Vadim Don Benyatov v Credit Suisse (Securities) Europe Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Underhill,Bean LJ,Singh LJ |
| Judgment Date | 17 February 2023 |
| Neutral Citation | [2023] EWCA Civ 140 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2022-000447 |
[2023] EWCA Civ 140
Lord Justice Underhill
(Vice-President of the Court of Appeal (Civil Division))
Lord Justice Bean
and
Lord Justice Singh
Case No: CA-2022-000447
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Justice Freedman
Royal Courts of Justice
Strand, London, WC2A 2LL
Charles Ciumei KC and Andrew Legg (instructed by Scott + Scott UK LLP) for the Appellant
Paul Goulding KC, Paul Skinner and Emma Foubister (instructed by Cahill Gordon & Reindel (UK) LLP) for the Respondent
Hearing dates: 11–13 October 2022
Approved Judgment
This judgment was handed down remotely at 10.30am on 17 February 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
| INTRODUCTION | 1–9 | |
| THE NEGLIGENCE CLAIM | 10–99 | |
| THE PLEADED CASE | 10–19 | |
| THE BANK'S DEFENCE | 20–23 | |
| THE JUDGE'S DECISION | 24–32 | |
| THE APPEAL | 33 | |
| GROUND 1: ERROR OF LAW | 34–62 | |
| (1) Reliance on the Bank's “Subjective Understanding” | 35–40 | |
| (2) Assumption of Responsibility | 41–56 | |
| (3) Rihan | 57–61 | |
| Conclusion | 62 | |
| GROUND 2: ERRORS OF FACT | 63–89 | |
| Head A | 66–73 | |
| Head B | 74–79 | |
| Head C | 80–82 | |
| Head D | 83–88 | |
| Conclusion | 89 | |
| GROUND 3: LIMITATION | 90–97 | |
| CONCLUSION ON THE NEGLIGENCE CLAIM | 98–99 | |
| THE CONTRACTUAL INDEMNITY CLAIM | 100–155 | |
| THE PLEADED INDEMNITIES | 100–109 | |
| PARA. 19.1: THE GENERAL INDEMNITY | 110–153 | |
| Implication as a Matter of Law | 110–146 | |
| Implication as a Matter of Fact | 147–153 | |
| PARA. 19.2: THE UNLAWFUL ENTERPRISE INDEMNITY | 154–155 | |
| CONCLUSION | 156 |
INTRODUCTION
This appeal raises an issue about the circumstances in which an employer may be liable to compensate an employee for loss of earnings caused by the act of a third party in consequence of the employee doing their job. The facts giving rise to the issue can be sufficiently summarised by way of introduction as follows:
(1) The Claimant, who is the Appellant before us, was born in 1966. His career, until the events which give rise to his claim, has been as a banker. From 1997 he was employed by the Respondent, Credit Suisse Securities (Europe) Ltd (“the Bank”). In 2005 he became a Managing Director in its Investment Banking Department, based in London. In April 2006 he became Head of European Emerging Markets. He was evidently an able and successful professional.
(2) From about 2002 onwards the Claimant was involved in privatisation consultancy work being carried out by the Bank in Romania (though he was never based there). From 2005–2006 he worked on a project in which it was advising a company called Enel SpA (“Enel”) about the purchase of a state-owned electricity company called Electrica Muntenia Sud (“EMS”).
(3) On 22 November 2006, while he was on a visit to Romania, the Claimant was arrested on suspicion of criminal wrongdoing in connection with the EMS privatisation. He was held in custody until 23 January 2007 and thereafter kept under house arrest and prohibited from leaving the country until August 2007, when he returned to England.
(4) On 7 January 2007 he was charged by Romanian prosecutors, along with two other Credit Suisse employees (Mr Flore and Mr Susak), with “economic or commercial espionage” and “the initiation and establishment of an organised criminal group”. In broad terms, the alleged wrongdoing consisted of obtaining for Enel confidential information about the first-round bids of its competitors in the EMS privatisation. The Claimant maintained, and continues to maintain, that he did nothing wrong, as a matter either of international banking practice or of Romanian law and that his prosecution was politically motivated.
(5) The allegations against the Claimant were thoroughly investigated by the Bank. They were satisfied that he and the other employees charged had indeed done nothing wrong. They supported him fully in the ongoing criminal proceedings in Romania, which were prolonged, and instructed lawyers at their expense to conduct his defence. He remained employed by the Bank.
