Costs and split trial - reasons
[2020]JRC121
Royal Court
(Samedi)
24 June 2020
Before :
|
R. J. MacRae, Esq., Deputy Bailiff, sitting
alone
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Between
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(1) Vladimir Anatolevich Chernukhin
|
Representors
|
|
(2) Navigator Equities Limited
|
|
And
|
(1) Oleg Vladimirovich Deripaska
|
Respondents
|
|
(2) B-Finance Limited
|
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Advocate N. M. C. Santos-Costa for the
Representors.
Advocate D. M. Cadin for the First Respondent.
judgment
the deputy bailiff:
1.
On 15th
April 2020 I heard argument in relation to two summonses and thereafter invited
the parties to file further written submissions on the Court, which they
did.
2.
I reserved
my decision on the first summons and gave my decision on the second but
reserved my reasons.
The first summons
3.
The first
summons in time is the summons issued by the Representors (also known as the
Chernukhin parties) issued on 24th January, 2020, seeking security
for costs from the First Respondent, Mr Deripaska, in respect of the Representors’
costs of and incidental to the First Respondent’s claim brought under
claim number 2020/004.
The second summons
4.
The second
summons was issued by the First Respondent on 18th March, 2020, and
sought an order that there be a split trial of the proceedings brought under
claim 2020/04, with the Court first considering the question of whether there
was a breach of duty and if so satisfied, thereafter giving directions in
relation to the assessment of loss and damage. Various ancillary directions were
sought.
5.
At the end
of the hearing on 15th April 2020 I dismissed the application for a
split trial but gave directions designed to bring the case on for hearing
reasonably soon. Those directions
were:
(i)
The
parties shall apply to the Bailiff’s Judicial Secretary within seven days
to fix before the Bailiff for the trial of this action (not to be earlier 56
days hereafter, time estimate two days) and the pre-trial review (not to be
earlier than 28 days hereafter, time estimate one hour);
(ii) Unless otherwise ordered by the Bailiff,
discovery between the parties shall not be required;
(iii) Signed dated and sworn witness statements of
fact standing as evidence in chief shall be simultaneously exchanged by close
of business 35 days after the date of this judgment, witnesses to attend to be
cross-examined, subject to the order of the Court at the pre-trial review;
(iv) There be liberty to apply.
Background
6.
Although
the disputes between Mr Chernukhin and Mr Deripaska are complex and involve
other jurisdictions, for the purpose of the applications before me they can be
summarised reasonably briefly.
7.
The
litigation between the parties began with dispute over a valuable site in
central Moscow which was the subject of a shareholder agreement dated 31st
May 2005. The dispute between the
parties arose in 2009/2010. After
negotiations failed, Mr Chernukhin and his corporate vehicle Navigator Equities
Limited (“Navigator”) commenced an arbitration before the London
Court of International Arbitration (“the LCIA”) against Mr Deripaska
and a company owned by him, Filatona Trading Limited.
8.
The
Arbitral Tribunal made awards on 16th November 2016, 20th
July 2017 and 18th January 2018.
9.
The Chernukhin parties generally prevailed in the
arbitration, and the Second Partial Award dated 20th July 2017
ordered Mr Deripaska and Filatona Trading Limited connected entities to
purchase certain shares for $95,118,285.
Pursuant to the Final Award dated 18th January 2018, the
Arbitral Tribunal ordered Mr Deripaska and Filatona Trading Limited to pay the
Chernukhin parties’ costs exceeding £7m plus interest on the
principal sum due pursuant to the 20th July 2017 award and other
ancillary costs.
10. On 6th April 2018 the United States
Office of Foreign Asset Controls (“OFAC”) imposed sanctions upon Mr
Deripaska which extended to the Second Respondent owing to, inter alia, Mr Deripaska’s close
association with the President of Russia.
11. Whilst the arbitration proceedings were
ongoing, the Chernukhin parties sought and obtained a worldwide freezing
injunction against Mr Deripaska from the English High Court on 11th
May 2018. The continuation of the
worldwide freezing order was compromised on the basis of certain undertakings
given by Mr Deripaska in respect of 45.5m certificated shares in EN+ Group Plc
(“EN+”) a Jersey company listed on the London Stock Exchange and
Moscow Stock Exchange which held assets relating to aluminium production. These undertakings were given by Mr
Deripaska and B-Finance Limited, the Second Respondent, and Mr Deripaska’s
London solicitors. The worldwide
freezing order required Mr Deripaska not to dissipate assets up to a maximum of
£87.5m. By this time Mr
Deripaska had issued proceedings in the High Court contesting the arbitration
award and in particular challenging whether the terms of the shareholders
agreement precluded Mr Chernukhin from enforcing it. There were also various challenges to
the arbitration proceedings themselves advanced by Mr Deripaska.
12. The English High Court proceedings were
ultimately determined by Mr Justice Teare who heard evidence and argument over
the course of 19 days between November 2018 and January 2019, leading to an
extensive and comprehensive judgment dated 7th February 2019. Mr Justice Teare when setting out his
approach to the evidence said:
“12. In this case the
probabilities must be assessed, as best this court can, in the light of the
collapse of the USSR, the emergence of private enterprise in Russia, the
accumulation of huge wealth by a few individuals, the manner in which “oligarchs”
do business with each other, the importance of support from those in power, the
loyalties which huge wealth can generate and the use of offshore companies and
trusts to hold (and hide) such wealth.”
13. Much was made by counsel for Mr Chernukhin as
to the findings of Mr Justice Teare and the criticisms made of Mr Deripaska,
whose claims were ultimately dismissed.
However, Teare J said at paragraph 15 “As will become apparent from my
comments upon the witnesses there are real grounds to doubt the honesty of each
of the principal actors and of many of the other witnesses.” As to Mr Deripaska, the Judge said at
paragraph 21 “He did not appear to me to be a witness who wished to assist the court
in ascertaining the truth.”
He continued “Moreover, some of this answers strained the
court’s credulity to breaking point.”
14. These findings were drawn to my attention
during the application for security for costs on the footing that I should
regard any claim advanced by or on behalf of Mr Deripaska with suspicion and
that he may not satisfy an adverse costs order. Teare J’s conclusion in relation
to the credibility of Mr Deripaska was:
“For these reasons I formed
the view that it would be wholly unsafe to rely upon his evidence save where it
was not disputed, was in accordance with the probabilities or was supported by
the contemporaneous documents. As
with Mrs Danilina it seemed to me that I should exercise great caution before
accepting his evidence.”
15. Mr Chernukhin also gave evidence, over some
days. The judge said that his
evidence too should be treated “With great caution”. He said:
“Mr Chernukhin’s late
disclosure in the case (during the hearing and, indeed, during his own
cross-examination) demonstrated that he was prepared to allow untrue statements
to be made on his behalf in the arbitration.”
16. He went on to say “His conduct before the tribunal
demonstrates a willingness to mislead a tribunal of fact”.
