Vadim Don Benyatov v Credit Suisse Securities (Europe) Ltd
Jurisdiction | England & Wales |
Judge | Mr Justice Freedman |
Judgment Date | 25 January 2022 |
Neutral Citation | [2022] EWHC 135 (QB) |
Docket Number | Case No: QB-2018-001043 |
Court | Queen's Bench Division |
[2022] EWHC 135 (QB)
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 |
I Introduction
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.
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.
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.
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.
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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