Vadim Don Benyatov v Credit Suisse Securities (Europe) Ltd

JurisdictionEngland & Wales
JudgeMr Justice Freedman
Judgment Date25 January 2022
Neutral Citation[2022] EWHC 135 (QB)
Docket NumberCase No: QB-2018-001043
CourtQueen's Bench Division
Between:
Vadim Don Benyatov
Claimant
and
Credit Suisse Securities (Europe) Limited
Defendant

[2022] EWHC 135 (QB)

Before:

Mr Justice Freedman

Case No: QB-2018-001043

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Charles Ciumei QC, Andrew Legg and Naomi Hart (instructed by Scott+Scott (UK) Limited) for the Claimant

Paul Goulding QC, Paul Skinner and Emma Foubister (instructed by Cahill Gordon & Reindel (UK) LLP) for the Defendant

Hearing dates: 8, 9, 10, 11, 14, 15, 16, 17, 21, 22, 23, 24, 25, 28, 29 & 30 June and 8 & 9 July 2021

Approved Judgment

SECTION NUMBER

SUBJECT

PARAGRAPH NUMBER

Contents

I

Introduction

1–8

The facts

(a) Mr Benyatov's background and experience

9–11

(b) Romania in the 2000s

12–17

(c) British Embassy in Romania (2002–2006)

18–19

(d) EU Delegation in Romania (2002–2006)

20

(e) The Petrom privatisation (2002–2004)

21–23

(f) The Distrigaz Nord and Distrigaz Sud privatisations (2002–2004)

24

(g) The Electrica Banat and Electrica Dobrogea privatisations (2003–2004)

25

(h) Mr Benyatov's role advising Enel on the EMS privatisation (2005–2006)

26

(i) Promotion of Mr Benyatov

27–28

(j) Contract of employment

29–32

(k) The circumstances of Mr Benyatov's arrest and conviction

33–37

(l) Mr Benyatov's move to the Fixed Income Division in 2012

38

(m) Mr Benyatov provisionally selected for redundancy

39

(n) The Romanian Court's decision to convict Mr Benyatov

40

(o) The revocation of Mr Benyatov's FCA authorisation

41–42

(p) The Romanian Court's decision on Mr Benyatov's appeal

43–44

(q) Mr Benyatov's dismissal for redundancy

45–48

(r) Mr Benyatov's move to the United States in January 2015

49

III

Assessment of the evidence

50–51

(a) Mr Benyatov

52–54

(b) Unsatisfactory features

55–56

(i) The need for Mr Benyatov to serve witness summaries

57–64

(ii) Witnesses of fact called by the Bank who did not work for the Bank

65–75

(iii) The selection of witnesses called by the Bank from its current and ex-employees

76–89

IV

Expert Evidence

90

(a) Professor Deletant

91–93

(b) Mr McGregor

94–96

(c) Mr Worman

97–100

(d) Dr Donald

101–103

V

Mr Benyatov's case as to a duty of care

104–111

VI

The law as to a duty of care

(a) The law as to the existence or non-existence of a duty of care

112–118

(b) Restrictive approach to duty to prevent pure economic loss

119–131

(c) Cases where duty fashioned to take reasonable care to protect employees from pure economic losses

132–147

(d) Various general propositions of law

148

(e) Application of the above to the instant case

149–156

VII

The facts relating to a duty of care

(a) The case for Mr Benyatov

157–160

(b) The case for the Bank

161–165

(c) Overview

166–167

(d) Romania as a “high-risk” country and the degree of perceived risk

168–175

(e) High-risk transactions and the degree of perceived risk

176–178

(f) Alleged warning flags in relation to Mr Benyatov's work in Romania

179–180

(i) December 2004 reports of corruption investigations into Petrom

181

(ii) The Rompetrol matter from June 2005

182–188

(iii) Linklaters' email about the anonymous letter in September 2005

189–190

(iv) Petrom press allegations June 2006

191–195

(v) SRI investigations into Petrom in June 2006

196–201

(vi) Burkey intelligence from the Bulgarian secret services in Sept/ Oct 2006

202–203

(vii) Matt Harris approval of travel to Romania in November 2006

204–205

(g) Discussion regarding the amber or red flags

206–216

(h) Risk assessment not standard

217–222

(i) Features specific to Mr Benyatov

223

(j) Conclusion as regards duty of care

228–231

VIII

The argument that Mr Benyatov had the ultimate responsibility in respect of risk assessment