17. His conclusion in relation to the credibility
of Mr Chernukhin was similar to that which he reached in respect of Mr
Deripaska:
“32. For all of these reasons
I reached the conclusion that I should only accept Mr Chernukhin’s
evidence where it was consistent with the probabilities, was supported by the
contemporaneous documents or was not in dispute. As with Mrs Danilina and Mr Deripaska I
determined that I should exercise great caution before accepting his evidence.
33. Thus, the depressing fact is
that there was good reason to doubt the honesty of each of the principal actors
in this case.”
18. The reason for reciting these findings in this
judgment is that, as I observed to counsel in the course of argument, neither
party covered itself in glory before the English High Court and in the
circumstances it did not seem to me that I should dismiss Mr Deripaska’s
claims in the proceedings in this Court merely because of the findings of the
English High Court, as the defence to these claims ought presumably, at this
stage, to be treated with equal caution.
19. Prior to Teare J giving his judgment in the
English High Court, an event occurred which lead to Mr Chernukhin issuing
proceedings in Jersey in the summer of 2019. On 20th December 2018 EN+
resolved to re-domicile the company from Jersey to Russia. Precisely when Mr Chernukhin became
aware of this development is disputed.
Certainly OFAC was notified so that EN+ could be removed from the ambit
of the 2018 US sanctions. On 27th
January 2019 OFAC announced that it was removing EN+ and other companies from
its list of Specially Designated Nationals (i.e. those who are subject to US
sanctions). Further, on 17th
May 2019 the Jersey Financial Services Commission approved in principle the
migration of EN + to Russia.
20. On 29th May 2019, Mr
Deripaska’s London lawyers Reynolds Porter Chamberlain wrote to Clifford
Chance, Mr Chernukhin’s London lawyers, to inform them of all these
matters. It did not appear to be
disputed by either side that the proposed re-domiciliation of EN+ to Russia
would remove the protection that the undertakings given by Mr Deripaska to the
English High Court in connection with the worldwide freezing order in June 2018
provided. Those undertakings
essentially provided that the shares in EN+ should be held pending final
determination of the dispute between the parties and that if the Chernukhin
parties were to prevail and the sums ordered pursuant to the LCIA awards were
not paid then the shares would be sold in settlement of those accounts.
21. Mr Deripaska says that the plan to re-domicile
EN+ to Russia was the subject of public announcements commencing on 2nd
November 2018, later referred to in an article published in the Wall Street
Journal on 9th November 2018 and in another public notice on 30th
November 2018 published on the websites of EN+ and the London Stock
Exchange. Further, OFAC’s
announcement of the delisting of EN+ was itself subject to a public
announcement on 27th January 2019.
The June 2019 hearing
22. A month after formal notification through
Reynolds Porter Chamberlain of the re-domiciliation, the Chernukhin parties
served on Mr Deripaska’s London lawyers an application to this Court made
by way of Representation seeking leave of the Court, ex-parte, to enforce the arbitral awards over the shares in EN+ and
the appointment of receivers in respect of the shares. At 1.21pm on Friday 29th June
2019 the Chernukhin parties informed Mr Deripaska’s London lawyers that
the application would be heard by the then Deputy Bailiff at 3pm that day. In the time available Reynolds Porter
Chamberlain was able to arrange an advocate from Ogier to attend the hearing
with a watching brief, although the advocate had no instructions and
accordingly the hearing remained essentially an ex-parte application.
23. In advance of the hearing, Mr Deripaska’s
London lawyers asked Mr Chernukhin’s London lawyers to withdraw the
application.
24. It is accepted by the Chernukhin parties in
their skeleton argument filed for the hearing before me that the order obtained
on 28th June 2019 was obtained “ex-parte on short notice”.
25. The nature of the relief sought in the
Representation has been described in different terms by the parties. The Representation says that the
Representor seeks leave of the Court ex
parte to enforce three London Court of International Arbitral Awards. The Representation provides the
background to the dispute; refers to the arbitral awards; the High Court
proceedings are summarised briefly; the worldwide freezing order obtained on 11th
May 2018 including the undertakings given by Mr Deripaska as ultimate
beneficial owner of B-Finance, a British Virgin Islands company incorporated in
the British Virgin Islands and the legal owner of 45.5 million unencumbered
shares in EN+ are referred to. The
Representation referred to the “stringent
sanctions” imposed by the United States via OFAC and the removal by
OFAC of EN+ from the Specially Designated National list in January 2019. Finally the Representation refers to the
re-domiciliation of EN+ to Russia and the timetable anticipated by the letter
from Reynolds Porter Chamberlain dated 29th May 2019 to the effect
that the Russian entity would be incorporated on or about 4th July
2019 and re-domiciliation completed on 12th July 2019. The Representation alleges that the
Representors were at risk of “irreparable
harm” as the consequence of re-domiciliation will be that the shares
in the Jersey company would be cancelled and have no value. Accordingly the Representors sought
“ex-parte relief”
including that the arbitral awards be declared enforceable in Jersey and that
the Representors shall have leave to enforce the awards by way of an immediate
interim arrêt entre mains over
the shares; that various UK receivers be appointed in respect of the shares
with legal title of the shares immediately vested in them and that the parties
cited (Intertrust) are ordered and directed to record the names of the
receivers as the holder of the shares with the existing shares being cancelled
and issued to the Receivers with the Receivers being empowered and authorised
to sell sufficient quantity of the shares to raise the amount of
£90,595,749; in the alternative that the Viscount be directed to put the
interim arrêt entre mains into
immediate effect.
26. The Court was furnished with the transcript of
the hearing which took place on 28th June 2019. It was clear from the transcript that
the advocate for Ogier indicated that he was present but “without instruction”. He had received the Representation 25 minutes
prior to the hearing.
27. The Deputy Bailiff said that he was “confused as to why this has not proceeded by
way of an Order of Justice”.
The advocate for the Representors said that “a great deal of documentation has been filed”. The Deputy Bailiff said that the Court
had been sitting since 9.30am that morning and he had had only had 45 minutes
to read what he could, which was limited to the Representation and the skeleton
argument.
28. The Deputy Bailiff said that this was an
ex-parte application and emphasised the duty of the Representors to make full
and frank disclosure. The advocate
for the Representors said this was duly noted. Various complaints are made by Mr
Deripaska’s advocate as to what was and was not said by Mr
Chernukhin’s lawyers at this hearing. In particular, it is said that the
mention by the Representors advocate of the “sanctions issue” at page 45 of the transcript was brief and
inaccurate. Ultimately, the Court
ordered that the shares in EN+ be vested in the Viscount in order to ensure
that they remained available for enforcement of any award that might be given
effect to in due course. When
giving its decision the Court said that it had limited time to review the
papers. The Deputy Bailiff made it
clear that there was liberty to apply, and that the correspondence to be sent
to the parties to be served should draw to the attention of those receiving it
that they had liberty to apply at short notice.
29. I provisionally agree with the Deputy Bailiff
(as he then was) that the proceedings begun by way of Representation in this
case should have been issued by way of Order of Justice noting that this is a
matter which will be further ventilated at trial. These were proceedings seeking ex parte injunctive relief on the
grounds that if orders were not made in relation to particular assets then they
would be dissipated and lost.
