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England and Wales High Court (Queen's Bench Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Benyatov v Credit Suisse Securities (Europe) Ltd [2020] EWHC 85 (QB) (22 January 2020) URL: http://www.bailii.org/ew/cases/EWHC/QB/2020/85.html Cite as: [2020] IRLR 299, [2020] EWHC 85 (QB) |
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| VADIM DON BENYATOV |
Claimant |
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- and – |
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| CREDIT SUISSE SECURITIES (EUROPE) LTD |
Defendant |
____________________
PAUL GOULDING Q.C., PAUL SKINNER and EMMA FOUBISTER (instructed by Cahill Gordon & Reindel (UK) LLP) for the Defendant
Hearing dates: 9, 10 and 11 December 2019
____________________
Crown Copyright ©
Roger ter Haar Q.C.:
Table of contents Paragraph The Facts 4 Procedural history in this Court 34 Summary judgment Proper approach and legal test 47 Meaning of "No real prospect of succeeding" 50 Meaning of "No other compelling reason [for] a trial" 55 Strike out 57 No reasonable grounds for bringing the claim 60 Abuse of process or otherwise likely to obstruct just disposal 61 Overlap between summary judgment and strike out 63 Timing of any such application 64 Procedural objections to the application to strike out and for summary judgment 66 Mandatory injunction and specific performance 91 The Pleaded Causes of Action 93 Obligations under the contract of employment with the Defendant 96 Indemnity 97 Obligation of Trust and Confidence 159 Paragraphs 19.3 to 19.6 of the Particulars of Claim 174 Paragraph 19.7 of the Particulars of Claim 179 Obligations under the contract of employment with the Defendant: conclusions 189 Obligations arising under the letter dated 1 December 2014 191 Obligations arising from oral assurances 200 Duties of care in tort 204 Breach 240 Causation 242 Remoteness 250 Proposed Amendment 252 Strike out and Summary Judgment: Conclusions 260 Conditional Order 262 Security for Costs 271
The Facts
"This was a standard "buy-side" mandate where we offered support to our Italian colleagues in their work for our client, Enel, primarily by way of on the ground advice. This included, for instance, regular updates on the latest developments in the thinking at the Ministry of Energy, advice on bidding strategy and weekly phone calls to discuss the competitive landscape. In large part due to our advice, Enel won the auction, and were close to completing the purchase at the end of 2006."
"38. In November 2006 I had travelled to Bucharest for two reasons: first to discuss the Romgas and Romtelecom privatisation mandates, and second to help Ministry of Energy officials with their presentation to the new government on the privatisation of Petrom that had taken place a few years previously.
"39. I was staying in the Hilton Hotel in Bucharest. In the early hours of 22 November 2006, I awoke to knocking at my hotel room door. I got out of bed, went to look through the spyhole in the door and was shocked to see masked men with machine guns on the other side of the door. I ran to the telephone and called the operator, who sent security up to my room. Hotel security confirmed that the individuals outside my door were secret police officers with a warrant for my arrest. I put on some clothes and opened the door. I was arrested and immediately led away from the hotel in handcuffs, without having any opportunity to contact my family, colleagues or the US Embassy.
"40. I was detained in a jail in Bucharest for 56 days, over the Christmas and New year period, during which time I was placed in a cell with serious criminals; two were heroin dealers and another was a serial burglar. After that I was placed under 'house arrest' – forbidden from leaving the city of Bucharest – until August 2007."
"We share your frustration at the process to date, your anxiety regarding the final outcome of the case, and your desire to exhaust every appropriate avenue that could enhance the chances of a positive outcome in the case.
"The bank has examined a range of options to support a positive outcome, including the option you alluded to of having a prominent individual express our concerns regarding the irregularities and due process issues of the case, and the signals a decision to uphold the convictions would send regarding the business and judicial climate in Romania.
"The bank has reached a settled view that this type of intervention is not appropriate in advance of a final verdict. There is significant risk that prior to the conclusion of the case, such an intervention could be misconstrued as attempting to influence the Romanian judicial process, with negative consequences for the case outcome and the reputation of the bank. The current Romanian political climate and government transition heightens this risk. Relevant diplomatic stakeholders have advised on the basis of recent events of a similar nature, that it would be unadvisable to pursue such an intervention.
