Novoship (UK) Ltd v Nikitin
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore |
| Judgment Date | 04 July 2014 |
| Neutral Citation | [2014] EWCA Civ 908 |
| Docket Number | Case No: A3/2013/0249, A3/2013/0250, A3/2013/0294, A3/2013/0249(C) & A3/2013/0250(C) |
| Court | Court of Appeal (Civil Division) |
| Date | 04 July 2014 |
[2014] EWCA Civ 908
The Right Honourable Lord Justice Longmore
The Right Honourable Lord Justice Moore-Bick
and
The Right Honourable Lord Justice Lewison
Case No: A3/2013/0249, A3/2013/0250, A3/2013/0294, A3/2013/0249(C) & A3/2013/0250(C)
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE CHRISTOPHER CLARKE
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Steven Berry QC & Mr Nathan Pillow (instructed by Lax & Co LLP) for the Appellants
Mr Michael Brindle QC, Mr Dominic Dowley QC, Mr Charles Dougherty QC & Ms L Crowley (instructed by Ince & Co LLP) for the Respondents
Hearing dates: 9 th, 10 th, 11 th, 12 th, 16 th & 17 th June 2014
This is the judgment of the court to which we have all contributed.
Introduction
When Odysseus penetrated the underworld, he encountered, among many other ghosts, that of Eriphyle whom Homer (Od. 11.326) calls "hateful" because she had been bribed by Polyneices with Aphrodite's golden necklace to reveal the whereabouts of her husband, so that he could be found and compelled to march on Thebes where he foresaw he would be killed. This may or may not be the first recorded instance of a successful bribe but, centuries later, bribery is still prevalent and pervasive however much legislators and judges try to stamp it out. This case centres on the activities of a Mr Mikhaylyuk, a Mr Nikitin (both of Russian origin) and a Venezuelan, Mr Ruperti.
Mr Mikhaylyuk acted as the General Manager and Commercial Manager of the first respondent ("NOUK") from October 2002. He was also a director of NOUK from November 2003. Mr Mikhaylyuk was responsible for (among other things) negotiating the charters of vessels owned by companies within the Novoship group (to which we refer when necessary as "NSC"), the remaining respondents. Mr Mikhaylyuk owed fiduciary duties both to NOUK and to the relevant ship-owning companies.
While he held the position of Manager, Mr Mikhaylyuk acted in a corrupt and dishonest way. He arranged a series of schemes by which he defrauded the respondents and enriched himself and others – including the first appellant, Mr Yuri Nikitin – by the payment of bribes given to him by those who chartered the respondents' vessels. The various schemes included dishonesty on the part of Mr Mikhaylyuk which is not the subject of this appeal, including (1) the payment of bribes to Mr Mikhaylyuk by the charterers of the TULA (the bribes in question, totalling some US$158,000, being paid to a secret offshore account in Nevis in the name of Mirador Shipping Inc, a Nevisian company) and (2) the payment of bribes to Mr Mikhaylyuk by brokers involved in the charters of various vessels to Stena Bulk (these bribes, totalling some US$1.2 million, being paid to a secret offshore account in Nevis in the name of Pulley Shipping Limited, a further Nevisian company set up by Mr Mikhaylyuk). More importantly, a third scheme related to the chartering of 5 vessels ostensibly to Petroleos de Venezuela SA ("PDVSA") (the Venezuelan national oil company) but in reality to a company or companies owned and controlled by Mr Wilmer Ruperti. These vessels were then sub-chartered to PDVSA by the Ruperti companies at substantially higher rates giving a profit of some $58 million which Mr Ruperti has been found liable to disgorge to the respondents. These Ruperti/PDVSA charters commenced in late 2002, subsequent to Mr Mikhaylyuk's appointment as General Manager of NOUK in October 2002.
The dishonest involvement of the appellants in these Ruperti/PDVSA charters arose because Mr Mikhaylyuk required Mr Ruperti, as the price of obtaining the charters, to make substantial payments of bribes not only to himself but also to Amon International (the seventh defendant and second appellant). Amon was a British Virgin Islands company owned and controlled by Mr Nikitin.
The bribes paid by Mr Ruperti to Mr Mikhaylyuk were (like the Tula and Stena bribes) paid to the accounts of Mirador Shipping and Pulley Shipping in Nevis. The total payments amounted to some $1.7 million. The bribes demanded by Mr Mikhaylyuk for the benefit of Amon/Mr Nikitin on the PDVSA/Ruperti charters amounted to $410,304.39.