(6) On 15 October 2013 the Claimant was notified by the Bank that he had been provisionally selected for redundancy. He was placed on garden leave pending consultation. For reasons which I need not go into, his employment did not in fact terminate until 13 June 2015.
(7) On 3 December 2013 the Claimant was found guilty by the Romanian court and sentenced to ten years' imprisonment.
(8) In accordance with its regulatory obligations the Bank forthwith notified the Financial Conduct Authority (“the FCA”) of the Claimant's conviction. In fact, because he was by then on garden leave and not conducting any regulated activities, the FCA did not take any action as regards his registration. But it is common ground that the conviction is in practice an insuperable obstacle to his ability to work as a regulated financial professional either in this country or elsewhere.
(9) With the continuing support of the Bank, the Claimant appealed against his conviction. On 27 January 2015 the Romanian Appeal Court overturned the original conviction but substituted a conviction for “the instigation of disclosure of professional secrets or non-public information”. It reduced his sentence to 4 1/2 years. The Claimant was not in Romania and the sentence has never taken effect.
(10) There is no right to a further appeal, but the Claimant has made an application (again, with the support of the Bank) to the European Court of Human Rights complaining that the proceedings against him were vitiated by serious failings of due process contrary to article 6 of the European Convention on Human Rights (“the Convention”). Although the application was lodged in July 2015 we were told that he is still awaiting an admissibility decision.
(11) In January 2015 the Claimant moved to the United States of America. If he had remained in this country, or elsewhere in the European Union, he would have been liable to be arrested under a European Arrest Warrant and to be returned to serve his sentence in Romania.
(12) The Claimant has not been able since the termination of his employment by the Bank to find work of a kind which could generate earnings at anything like the level that he could have expected if he had continued to work as a banker.
Fuller details can be found in the judgment under appeal ( [2022] EWHC 135 (QB), [2022] 4 WLR 54), and I shall have to return to some aspects of the story later in this judgment.
The present proceedings were commenced on 22 January 2018. It is the Claimant's case that the Bank is liable to compensate him for the loss of earnings that he has suffered as a result of his conviction. He originally estimated that loss at over £66m.
In bare outline, the Claimant advanced his claim on two alternative bases:
— that it was an implied term of his contract of employment that the Bank would indemnify him against a loss of the kind suffered – “the contractual indemnity claim”; and
— that the Bank was in breach of a duty to take reasonable care to avoid the risk of his being convicted and that he is entitled to damages for that breach – “the negligence claim”.
The fundamental difference between the two claims is that the latter involves fault on the part of the Bank – that is, in failing to take steps to protect him against being convicted by the Romanian court – whereas the former involves no such fault and depends simply on the fact that the conviction arose out of his doing the job for which the Bank employed him.
The claim had a highly contested interlocutory history, including an unsuccessful application by the Bank to strike it out, which generated two hearings before Mr Roger ter Haar QC, sitting as a Deputy High Court Judge.
The trial eventually took place before Freedman J over eighteen days in June and July 2021. He heard evidence not only from numerous witnesses of fact but from four expert witnesses. The question on which expert evidence was permitted was
“[a] the risks of doing business in Romania between 1 January 2005 and 22 November 2006, in particular the risk of covert surveillance, the risks of wrongful and politically motivated criminal proceedings being brought against foreign businessmen and [b] the extent to which any such risks were publicly known, reasonably discoverable and could be mitigated by businessmen and/or their employers working in Romania during this time.”
(I have inserted the [a] and [b].) The Claimant's experts were Professor Dennis Deletant and Mr Philip Worman, and the Defendant's Mr Neil McGregor and Dr Dominick Donald. As I understand it, Professor Deletant and Mr McGregor were supposed to focus more on “aspect [a]” and Mr Worman and Mr Donald more on “aspect [b]”, but the dividing line does not seem very clear-cut. Several of the factual witnesses also clearly had relevant expertise in a broader sense: they included Mr Quinton Quayle, the British ambassador to Romania at the relevant time, and Mr Michael Schilling, the manager of Linklaters' office in Bucharest from 2003 to 2007.
On 25 January 2022 Freedman J handed down a judgment dismissing the claim in its entirety. The judgment runs to over 120 pages, structured in fifteen parts, and deals with exemplary clarity and thoroughness with both the factual and the legal issues. The Judge considered the question of quantum in case he was wrong on liability and assessed the Claimant's loss of earnings as a result of his conviction, and thus his inability to work again as a banker, as being of the order of £12.5m.
This is the Claimant's appeal against the dismissal of his claim, with permission granted by Bean LJ. He has been...
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