Daniel Toledano Q.C.:
Introduction
- There are two applications before the Court. The first is an application by the Defendants to set aside permission granted by Leggatt J on 15 December 2016 to serve the claim form on them out of the jurisdiction. All three Defendants are based in Russia. The second is an application by the Claimants for permission to amend the Claim Form and the Particulars of Claim so as to introduce new causes of action.
- The original claim form and Particulars of Claim alleged only that the First Defendant ("Mr Fosman") had been enriched at the expense of the First Claimant ("Mr Bazhanov"). The inclusion of the Second Claimant, a BVI Company ("Morrins Commercial"), was said to have been justified on the basis that it was "a vehicle for the First Claimant and holds and held its assets for his ultimate benefit". It was not clear on what basis the Second Defendant ("Mrs Fosman") or the Third Defendant, a Russian company ("Akvilon"), were included as parties. During the course of the hearing, Mr Lord Q.C., appearing for the Claimants, accepted that there was no proper basis for any claims against Mrs Fosman. Accordingly, I will set aside service against her and dismiss the application for permission to amend in so far as it was made against her.
- The amendments seek to bring additional causes of action against Mr Fosman for breach of two alleged agreements, the first dated 18 June 2014 (the "June 2014 Agreement") and the second dated 19 May 2015 (the "May 2015 Agreement"). A third agreement is also pleaded dated November 2014 (the "November 2014 Agreement") although no allegation of breach of contract is made in respect of this agreement. The Claimants also seek to bring further new claims against Mr Fosman for breach of fiduciary duty and against all of the Defendants for breach of trust and based on estoppel. Finally, the Claimants seek to widen the claim in unjust enrichment so as to make it against all Defendants and not just against Mr Fosman.
Factual evidence
- Before dealing with the factual background, I should first explain what evidence is before the court and what reliance the court is able to place on it. The Claimants' original application for permission to serve out of the jurisdiction was supported by a witness statement from Mr Korasenko, a director of the firm of solicitors then acting for the Claimants. The Defendants responded to the application with a witness statement from Mr Fosman (Fosman 1) and with a further witness statement from Mr Marsh of the Defendants' solicitors. In reply, the Claimants relied on evidence from (1) Mr Repalo, Akvilon's manager for the period October 2014 to November 2015, (2) Mr Bazhanov ("Bazhanov 1"), (3) Ms Bazhanova, who was previously married to Mr Bazhanov and (4) Ms Rees of the Claimants' solicitors. Two further rounds of evidence were also served. For the Defendants, this consisted of a further witness statement from Mr Fosman ("Fosman 2") and a witness statement from Mr Bublikov, a partner in RCT, a law firm in Russia which acts as corporate counsel for Mr Fosman and Akvilon. For the Claimants, the additional evidence consisted of (1) a second witness statement of Mr Repalo, (2) a second witness statement of Mr Bazhanov ("Bazhanov 2") and (3) a witness statement from Mr Kravtsov, an attorney-at-law and partner at a Russian law firm called Enigma Legis.
- Fosman 1 contained a number of significant inaccuracies which Mr Fosman sought to correct in Fosman 2. Mr Lord Q.C. submitted that the inaccuracies in Fosman 1 were only explicable on the basis that Mr Fosman had deliberately sought to mislead the court with the result that the entirety of his evidence was irretrievably tainted. I do not consider that I need to reach a conclusion on whether any errors in Mr Fosman's account were deliberate. However, as will appear from the factual background section of this judgment, I consider that the errors in Fosman 1 were significant and difficult to explain away. I therefore proceed with caution before placing reliance on Mr Fosman's evidence unless it is supported by other evidence or documents or by the inherent probabilities.
- This is, however, a case in which there are difficulties on both sides in relation to the way that material has been presented to the court. As Mr Ritchie Q.C. appearing for the Defendants rightly pointed out, the Claimants' case has evolved to a significant extent as matters have progressed. I have already referred to the fact that new causes of action have been asserted. In addition, important matters such as the alleged oral agreement relating to jurisdiction and governing law were not mentioned in the original Particulars of Claim or in Mr Korasenko's witness statement in support of permission to serve out of the jurisdiction. The case I am now tasked with deciding is different in many respects to the one which was presented to Leggatt J. Mr Ritchie submits that what he called the "radical shift" in the Claimants' case was more "eye-brow raising" than the changes in Mr Fosman's evidence. I accept that the changes in the Claimants' case are significant and that I must also take those changes into account when deciding what weight to give to the Claimants' evidence on the issues that arise.
The expert evidence
- In addition to the factual evidence that I have already referred to, each side relied on the evidence of an expert in relation to Russian law and procedure. The Claimants relied on the expert report of Professor William Bowring, who is a Professor of Law at Birkbeck College, University of London. The Defendants relied on the expert report of Professor William Simons, who is a Professor of Law at the University of Leiden in The Netherlands and Visiting Professor at the University of Tartu in Estonia. I am entirely satisfied that both individuals have extensive expertise in relation to the Russian legal system and are eminently qualified to assist the court on the forum issues that arise. It is fair to say that in some respects the experts have answered somewhat different questions and have adopted somewhat different approaches. However, I have found both reports to be of assistance and refer to them as appropriate below. The experts also helpfully prepared a list of agreed and disputed issues.
Factual background
The Masloprodukt group
- The claims before the Court relate to the business of the Masloprodukt Group. This is a sunflower seed oil production business with its production and storage facilities located in Verkhnyaya Khava region of Voronezh Oblast in Russia. At least until the events described further in this judgment, the business was owned by Morrins Commercial for the ultimate benefit of Mr Bazhanov. As well as being a businessman, Mr Bazhanov was a politician and in March 2009 he was appointed to the post of the Deputy Minister of the Ministry of Agriculture of the Russian Federation.
The criminal charges
- In about April 2013, Mr Bazhanov was accused by the Russian authorities of fraud in relation to the advance of sums by Rosagroleasing PJSC ("Rosagroleasing"), a state owned finance business, to Vita LLC ("Vita"), an agricultural plant and machinery supplier. The monies had been advanced in connection with the acquisition of plant and machinery for the Masloprodukt group. Mr Bazhanov and other individuals were arrested and detained. Mr Bazhanov claims that during his period of detention between April and December 2013 he was subjected to inhumane and degrading treatment. However, in December 2013 a case worker downgraded the charges against Mr Bazhanov leading to his release from custody. Mr Bazhanov fled Russia to England where he has remained ever since.
- In March 2014 the allegations in Russia against Mr Bazhanov were varied so as to include additional charges relating to 1.15bn roubles in loans advanced by banks in Russia (in particular, Rosselkhozbank and Svyaz Bank) to companies within the Masloprodukt group. The Russian criminal court arrested Mr Bazhanov in absentia and placed him on an international wanted list. I am told that the charges remain outstanding.
- Thereafter, the Masloprodukt group was placed into an insolvency process under Russian law and in the meantime its operation was taken over by a Mr Vadim Moshkovich.
- Mr Bazhanov denies all of the charges against him. His evidence is that the charges are trumped up, politically motivated and part of an attempt to build a case against Yelena Skrynnik, who was director of Rosagroleasing in 2007 when it first provided loan finance, as well part of a campaign to take control of the Masloprodukt group. Mr Bazhanov says that he has been the victim of a "prosecution to order" and of "corporate raiding". I consider these matters further in the context of the issues that arise in relation to the proper forum for this dispute.