(a) Risk assessment processes within Credit Suisse

232–241

(b) The effect of Mr Benyatov's contractual duties on any duty of care of the Bank

242–244

(c) Responsibility for risk

245–248

(d) Conclusion on duty of care

249

Breach of duty of care

250–252

(a) Risk assessment

253–272

(b) Other allegations of breach considered

(i) Contacting third parties (para. 52.1.2. AMPOC)

273–276

(ii) The suitability of Mr Benyatov (para. 52.1.3 AMPOC)

277–281

(iii) Stamen Stantchev (para. 52.1.4 AMPOC)

282–289

(iv) Failure to have a risk assessment review para. 52.2 AMPOC

290

(v) Surveillance (para. 52.5 AMPOC)

291

(vi) Conclusion on breach of duty of care

292

X

The defence of limitation

293–305

XI

The Contractual indemnity claim

(a) Indemnity: introduction

306–307

(b) The general indemnity implied into an employment/agency relationship

308–311

(i) Analysis of implied indemnity as a matter of law

312–318

(ii) Mr Benyatov's submissions

319–321

(iii) The Bank's submissions

322–325

(iv) Discussion

326–347

(c) Indemnity in para. 19.2

348–361

(d) Indemnity in fact

362–368

(e) Other arguments about an indemnity

369–372

(f) Conclusion

373

XII

Effect of criminal convictions on the issues in this case

(a) Do the convictions stand as evidence against Mr Benyatov?

374–388

(b) The rule in Hollington v Hewthorn

389–393

(c) Conclusion

394–396

XIII

Causation of loss

397–400

XIV

Quantum

401–430

XV

Conclusion

431–432

Mr Justice Freedman

I Introduction

1

Mr Benyatov was a Managing Director of the Defendant bank (“the Bank”). Mr Benyatov is a US citizen, but he was based in London. Prior to the events giving rise to the claim, he was a successful investment banker specialising in the energy sector and especially involved in privatisations in Eastern Europe. This case arises following his arrest in Bucharest on 22 November 2006 whilst working for the Bank, his incarceration for 56 days, his having to remain in Bucharest until August 2007, and his subsequent trial and conviction in absentia in 2013 and sentence to 10 years of imprisonment. His appeal in January 2015 was allowed in part, and his sentence was varied to 4 1/2 years. The result of his conviction was that Mr Benyatov's status as an approved person with the FCA came to an end. Fearing the imposition of a European Arrest Warrant, he went to live in the United States where he still lives. He was made redundant on 13 June 2015. He has been unable to secure employment since then. There is an ongoing appeal to the European Court of Human Rights (“ECHR”), but this has still not been heard.

2

Absent any criticism of Mr Benyatov's conduct, and indeed with the Bank assisting Mr Benyatov in his defence and appeals, Mr Benyatov has brought this action against the Bank. He claims career loss of earnings pursuant to an indemnity to be implied into his contract of employment. The Bank challenges this and says among other things, that this goes beyond the scope of any indemnity that could be implied in a contract of employment. In the alternative, Mr Benyatov claims damages for the Bank's breaches of a duty of care in tort to protect him from criminal conviction in the performance of his duties for the Defendant in failing to assess the risks for Mr Benyatov in Romania which led to his conviction. The amount of the claim is very considerable. In the Amended Particulars of Claim (“AMPOC”), the sum claimed was about $86 million then equating to about £66 million. It is intended to reflect loss of potential earnings for the remainder of Mr Benyatov's working life. The allegations of duty of care, negligence, causation of loss and damage are all challenged by the Bank.

3

There have been long lists of issues prepared by both sides before the trials, but nothing has been agreed in those lists. The Court has been assisted by very detailed closing arguments both in writing and orally, but the arguments have not followed expressly the structure of even their own lists of issues. That has been sensible because otherwise there might have been many tens of issues to be decided without having an easily comprehensible structure. By following principally the structure of the written and oral arguments, the Court has endeavoured to cover the primary and other issues in the case to the extent that adjudication was required.

4

This is a case where there has been a large amount of factual evidence and expert evidence as regards (a) the nature and extent of the risk to which Mr Benyatov was exposed, (b) whether and how this ought to have been assessed by the Bank in advance of Mr Benyatov's arrest, and (c) the steps which the Bank ought to have taken in the light of such risk.

5

The evidence before the Court has comprised the following:

(1) Evidence adduced by Mr Benyatov from three former employees of the Bank where witness summaries had been served,...

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