Accordingly the Practice Direction in relation to Orders of Justice
seeking freezing orders should have been followed. An undertaking in damages should have
been given in relation to the damage that the defendants might suffer, and the
usual undertakings in relation to the costs of the parties cited ought to have
been given too. The judge’s
attention should have been drawn to the difference between the pleading drafted
and the standard freezing Order of Justice set out in the Practice
Direction. Some of the issues that
have arisen in this case would not have arisen had the Representors followed
the proper procedure.
30. At an inter
partes hearing on 12th July 2019, the orders made by the Royal
Court at the ex parte hearing on 28th
June 2019 were confirmed. This
included the direction that the Viscount hold the shares in EN+ to the order of
the Court, and an injunction restraining the Respondents from disposing of or
dealing with them in any manner whatsoever until further order. It is argued that the making of these
orders (and other orders confirmed on the same day) and the fact that they were
continued by consent prevents Mr Deripaska complaining now about the
Representors’ failure, on Mr Deripaska’s case, to comply with their
duties to the Court which it is alleged were breached at the time that the ex
parte order was obtained. I shall
return to this argument below.
31. On 6th July, 2019, the Representors
issued a summons (amended on 2nd September 2019) for a hearing in
which orders would be sought, including declarations that the arbitral awards
be declared enforceable in Jersey and that they be enforced by, inter alia, the sale of the shares in
EN+, with the sale proceeds being remitted to the English High Court in
satisfaction of an order made there on 3rd July 2019, which would in
turn effectively settle the Chernukhin parties’ claims in that
jurisdiction. The Court ordered
that the summons be determined by the Inferior Number on 5th
November 2019.
32. This hearing did not take place. It was unnecessary as, between 23rd
September and 7th October 2019, Mr Deripaska satisfied the Arbitral
Awards. However, the English
proceedings did not come to an end.
Mr Deripaska appealed the order made by Teare J and the appeal was
listed to be heard by the Court of Appeal on 3rd and 4th
December 2019. The appeal was
unsuccessful. There was also a
hearing before the Court of Appeal on 21st November 2019 after which
Lady Justice Asplin dismissed an application by the Chernukhin parties for security
for costs against the Deripaska parties in relation to the costs of the
forthcoming appeal.
33. That hearing is of interest as some of the
issues before me were also considered by Lady Justice Asplin. At paragraph 6 of her judgment she
records that “The gateway [for security for costs] at CPR Rule 25.13(2)(a) is
satisfied and that there is a risk of non-enforcement of the costs order made
in the appeal in Russia”. Lady Justice Asplin recorded that Mr
Deripaska “Has recently made a substantial payment of around $106million to the
Respondents in satisfaction of the arbitral award made against him and
approximately £7.9million in respect of costs despite not being obliged
to do so by an order of the Court.” In those circumstances it was submitted
on behalf of the Deripaska parties that there was minimal risk that Mr
Deripaska would fail to pay a costs order in the region of £360,000
“having paid all costs orders against him promptly”. It was also submitted that the
application for the security of costs was made very late.
34. At paragraph 13 of her judgment, Lady Justice
Asplin detailed the steps which Mr Deripaska needed to take in order to pay the
monies he owed to the Chernukhin parties and the involvement of OFAC in that
process, as the payment could not be made without the consent of OFAC, and one
consequence of their involvement was that the process of arranging payment took
over two months.
35. In her conclusions Lady Justice Asplin held
that the merits of the application were “finely balanced”
and she declined the application.
She noted that applications for security for costs should be made
“promptly as soon as the facts justifying the application are known”
and that she should have regard to delay.
She took into account the Chernukhin parties had stood by and watched Mr
Deripaska make his application for OFAC consent and the day after OFAC was
“stood down” and matters had “gone cold” the
application for security for costs was issued. It was not asserted that the need for
OFAC consent might “stifle”
the appeal so far as Mr Deripaska was concerned: “It is now submitted that the
complications with OFAC create real uncertainty and may well lead to a
situation in which security will not be provided in time and, even if it were,
would not be returned without serious complications if Mr Deripaska is
successful on his appeal.
Nevertheless, it is not suggested that an order would stifle the claim.” However, owing to the lateness of the
application Lady Justice Asplin ultimately refused the application for security
for costs.
The November 2019 hearing
36. The Jersey proceedings by way of representation
were effectively disposed of by an order made by the Royal Court on 19th
November 2019. What occurred at the
hearing is of some importance to the outcome of this application.
37. The Bailiff recognised in his judgment given
after the hearing on 19th November 2019 that it was no longer
necessary for the shares in EN+ to be preserved in the hands of the
Viscount. However, he recorded that
the matter was “complicated” in one way and
that was the issue of OFAC consent.
The Bailiff said “Mr Deripaska is subject to sanctions imposed
by the United States of America and although there was some reference to that
when conservatory orders were obtained, in the interim period the matter has
loomed somewhat larger”. In particular OFAC consent had not
been obtained for the transfer by the Viscount of the shares that she may hold
at the direction of Mr Deripaska.
The Court was provided with expert evidence indicating that the risk of
the Viscount breaching US sanction orders by transferring shares as required
was “very slight”.
Nonetheless, the Viscount was concerned as she thought that there should
be “no
risk” to her. It was
said on behalf of Mr Deripaska that the draft order he had prepared for the
Court would eliminate the risk to the Viscount as it did not require her to
undertake any action but merely recorded the fact that the proceedings had been
withdrawn and any conservatory orders previously granted had fallen away. The Court adopted this suggested wording
in the order that was made.
Accordingly, by Act of Court the relevant orders made on 12th
July 2019 were discharged and the Court “confirmed an order that all claims to, encumbrances on and restrictions
on the legal and beneficial enjoyment of the [shares in EN+] by the Respondents
previously imposed by the Royal Court of Jersey are released”. Notwithstanding the withdrawal of the
Representation or at least the discharge of the orders made upon it, by this
time Mr Deripaska claimed to be troubled by what had been said to this Court on
28th June 2019 and in paragraph 6 of the order made on 19th
November 2019 the Bailiff ordered a transcript of the hearing on 28th
June 2019 and further ordered:
“(a) Within 21 days of
the provision of the transcript the Respondent shall file full particulars of
all alleged breaches of full and frank disclosure on the part of the
Representor’s in relation to the said hearing, together with all evidence
in support thereof; and
(b) There shall be a directions
hearing before the Bailiff on the first available date within 14 days of the
said particulars being filed, time estimate of one hour.”
38. It is said by Mr Deripaska (although little may
in fact turn on this) that by this order they were being directed by the Court
to advance the alleged breaches and they cannot be liable to provide security
for the other sides’ costs for simply complying with the Court’s
directions. However, it was the
choice of Mr Deripaska to complain about the absence of full and frank
disclosure on the part of the Representors, and indeed the judgment given on 19th
November 2019 recalls at paragraph 17, in relation to the part of the order set
out above “I have no difficulty if that is the wish of Mr Deripaska”.