In relation to the payments to Amon arranged between Mr Mikhaylyuk, Mr Ruperti and Nikitin, Christopher Clarke J found as follows:-
i) Mr Mikhaylyuk required Mr Ruperti, in connection with (or, as the learned judge put it, as the "price for") the Ruperti/PDVSA charters, to make secret payments between 27 th February 2003 and 16 th January 2004 to Amon for the benefit of Mr Nikitin in a total sum of $410,379.00. The respondents contended that it was to be inferred that the payments made were in fact significantly greater, on the basis that they probably represented a percentage of the total hires paid for the chartered vessels but the judge held that there was no evidence to support the respondents' contention that Mr Nikitin or Amon were paid more than $410,379.
ii) The explanation for the payments by Mr Ruperti to Amon put forward by Mr Nikitin was that, so far as he could recall or reconstruct, the payments were remuneration for introductions which he (Mr Nikitin) had made in order to facilitate Mr Ruperti's doing business with Russian oil traders or producers. (Mr Ruperti and Mr Mikhaylyuk gave, in their pleadings and witness statements, similar, although not entirely consistent, accounts, but neither gave evidence at trial.) By reference to the documents and the inherent probabilities, the judge rejected all these accounts as untruthful and concluded that Mr Nikitin, Mr Mikhaylyuk and Mr Ruperti had put the explanation forward in order to cover up the dishonest character of the payments to Amon.
iii) Of particular significance was a series of secret emails between Mr Mikhaylyuk and Mr Ruperti which showed Mr Mikhaylyuk demanding payments from Mr Ruperti in connection with the Ruperti/PDVSA charters. This email correspondence (the so-called "Misha Fu emails") was conducted via a secret email account used by Mr Mikhaylyuk which Mr Mikhaylyuk dishonestly sought to conceal from the respondents in this litigation. The emails made plain that Mr Mikhaylyuk was requiring payments to be made to Mr Nikitin (as well as himself) and was suggesting the creation of "side letters" to give a false explanation or "cover" for the payments. The judge dealt with these emails in great detail; he concluded that neither Mr Nikitin nor Amon had played any part in arranging the PDVSA charters and also that Mr Nikitin had no knowledge of the secret Misha Fu email account.
iv) The payments which Mr Ruperti made to Amon were commissions on the hire from the Ruperti/PDVSA charters which Mr Mikhaylyuk required Mr Ruperti to make in order to secure those vessels (on which Mr Ruperti was then able to make substantial profits by means of the sub-charters to PDVSA). The judge made the following critical findings:-
"358. The most likely explanation is that these [ sc, the payments to Amon/Mr Nikitin] were commissions on the hire in respect of the PDSVA vessels, which had to be kept secret because they were being paid by Mr Ruperti at the behest of Mr Mikhaylyuk and were, thus, payments made by a third party on the direction of the agent of the principal with whom the third party was dealing. For that reason they were discussed in the secret Misha Fu email account which was used by Mr Mikhaylyuk and Mr Ruperti to deal with payments for the benefit of Mr Nikitin (Amon), Mr Mikhaylyuk and others.
…
361. Whilst I cannot be satisfied that Mr Nikitin was aware of the contents of the Misha Fu account it seems to me he must have been aware of the proposal to make Amon the beneficiary of commission on hire on the PDVSA charters. The suggestion that such a proposal occurred without Mr Nikitin's knowledge … is implausible. There would have been no reason for Mr Mikhaylyuk and Mr Ruperti to keep it from him.
…
390. I … infer that Mr Nikitin knew that the money coming to Amon was coming from Mr Ruperti's companies, and that the charters in respect of which commission was being paid were charters to Mr Ruperti's company. I regard it as wholly improbable that whereas Mr Mikhaylyuk and Mr Ruperti knew what the monies paid to Amon represented, Amon and Mr Nikitin did not."
v) The likely explanation for these payments being made to Amon/Mr Nikitin at the direction of Mr Mikhaylyuk was either (1) that Mr Nikitin had provided (or held out the prospect of) some benefit to Mr Mikhaylyuk or (2) that Mr Mikhaylyuk was seeking to benefit Mr Nikitin in the hope of some future advantage (para 389).
vi) At precisely the time that Mr Mikhaylyuk, Mr Ruperti and Mr Nikitin were acting dishonestly in this way in connection with the PDVSA/Ruperti charters by defrauding Mr Mikhaylyuk's principals, Mr Mikhaylyuk and Mr Nikitin were also arranging charters of other NSC vessels to Mr Nikitin's company, Henriot Finance Ltd, (Henriot"), a second British Virgin Islands company owned and controlled by Mr Nikitin. It is these Henriot charters, and the profits which Mr Nikitin and his companies made from them and for which the judge held the appellants liable to account to the respondents, which are the subject matter of the grounds of appeal for which the judge himself granted permission to appeal.
As regards the connection between the PDVSA charters and the Henriot charters, the learned judge found:-
"505. The likelihood...
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