Vladimir Anatolevich Chernukhin v Lolita Vladimirovna Danilina

JurisdictionEngland & Wales
JudgeLord Justice Longmore,Sir Stephen Richards,Lord Justice Hamblen
Judgment Date30 July 2018
Neutral Citation[2018] EWCA Civ 1802
CourtCourt of Appeal (Civil Division)
Docket NumberCase Nos: A3/2018/0350 & A3/2018/0348
Date30 July 2018
Between:
(1) Vladimir Anatolevich Chernukhin
(2) Navigator Equities Limited
First & Second Appellants
(3) Vadim Kargin
Third Appellant
and
Lolita Vladimirovna Danilina
Respondent

[2018] EWCA Civ 1802

Before:

Lord Justice Longmore

Lord Justice Hamblen

and

Sir Stephen Richards

Case Nos: A3/2018/0350 & A3/2018/0348

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURT

OF ENGLAND AND WALES (QBD)

COMMERCIAL COURT

Mrs Justice Cockerill

[2018] EWHC 39 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Jonathan Crow QC and James Weale (instructed by Clifford Chance) for the First and Second Appellants

Iain Pester (instructed by PCB Litigation) for the Third Appellant

David Foxton QC and Tom Ford (instructed by Byrne & Partners) for the Respondent

Hearing date: 17 July 2018

Judgment Approved

Lord Justice Hamblen

Introduction

1

This is an unusual appeal in that it concerns the quantum of security for costs ordered.

2

The appellants, in whose favour security was ordered, challenge quantum on a number of grounds, including an issue of principle, namely whether, once it is found that there is a real risk of non-enforcement of a judgment against a claimant resident in a non-Convention jurisdiction, it is appropriate to grade that risk and to discount the costs to be secured accordingly.

The factual and procedural background

3

The Claimant/Respondent, Mrs Danilina, is a Russian national, resident in Moscow. For a number of years, commencing in the early 1990s, she was in a relationship with the First Defendant/Appellant, Mr Chernukhin. He is also a Russian national but has lived in England since 2004.

4

The Second Defendant/Appellant, Navigator Equities Limited (“Navigator”), is a company registered in the British Virgin Islands.

5

The Third Defendant/Appellant, Mr Kargin, is resident in Riga, Latvia.

6

Mrs Danilina's claims arise out of two matters.

7

The first claim (“the TGM Claim”) is made against all three defendants. It concerns her claim that she is the owner of Navigator, which in turn held a 50% interest in a Cypriot company, Navio Holdings Limited (“Navio”). Navio was a joint venture vehicle for the development of a valuable real estate site in central Moscow held by a former state-owned textiles factory, Trekhgornaya Manufaktura OJSC (“TGM”). The other party to the joint venture, holding the remaining 50% interest in Navio, is a Cypriot company, Filatona Trading Limited (“Filatona”). Filatona's owner is Mr Oleg Deripaska, a Russian national who has been involved in other litigation in this country. In support of her claim Mrs Danilina relies on a Shareholders Agreement dated 31 May 2005 (“the SHA”) which was entered into by Mr Deripaska, Filatona, Navio, and Mr Kargin on behalf of Navigator, which provided that Mrs Danilina was a party to the SHA and the beneficial owner of Navigator. It is Mr Chernukhin's case that he is and always has been Mr Deripaska's joint venture partner and the beneficial owner of Navigator.

8

The second claim (“the Family Claim”) is made against Mr Chernukhin only. It is alleged that, in or around 2007 she and Mr Chernukhin orally agreed that assets accumulated during the course of their relationship and regarded as family assets would be divided as agreed between them. It is Mrs Danilina's case that she and Mr Chernukhin agreed that he would implement this agreement (“the 2007 Agreement”) and that he constituted himself as her agent and/or trustee. Mrs Danilina contends that she understood and was led to believe that Mr Chernukhin was at least partly performing the 2007 Agreement through the creation of a trust which was in fact set up and of which she was and remains a beneficiary (“the Sanderson Trust”). It is Mrs Danilina's case that Mr Chernukhin breached the 2007 Agreement and/or is in breach of trust and/or his fiduciary duties, including through failing to (at least) fully implement the 2007 Agreement and/or through his subsequent dealings with the assets and dealings in relation to the Sanderson Trust.

9

Before these proceedings were issued, by a request for arbitration dated 3 November 2015, Mr Chernukhin and Navigator commenced an arbitration against Mr Deripaska and Mr Deripaska's holding vehicle, Filatona. The primary relief sought in the arbitration was an order that Mr Deripaska and/or Filatona purchase Navigator's shareholding in Navio, on the grounds of the other shareholder's unfairly prejudicial conduct. Mr Chernukhin contended that Mr Deripaska authorised and initiated a forcible takeover of the joint venture business premises on 14 December 2010 by a large group of armed men, since when Mr Deripaska has had exclusive access to and control over the business. The claim was for substantially in excess of $100 million.