"However, we are exploring options for additional avenues Credit Suisse might pursue in the unfortunate event of a negative decision, such as a presidential pardon, an application to the European Court of Human Rights, and direct representations to appropriate individuals and authorities in Romania, the US, EU and elsewhere on your behalf. Following a verdict, such direct representations would not bear the same risks.
"Please be assured that we will continue to provide support to you during these extraordinary circumstances."
Procedural history in this Court
"This Defence is without prejudice to the Defendant's contention that the Particulars of Claim, in whole or in part, are liable to be struck out as disclosing no reasonable grounds for bringing the claims therein and/or as an abuse of process, or alternatively to be dismissed as having no real prospect of success."
(1) The introduction recorded in paragraph 1 that[9]:
"There is a significant measure of agreement between the parties as to the directions that are necessary at this stage for the management of this litigation …. "
(2) Section D dealt with the scope of expert evidence. It contained the following (emphasis added)[10]:
"28. The parties are agreed that this case will require expert evidence, but do not agree in relation to the scope of such evidence:
"28.1 The risks of doing business in Romania between 1 January 2005 to 22 November 2006, in particular the risk of covert surveillance, the risks of wrongful and politically motivated criminal proceedings being brought against foreign businessmen and the extent to which any such risks were publicly known, reasonably discoverable and could be mitigated by businessmen and/or their employers working in Romania during this period;
"28.2 The steps that could effectively be taken in Romania from 22 November 2006 (the Claimant's arrest) to date to have an investigation or criminal proceedings discontinued, overturned or otherwise nullified.
"28.3 The remuneration of senior finance professionals.
"29. The parties agree that expert evidence will be required in respect of the first of these (albeit) the Claimant seeks to elide the first and second topics and thereby extend the time in relation to which the first topic would need to be addressed). The Defendant submits that expert evidence is not reasonably required to resolve the proceedings on either the second or third of these topics".
Summary judgment
Proper approach and legal test
"The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if—
(a) it considers that—
(i) that claimant has no real prospect of succeeding on the claim or issue; …
(b) there is no other compelling reason why the case or issue should be disposed of at a trial.
(Rule 3.4 makes provision for the court to strike out a statement of case or part of a statement of case if it appears that it discloses no reasonable grounds for bringing or defending a claim.)"
"(3) The application notice or the evidence contained or referred to in it or served with it must -
(a) identify concisely any point of law or provision in a document on which the applicant relies, and/or
(b) state that it is made because the applicant believes that on the evidence the respondent has no real prospect of succeeding on the claim or issue or (as the case may be) of successfully defending the claim or issue to which the application relates, and in either case state that the applicant knows of no other reason why the disposal of the claim or issue should await trial."
Meaning of "No real prospect of succeeding"
(1) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91;
(2) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8];
(3) In reaching its conclusion the Court must not conduct a "mini-trial": Swain v Hillman;
(4) In reaching its conclusion the Court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial;
(5) If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the Court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success.
Meaning of "No other compelling reason [for] a trial"
Strike out
"If an application involves prolonged serious argument, the court should, as a rule, decline to proceed to the argument unless it harbours doubt about the soundness of the statement of case and is satisfied that striking out will obviate the necessity for a trial or will substantially reduce the burden of the trial itself".
"(2) The court may strike out a statement of case if it appears to the court—
(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;
(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings;"
"1.4 The following are examples of cases where the court may conclude that particulars of claim (whether contained in a claim form or filed separately) fall within rule 3.4(2)(a):
(1) those which set out no facts indicating what the claim is about, for example "Money owed £5,000",
(2) those which are incoherent and make no sense,
(3) those which contain a coherent set of facts but those facts, even if true, do not disclose any legally recognisable claim against the defendant.
1.5 A claim may fall within rule 3.4(2)(b) where it is vexatious, scurrilous or obviously ill-founded."
No reasonable grounds for bringing the claim
(1) In Biguzzi v Rank Leisure Plc [1999] 1 WLR 1926 at 1932-1933 per Lord Woolf MR, the Court of Appeal referred to strike out as a "draconian" step: the striking out of a valid claim should only be taken as a last resort.
(2) In a strike-out application the proportionality of the sanction is very much in issue; see Walsham Chalet Park Ltd v Tallington Lakes Ltd [2014] EWCA Civ 1607 at [44].