The Alleged June 2014 Agreement
- Against the background of these events, Mr Bazhanov met Mr Fosman in London on 18 June 2014. According to Mr Bazhanov, the impetus for that meeting was a meeting that Mr Bazhanov had with Mr Nozdrachev, the President of Svyaz Bank in or around May or June 2014. During that meeting, Mr Bazhanov and Mr Nozdrachev discussed how Svyaz Bank might be able to help in refinancing the Masloprodukt business and Mr Nozdrachev suggested that Mr Bazhanov try to find a solution to the situation of the Masloprodukt group. Mr Bazhanov then decided to ask his old friend, Mr Fosman, to get involved as Mr Fosman had experience in oil seed businesses, through his group of companies called the Blago group.
- Mr Bazhanov called Mr Fosman and told him during a short conversation that he had a business proposition to discuss with him as soon as possible. Mr Fosman agreed to make a special trip to London despite the fact that he was on holiday in Italy at the time.
- The meeting between the two individuals took place on 18 June 2014 (wrongly identified as a date in July 2014 in the original Particulars of Claim). They met at Heathrow airport and then went to Banya No 1 ("Banya"), a Russian spa club in London. There is a considerable measure of dispute between Mr Bazhanov and Mr Fosman about what took place on this occasion as well as on the other occasions that they met referred to further below.
- According to Mr Bazhanov, "Banya was the perfect location for [Mr Bazhanov and Mr Fosman] to catch up together, socialise, and talk in some privacy about the business proposition I had for Mr Fosman." Mr Bazhanov says that the meeting lasted for about two to two and a half hours. According to Mr Bazhanov, the two men agreed upon a plan to "regalvanise the operation" of the Masloprodukt group. The key planks of the plan were: (1) the liquidator/administrator would be offered a sum of money to buy the property of the enterprise out of the insolvency process, (2) the price for that would be approximately 4.5 bn roubles and (3) this sum would be funded by means of a loan from a bank or consortium of banks.
- The financial aspects of the deal were, according to Mr Bazhanov, agreed "very quickly". Mr Fosman is said to have suggested a deal which Mr Bazhanov was prepared to agree to which involved Mr Bazhanov being entitled to 45% of "the business" and Mr Fosman being entitled to 55%. The split was to reflect the "work that each party was going to have to undertake for us to be able to recover and re-start the business, and the cost that Mr Fosman would have to incur along the way". The two individuals also discussed and agreed what each individual would do to progress the plan. Mr Fosman would liaise with relevant authorities in Russia and work on raising funding. Mr Bazhanov would effect introductions to the management team on the ground and provide important documentation.
- According to Mr Bazhanov, the two individuals also agreed that (1) Mr Fosman would have an option to buy out Mr Bazhanov's interest in the business, (2) Mr Bazhanov's lawyer, Mr Muraviev, would be asked to draft a document to reflect the agreement which would be signed during Mr Fosman's next visit and (3) "all agreements…would have to be made under and resolved under English jurisdiction". The third of these points is specifically supported by the evidence of Mr Kravtsov, who recalls a conversation with Mr Bazhanov around this time during which Mr Bazhanov told him about the agreement he had reached with Mr Fosman and about the fact that they had agreed it would be governed by English law and jurisdiction.
- Mr Fosman's original account of the June 2014 meeting in Fosman 1 was inaccurate in several important respects. In particular, Mr Fosman failed to refer to the visit to Banya spa at all and said that the discussion had taken place at Heathrow airport only. Mr Fosman suggested that the main thrust of the conversation had related to Mr Bazhanov's plea for help in relation to the criminal proceedings in Russia rather than a discussion about the operation of the Masloprodukt group going forward. In Fosman 2, Mr Fosman corrected the position but maintained his insistence that no concluded agreement had been reached at this meeting. Mr Fosman also says that there was no reference at any point to English courts or to English governing law.
- Following the meeting on 18 June 2014, Mr Bazhanov says that he started to do all of the things that he had agreed he would do such as briefing his core management team and asking them to provide documentation to Mr Fosman. Any such briefings and/or instructions were given by Mr Bazhanov whilst he was in England since he considered himself unable to return to Russia (and still does). Mr Bazhanov considered that there was some urgency about matters because it was high season for productivity in September. Mr Bazhanov's evidence about steps he took over the summer of 2014 and thereafter is supported by the evidence of Mr Repalo, Ms Bazhanova and Mr Kravtsov. Mr Bublikov for Mr Fosman plays down the involvement of Mr Bazhanov during this period. However, it is clear that Mr Kravtsov at least was involved as he is copied into emails from Mr Bublikov and others. Mr Kravtsov says that his involvement in the project was at all times for and on behalf of Mr Bazhanov.
- For his part, Mr Fosman accepts that he engaged in discussions with creditors of the Masloprodukt group and that he updated Mr Bazhanov about those discussions. However, he claims that this was not pursuant to any agreement he had already concluded with Mr Bazhanov but rather to keep him apprised of developments at the plant and also because he was considering the feasibility of a purchase of Mr Bazhanov's shares in the business. Mr Fosman also accepts that he had discussions with Svyaz bank around this time. However, whilst Mr Bazhanov says that this was the result of Mr Bazhanov's introduction, Mr Fosman says that he had his own personal contact at the bank.
The Alleged November 2014 Agreement
- On 14 November 2014 Mr and Mrs Fosman visited London staying at the Royal Garden Hotel on Kensington High Street. During his visit, Mr Fosman met with Mr Bazhanov on a number of occasions which included dining together with partners at the Novikov restaurant on Berkley Street in Mayfair. The discussions culminated in a meeting at Mr Bazhanov's apartment. At this meeting, Mr Fosman wrote down a manuscript note of points which was then typed up on a laptop. Both documents were written in Russian and were exhibited to the evidence before the court. I have also been provided with a translation of the typed document. This document contains 10 clauses. According to Mr Bazhanov, Mr Fosman had decided to exercise the option, agreed in June, to buy out Mr Bazhanov's shares. The November document was agreed to give effect to the exercise of this option and to agree certain additional matters. Clause 1 in particular is worthy of note. It provided that the sum of money to be paid would be "defined" and would have a "repayment date" before 15 December 2014. The sum of money was said to be "approximately $10-15 million (USA dollars)" although an "approximate formula" was also included which produced a number of $18 million. The two individuals signed the document at a café at Heathrow airport the following day. According to Mr Bazhanov, Mr Fosman was reluctant to sign the document because he was afraid of being sued in England but was eventually persuaded to do so after being reminded that they had already agreed that disputes would be resolved in England under English law.
- Mr Fosman's evidence about the alleged November 2014 Agreement in Fosman 1 was, again, entirely unsatisfactory. In particular, Mr Fosman wrongly suggested that he recalled the typed document as having been handed to him in September 2014 by Ms Alla Petukhova. Mr Fosman also thought that he had not signed the document. The inaccuracies were corrected in Fosman 2, albeit that no explanation was given as to how Mr Fosman managed to get matters so wrong the first time around. Even in Fosman 2, Mr Fosman denied that a binding agreement had been reached. His evidence in Fosman 2 is that "neither of us understood these scribbles to be a binding agreement. It was a kind of minutes of the meeting, with the framework for a potential future agreement". Mr Fosman also denied that there was any conversation about jurisdiction or governing law.