39. The directions hearing before the Bailiff,
ordered on 19th November 2019, was listed for 6th January
2020 but directions were agreed. By
that date Particulars of Claim had been filed by Mr Deripaska. The Particulars of Claim state that they
were filed pursuant to the Act of Court dated 19th November 2019 and
list the parties in the same way as they were listed in the Representation i.e.
the Chernukhin parties as Representors and Mr Deripaska and B-Finance as
Respondents. The file number for
the Representation is given at the top of the pleading i.e. “2019/173”. I will return to certain of the contents
of the Particulars of Claim when dealing with the merits of the competing
arguments below.
40. On 6th January 2020, the Royal Court
ordered that the Particulars of Claim, dated 17th December 2019
“shall be deemed to be sufficient
to institute proceedings and a separate number, 2020/004, shall be allocated;
the said claim shall be placed on the pending list; and the Respondents shall
file an answer by 13th February 2020 and thereafter the Royal Court Rules shall
apply to the proceedings”.
An Answer was duly filed on 13th February 2020 and the case
reference on the first page of the Answer is given “File No: 2019/173 and
2020/004”.
41. The reason for setting out the procedural
history as extensively as I have is to put in context one of the key issues
between the parties now; namely that the Representors say that Mr Deripaska is
the Plaintiff in a new action against them, it being acknowledged that it is
generally plaintiffs and not defendants (unless they are advancing an
independent counterclaim) who are required to give security of costs.
42. Mr Deripaska does not accept that and argues
that he is not truly the plaintiff at all, and that these proceedings are
purely consequential upon by the Representation issued against the Respondents
to which they were, in effect, defendants; and that their claims bring to the
Court’s attention breaches of the duties which the Representors owed to
the Court, and seek consequential damages payable to Mr Deripaska on account of
those breaches.
The parties’ central arguments
The Court’s jurisdiction to grant security for costs
43. The Royal Court has a wide inherent
jurisdiction and in principle might order any party to provide security for
costs. However, it is important
that any jurisdiction is exercised, where appropriate in accordance with
settled principles. In this regard
the Royal Court Rules 2004 provide at Rule 4(1)(4):
“Any plaintiff may be ordered
to give security for costs.”
44. Pursuant to Rule 1/1(2) a reference to a
“plaintiff” includes the
reference to:
“(a) … any party
(howsoever described) for the moment in the position of plaintiff … in
any proceedings.”
45. Pursuant to Rule 1/1(1) “proceedings”
means “any proceedings in the Court however commenced …”.
46. Accordingly, the Court looks to the substance
of the matter rather than the form.
So, for example, a representor in proceedings begun by way of
representation can be ordered to give security for costs Trigwell –v-
Clapp [2016] JRC 197, as may an applicant in judicial review proceedings Larsen
Oil and Gas Drilling Limited –v- Comptroller of Taxes [2015] (1) JLR
117. The general principles
governing the exercise of the Court’s discretion were summarised by the
Court of Appeal in A E Smith & Sons Limited –v- L’Eau des
Iles (Jersey) [1999] JLR 319 as follows:
“(1) The Court has a complete
discretion whether to order security.
(2) That the plaintiff company will
be deterred from pursuing its claim by an order for security is not without
more a sufficient reason for not ordering security.
(3) The Court must balance, on the
one hand the injustice to the plaintiff company if prevented from pursuing a
genuine claim by an order for security, and on the other hand the injustice to
the defendant if no security is ordered, the plaintiff’s claim fails, and
the defendant is unable to recover its costs from the plaintiff. So the
Court will seek not to allow the power to order security to be used oppressively,
by stifling a genuine claim by an indigent company against a more prosperous
company, particularly when the circumstances underlying the claim and/or the
failure to meet the claim may have been the cause or a material cause of the
plaintiff company being indigent. The Court will also seek not to be so
reluctant to order security that the impecunious plaintiff company can be
enabled to use its inability to pay costs as a means of putting unfair pressure
on the more prosperous defendant company.
(4) The Court will broadly take
into account the prospects of success in the action, and the conduct of the
action so far.
(5) The Court has a discretion to
order security of any amount, and need not order substantial security.
(6) If the plaintiff company
alleges that the effect of an order for security would be unfairly to stifle
its genuine claim, the Court must be satisfied that, in all the circumstances,
the claim probably would be stifled. The test is one of probability, not
possibility.
(7) The stage of the action at
which security is sought is one aspect of the conduct of the action which the
Court will take into account.”
47. At the time that Smith was decided there
was a general presumption in favour of ordering that plaintiffs resident
outside the jurisdiction provide security for costs. That practice ceased with the decision
of the Court of Appeal in Leeds United AFC and another –v- Admatch
[2009] JLR 186. In summary, the
Court of Appeal held that the indiscriminate practice of requiring security for
costs from plaintiffs resident outside Jersey constituted discrimination on the
ground of status under Article 14 of the European Convention on Human Rights in
that it impeded their right of access to the courts under Article 6. The protection of the ability of a Jersey
defendant to enforce a costs judgment in its favour was a legitimate objective,
but the indiscriminate practice of requiring security from all non-resident
plaintiffs was not a proportionate means of achieving it. Accordingly, the difficulty that any defendant
before the Jersey court might have in enforcing a cost judgment needed to be
considered, henceforth, on an individual basis.
48. Counsel for the Representors drew to my
attention the Civil Procedure Rules in England and Wales, which are not
applicable in this jurisdiction but provide:
“(1) The court may make an order for security for costs
under rule 25.12 if –
(a) it is satisfied, having regard to all the
circumstances of the case, that it is just to make such an order; and
(b)(i) one or more of the conditions in paragraph
(2) applies, or
(ii) an enactment permits the court to require
security for costs.
(2) The conditions are –
(a)
the claimant is –
(i)
resident out of the
jurisdiction; but
(ii) not resident
in a Brussels Contracting State, a State bound by the Lugano Convention, a
State bound by the 2005 Hague Convention or a Regulation State, as defined in
section 1(3) of the Civil Jurisdiction and Judgments Act 1982;
…
(g)
the claimant has taken steps
in relation to his assets that would make it difficult to enforce an order for
costs against him.”
49. The White Book 2019 says in relation to
claimants resident out of the jurisdiction:
“If security is sought on the
grounds that there will be obstacles to enforcement, the obstacles need to be
sufficiently substantial to amount to a real risk of
non-enforcement.”
50. This approach seems to equate to the proper
approach for this Court after the Leeds United decision. That there is a real risk of
non-enforcement is accepted as against the First Respondent. The First Respondent’s advocates
wrote to the Representor’s advocates on 4th March 2020, and in
order to narrow the issues before the Court stating, “While our client does not accept that there
is a real risk that a Jersey costs order would not be enforced in Russia, he
will not dispute the issue for the purposes of your clients extent application”. This was a proper concession to
make. Accordingly, if Mr Deripaska
is to be regarded as the plaintiff for the purposes of these proceedings, there
is a substantial real risk of non-enforcement of a costs order made against
him.
51. I also heard submissions on the merits, which
is a relevant consideration set out under (4) from the passage from A E
Smith & Sons Limited –v- L’Eau des Iles (Jersey) cited above. It is quite difficult to make a proper
assessment of the merits in a heavily contested case such as this. The Representors draw to my attention
the English Court of Appeal decision in Chernukhin and others –v-
Danilina and others [2018] EWCA Civ 1802 which approved the White Book 2018
note which said “Parties should not
attempt to go in to the merits of the case unless it can be clearly
demonstrated one way or another that there is a high degree of probability of
success or failure…”
This is consistent with the approach taken in previous Jersey cases, and
it is important on such applications that the court should not spend too long
attempting to predict the outcome of heavily contested proceedings. It was contended on behalf of the
Representors that the Respondents’ claim, as set out in the Particulars
of Claim, was hopeless because, in summary, the Respondents were claiming
damages on the basis of duties owed to the court and not the Respondents; that
the subsequent litigation in England in which the Respondents had been
unsuccessful was further proof of the weakness of the Respondents’
claims; that the Respondents had agreed to the continuation of the ex-parte
relief obtained at the hearing on 12th July and did not seek to
discharge the orders obtained at the hearing on 2nd September
2019. The claims are described as
“vexatious”, and it is
submitted that the Court may safely conclude that there is a high degree of
probability of failure of the claim.
52. In response, Mr Deripaska says that in
directing him to proceed by way of issuing particulars of claim, the Court had
already decided that there was a case to answer; that this was borne out by the
transcript of the hearing that took place on 28th June 2019; that it
was self-evident that the Representors had failed in their duty to make full
and frank disclosure prior to and at the hearing on 28th June 2019;
and that on analysis the claims made in the Particulars of Claim were strong
ones.
53. The Representors drew my attention to paragraph
24–015 of Gee on Commercial Injunctions which deals with
circumstances where a defendant belatedly seeks to discharge an
injunction. The section within
which paragraph 24-015 falls is entitled “Application for variation or discharge based on a point available to be
taken at an earlier inter partes hearing: abuse of the process”.
54. Paragraph 24-014 contains the following
statement:
“Accordingly, if the defendant wishes to preserve an
unfettered right to apply to discharge or modify an undertaking, prior to the
trial, he should expressly reserve the right to make such an application,
orally before the judge, or by express wording in the undertaking.”
55. Paragraph 24-015 reads:
“The principle applies when
there has been a consent order for continuance of an injunction, even if it
includes an express liberty to apply to discharge or vary the order, or a
contested inter partes application for an injunction or for a variation or
discharge, and the defendant wishes to take a new point which was available to
him at the time of the original application. The reason is that the defendant must
take his point at the earlier hearing, if it was available to be taken by him
at that hearing, and he cannot be allowed to delay taking it until later unless
the point was expressly reserved by him.”
56. It seems to me that this passage deals with a
rather different point from the one that was being made to me by the
Representors. These passages seem
to indicate that if a party wishes to take a point which might lead to
discharge or varying an order then they should do so swiftly. Mr Deripaska says that this is rather a
different case. Now that the
substantial payment has been made to the Representors the need for any
consideration of the relief obtained on 28th June 2019 has gone
away, but Mr Deripaska argues he is still entitled to seek damages on account
of the alleged breach of duty owed to the Court which occurred when those
injunctions were obtained.
57. Mr Deripaska also rely on the fact that the
period June – September 2019 was a particularly busy time for him on a
number of fronts, not least the period leading up to the payment of the
arbitral award on 7th October 2019, the work required to arrange
funding and deal with OFAC. There
were also several hearings during this period before the English Commercial
Court. In any event they say that
this is not an application to vary or discharge an injunction, but to hold the
Representors to account for failure to discharge their duties to the Court.
58. Mr Deripaska accepts that the claims are
pleaded as breaches of duty to the Court and not as breaches of duty to
him. Much is made of the alleged
failure to explain to the Court the fact and consequences of the US sanctions
including, it is said, the risk posed to not only the Viscount but to members of
the judiciary constituting the Court in that there was a risk that the Court
was being asked to order that steps be taken which might lead OFAC to impose
sanctions upon the judge, Jurats and the Viscount.
59. As to any suggestion that Mr Deripaska cannot seek
damages in the Particulars of Claim as there was no undertaking in damages
provided in this case, Mr Deripaska makes two points. First, there ought to be an undertaking
in damages (I have dealt with this above) and in written submissions filed
after the oral hearing the Respondents drew to the Court’s attention the
judgment of Bailhache DB in FG Hemisphere Associates –v- Democratic
Republic of Congo [2010] JRC 033 (paragraph 31 of the judgment) from which
it is clear that the Court proceeded, in the case of an application for interim
conservatory relief including an arrêt
entre mains, that it was essential for an undertaking in damages to be
given, and that it would be inequitable for the injunction to be maintained if
there were no material assets with which to meet the undertaking in
damages.
60. Secondly, he relies upon the decision in Hughes
–v- Clewley [1996] JLR 24 in support of the proposition that whether
or not an undertaking or cross-undertaking in damages has been given then the
Court may nonetheless be entitled to award damages. In that case an Order of Justice
containing an interim injunction had not contained an undertaking in
damages. The Court said “It is
clear that if an undertaking in damages has been given or can be implied, it
may at any stage in the proceedings be appropriate to determine whether the
party giving the undertaking should be ordered to pay damages.”
61. The Court observed that there had been no
express undertaking in damages given by the Plaintiff. It was argued that an undertaking in
damages should be implied as being the natural and usual price of an interim
injunction. At that time, as the
Court noted, there was no Practice Direction requiring a judge in Jersey to
insert such an undertaking in the order.
That of course is no longer the position. The Court was not persuaded on the
authorities cited to it that it had any power to imply such an undertaking in
damages. However, the Court
said:
“That is not … the end
of the matter because we should be very reluctant to hold that we had no power
to order a person who had wrongly invoked the process of this court to pay
damages for loss which resulted.
Even before the enactment of the Bankruptcy (Désastre) (Jersey)
Law 1990 it was the case that the court had asserted jurisdiction to order a
creditor wrongfully declaring the goods of a debtor en désastre to pay
damages for that wrongful act (see D’Allain –v- De Gruchy). We see no reason why that principle
should not apply to any wrongful invocation of the court’s process,
particularly where the interlocutory relief is obtained ex parte. In our judgment, we have a discretion,
irrespective of whether or not an undertaking or cross-undertaking in damages
being given, to consider whether there has been a wrongful act which ought to
be visited with damages.”
62. It may be that the decision of the Royal Court
in respect of whether or not an implied undertaking in damages is given in
cases such as these needs to be re-visited in view of current practice,
including the Practice Direction, in respect of the obtaining of freezing
orders.