10

At the outset of the arbitration, Mr Deripaska raised a jurisdictional dispute. He contended that his joint venture in relation to TGM was with Mrs Danilina rather than Mr Chernukhin. He relied on the SHA and the fact that it named Mrs Danilina and not Mr Chernukhin as the shareholder of Navigator. Mr Deripaska accordingly contended that Mr Chernukhin had no standing to commence the arbitration, because it was the SHA itself which contained the relevant arbitration provision. The arbitral tribunal, J. William Rowley QC, Christopher Symonds QC (presiding) and Michael Brindle QC (“the Tribunal”), ordered that the issues as to whether Mr Chernukhin was the beneficial owner of Navigator and whether Mr Chernukhin was a party to the SHA should be determined at a preliminary hearing. In addition to extensive written and oral submissions on behalf of the parties, the Tribunal heard oral evidence from a number of witnesses on behalf of both Mr Chernukhin and Mr Deripaska over the course of three days, including from Mr Kargin, who was a witness for Mr Chernukhin. Mrs Danilina was not a party to the arbitration and was not called as a witness by either side. Mrs Danilina has stated in a witness statement for the present proceedings that the reason she did not intervene in the arbitration was because she “… did not have the financial resources to intervene in it and did not think it necessary for me to do so”.

11

By its Partial Final Award dated 16 November 2016 (“the First Award”), the Tribunal rejected Mr Deripaska's case. The Tribunal concluded that:

“All these matters, put together, give the lie to the case that Mr Deripaska has put before us. We have no hesitation in rejecting that case. We are satisfied that Mr Chernukhin was and is the legal and beneficial owner of Navigator. We are also satisfied that he agreed with Ms Danilina that she would put her name to the SHA as his agent or front. We are quite satisfied that this was known by Mr Deripaska who had the initial discussions about the venture with Mr Chernukhin. … It follows that Mr Chernukhin was a disclosed principal. In reaching these conclusions we are satisfied that the Claimants have satisfied the burden of proof, which, as we have said, was on them.”

12

Following the making of the Partial Final Award, on 14 December 2016, Mr Deripaska and Filatona began proceedings in the Commercial Court, pursuant to section 67 of the Arbitration Act 1996, seeking to challenge the First Award (“the section 67 proceedings”).

13

Shortly after the initiation of the section 67 proceedings, Mr Deripaska entered into two agreements with Mrs Danilina, both dated 23 December 2016, namely an Interest Purchase Option and Assignment of Rights Agreement (the “Option Agreement”) and a Loan Agreement (the “Loan Agreement”).

14

Under the Option Agreement Mrs Danilina has a “put”, and Mr Deripaska a “call” option in relation to Mrs Danilina's interest in Navigator (on the assumption that she will succeed in establishing such an interest) of up to US$12 million. In addition, Mr Deripaska agreed to pay Mrs Danilina US$2 million (in quarterly instalments of US$500,000) in consideration inter alia for Mrs Danilina: (i) producing evidence in support of Mr Deripaska's case; (ii) not cooperating with the Defendants; and (iii) instituting proceedings against the Defendants for the purpose of establishing that Mrs Danilina was and is the beneficial owner of Navigator.

15

Under the Loan Agreement, Mr Deripaska agreed to finance Mrs Danilina's claim with up to US$3 million, subject to Mr Deripaska agreeing upon the identity of Mrs Danilina's lawyers and being “kept informed” of progress and strategy.

16

It is the appellants' case that the Option Agreement and the Loan Agreement represent an improper arrangement whereby Mr Deripaska seeks to frustrate the arbitration.

17

Mrs Danilina commenced the present proceedings on 22 February 2017. She began her claim by applying for an injunction against Mr Chernukhin and Navigator to restrain them from further pursuing the underlying arbitration, which was proceeding to a substantive hearing in March 2017. This followed a number of unsuccessful adjournment applications made by Mr Deripaska. The injunction application was ultimately resolved through the proffering of certain, more limited, undertakings which did not require any stay of the arbitration.

18

The further hearing in the arbitration took place between 20 and 31 March 2017, with closing submissions on 6 June 2017.

19

In its second partial final award dated 20 July 2017 (the “Second Award”), the Tribunal ordered Filatona and/or Mr Deripaska to purchase Navigator's shares in Navio at a price of US$95,181,285. The Tribunal found that “there is an overwhelming case of oppression which we find has been made out” and also that Mr Deripaska was “prepared to go to considerable lengths to influence individuals and the evidence they might give before us and/or to affect the outcome of the Arbitration.”

20

On 19 June 2017 it was ordered that the present proceedings should be listed...

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