- Later in November 2014, Mr Bazhanov says that he asked his lawyer Mr Muraviev to draw up a formal agreement with Mr Fosman dealing with the buy-out of his shares. Mr Bazhanov says that he instructed Mr Muraviev to prepare an agreement that was subject to English law and jurisdiction. Mr Muraviev did prepare a draft agreement, and a version of this document was exhibited to the evidence before the court. The draft written agreement provides for English governing law and LCIA arbitration. Mr Bazhanov prays this in aid of his case whilst Mr Fosman points to the fact that arbitration is stipulated and not resolution by court in England. The draft before the court leaves a blank space for the identity of the buyer whilst assuming that it would be a corporate vehicle and not Mr Fosman personally. The purchase price is also left blank.
Meeting in December 2014
- Mr Bazhanov and Mr Fosman met for a third time in London in December 2014. Mr Bazhanov says that the two individuals discussed the "matter of agreeing the price for my share in Masloprodukt Group" and the draft agreement prepared by Mr Muraviev. Mr Fosman recalls being sent the draft agreement but maintains that nothing was ever agreed.
Alleged interim arrangement in March 2015
- Mr Bazhanov claims that he became frustrated about delay and that this led to an interim arrangement being agreed in March 2015 whereby a monthly payment of 1m roubles and one third of the profit from the companies controlling the production plant would be made to Mr Bazhanov with effect from September 2014. Mr Fosman denies that any such interim arrangement was concluded. Mr Fosman says that payments totalling 20m roubles were made to Mr Bazhanov's companies in instalments between December 2014 and April 2015 but that these were a loan from one of Mr Fosman's companies to help Mr Bazhanov with his defence costs and living expenses.
- Mr Bazhanov claims that during this period he was constantly pressing Mr Fosman for him to sign the draft agreement prepared by Mr Muraviev. However, on at least one occasion, Mr Bazhanov wrongly attributes in his evidence an exchange with Mr Fosman about a different matter to the conclusion of the draft agreement prepared by Mr Muraviev.
Alleged May 2015 Agreement
- In May 2015 Ms Bazhanova travelled to Moscow to meet with Mr Fosman. They met in a hotel in Moscow. During the meeting, Mr Fosman also spoke to Mr Bazhanov on the telephone. According to Mr Bazhanov, Mr Fosman indicated that he no longer wanted to buy Mr Bazhanov's interest in the business, that in due course Mr Bazhanov would still be entitled to 45% of the company operating the business as agreed back in June 2014 and that in the meantime he would receive 33% of the profits as agreed in March 2015. An additional sum for introducing the opportunity to Mr Fosman would also be payable. Mr Bazhanov says that all of this was agreed by way of amendment to the June 2014 Agreement. The discussion was then typed up as 12 lines of text, a photograph of which was sent to Mr Bazhanov on Ms Bazhanova's mobile telephone. Mr Bazhanov approved the text and it was then signed by Ms Bazhanova for Mr Bazhanov and by Mr Fosman. Mr Bazhanov accepts that there was no discussion on this occasion about jurisdiction or governing law but says that there is no doubt in his mind that this agreement was also to be governed by English law and jurisdiction.
- In Fosman 1, Mr Fosman denied that the 12 line document had anything to do with the Masloprodukt matter at all. He stated that he thought it concerned an unrelated sunflower oil manufacturing plant in Krasnodar Krai in Russia. In Fosman 2, Mr Fosman retracted this suggestion and accepted that Mr Bazhanov had correctly identified the document as relating to the Masloprodukt group. However, Mr Fosman continued to deny that it recorded a binding agreement. Mr Fosman describes the document as "a short statement that was incomplete and ambiguous in places but broadly recorded the status of our negotiations at that time, which I did not believe to be binding".
- I have annexed to this judgment, both the alleged November 2014 Agreement and the alleged May 2015 Agreement.
Further drafts
- In August and in September 2015 Mr Fosman sent draft agreements to Mr Bazhanov for his approval but these drafts were not acceptable to Mr Bazhanov and were not progressed.
Current ownership status of the Masloprodukt group
- The Claimants' case is that, by virtue of steps taken between 2014 and 2017, Akvilon has come to own and operate the Masloprodukt group business and that it was able to achieve this outcome at a very favourable price.
Issue of proceedings
- In December 2016 the Claimants issued the claim form and obtained permission from Leggatt J to serve it on all of the Defendants out of the jurisdiction.
Grant of permission to serve out of the jurisdiction
- It is common ground that in order for the English court to grant permission to serve out of the jurisdiction, the Claimants must satisfy the court as to the following three matters which were restated by Lord Collins in the Privy Council in AK Investments v Kyrgyz Mobil [2011] UKPC 7:
(1) There must be a serious issue to be tried on the merits in relation to each alleged cause of action;
(2) There must be a good arguable case that each cause of action falls within one or more jurisdictional gateway under CPR Practice Direction 6B ("PD 6B"); and
(3) In all the circumstances, the Court ought to exercise its discretion to permit service out of the jurisdiction. The Court will only do so if it is satisfied that England is the proper place in which to bring the claim.
- There was little if any disagreement between the parties as to the correct approach in relation to serious issue to be tried and proper exercise of discretion. However, the good arguable case test proved more controversial. In large part this is due to what has become known as the Canada Trust gloss. This gloss originates in the judgment of Waller LJ in Canada Trust Co v Stolzenberg (No. 2) [1998] 1 WLR 547, at p. 555 where he stated that the good arguable case test "reflects in that context that one side has a much better argument on the material available".
- Some authorities support the proposition that the Canada Trust gloss should not apply "where there is a conflict of evidence which cannot be resolved without oral evidence and sight of the contemporaneous documents following disclosure": Teare J in Antonio Gramsci Shipping Corp v Recoletos Ltd [2012] EWHC 1887 (Comm); 2012 2 Lloyds Rep 365, at paragraph 39. Teare J concluded that, where there was such a conflict of evidence, it was enough if the evidence relied upon was sufficiently strong to allow the court to take jurisdiction even if it could not be shown that the party in question had much the better argument. There seems to me to be considerable force in this approach which is consistent with the fact that, at the jurisdiction stage, the court is not deciding matters on a balance of probabilities after a trial.
- A helpful analysis of the case law relating to the meaning of the good arguable case standard and the Canada Trust gloss is set out in the judgment of Mr Peter MacDonald Eggers QC in the case of Kaefer Aislamientos SA de CV v AMS Drilling Mexico SA de CV and ors [2017] EWHC 2598 (Comm), paragraphs 47-66.
- The good arguable case standard was recently considered by the Court of Appeal in Brownlie v Four Seasons Holdings Inc [2015] EWCA Civ 665; [2016] 1 WLR 1814, Arden LJ at paragraphs 17-24. After I had provided my judgment in this matter to the parties in draft but before the formal handing down, the Supreme Court delivered their judgments in the Brownlie case. I invited the parties to make written submissions about the impact of the Supreme Court decision.
