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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> JSC BTA Bank v Solodchenko & Ors [2012] EWHC 550 (Ch) (08 March 2012) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2012/550.html Cite as: [2012] EWHC 550 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Rolls Building Fetter Lane London, EC4A 1NL
		08/03/2012

Preliminary ruling on costs relating to the cross-examination of Mr Ereshchenko

Mr Justice Henderson:

1. At the conclusion of the hearing of the restored cross-examination of Mr Ereshchenko on 21 November 2011, it was ordered that, in the absence of agreement between the parties, sequential written submissions should be served by the claimant ("the Bank") and Mr Ereshchenko dealing with the costs incurred in connection with the cross-examination ("the costs"). The order further provided that, if the court considered it necessary to convene a hearing to determine the issue of costs, such hearing should be listed before me as soon as reasonably practicable after 13 December 2011. The costs in question relate not only to the three days of the restored cross-examination in November, but also include the reserved costs of the first three days of his cross-examination which took place before Peter Smith J in June 2011.
2. At the hearing on 21 November 2011, no indication was given by counsel for the Bank that committal proceedings against Mr Ereshchenko were in contemplation. The directions relating to the costs were therefore given without any consideration of the possible impact of such a development. The apparent finality of this phase of the proceedings was underlined by the fact that directions were also given, by consent, for Mr Ereshchenko's solicitors (Stewarts Law LLP) to be released from their existing undertakings in relation to his passports at 4.00 pm on 28 November, unless any order or agreement to the contrary was made or reached in the meantime.
3. On the next day, however, the Bank's solicitors (Hogan Lovells International LLP) wrote to Stewarts Law expressing the view that it was clear from the cross-examination that Mr Ereshchenko had plainly failed to comply with the disclosure obligations in the original disclosure order made by me on 3 November 2010, and giving notice of the Bank's intention to make an application for Mr Ereshchenko to be committed to prison for contempt of court in respect of such breach. Notice was also given that the Bank would apply for the passport undertakings to be continued until 24 hours after judgment was given on the committal application, provided that the latter application was issued and served by 21 December 2011.
4. The committal application was issued on 16 December 2011, and the parties were then able to agree on a suitable extension to the passport undertakings. The alleged grounds of contempt were set out in the application notice, and fall under two main heads. The first head is that Mr Ereshchenko gave false evidence about his knowledge of and involvement in the AAA transactions. It is alleged that he made five false statements concerning his involvement in those transactions, with no honest belief in their truth. The material relied upon in support of the allegations, as set out in the 17^th affidavit of Mr Christopher Hardman (the solicitor at Hogan Lovells with principal conduct of the matter on behalf of the Bank), includes evidence given by Mr Ereshchenko in the course of the two cross-examination hearings. The second main allegation of contempt is that Mr Ereshchenko made further false statements about documents, with no honest belief in their truth, when giving written and/or oral evidence. Particulars are then given of three statements, to the effect that (a) he had no access to documents that might help him respond to the original disclosure order, (b) that he did not know where the client files for the 13^th defendant, Eastbridge Capital Ltd, were kept, and (c) that he did not know about the existence of archives of files used and generated by Eastbridge. In support of these allegations reliance is again placed upon material set out in Mr Hardman's 17^th affidavit, and it again includes evidence given by Mr Ereshchenko in the course of his cross-examination.
5. On 17 January 2012 the committal application came before me, sitting in the Chancery applications court, for directions. I refused an application made on behalf of Mr Ereshchenko to adjourn the directions hearing until after the return of his leading counsel, Mr Paul Lowenstein QC, from a period of absence in mid February, and gave directions for the service of evidence and various other matters, with a view to the effective hearing of the committal application taking place, if possible, in April/May 2012.
6. I now return to the written submissions on costs which I directed on 21 November 2011.
7. On 2 December 2011 the Bank filed its submissions, arguing:

a) that the question of liability for the costs should be determined now, rather than after the hearing of the committal application;

b) that Mr Ereshchenko should be ordered to pay the Bank's costs, on the footing that the Bank was in effect the successful party;

c) that the costs should be assessed on the indemnity basis, in the light of Mr Ereshchenko's conduct throughout the cross-examination process; and

d) that the court should order an interim payment on account of those costs in the sum of £113,500, estimated to represent not more than 50% of the total costs incurred by the Bank in relation to the entire cross-examination process.