63. In extensive supplemental submissions filed
after the hearing before me (I am not sure that I gave leave for such submissions
but nonetheless I have read them) the Representors repeated and expanded upon
their submission that Mr Deripaska’s claims were “utterly hopeless”, particularly on
the footing that the Court’s discretionary power to order an enquiry as
to damages or award damages either on an express cross-undertaking or pursuant
to its inherent jurisdiction is only engaged where the injunction is discharged
prior to trial on the basis it should not have been made or the plaintiff fails
in its claim at trial and (in both cases) there is no reason why, in the
exercise of its discretion, an enquiry into damages should be refused.
64. I do not propose to set out the extensive
further written argument in support of these contentions which may of course
succeed at trial. But it seems to
me that there are three points that can be made in respect of these
arguments. First, the Representors
have not sought the listing of an application to strike out the Particulars of
Claim on the grounds that they are an abuse of process and/or hopeless in the
four or five months since they were served. Secondly, owing to the payment made in
October 2019, the proceedings begun by way of representation are in effect at
an end and it would be difficult to set aside the orders obtained on 28th
June 2019. Thirdly, the Particulars
of Claim were filed pursuant to the Court’s direction contained in the
Act of Court dated 19th November 2019 referred to above. There was no appeal against that order,
nor, so far as appears from the judgment of the Bailiff, any submission to the
effect that such an order should not be made.
65. Accordingly as to the merits, although Mr
Deripaska may face considerable challenges when his claims are determined, I
cannot conclude that there is a high degree of probability of failure of those
claims at this stage.
66. As to the risk that Mr Deripaska’s claims
set out in the Particulars of Claim claim might be “stifled”, a matter which the Court ought to consider pursuant
to the guidance in A E Smith & Sons Limited –v- L’Eau des
Iles (Jersey), it was submitted on behalf of Mr Deripaska that the process
of securing OFAC consent so as to provide the security sought could be lengthy
and ultimately impossible because these are funds which eventually might be
re-paid to Mr Deripaska advocate and thereafter to Mr Deripaska . I heard lengthy submissions on this
matter and was referred to affidavits sworn by the First Respondent’s
London lawyers, both for the purpose of this application and for the purpose of
proceedings before the English High Court.
I fully accept that the process of obtaining OFAC consent is challenging
and time consuming and can result in substantial delay. However, I find, as did Lady Justice
Asplin in respect of a similar application, that there is no risk of the claim
(in that case an appeal) being stifled – although there was a concession
to that effect in that appeal. Mr
Deripaska would, if he succeeds in any litigation, receive a repayment of costs
that he has paid his advocates if costs orders are made and enforced against
the Chernukhin parties. As the
advocate for the Representors said, both Mr Deripaska and Mr Chernukhin are
“incredibly wealthy people”
and I do not accept, bearing in mind (so far as these parties are concerned)
the relatively modest sum sought by way of security for costs, that the process
of obtaining OFAC consent is a significant factor and ought to be taken into account
in the exercise of the Court’s discretion.
Is Mr Deripaska really a “Plaintiff”?
67. Ultimately this is the central issue that the
Court must determine for the purposes of this application.
68. As set out, in summary, the Representors argue
that Mr Deripaska has brought a separate free-standing claim which does not
purport to enforce a cross-undertaking in damages.
69. He contests this. He also relies upon the decision of the
English Court of Appeal in CT Bowring & Co (Insurance) Limited –v-
Corsi and Partners [1994] BCC 713.
In this case the plaintiffs obtained a Mareva injunction against the
defendants on the usual cross-undertaking in damages. The injunction was discharged by
consent. The action did not proceed
to trial, the defendants having paid the plaintiff a certain sum. The defendants sought an enquiry into
damages under the cross-undertaking, claiming substantial damages even though
the injunction was only in force for just under two months. The plaintiffs sought security for costs
in relation to the defendant’s application for an enquiry into
damages. This was refused at first
instance and the plaintiffs appealed to the Court of Appeal.
70. The relevant provision for awarding security
for costs relied on in the summons arose under section 726 of the Companies
Act 1985 which provided “Where in England and Wales a limited company
is plaintiff in an action or other legal proceedings, the court having
jurisdiction in the matter may, if it appears by credible testimony that there
is reason to believe that the company will be unable to pay the
defendant’s costs if successful in its defence, require sufficient
security to be given for those costs, and may stay all proceedings until the
security is given.”
Dillon LJ said “In the present case we are not concerned
with whether or not the defendant will, if unsuccessful, be able to pay the
plaintiff’s costs of its application for the enquiry as to damages, or
the plaintiffs costs of the enquiry, if ordered. Before
the judge, the case did not reach that stage; he held the defendant was a
defendant and not a plaintiff and so it cannot be ordered to provide security
for the plaintiffs costs.”
71. Dillon LJ traced the legislative antecedents of
section 726 to an Act of Parliament from 1857 and said “There was, even before 1857, a power which
the court’s exercise, under their inherent jurisdiction, in certain cases
to order a plaintiff to give security for costs. But again there was a strongly
established rule of practice that a person who is in the position of a
defendant is to be at liberty to defend himself and is not to be called on to
give security”. He went
on to say that although the word “counterclaim”
is not used in section 726, it was clear that an impecunious company which
makes a counterclaim “which is
more than a mere formulation of its defence can be ordered to give security for
the plaintiffs costs of the counterclaim”.
72. Dillon LJ then referred to the Rules of Supreme
Court, as then provided, in respect of security for costs and set out the relevant
rule (Order 23 Rule 1). He added
“To add a new category, not covered by an enactment, to those listed in
Rule 1/1 in which a plaintiff can be ordered to give security would now be a
matter for the Rules Committee, and not for the discretion, as a matter of
inherent jurisdiction, of the individual judge in the individual case.”
73. He noted that the statutory definition of
“plaintiff” as follows “Plaintiff includes every person asking for
relief (otherwise than by way of a counterclaim as a defendant) against any
other person by any form of proceedings, whether the proceeding is by way of
action, suit, petition, motion, summons or otherwise.” This definition did not, however, extend
to interlocutory applications within proceedings. Accordingly, Dillon LJ said that he
agreed “respectfully and
emphatically” with the passage in the judgment of Parker LJ in Taly
–v- Terra Nova Ltd [1995] 1 WLR 1359 where the latter said:
“I will deal first with the
suggestion that the application for specific discovery and leave to deliver
interrogatories should be regarded as proceedings within the rule. I have no hesitation, myself, in coming
to an opposite conclusion. In my
judgment the proceedings referred to in the rule, if they are not an action,
are at least proceedings of the nature of an action and refer to the whole
matter and not to an interlocutory application in some other proceedings. Were it otherwise, it appears to me that
chaos would reign, for every time an interlocutory application was taken out by
a defendant the plaintiff would be able to say, “The plaintiff is in the
position of the defendant in this application and the defendant is in the
position of the plaintiff. They are
proceedings. Therefore I ought to
have security for costs of this application.” One has only to examine that to see that
it cannot have any foundation whatever.”