- In the Court of Appeal in Brownlie Arden LJ referred to the fact that the "much better argument" test was concerned with "relative plausibility" but also to the fact that there was an "absolute standard to be met". The absolute standard required the claimant's argument to have "some substance to it". This was designed to ensure that the court did not take jurisdiction without there being an "acceptable level of quality and adequacy". The court was not bound to accept a witness statement that was "inherently defective, and certainly should not do so if it conflicts with other incontrovertible evidence or is unreliable for some other tangible reason, or as Christopher Clarke J put it in Cherney v Deripaska (No 2) [2009] 1 AER (Comm) 333, para 44, 'wholly implausible'". However, it was also the case that the good arguable case standard was not the same as that of succeeding on a balance of probabilities because there will have been no trial at the jurisdiction stage.
- In paragraph 7 of his judgment in Brownlie, Lord Sumption (with whom Lord Hughes agreed) stated the position in relation to the good arguable case standard as follows:
"An attempt to clarify the practical implications of these principles was made by the Court of Appeal in Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547. Waller LJ, delivering the leading judgment observed at p 555:
"'Good arguable case' reflects … that one side has a much better argument on the material available. It is the concept which the phrase reflects on which it is important to concentrate, ie of the court being satisfied or as satisfied as it can be having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction."
When the case reached the House of Lords, Waller LJ's analysis was approved in general terms by Lord Steyn, with whom Lord Cooke and Lord Hope agreed, but without full argument: [2002] AC 1, 13. The passage quoted has, however, been specifically approved twice by the Judicial Committee of the Privy Council: Bols Distilleries (trading as Bols Royal Distilleries) v Superior Yacht Services Ltd [2007] 1 WLR 12, para 28, and Altimo Holdings, loc cit. In my opinion it is a serviceable test, provided that it is correctly understood. The reference to "a much better argument on the material available" is not a reversion to the civil burden of proof which the House of Lords had rejected in Vitkovice. What is meant is (i) that the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway; (ii) that if there is an issue of fact about it, or some other reason for doubting whether it applies, the Court must take a view on the material available if it can reliably do so; but (iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it. I do not believe that anything is gained by the word "much", which suggests a superior standard of conviction that is both uncertain and unwarranted in this context."
- In paragraph 33 of her judgment Lady Hale stated:
"As we agree that this action cannot continue against the current defendant, everything which we say about jurisdiction is obiter dicta and should be treated with appropriate caution. For what it is worth, I agree (1) that the correct test is "a good arguable case" and glosses should be avoided; I do not read Lord Sumption's explication in para 7 as glossing the test…"
- Lord Wilson agreed with the judgment of Lady Hale and therefore, as he stated in paragraph 56 of his judgment, with the parts of the judgment of Lord Sumption with which she agreed. Lord Clarke stated (in paragraph 68) that "In so far as there are issues between Lady Hale and Lord Wilson on the one hand and Lord Sumption and Lord Hughes on the other, I prefer the reasoning of Lady Hale and Lord Wilson for the reasons they give."
- It follows from the above that, whilst Lord Sumption referred to the Canada trust gloss as a "serviceable test, provided it is correctly understood", Lady Hale preferred to avoid all glosses on the good arguable case test. However, there does not seem to have been any disagreement between the Supreme Court Justices in relation to the applicability of points (i) to (iii) in paragraph 7 of Lord Sumption's judgment since Lady Hale did not consider that this glossed the good arguable case test. The good arguable case test must therefore be applied in light of those points.
- I will turn to each of the alleged causes of action, starting with breach of contract.
The contract claims
- Rather than deal first with whether the Claimants are able to establish a serious issue to be tried on the merits of the contract claims, I will first consider whether they have established a good arguable case that the contract claims fall within one or more of the gateways relied upon. This is because, so far as the contract claims are concerned, in order to establish the existence of a gateway, the Claimants will have to establish a good arguable case both as to the existence of the contract or contracts in question and as to the additional jurisdictional feature in question: Sax v Tchernoy [2014] EWHC 795 (Comm), Hamblen J at paragraph 57. If the Claimants can satisfy the court in relation to these matters, then it will follow that the Claimants will also be able to satisfy the court that they have a serious issue to be tried on the merits of the argument about whether a contract or contracts were concluded (the Defendants take no separate point in relation to breach of contract at this stage). If, on the other hand, the Claimants cannot satisfy the good arguable case standard, then no gateway will be available to them and it will not matter whether a serious issue to be tried might have existed.
- In their evidence, the Claimants relied on three separate jurisdictional features: a contract made in the jurisdiction (PD 6B 3.1(6)(a)), a contract governed by English law (PD 6B 3.1(6)(c)) and a contract containing a term to the effect that the English Court shall have jurisdiction to determine any claim in respect of the contract (PD 6B 3.1(6)(d)). It is enough if the Claimants can establish to the standard of a good arguable case any one of these three features. In their skeleton argument, the Claimants relied on a fourth jurisdictional feature and gateway, namely, a breach of contract committed within the jurisdiction (PD 6B 3.1(7)).
The existence of a contract or contracts
- The Claimants contend that all three of the alleged Agreements in this case were binding contracts as a matter of English law. However, the Claimants only found causes of action for breach of contract on the alleged June 2014 Agreement and on the alleged May 2015 Agreement. It will nevertheless be necessary for me to reach conclusions in respect of all three alleged contracts because all three are said by the Claimants to have formed part of one continuum or progression.
- The relevant English law principles concerning contract formation have recently been considered by Leggatt J in Blue v Ashley [2017] EWHC 1928 (Comm) at paragraphs 49-64 and were also considered by Hamblen J in the permission to serve out context in Sax v Tchernoy at paragraphs 62-67. The parties in the present case approached the question of whether an enforceable contract came into existence primarily by reference to these English law principles. However, if the alleged agreements (had they been concluded) would have been governed by Russian law, then it would be Russian law which would determine whether enforceable agreements came into existence in the first place. Since the evidence before the Court indicated that Russian law does not allow proof of oral agreements because contracts must be reduced to writing, the position would appear to be considerably more difficult for the Claimants under Russian law than under English law. Further, Mr Kravtsov for the Claimants suggests that even a signed document such as the November 2014 document would be unenforceable in Russia because it was not executed in compliance with the requirements set out in the Civil Code of the Russian Federation. I have, in any event, addressed the matter from an English law perspective below in accordance with the way that the matter was argued before me.
- The Defendants contend that the Claimants do not meet the good arguable case threshold in relation to any of the three alleged Agreements for four reasons (which overlap at least in some respects): first, there was no or no sufficient meeting of minds; secondly, there was no intention to create legal relations; thirdly, even if there was an agreement, it was an unenforceable agreement to agree; and fourthly any agreement was insufficiently certain to amount to an enforceable agreement.
- The Claimants submit that the good arguable case standard is met in relation to each of the alleged Agreements. Mr Lord Q.C. emphasised, in particular, that Mr Bazhanov's account of the chronology was detailed and cogent and that, by contrast, the evidence of Mr Fosman was unreliable.
- In my judgment, the Claimants are unable to demonstrate a good arguable case in relation to any of the three alleged Agreements. This is so, in my view, even if the Canada Trust gloss does not apply. I agree with Mr Ritchie Q.C.'s submission that the Claimants are unable to satisfy even the absolute standard to be met, let alone any relative plausibility test. To use the words of Lord Sumption in Brownlie, the Claimants have not supplied a "plausible evidential basis" for their case. I reach this conclusion even though, as indicated above, I have treated the evidence of Mr Fosman with caution. I will deal with each of the alleged Agreements in turn.