(3) If the Court is able to say that a case is "unwinnable" such that continuance of the proceedings is without any possible benefit to the respondent and would waste resources on both sides it may be struck out: see Harris v Bolt Burdon [2000] CP Rep 70; [2000] CPLR 9 at [27].
(4) An application to strike out the claim should not be granted where there are significant disputes of fact between the parties going to the existence and scope of an alleged duty of care unless the court is "certain" (emphasis in original) that the claim is bound to fail: see Hughes v Colin Richards & Co [2004] EWCA Civ 266; [2004] PNLR 35 at [22].
(5) Where "the legal viability of a cause of action is unclear (perhaps because the law is in a state of transition), or is in any way sensitive to the facts, an order to strike out should not be made": per Sir Thomas Bingham in E (A Minor) v Dorset CC [1995] 2 AC 633 at 694B.
(6) It is not appropriate to strike out a claim in an area of developing jurisprudence, since, in such areas, decisions as to novel points of law should be based on actual findings of fact: see Farah v British Airways, The Times, 26 January 2000, CA at [42] referring to Barrett v Enfield BC [2001] AC 550 (see 557) and X (Minors) v Bedfordshire County Council [1995] 2 AC 633 at page 741.
(7) A statement of case is not suitable for striking out if it raises a serious live issue of fact which can only be properly determined by hearing oral evidence: see Bridgeman v McAlpine-Brown 19 January 2000, unrep (CA) at [24].
Abuse of process or otherwise likely to obstruct just disposal
Overlap between summary judgment and strike out
Timing of any such application
"5.3 (1) A party intending to make such an application [under CPR 3.4 or 24] should do so before or when filing his directions questionnaire."
and
"Applications for orders under rule 3.4(2)
5.1 Attention is drawn to Part 23 (General Rules about Applications) and to Practice Direction 23A. The practice direction requires all applications to be made as soon as possible and before allocation if possible."
Procedural objections to the application to strike out and for summary judgment
"What then is the rule as regards delay and Order 14? It is said that the plaintiffs have delayed so much, and the case is so close to trial, that I should regard the application as an abuse of process. Now it is true that normally plaintiffs use Order 14 shortly after they commence proceedings, normally, but not always, before a defence is filed. But there is nothing in the rules precluding an application at a later stage in the proceedings. I do not see why delay, of itself, should be a relevant matter. If there is no "defence to the claim" or the defendant cannot show that there is an "issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of that claim" then delay can make no difference. Of course in some circumstances delay in proceeding summarily, coupled with an adoption of the procedures for full trial, may well suggest a weakness in the plaintiff's case or may even suggest some other reason for trial. But it would be that weakness or reason, not the delay itself, which led to refusal of the application. Moreover the plaintiff may well, having indicated an intention to go to full trial and then having incurred his own costs and caused the defendant to incur his in going down that route, have to suffer a penalty in costs if he brings his Order 14 application late. But otherwise I can see no objection to a late application for judgment under Order 14. Indeed, in some cases, and I think this is one, its use may be commendable as saving both the extra costs and time involved in a full trial. If these defendants truly have no defence it is worse than pointless for them to be present at the trial, which will be complex enough without them. The plaintiffs are right to clear the decks as far as possible before trial."
Mandatory injunction and specific performance
The Pleaded Causes of Action
(1) Obligations under the contract of employment with the Defendant;
(2) Obligations under the letter dated 1 December 2014;
(3) Obligations arising from oral assurances;
(4) Duties of Care in tort.
"26. At all material times, Mr. Benyatov was an employee in good standing with the Defendant who faithfully and diligently served the Defendant. In particular:
"26.1 It has never been suggested by the Defendant that in relation to his work in Romania he acted otherwise than within the limit of his instructions and authority at all times.
"26.2 He was paid his salary in accordance with Clause 3; and received bonuses until 2011 in accordance with Clause 4.
"27. From about 2001 onwards, Mr. Benyatov was required by the Defendant to visit and carry out work in Romania pursuant to clauses 8 and 9 of the Contract. He was involved on behalf of the Defendant in providing advisory services and access to capital in respect of various substantial transactions in Romania, including in particular privatisations of Petrom and Distrigaz (which were state-owned energy companies).