74. The key passage of the judgment for the
purposes of this application is at page 11:
“Mr Gee accepts, as I have
mentioned, that the rule that a defendant cannot be ordered to give security
when he has been brought before the court and is seeking to defend himself (as
opposed to counterclaiming in respect of matters which go beyond his defence)
would preclude a plaintiff from claiming security against a defendant, whether
a foreign resident or an impoverished company, in respect of an application by
that defendant to set aside or curtail a Mareva or other injunction obtained ex
parte by the plaintiff. In my judgment, an application by the defendant for an
inquiry as to damages under the cross-undertaking when the Mareva or other
injuction has been discharged is likewise a mere matter of defence.
For this conclusion there are
several reasons which are cumulative (or different aspects of the same point),
viz: (1) the crossundertaking is the price which the plaintiff has to pay for
obtaining an injunction before the action can be finally tried and decided, (2)
the damages under the cross-undertaking are not strictly damages but
compensation to the defendant for loss suffered if it is subsequently
established that the interlocutory injunction should not have been granted, and
(3) there is no separate cause of action for the damages and it can only be
enforced by application in the action in which the injunction was granted. See
generally the observations of Neill LJ in Cheltenham & Gloucester Building
Society v Ricketts [1993] 1 WLR 1545 at pp. 1550H-1552G. Therefore the general
rule as to not awarding security for costs against a defendant is applicable.
Mr Gee submits alternatively that
the rationale of the immunity of a defendant from giving security for costs is
that the defendant is not to be hampered in his defence of the action by having
to give security. Mr Gee therefore submits that the rationale ceases to apply,
and the immunity should cease to apply when because the action has been tried
or *722 for some other reason there is no longer any claim outstanding against
which the defendant needs to defend himself. He submits that in the present
case there is no subsisting lis, except the application by the defendant for an
inquiry under the cross-undertaking.
I do not, however, find that line of argument persuasive. It is often
the case that an interlocutory injunction is discharged before trial, but the
court cannot know enough to decide whether to order an inquiry as to damages
until after judgment at the trial. Moreover if a plaintiff, having obtained an
interlocutory injunction, terminates the proceedings by serving notice of
discontinuance, it will inevitably happen that the question of ordering an
inquiry as to damages will only be brought before the court at a time when
there is no longer any outstanding claim by the plaintiff-see Newcomen v
Coulson (1878) 7 ChD 764 . I prefer the view that as the interlocutory injunction
will have been obtained against the defendant as a defendant (or potential
defendant) and as the damage in respect of which he claims to be compensated
will have been suffered by him while the injunction was in force and thus while
he was still a defendant, it is only fair and just that his immunity against
having to give security should continue until all matters under the
cross-undertaking have been worked out. Such matters are part of the
defendant's defence to the claim for the interlocutory injunction, even if not
- particularly in the case of a cross-undertaking in a Mareva or Anton Piller
order — part of his defence to the substantive issues in the action.
In theory, as the courts originally
ordered security for costs under their inherent jurisdiction, there must be
still inherent jurisdiction in the court to order security in cases not covered
by s. 726 or any other statutory provision or by O. 23 or any other rule of
court. But the issues of policy involved are such that I find it difficult to envisage
the court creating a new category of case in which a plaintiff or defendant can
be required to give security, without leaving that to the Rules Committee or
Parliament.”
75. Millet LJ gave slightly different reasons for
dismissing the appeal. At paragraph
40 of the judgment he said:
“Policy considerations
support the same conclusion. The purpose of the jurisdiction to order security
for costs is to prevent the injustice which would result if a plaintiff who was
in effect immune from orders for costs were free to litigate at the defendant's
expense even if unsuccessful. Such an order can be made only against a
plaintiff; it cannot be made against a defendant. That is because a plaintiff
institutes proceedings voluntarily.
If he chooses to bring proceedings against an insolvent company with
limited liability, he does so with his eyes open; he takes the risk that he may
not recover his costs even if successful, but it is his own decision to take
that risk. The defendant, however, has no choice in the matter. He is compelled
to litigate or submit to the plaintiffs demands. He must be allowed to defend
himself without being subjected to the embarrassment of having to provide
security for the plaintiffs costs.
…
If attention is concentrated on the
defendant's application to enforce the plaintiffs cross-undertaking in damages,
the defendant certainly has the appearance of a plaintiff. It claims that it
has suffered loss for which the plaintiff is responsible and it seeks
compensation for that loss. If the plaintiff recognises that it is likely to be
ordered to pay something, though not as much as the defendant claims, it can
protect its position by making a payment into court. It certainly looks like a
defendant. But as the cases which I have cited in this part of my judgment
demonstrate, it is necessary to consider the whole litigation between the
parties in order to determine which of them is really in the position of a
plaintiff and which a defendant. If the proceedings are considered as a whole,
then it is apparent that the parties have never exchanged roles, and that the
defendant has done nothing to justify being treated as a plaintiff.
It was the plaintiff which chose to
bring the proceedings and take the risk of failing to recover its costs even if
successful. It was the plaintiff
which chose to apply for interlocutory relief and to offer the court a
cross-undertaking in damages as the price of obtaining such relief. It must
have known that the injunction which it obtained might cause the defendant
loss, that it might subsequently be established that the injunction should not
have been granted, and that the defendant might seek to recover its loss by
applying to enforce the cross-undertaking. It must have known that, if it chose
to resist such an application, it might incur further irrecoverable costs. It
did not qualify its cross-undertaking by making its enforcement conditional on
the defendant providing security for costs. Had it attempted to do so, its
cross-undertaking would have been rejected and its application for an
injunction refused. Having offered the court an unqualified cross-undertaking,
it now seeks to protect itself against a situation which it must have been able
to foresee. That it should succeed is not an attractive proposition.
As for the defendant, it has had no
choice in the matter. It has done nothing beyond reacting to the steps which
the plaintiff has taken against it. The plaintiff brought the proceedings; the
defendant has been compelled to defend them. The plaintiff obtained an injunction
against it which the defendant claims ought not to have been granted; the
defendant has obtained its discharge. The defendant claims that the existence
of the injunction caused it loss; it seeks to recover the loss. It seeks only
to be restored, so far as compensation can achieve it, to the position it was
in before the proceedings began. The defendant must counter-attack to recover
ground lost by an earlier defeat, but it makes no territorial claim of its own;
it cannot fairly be described as an aggressor.
Although the defendant is claiming
monetary compensation for loss which it alleges it has sustained as a result of
the injunction, it has no independent cause of action to recover such loss. It
cannot bring separate proceedings, whether by writ or counterclaim in the
existing proceedings. Its claim arises out of and is wholly dependent upon the
plaintiffs cross-undertaking. Its only remedy is to enforce the
cross-undertaking by applying under the liberty to apply in the proceedings in
which the cross-undertaking was given. Analogies tend to be imperfect, but the
closest analogy which occurs to me is the enforcement by a successful defendant
of an order for costs made in his favour. Security for the plaintiffs costs of
resisting enforcement would not be ordered for other reasons, but I cannot
think that such a defendant could properly be regarded as being in the position
of a plaintiff.”
76. CT Bowring –v- Corsi has been considered in a Privy Council decision on appeal from the
Court of Appeal in the Cayman Islands, which counsel for Mr Deripaska quite
properly drew to my attention. In GFN
SA and others –v- Liquidators of Bancredit Cayman Limited [2009] UKPC
39, the court considered an appeal against an order for security for
costs. The principal judgment of
the Privy Council given by Lord Scott.
He expressly agreed with the proposition, as explored by the judges in CT
Bowring –v- Corsi, that the rule that an order for security for costs
will not be made against the defendant was now settled practice. However Lord Roger, Lady Hale and Sir
Jonathan Parker agreed with the short speech of Lord Neuberger (who also agreed
with Lord Scott that the appeal should be dismissed). However, at the end of his judgment Lord
Neuberger said:
“34. For my part, I would
prefer to leave entirely open questions such as whether and if so when it is
possible or appropriate to order security for costs against a defendant who
brings a counterclaim or defends by way of set-off, whether and if so when
security can be ordered in the context of a committal application, or in
connection with an application to set aside a compromise of an action, and
whether the decision of the Court of Appeal in C T Bowring & Co
(Insurance) Ltd –v- Corsi Partners Ltd [1994] 2 Lloyd’s Rep 567
was correct. We did not hear much,
if any, argument on any of those issues and it is unnecessary to resolve them
for the purpose of determining this appeal. This is not meant to imply that I
positively disagree with anything Lord Scott says on those issues in his
admirable opinion: it is merely that I prefer to leave them for determination
when they have been subject to fuller argument.”
Decision on summons seeking security for costs
77. I have decided that Mr Deripaska cannot
properly be described as a “plaintiff”
for the purpose of Royal Court Rule 4/1.
These proceedings arose out of the Representors’ representation
and in the Particulars of Claim Mr Deripaska seeks and only seeks damages
arising from the alleged breach of duties owed by the Representors to the Royal
Court arising from the Representors’ alleged failure to make full and
frank disclosure. I found the judgment
of Dillon LJ in C T Bowring –v- Corsi compelling. This is a case where there is no
separate cause of action for damages; they can only be sought by application in
the action in which the injunction was granted. This is akin to an enquiry in damages
under a cross-undertaking when an injunction has been discharged. There ought to have been a
cross-undertaking in damages given in this case and the injunctive orders have
in fact been discharged owing to the payment made. Dillon LJ specifically envisaged this
sort of situation where proceedings have been terminated “for
any reason” and the enquiry as to damages is brought “at
a time when there is no longer any outstanding claim by the plaintiff”.
78. Had I concluded that Mr Deripaska was a true
plaintiff in these proceedings then, owing to the substantial impediments in
respect of enforcement, which are admitted in this case, and the absence of any
other special circumstances having regard to the discretionary factors
considered above, I should have ordered that security for costs be provided.
79. Although it may be unnecessary to do so, as I
heard arguments in respect of quantum and received submissions I will now
address that issue.
Quantum of security
80. The sum by way of costs sought by the
Representors on account of security total approximately £298,000. Collas Crill’s costs incurred to
date applying the relevant factor A rates and a factor B uplift of 50% come to
approximately £85,647.
Projected costs of Collas Crill, on the same basis, run to
£147,278. The balance,
principally the costs of Clifford Chance and counsel, run to
£65,077.
81. Various points were made about these
claims. Certain claims ought not to
have been made at all in accordance with the Practice Directions – for
example photocopying at £175 per hour, plus 50% uplift. There ought never to be claims for such
matters as photocopying contained in the schedules particularising costs on
such an application. Some of the
other costs seemed high, e.g. in excess of £13,000 for “pleadings” which could only extend
as far as seeking a request for further particulars according to the
schedule. Overall the costs seemed
high when the time estimate for the trial is just two days. Any security should be limited to the
sum which the Court considers the applicant would be likely to recover on
taxation. I note that in Café
de Lecq –v- R A Rossborough (Insurance Brokers) Limited [2011] JLR 31
the Royal Court, Commissioner Clyde-Smith, presiding, held on a security for
costs appeal in relation to a claim that “cannot be described as unusually
complex” that “we do not think it fair in the exercise of
our discretion at this stage and absent the detailed examination that would
take place on taxation to order security for the costs of two firms of lawyers
and of a Queen’s Counsel (in addition to junior counsel).” In that case the sums of solicitor and
counsel (totalling £61,029) were deducted and, on the footing that the
remaining balance “is not likely to emerge unscathed after
taxation”, a further discount of 20% was applied.
82. Had I been minded to order that security be
provided, I would have at this stage disallowed the fees of English solicitors
and counsel and, taking into account the sums claimed and the likely effect of
taxation, ordered security in the sum of £155,000, which is just under
two thirds of the Collas Crill costs to date, together with anticipatory costs
to the end of the hearing.
Respondents’ summons seeking a split trial
83. I dismissed this application at the end of the
hearing. I now give reasons for
that decision.
84. Mr Deripaska argued that to determine the issue
of breach of duty and consequential damages together would be not an effective
use of court resources, particularly as the former question could be resolved
by considering what was said to the Royal Court in the hearing that took place
on 28th June 2019 together with documents filed at that stage. The Representors argued that this was an
artificial approach, particularly regarding their case that no duty arose and
that Mr Deripaska had no consequential right to damages. They point to the overriding objective
at Rule 1/6(6)(i) of the Royal Court Rules which provides that “active
case management includes … dealing with as many aspects of the case as it
can on the same occasion”.
85. It is clear from the authorities and indeed
good sense that in general liability and quantum should be tried together. There should only be separate trials of
liability and quantum if there is a clear line of demarcation between the
issues and there is a very good reason for so doing, for example in a personal
injury action where the issue of damages cannot be determined now owing to
uncertainty regarding the plaintiffs prognosis and where liability ought to be
determined now whilst recollections of the circumstances - for example a road
accident - are fresh. But,
generally, the starting point should be a single trial of all issues, and the
Court should be wary of the risks of a split trial in terms of additional
costs, delay and the possibility of different tribunals of fact determining
separate aspects of the same dispute.
I have no doubt that this dispute should be tried in the usual way in a
single hearing, particularly having regard to the agreed time estimate of two
days.
Other points
86. It was submitted in the Court of argument that
the Representors ought to have specifically asked for a stay of the proceedings
pending payment of security for costs.
It might have been better had such relief been specifically claimed in
the summons but, in my view, it is axiomatic that the Court will order the
proceedings be stayed pending a payment on account of security for costs being
lodged in Court, absent special circumstances.
87. The parties are invited to provide written
submissions within 14 days as to the incidence of costs, which I propose to
determine on the papers.
Authorities
Royal Court Rules 2004.
Trigwell
–v- Clapp [2016] JRC 197.
Larsen
Oil and Gas Drilling Limited –v- Comptroller of Taxes [2015] (1) JLR 117.
A
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