- So far as the alleged June 2014 Agreement is concerned:
(1) The meeting in June 2014 was the first time that the two individuals had met to discuss the Masloprodukt group matter. The setting for the meeting was a social one. Nothing about the background to, or circumstances of, the meeting suggest that the parties intended to create legal relations.
(2) The situation of the Masloprodukt group at the time was, on any view, a complex one that involved insolvency processes and the special position of Mr Moshkovich. Mr Fosman did not know any of the detail about the affairs of the group prior to this meeting, as Mr Bazhanov accepts. It is inherently implausible that Mr Fosman would have been in any position to reach a decision at the initial meeting as to whether he wanted to get involved in a contractually binding way or on what terms. By way of example, it is impossible to see how Mr Fosman could have known at this meeting that a 45/55 split was appropriate in order to reflect the work that each individual would have to undertake and the costs that Mr Fosman would incur along the way. Mr Fosman would have had no or very little idea of what that work would involve or what those costs would have been. It is unreal to suppose, as Mr Bazhanov suggests, that Mr Fosman put forward the 45/55 split as, in effect, a contractual offer in the circumstances as they appear to have existed at this meeting.
(3) Significant terms were left entirely up in the air even on Mr Bazhanov's case as to what took place at the meeting. I do not consider that the content of the discussion could possibly have been sufficiently certain to amount to a binding contract. In particular, no agreement was reached as to precisely what Mr Fosman would be acquiring, whether it would be shares in the Masloprodukt group operating companies or in Morrins Commercial or whether instead Akvilon would acquire plant and assets.
(4) Although Mr Bazhanov contends that an option to buy him out was agreed, this can only have been an unenforceable agreement to agree since even Mr Bazhanov accepts that further negotiation in relation to this option was needed both at the November 2014 meeting and during the process of discussion of the draft written agreement that followed.
(5) My conclusions referred to above are supported by the absence of any written record of the alleged June 2014 Agreement, let alone a record signed by both parties.
(6) My conclusions are also supported by the fact that although Mr Bazhanov says that there was a discussion at the meeting about the need for a written agreement to be drawn up and then checked and approved by an English solicitor, no agreement was actually drawn up until towards the end of the year and even then the agreement that was drafted only dealt with the purchase of Mr Bazhanov's shares and not with the totality of what the Claimants allege was agreed in June 2014. Nor is there any indication that an English solicitor had been engaged to check and approve it.
(7) I also take into account when reaching these conclusions that Mr Bazhanov himself did not put forward a case in contract in his original Particulars of Claim. Although the original Particulars of Claim refers to the meeting in question and refers to promises made at that meeting and matters agreed, it stopped short of alleging that a binding contract had been concluded.
(8) Finally, I am not persuaded that I can place much reliance on the fact that, following the discussion in June, Mr Bazhanov provided assistance and input in relation to the steps that Mr Fosman took in connection with the Masloprodukt group. Such actions do not demonstrate that a binding contract had been reached and might have been provided even if one had not.
- So far as the alleged November 2014 Agreement is concerned:
(1) The insurmountable problem so far as the Claimants are concerned is the lack of clarity and certainty in the clauses of the signed document. Many of the clauses are simply incomprehensible and appear to be no more than a note of points discussed or points for follow up.
(2) Mr Lord Q.C. appeared to recognise the force of this point, but sought to get around the difficulty by referring to the fact that Mr Bazhanov had set out in detail in his evidence what each of the ten clauses was intended to mean without this explanation being contradicted by Mr Fosman. However, Mr Bazhanov's subjective understanding as to the meaning of the document, even if not expressly contradicted clause by clause, cannot make up for the deficiencies of the document itself.
(3) Even the amount of money to be paid remained at large since it was variously described as (1) approximately $10-15million or (2) $18million resulting from the application of a formula. The inclusion of this formula does not assist the Claimants because it is itself described as "approximate". What is more, the entire clause about price is introduced with the words "we shall define a sum of money…" making it clear that, at most, this was an agreement to agree, itself unenforceable. This conclusion is reinforced by Mr Bazhanov's own evidence that the main purpose of the subsequent December 2014 meeting was "the matter of agreeing the price for my share in the Masloprodukt Group, which we had agreed back in November 2014 we would agree by mid-December…"
(4) Further, the parties do not appear to have conducted themselves as if the signed document was final and binding. They envisaged that a formal written agreement would be drawn up, and that is what then happened. Even the draft agreement leaves the price to be paid blank indicating that no final agreement as to price had been reached.
(5) I have taken into account the fact that the November document was typed up and signed by both individuals. Mr Lord Q.C. submitted that the fact that a document had been signed has been described in the authorities as a "cogent indication" of a binding arrangement: Teare J in Dhanani v Crasnianski [2011] EWHC 926 (Comm), cited by Hamblen J in Sax v Tchernoy at paragraph 64. However, Teare J went on to make it clear that it all depended upon the circumstances and that a document might not have been intended to be legally binding notwithstanding that it was signed by each party.
- That leaves the May 2015 Agreement. As to this:
(1) I am unable to accept that the signed document is sufficiently certain to be capable of being enforceable. The opening words "we don't sell and don't buy the shares…" are said by Mr Bazhanov to indicate that it was agreed that Mr Fosman would not buy out Mr Bazhanov's share of the business such that instead the parties would revert to the terms of the June 2014 Agreement, in particular as to the 45/55 split. The difficulty with this submission is that the words used do not say anything at all about reverting to the June 2014 Agreement and do not reference any such agreement at all.
(2) Once again, I do not consider that the Claimants can pray in aid Mr Bazhanov's explanation of the signed document to make good its deficiencies even if that explanation is not expressly contradicted.
(3) A good deal of the language used is suggestive of wish or intent rather than binding commitment (for example, "It is intended that there shall be made payment as an expression of appreciation…").
(4) Mr Lord Q.C. accepted that, standing alone, the May 2015 document would not be indicative of a binding contract. However, he submitted that this document need to be viewed in the context of the "whole picture" going back to June 2014. However, in view of the findings I have already made about the earlier discussions and negotiations, I am not at all satisfied that this makes any difference so far as the May 2015 document is concerned. If anything, the earlier exchanges suggested that more needed to be discussed and negotiated and a formal agreement drawn up before a binding contract could be concluded.
- My conclusions above concerning the lack of a good arguable case of an enforceable agreement, mean that the Claimants are unable to bring their contractual claim within any of the contractual gateways relied upon. I will nevertheless also go on to consider whether the Claimants would in any event have been able to establish any of the four jurisdictional features relied upon as part of their arguments on available gateways.
"made within the jurisdiction"
- So far as the "made within the jurisdiction" gateway is concerned, it was common ground that the June 2014 meeting took place in London such that, had an enforceable agreement been concluded, it would have been made in England. It was also common ground that the May 2015 meeting took place in Moscow. Mr Lord Q.C. contended, however, that the May 2015 Agreement operated by way of amendment to the June 2014 Agreement such that it would still be considered to be made within the jurisdiction if the overall agreement as amended was "substantially made" within the jurisdiction: Sharab v HRH Prince Al-Waleed bin Talal bin Abdal-Aziz Al-Saud [2008] EWHC 1893 (Ch), para 62, citing Kerr J in BP Exploration (Libya) Ltd v Hunt [1976] 1 WLR 788. However, for reasons already set out, there is nothing in the May 2015 document to suggest that it operated by way of amendment of any earlier agreement.
