Recovery Partners GP Ltd v Mr Irakli Rukhadze

JurisdictionEngland & Wales
JudgeLord Justice Popplewell,Lord Justice Phillips,Lady Justice Falk
Judgment Date21 March 2023
Neutral Citation[2023] EWCA Civ 305
CourtCourt of Appeal (Civil Division)
Docket NumberCase Nos: CA-2022-001419, CA-2022-001428
(1) Recovery Partners GP Limited
(2) Revoker LLP
(1) Mr Irakli Rukhadze
(2) Mr Igor Alexeev
(3) Mr Benjamin Marson
(4) Hunnewell Partners (UK) LLP
(5) Hunnewell Partners (BVI) Limited
(6) Park Street (GP) Limited
(7) Park Street (BR) Limited
(8) Park Street (GS) Limited
(9) Park Street (L) Limited

[2023] EWCA Civ 305


Lord Justice Popplewell

Lord Justice Phillips


Lady Justice Falk

Case Nos: CA-2022-001419, CA-2022-001428






[2022] EWHC 690 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Tom Weisselberg KC, Tom Cleaver, Will Bordell and Marlena Valles (instructed by Brown Rudnick LLP) for the Claimants/Respondents

Lord Wolfson KC, Simon Birt KC and Watson Pringle (instructed by Signature Litigation LLP) for the Defendants/Appellants

Hearing dates: 29, 30 November and 1 December 2022

Approved Judgment

This judgment was handed down remotely at 10.30am on 21 March 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.



This is the judgment of the court to which all members have contributed.


These appeals raise issues as to the proper fashioning by the court of an account of profits. The account in question was of the profits the defendants had made in breach of fiduciary duties they owed to Salford Capital Partners Inc (“SCPI”) and/or the claimants 1.


On 1 November 2018, following a “Phase 1” liability trial, Cockerill J (“the Judge”) determined that in 2011 the defendants had wrongfully appropriated a maturing business opportunity from SCPI (which it was intending to exploit through the claimants). The first to third defendants (“the Individual Defendants”) had resigned in bad faith as directors or employees of SCPI and/or the claimants with an intent to compete with SCPI for the opportunity, for which purpose the remaining defendants were subsequently incorporated. The opportunity was to provide “recovery” services to the family members (“the Family”) of the deceased Georgian billionaire Arkadi “Badri” Patarkatsishvili, who had died in February 2008. Those services (“the Recovery Services”) were needed to identify, protect and recover the estate's assets held in various jurisdictions by various structures and individuals.


After the conclusion of the Phase 1 liability trial, the claimants elected to pursue an account by way of remedy, maintaining that the defendants should pay over all proceeds which had come to them via the business opportunity from 2011. The account was taken during a lengthy “Phase 2” trial, following which (and a further ruling by the Judge as to the value of one asset), on 25 July 2022, the Judge ordered each of the defendants to make a specified payment to the claimants (plus interest), provided that the total recoverable from them all was not to exceed US$129,576,750 plus interest.


In her reserved Judgment dated 25 March 2022 the Judge determined numerous issues as to how the account of profits should be fashioned. Those in respect of which permission to appeal was granted (by the Judge or subsequently by Males LJ) were that:

i) contrary to the defendants' contentions, there was no pre-existing profit-sharing agreement (50/50 or otherwise) between the Individual Defendants and SCPI and/or the claimants, but that even if there had been such an agreement (a) it would not have limited the amount for which the defendants were liable to account because any such agreement would not have limited SCPI's interest in the profits, but only determined the payment which the defendants would have been entitled to be paid by SCPI had they not breached their fiduciary duties and (b) it would automatically have been revoked on the individuals' breach of their fiduciary duties;

ii) it was not open to the defendants to limit the temporal scope of the account on the grounds of unconscionable delay on the part of the claimants as the question of delay goes to whether an account should be ordered at all, not the fashioning of the account once it has been ordered; but in any event, even if the delay principle was at large, the claimants were not in a financial position to

commence this type of proceedings earlier than they did and it was in any event reasonable for them to have delayed as they did;

iii) the defendants were, however, entitled to an equitable allowance of 25% of the profits they made from the business opportunity to reflect the value of the work they did to generate those profits.


The defendants appeal against the Judge's decision on two grounds. By ground 1 the defendants challenge each aspect of the Judge's decision in relation to the alleged preexisting profit-share agreement, and argue in the alternative that, even if not binding and legally relevant to the fashioning of the account, there was an understanding as to a 50/50 split which should have dictated the percentage of the equitable allowance made. Ground 2 challenges the Judge's conclusions as to unconscionable delay, contending that it is a freestanding discretionary defence which can (and in this case should) result in the account being temporally limited.


The claimants cross-appeal against the award of the equitable allowance, submitting that the defendants did not argue for the market value of their services and that there had been no disclosure or evidence as to such value. They further contend that the Judge had erred in basing her conclusion (that 25% was the appropriate allowance) on the expectations of various of the defendants and other persons, none of which was relevant.