8. On 9 December 2011 Mr Ereshchenko responded, with a document settled by Mr Lowenstein QC headed "Initial submissions of [Mr Ereshchenko] on costs relating to his cross-examination". The general thrust of this document was that, in the light of the threatened committal proceedings against Mr Ereshchenko (which were in fact commenced a week later, on 16 December), the issue of the costs should be adjourned until after the final determination of the committal application. Mr Ereshchenko asked the court to rule accordingly, either on the strength of the written submissions alone, or (if necessary) after a hearing to determine the point. The principal reasons for the submission were, in summary, (a) that there is a very high degree of overlap between the issues to be determined in relation to costs and those likely to arise on the committal application, and (b) that there is a real risk of prejudice to Mr Ereshchenko, which may lead to actual injustice, if the costs issues are determined in advance of the committal hearing. Having taken this preliminary point, Mr Ereshchenko then reserved his position on the questions of what costs should be paid to whom, the basis of assessment, and interim payment.
9. On 13 December 2011 counsel for the Bank (Mr Philip Marshall QC and Ms Emily Gillett) filed a short reply addressing two points arising from the written submissions made by Mr Ereshchenko. First, the Bank took issue with the suggestion that there would be a very high degree of overlap between the issues relating to costs and those likely to arise on the committal. Secondly, the Bank took issue with the suggestion that, by ruling on the costs, the court would necessarily be pre-judging issues likely to arise in the committal proceedings. In support of these submissions, counsel argued that in the committal application the Bank will be seeking to show, to the criminal standard of proof, that Mr Ereshchenko gave false evidence, knowingly, deliberately and dishonestly, when responding to the disclosure order and/or in the course of his cross-examination; while in order to award costs in the Bank's favour, the court would only need to reach the conclusion that Mr Ereshchenko's original response to the disclosure order had been incomplete in material respects, that his oral evidence in the June cross-examination was likewise incomplete, and that the November cross-examination again exposed further material deficiencies in his response. Further, the civil standard of proof would apply, and for that reason alone it would not be possible for a decision in favour of the Bank on the costs issues to pre-determine in any way the outcome of the committal application. For good measure, the Bank added that it did not intend in any event to rely on any costs order that might be made in support of its allegations against Mr Ereshchenko in the committal proceedings.
10. I have not found this an easy question to determine, but in the end I have come to the conclusion that there is a sufficient risk of real prejudice to Mr Ereshchenko, if the costs issues are determined in advance of the committal hearing, to make it the preferable and safer course to accede to Mr Ereshchenko's request. In reaching this conclusion, I have been influenced in particular by the following considerations.
11. First, it appears to be common ground (see paragraph 6 of the Bank's submissions in reply) that the same evidence will largely be relied upon by the Bank in both the costs and the committal applications. The precise issues to which that evidence will be directed are of course different, but I am satisfied that there will nevertheless be a considerable degree of overlap between the matters relied upon by the Bank in support of its application for costs and those relied upon in support of the committal application. The mere fact that the standard of proof will be different does not logically detract from the probable extent of the overlap.
12. Secondly, it is important to remember that the Bank is asking for its costs to be assessed on the indemnity basis. Determination of this question will inevitably involve a close examination of Mr Ereshchenko's conduct throughout the cross-examination process, including matters which are directly relied upon by the Bank in support of the committal application. If the court were to make adverse findings in relation to such matters, albeit to the civil standard of proof (on the balance of probabilities) rather than the criminal standard of proof (beyond reasonable doubt), I think Mr Ereshchenko might reasonably feel that such findings would be likely to influence the judge hearing the committal application, even if the Bank were expressly to disclaim reliance upon them. The perception of possible prejudice would be all the greater if, as is possible, the judge hearing the committal application were to be myself.
13. Thirdly, the overlapping issues of conduct will be examined in much greater detail in the committal proceedings than would be either possible or appropriate in the context of the costs application. Furthermore, any adverse findings that the court may make against Mr Ereshchenko in its judgment on the committal application would in practice be very difficult, if not impossible, for Mr Ereshchenko to challenge in the context of a later adjourned hearing of the Bank's costs application. Not only would those findings have been the subject of minute and detailed scrutiny at the committal hearing, but they would have been made to the criminal standard of proof. This in turn suggests that, in practice, the outcome of the committal application may well be decisive of the costs application, with the consequence that an adjourned hearing will be unnecessary.
14. Finally, although the Bank is understandably anxious to obtain an order for costs in its favour as soon as possible, there will be no prejudice to it apart from delay if the costs issues are adjourned. The Bank is clearly not short of money, and it is able to devote huge resources to the prosecution of this litigation on a number of different fronts. I agree with the submission of Mr Lowenstein QC that there is no obvious urgency in relation to recovery by the Bank of its costs of the cross examination proceedings. Furthermore, it is unlikely that any further delay will be of more than a few months' duration, given that it is now March 2012 and the hearing of the committal application is, I believe, listed to begin at the end of April (subject to an outstanding application by Mr Ereshchenko for it to be postponed by three weeks).
15. For these reasons, I will direct that determination of the costs issues relating to the cross-examination of Mr Ereshchenko be postponed until after the final determination of the committal application. Mr Ereshchenko also asks that he should be awarded his costs of having to argue the timing point, but I do not consider it appropriate to make such an order. My decision is a case management one, and as I have indicated I have not found it easy. In my view the right course is to order that the costs of the preliminary timing issue should be costs in the case, the "case" for this purpose being the Bank's costs application.