"governed by English law"
- I am not persuaded that the Claimants have demonstrated a good arguable case (whether or not the Canada Trust gloss applies) that the alleged June 2014 Agreement is governed by English law. The Claimants' primary case on this point rested on the alleged oral agreement at the Banya spa meeting that, due to Mr Bazhanov's concerns about the ongoing criminal proceedings in Russia, "all agreements…would have to be made under and resolved under English jurisdiction". Not only is it not at all clear that this was intended to include an agreement as to governing law rather than just jurisdiction, it seems to me that it is not only inherently improbable but wholly implausible that the two individuals would have discussed this matter at all let alone agreed it at their very first meeting about the Masloprodukt group. I am not therefore bound to accept the evidence contained in Mr Bazhanov's witness statement in this respect in line with the guidance set out above in the Brownlie case.
- Moreover, it seems to me that had such an agreement been reached, it would have been referred to in the original Particulars of Claim and/or in Mr Korasenko's witness statement in support of the application for permission to serve out. Mr Lord Q.C. suggested that the omission could be explained on the basis that no contract claim was being pursued at that time such that it would have been less important to consider whether governing law and/or jurisdiction had been agreed. However, this explanation does not sit well with the fact that the Claimants were relying before me on the alleged agreement as to governing law and jurisdiction not only in relation to the contract claims but also in relation to the other non-contractual causes of action.
- The absence of any document that supports the alleged agreement as to governing law and jurisdiction is also telling. In particular there is no reference to any such agreement in the document signed in November 2014 or in the document signed in May 2015. The closest that the Claimants come to documentary support for their case is that the draft agreement prepared by Mr Muraviev contained an English governing law clause and an LCIA clause. However, the inclusion of these terms does not prove that they were agreed at the outset in the way suggested by the Claimants. Moreover, the inclusion of an arbitration provision in the draft agreement, if anything, suggests that Mr Muraviev had something in mind for dispute resolution of a different nature to that put forward by Mr Bazhanov in his evidence.
- Although I am bound to place some weight on the apparently corroborative evidence of Mr Kravtsov, I am unable to accept that overall the Claimants have demonstrated a good arguable case that the alleged agreement was concluded.
- The position is even more difficult when it comes to the alleged May 2015 Agreement since it is accepted by Mr Bazhanov that there was no discussion on that occasion about governing law or jurisdiction. Mr Lord Q.C.'s answer to this point was to rely here too on the fact that the May 2015 Agreement was intended to operate by way of amendment of what had been agreed in June 2014. However, as I have already concluded, I do not consider that a good arguable case has been shown in relation to any agreement in June 2014.
- In the absence of an express agreement as to governing law which would have been given effect by virtue of Article 3 of the Rome I Regulation (Regulation (EC) No 593/2008), the Claimants must fall back on the provisions of Article 4 of that Regulation.
- The Claimants contend that the alleged June 2014 Agreement was a "contract for the provision of services" with Mr Bazhanov as the service provider. Accordingly, the Claimants submit that, under Article 4 paragraph 1(b), the applicable law would have been the law of the country where Mr Bazhanov had his habitual residence, which would have been English law.
- The difficulty with this argument, it seems to me, is that, even on Mr Bazhanov's own evidence, the alleged June 2014 Agreement contemplated that services would be provided by both individuals. That indeed was the whole premise of the mutually beneficial arrangement. I also consider that precisely the same difficulty would also have applied to any argument based on characteristic performance under paragraph 2 of Article 4. It follows that, had I been persuaded that there was a good arguable case for an enforceable contract in June 2014, I would have concluded that the governing law of that contact could not be determined pursuant to paragraph 1 or paragraph 2 of Article 4, with the result that the contract would have been governed by the law of the country with which it is most closely connected by virtue of paragraph 4 of Article 4. It was common ground that, if paragraph 4 of Article 4 was engaged, then Russian law would have governed the contract. The position would have been the same in relation to the alleged May 2015 Agreement since the Claimants' case was that this was no more than an amendment of the earlier agreement.
"contains a term to the effect that the court shall have jurisdiction"
- For reasons which are the same as those set out above in relation to the alleged express agreement as to governing law, I do not consider that the Claimants are able to demonstrate a good arguable case of any agreement containing a term to the effect that the English court should have jurisdiction.
"breach of contract committed within the jurisdiction"
- The Claimants relied on Mr Fosman's failure to make payments to Mr Bazhanov said to have been required by the alleged Agreements. They relied on the presumption that a debtor must seek out his creditor, in this case by ensuring payment was made to Mr Bazhanov in England. However, the evidence before the court was that on the occasions when money was transferred to Mr Bazhanov (on his case, in part payment of monies owed under the November 2014 Agreement and on Mr Fosman's case, as part of a loan arrangement) the money was not paid to him personally but rather to different companies within the Masloprodukt Group. Accordingly, the evidence indicates that these two individuals would not have required any necessary payments to be made to Mr Bazhanov personally. I am not therefore persuaded that a good arguable case would have been made out under this gateway either even if an enforceable agreement had been demonstrated.
Conclusion on contract gateway
- In light of the matters I have set out above, I have concluded that the Claimants have not established a good arguable case of any gateway in relation to their contractual claims.
The claims in unjust enrichment
- I turn now to consider the claim made in unjust enrichment. This claim is made against both Mr Fosman and against Akvilon.
Serious issue to be tried
- According to the evidence of the Claimants' own lawyer, Mr Kravtsov, Russian law does not recognise claims based on unjust enrichment and does not recognise the concept of equitable compensation, or compensation for work done, in the absence of a contractual relationship. Accordingly, the unjust enrichment claim can only raise a serious issue to be tried if it is arguable that it is governed by English law. In such circumstances, it is necessary for me to evaluate whether there is a serious issue to be tried by considering first whether it is arguable that English law applies.
- The answer to whether English law might arguably govern the unjust enrichment claim depends upon the application of the Rome II Regulation (Regulation (EC) No 864/2007).
- Article 14 of Rome II provides that the parties may agree to submit non-contractual obligations to the law of their choice by (under paragraph 1(b) which applies where all the parties are pursuing a commercial activity) "…an agreement freely negotiated before the event giving rise to the damage occurred". The choice "shall be expressed or demonstrated with reasonable certainty by the circumstances of the case and shall not prejudice the rights of third parties."
- I have already concluded, in the context of the contract gateways, that the Claimants have not shown a good arguable case that the parties expressly agreed that English law would govern the alleged agreement between them. The position of non-contractual obligations is an a fortiori one.
- Even if I were to take Mr Bazhanov's evidence at its highest, the parties only agreed that "all agreements between us would have to be made under and resolved under English jurisdiction". There is no suggestion anywhere in Mr Bazhanov's account that the parties expressly agreed that non-contractual obligations would also be governed by English law. As Article 14(1) makes clear, the agreement concerning choice of law must be expressed or demonstrated with reasonable certainty by the circumstances of the case. Yet no choice of law for non-contractual obligations was expressed and no circumstances are relied on to support an implied choice beyond the mere fact of the alleged express agreement as to the contractual governing law and jurisdiction. It follows that, on the material before the court, even taking Mr Bazhanov's evidence at its highest, there is no basis on which Article 14(1) could even arguably be satisfied.
- In the absence of a choice of law, the applicable law of the unjust enrichment claim will depend upon the application of Article 10 of Rome II. This Article provides as follows:
"Article 10
Unjust enrichment
1. If a non-contractual obligation arising out of unjust enrichment, including payment of amounts wrongly received, concerns a relationship existing between the parties, such as one arising out of a contract or a tort/delict, that is closely connected with that unjust enrichment, it shall be governed by the law that governs that relationship.
2. Where the law applicable cannot be determined on the basis of paragraph 1 and the parties have their habitual residence in the same country when the event giving rise to unjust enrichment occurs, the law of that country shall apply.
3. Where the law applicable cannot be determined on the basis of paragraphs 1 or 2, it shall be the law of the country in which the unjust enrichment took place.
4. Where it is clear from all the circumstances of the case that the non-contractual obligation arising out of unjust enrichment is manifestly more closely connected with a country other than that indicated in paragraphs 1, 2 and 3, the law of that other country shall apply."
- I do not consider that it is arguable that paragraph 1 of Article 10 applies. Mr Lord Q.C. made it clear that the unjust enrichment claim was advanced in the alternative to a contract claim to cover the situation where, contrary to his primary case, no contract was in fact entered into (he relied in this regard on the analysis of Robert Goff J in British Steel Corp v Cleveland Bridge [1984] 1 AER 504). If, on this hypothesis, there is no contract, then there is no governing law that could be derived from it for the purposes of Article 10(1).
- Mr Lord Q.C. accepted that if he could not establish at least an arguable case for English law under either Article 14(1)(b) or under Article 10(1) then there was no other provision that would assist. This concession was inevitable because (1) paragraph 2 of Article 10 does not apply because the habitual residences of at least Mr Bazhanov and Mr Fosman are not the same (2) under paragraph 3, the law of the country where the unjust enrichment took place must be Russian law, because the alleged unjust enrichment took place in Russia where Mr Fosman and/or Akvilon are based and (3) paragraph 4 would not lead to the application of any law other than Russian law.
- It follows that the Claimants have failed to establish a serious issue to be tried that English law governs the claim in unjust enrichment. Since there is no claim under Russian law according to the Claimants' own evidence, I conclude that the Claimants have failed to establish a serious issue to be tried in relation to the unjust enrichment claim.
Gateways
- In view of my conclusion above in relation to the lack of a serious issue to be tried, the issue of gateways does not arise. However, in case I am wrong about the lack of a serious issue to be tried under English law, I will go on to consider whether the Claimants have demonstrated a good arguable case under one or more of the applicable gateways.
- In their skeleton argument, the Claimants sought to bring their unjust enrichment claims within the contract gateways in PD 6B3.1(6) on the basis that they were claims in quasi-contract. However, Mr Lord Q.C., rightly in my view, conceded during oral argument that the unjust enrichment claims were not claims in respect of a contract within the meaning of the practice direction. Mr Lord Q.C. also rightly accepted that he could not rely on gateway PD 6B3.1(9) (claims in tort) which had at one point been relied upon.
- The Claimants' main argument was based on the gateway contained in PD6B paragraph 3.1(16). This provides:
(16) A claim is made for restitution where –
(a) the defendant's alleged liability arises out of acts committed within the jurisdiction; or
(b) the enrichment is obtained within the jurisdiction; or
(c) the claim is governed by the law of England and Wales.
- The Claimants rely on both (a) and (c). I deal with each in turn.
"defendant's alleged liability arises out of acts committed within the jurisdiction"
- The first issue that arises under 3.1(16)(a) is as to what is meant by the "the defendant's alleged liability arises out of…". In particular, in the case of a claim in unjust enrichment, the issue is whether the court should have regard to the acts of the claimant and where they took place, or the acts of the defendant or both.
- Mr Lord Q.C. relied on Sharab v Al-Saud [2012] EWHC 1798 (Ch) in which Sir William Blackburne held (at paragraph 68) that "The essence of a claim in restitution (at any rate of the kind with which this case is concerned) is the conduct of the claimant which has enriched the defendant…It follows from this that the focus [of the gateway] is principally, although not exclusively, on the acts of the claimant". In the following paragraph, the learned judge also held that all that was needed was that "a substantial part of the acts in question, though not necessarily all of them" have been committed within the jurisdiction. He concluded by stating: "There is no bright line test: the evaluation of the matters calls for an exercise of judgment on the court's part reached after considering the acts as a whole and adopting a common sense approach".
- Mr Ritchie Q.C. was willing to agree that that the approach of Sir William Blackburne was correct albeit that Mr Ritchie reserved the right to argue the point if the matter is appealed.
- Adopting this approach, it seems to me that the Claimants have demonstrated a good arguable case that a substantial part of the acts in question were committed within the jurisdiction. The essence of the Claimants' complaint is that services were provided by or at the instruction of Mr Bazhanov to Mr Fosman and those acting for him which helped Mr Fosman through Akvilon to be enriched by acquiring the Masloprodukt group at a fraction of its true value without ensuring that Mr Bazhanov received any or any adequate value for the services provided. Although I accept that the assistance said to have been provided by Mr Bazhanov was translated into concrete actions (such as actions taken by lawyers or core management) in Russia, I also accept that on the case as pleaded this only took place because Mr Bazhanov, whilst based in England, had given his consent or his instructions. I also accept that the acts of Mr Fosman and others on the Defendants' side would have been acts committed in Russia. However, it seems to me that I should give more weight to the acts of Mr Bazhanov in view of the nature of the unjust enrichment claim pleaded and the approach of Sir William Blackburne in the Sharab case.
"the claim is governed by the law of England and Wales"
- I have already held that it is not seriously arguable that the claim is governed by English law. If I am wrong about that, and if, going beyond that, a good arguable case of an English law governed claim exists, then it would of course follow that this gateway would also be satisfied.
Breach of fiduciary duty
- The claim for breach of fiduciary duty is one that, in my view, stands or falls with the contract claims both as regards serious issue to be tried on the merits and as regards gateways.
- The reason for that conclusion is that the fiduciary duties themselves are said to arise out of the contractual relationship that was alleged to have been concluded in June 2014. If there was no contractual relationship or no sufficiently arguable case for any such relationship then there is no basis on the material before the court on which fiduciary duties could be imposed.
- I consider that the same conclusion applies to the claims based on estoppel since these too are said to be based primarily on the alleged contractual relationship.
Trust claim
- The Claimants allege that the Defendants hold the real estate and assets of the Masloprodukt business on trust for Mr Bazhanov and/or that Mr Fosman holds his interest in Akvilon on trust for the Claimants. The allegation is not clearly formulated even in the Amended Particulars of Claim but appears to be an allegation that a constructive trust ought to be imposed as a remedy arising out of the contractual and/or restitutionary claims. Mr Lord Q.C. made it clear in his submissions that this was indeed the basis on which the trust claims were advanced.
- In those circumstances, I consider that the trust claims must stand or fall with the contract and/or unjust enrichment claims.
Conclusion on jurisdiction
- In light of my various findings set out above, I have concluded that permission to serve out of the jurisdiction should not be granted in respect of any of the alleged claims and that it should be set aside in so far as it has already been granted. It follows too that I dismiss the application for permission to amend.