The background facts


The background facts were set out, considered and determined in considerable detail in the Judge's reserved judgments. For present purposes the following very brief summary will suffice, drawn from those judgments and from the chronology agreed by the parties for this appeal.


SCPI was incorporated in 2001 for the purpose of providing investment management services to Badri and Boris Berezovsky. It was wholly owned by Eugene Jaffe (“Mr Jaffe”). In July 2004 the first defendant (“Mr Rukhadze”) was appointed a director. The claimants were incorporated in the autumn of 2008, following Badri's death, with a view to undertaking the Recovery Services for SCPI. The second defendant (“Mr Alexeev”) was recruited to work on the Recovery Services in December 2008. Both Mr Rukhadze and Mr Alexeev became members of the second claimant (“Revoker”) in 2009, following which Mr Rukhadze ceased to be a director of SCPI.


The Recovery Services were conducted out of two London based offices: the Pall Mall office, run by Mr Jaffe, and the Park Street office, led by Mr Rukhadze and Mr Alexeev. The third defendant (“Mr Marson”) was employed by the second claimant from 5 October 2009 to be its chief legal counsel with specific responsibility for providing legal services to the Family, with an annual salary of £150,000 plus a bonus of £35,000.


Between 2008 and 2011, the Recovery Services were increasingly provided out of the Park Street office, with Mr Rukhadze leading on an ad hoc basis in return for management fees. The claimants accept that during this period Mr Jaffe said that he would allocate 40% of the profits from the Recovery Services to the Park Street team, later increased to 46%, and that Mr Jaffe had said that he was willing to increase it to 50% “should we agree on everything else”. The defendants contend that there was a binding oral agreement for a 50% split.


During 2010 to 2011 Mr Jaffe and Mr Rukhadze fell out. Negotiations began between them and the Family for the Individual Defendants to take on the Recovery Services and for Mr Jaffe/SCPI to receive a lump sum pay-off. No agreement was reached and, on 25 May 2011, Mr Jaffe was informed by the Family that he, SCPI and the claimants would no longer be involved in providing them with Recovery Services. On the same date Mr Marson emailed Mr Jaffe alleging that his employment contract with Revoker had been frustrated (which was taken by Revoker as a repudiatory breach, which it accepted). The following day Mr Rukhadze and Mr Alexeev resigned as members of Revoker.


Thereafter the Individual Defendants, at the request of the Family, continued providing the Recovery Services on an ad hoc basis and created a new corporate structure (named “Hunnewell”) for that purpose: the sixth to ninth defendants were incorporated on 19 July 2012 and the fourth and fifth defendants on 26 and 27 September 2012 respectively. In October 2012 an Investment Recovery Services Agreement (“the IRSA”) was signed between the defendants and the Family. The defendants agreed to provide the Recovery Services in exchange for a carried interest, to which they would only be entitled if they met a threshold of recovering US$500m in proceeds for the Family. The defendants did a huge amount of detailed work on the Recovery Services and the threshold was in due course reached. Following a dispute, a Deed of Termination was signed in 2018 resulting in full and final settlement between the defendants and the Family pursuant to which the defendants received cash and certain assets.


From as early as 27 May 2011 the claimants had reserved their rights against the Individual Defendants, including the right to seek an account of profits, but by the end of the summer 2011 Mr Jaffe had decided against suing them for the time being. It was not until 12 September 2016 that the claimants commenced these proceedings.


Following the Phase 1 liability trial, the Judge:

i) found that the business opportunity of providing the Recovery Services to the Family had belonged entirely to SCPI;

ii) did not...

To continue reading

Request your trial
3 cases
  • Between: Fortunate Drift Ltd Plaintiff v Canterbury Securities, Ltd Defendant
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 17 Agosto 2023 involves an evaluative judgment akin to the exercise of a discretion ( Recovery Partners GP Ltd and another v Rukhadze and others [2023] EWCA Civ 305 (21 March 2023).” [Emphasis added] 164 FDL submitted in their Closing Submissions: “ 531. The entitlement to an equitable allowance is a ......
  • Between: Fortunate Drift Ltd Plaintiff v Canterbury Securities, Ltd Defendant
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 13 Diciembre 2023
    ...The governing principles 13 The relevant law which was most significant is found in a case called Recovery Partners GP Ltd v Rukhadze [2023] EWCA Civ 305 (reported at [2023] Bus LR 646). Before considering this decision, I should try to place in factual context the basis for the claim bet......
  • Between: Fortunate Drift Ltd Plaintiff v Canterbury Securities, Ltd Defendant
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 17 Agosto 2023 involves an evaluative judgment akin to the exercise of a discretion ( Recovery Partners GP Ltd and another v Rukhadze and others [2023] EWCA Civ 305 (21 March 2023).” [Emphasis added] 164 FDL submitted in their Closing Submissions: “ 531. The entitlement to an equitable allowance is a ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT