
b) In respect of outstanding unpaid expenses, a sum of £560 for IT services and £1,585.80 for translation services;
c) Damages in the sum of £291,161.29 for losses allegedly incurred due to early termination of the contract (£300,000 less savings of £8,838.71).
There is evidence from NCM of additional losses, in the form of being unable to expand or invest as planned and, for example, from being unable to act for those with a conflict...
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