Proper place for the resolution of the dispute
- In view of the conclusion I have reached on serious issue to be tried and gateways, it is not strictly necessary for me to state my conclusion on proper forum. However, I will do so albeit relatively concisely in case this judgment is appealed and also because the proper forum issue was fully argued before me by reference to detailed expert reports.
- Had I concluded that the court did have jurisdiction to determine any or even all of the claims, I would nonetheless have declined to exercise the Court's discretion in favour of the Claimants because I do not consider that the Claimants have demonstrated that England is the proper place in which to bring this claim.
- The starting point is that, absent the three meetings that took place in London (in June, November and December of 2014) and the related fact of Mr Bazhanov's residence in London, the case is overwhelmingly connected with Russia. It concerns a business located in Russia, operated by Russians and recently in some form of Russian insolvency process. The dispute concerns alleged agreements concluded by two Russian nationals. Key witnesses (such as Ms Bazhanova and Mrs Fosman, Mr Repalo as well as the lawyers on both sides) are based in Russia and would need to give their evidence in Russian (as demonstrated by the fact that many of the witness statements on both sides for this application are in Russian and translated into English). Many, if not all, of the key documents, including those relied on as being contractual in nature, are written in Russian. The alleged enrichment took place in Russia. The causes of action are, at least as things appear at the jurisdiction stage, governed by Russian law for the reasons that I have already set out. According to Professor Simons' evidence, there is at least a serious risk that any judgment of the English court will not be enforceable in Russia where the relevant arbitrazh courts will consider themselves to have exclusive jurisdiction.
- The reality is that the only way in which the Claimants could overcome the overwhelmingly Russian nature of this dispute so as to persuade the court to exercise its discretion in favour of a trial in England is if they could demonstrate that there is a real risk that substantial justice will not be done because they would not get a fair trial in Russia.
- The authorities establish that the English court should show particular restraint before reaching the conclusion that a claimant would not receive substantial justice in a foreign country in view of the requirements of comity. The authorities indicate that the claimant must make good its argument based on "positive and cogent evidence": The Abidin Daver [1984] AC 398, 411C. Whilst there are rare cases where a claimant has been able to satisfy this standard, Cherney v Deripaska [2008] EWHC 1530 (Comm); [2009] 1 AER (Comm) 333 being the most often cited example, such cases are the exception.
- It is fair to say that the Claimants' arguments before me were very largely based on similar arguments which had been advanced successfully in the Cherney v Deripaska case. However, the Cherney v Deripaska case was an "extreme one" as Flaux J concluded in Erste Group Bank AG v JSC 'Red October' [2013] EWHC 2926 (Comm), at paragraph 201. This was because (1) Mr Cherney was seen as an enemy of the Russian state, (2) Mr Deripaska's interests were seen to be totally aligned with those of the Russian state and (3) the interest about which the parties were fighting was described by Christopher Clarke J as a "mighty interest" including as it did 20% of Rusal, the world's largest aluminium and alumina producer. These factors are not present in the case before me or not present to anything like the extent that they were in the Cherney case.
- Mr Lord Q.C. relied in particular on the fact that the two experts agreed that (1) prosecutions in the Russian Federation can be politically motivated, (2) the possibility of prosecutions to order does exist, (3) the concept of corporate raiding does exist and (4) the Russian judicial system is not without its problems including that there has been alignment of Russian courts to state interests or external influence in some high-profile cases. However, the real issue is whether and, if so, to what extent these factors would be likely to operate in the present case so as to jeopardise the prospect of a fair trial.
- In his report, Professor Bowring concluded that the prosecution of Mr Bazhanov was politically motivated, that it appeared to fall into the category of a prosecution to order and that the loss of control of the Masloprodukt group appeared to fit the pattern of criminal corporate raiding
- Mr Ritchie Q.C. submitted that Professor Bowring's conclusions were based on speculation and innuendo and were not reliably rooted in the available evidence about the present case. I accept that the key part of Professor Bowring's evidence relating to the alleged prosecution to order and corporate raiding was largely based on press reports, at least one of which Professor Bowring himself described as "engaging in somewhat sensational journalism". In particular, whilst Professor Bowring concluded that it was "highly likely" that Mr Moshkovich was behind the prosecution of Mr Bazhanov with a view to seizing his valuable assets, there did not appear to be any firm evidence to support this conclusion. I accept the conclusions of Professor Simons that the available evidence does not clearly demonstrate that Mr Bazhanov's prosecution was politically motivated or was a prosecution to order or had been used as a means of achieving a criminal corporate raid.
- In relation to whether Mr Bazhanov could bring his claims in the arbitrazh courts in Russia, Professor Bowring's evidence was that "there is a risk that were [Mr Bazhanov] to try to bring the current claims against Mr Fosman in the Russian Courts he would not receive a fair trial." However, this evidence was expressly based on Professor Bowring's earlier conclusions about a prosecution to order and corporate raiding which, as I have already stated, are not persuasive. Professor Bowring himself accepted that "under the leadership of Judge Anton Ivanov, Chairman of the Supreme Commercial Court, significant reforms were made to the arbitrazh system", albeit that Professor Bowring was concerned that these reforms had been seriously undermined by the dismissal of Judge Ivanov in early 2014. I accept Professor Simons' evidence that in low-profile cases at the arbitrazh courts that do not have a significant political, economic or social element there is a "low risk of external influence" and that in recent years (from 2014 onwards) "no credible evidence of the alignment of arbitrazh courts with state interests or external interference – even in high-profile cases – could be found in publicly accessible sources". I also accept Professor Simons' conclusion that the present case "cannot be characterised as a high-profile one having a significant political, economic, or social element".
- Further, even were I to accept Professor Bowring's conclusion that were Mr Bazhanov to return to Russia to face trial there would be a "grave risk of unfair trial", it seems to me that the solution to this concern would be for Mr Bazhanov to bring his claim in the arbitrazh courts whilst at all times remaining in England. I accept Professor Simons' evidence that "there is no legal requirement for Mr Bazhanov to appear in person and no practical reason for him to do so; his rights [are] not diminished if he chooses not to attend and is represented by others".
- In light of the above, I am not satisfied that the present case presents a stark choice between a trial in England or no trial at all as had been submitted by Mr Lord Q.C. In my view, a trial in the arbitrazh courts in the Russian Federation even without any attendance by Mr Bazhanov is an available alternative to a trial in England.
- I accept of course that a trial in the arbitrazh courts in Russia will only be possible if Mr Bazhanov is able to assert causes of action that are justiciable in that court. As I have already mentioned, the evidence before me suggests that claims based on alleged oral agreements not reduced to writing may not be possible under Russian law and that claims in unjust enrichment may not be possible either. However, I have concluded that, at least as things look at this jurisdictional stage, those claims would be governed by Russian law even if they were brought in England. Moreover, the fact that certain causes of action may not be available to Mr Bazhanov if he brings his claim in the arbitrazh courts does not mean that England automatically becomes the proper forum for the dispute. As Christopher Clarke J stated in Cherney v Deripaska (at paragraph 256) "The fact that the claimant may face difficulties or obstacles in proceeding in what is, prima facie, the natural forum does not necessarily entitle him to trial in England."
Conclusion
- For the reasons I have set out above, I will set aside permission to serve the Defendants out of the jurisdiction and I will grant a declaration that the English Court has no jurisdiction to hear the claim against the Defendants. The application by the Claimants for permission to amend the Claim Form and the Particulars of Claim is dismissed.