"28. From about 2005, Mr. Benyatov worked for the Defendant on the proposed privatisation of another Romanian state-owned company: S.C. Electrica Muntenia Sud SA. The Defendant was acting for the eventual purchaser, Enel SpA, an Italian Company.
"29. Unknown to him at the time, during his work for the Defendant in Romania, Mr Benyatov was the subject of covert surveillance by Romanian security forces along with two other of the Defendant's employees, various Romanian officials and other non-Romanian citizens. A criminal investigation was instigated against him and others in or about 21 November 2006."
Obligations under the contract of employment with the Defendant
"19 The following terms were implied into the Contract as a matter of law, fact or business efficacy. At all material times, the Defendant owed to Mr. Benyatov the following duties:
"19.1 To indemnify Mr Benyatov in respect of all losses, costs, expenses and claims he has suffered arising from or in consequence of performing his duties on its behalf. This obligation continues after the termination of the Contract in respect of the duties performed by Mr Benyatov as an employee and/or agent of the Defendant.
"19.2 Not, without reasonable and proper cause, to act so as to destroy or seriously damage the trust and confidence between employer and employee;
"19.3 To support Mr Benyatov in the performance of his duties;
"19.4 To protect and safeguard Mr Benyatov from obvious risks to his safety and well-being arising as a consequence of the performance of his duties;
"19.5 To take every step to assist and support Mr. Benyatov in ameliorating the effect of any sanction imposed on him as an individual in consequence of the performance of his duties under the Contract, save in circumstances (which do not apply here) where it was terminated for gross misconduct.
"19.6 Alternatively, it was an implied term that the Defendant would not terminate the Contract so as to deprive Mr. Benyatov of the benefit of the terms in the preceding paragraph 19.5[20].
"19.7 To exercise any contractual discretion rationally, reasonably (i.e. not contrary to the Wednesbury standard) and/or giving due consideration to[21] Mr. Benyatov's legitimate expectations. For the avoidance of doubt, it is contended that this obligation applied to the exercise of any discretion about matters previously governed by or arising in consequence of the performance of the Contract even after its termination.
"20. Further or alternatively, the obligation to indemnify Mr. Benyatov under paragraph 19.1 in all the circumstances arises in equity.
"21. Pursuant to Section 6 of the Human Rights Act 1998, the above obligations must be interpreted and applied by the Court in a way that is compatible with Article 8 of the ECHR (respect for private and family life) and Article 1 of Protocol No. 1 (peaceful enjoyment of possessions)."
Indemnity
"In consequence of the foregoing breaches of contract and/or of equitable duties and/or duties of care, Mr. Benyatov has suffered and continues to suffer loss and damage, in respect of which he is entitled to indemnification and/or damages, including the following:
"55.1 Lost income as a result of being unable to work as a senior finance professional since the termination of his employment on 13 June 2015 to date. Mr Benyatov's expected average earnings as a senior finance professional without having been convicted in Romania would have been on average US$3-5m, and higher if all had gone well. Using the figure of US$4m, his lost income for the two years since the end of his employment is approximately US$8m, or £6m;
"55.2 Lost future income as a result of being unable to work as a senior finance professional in the future. Mr Benyatov's future loss of earnings for the next 13 years (until Mr Benyatov is 65 years old) equates to approximately US$52m, or £39m at current exchange rates;
"55.3 A failed property transaction in London in September 2015, whereby Mr Benyatov was unable to obtain mortgage finance to complete purchases of Plots 46 (a 3-bed penthouse at £1.55m) and 47 (2 bed at £0.9m) Amberley Waterfront, W9 2JY, because of his convictions. Mr Benyatov lost £145,000 of the deposits paid, and costs and expenses of approximately £80,000. Mr. Benyatov had plans to develop these properties into a single unit, which would have a present value of approximately £3.5m. Accordingly, Mr. Benyatov has lost the difference in value of the purchase price and the current value of what would have been the developed property, minus development costs of approximately £100,000, resulting in a total loss of approximately £950,000."
"As to paragraph 19.1, it is admitted that there was an implied duty on the Defendant to indemnify the Claimant in respect of expenses and liabilities reasonably incurred by him in carrying out his duties as the Defendant's employee and within the scope of his authority. Paragraph 19.1 is otherwise denied. More particularly, it is denied that the Defendant had any or any implied obligation to indemnify the Claimant in respect of losses, costs, expenses or claims incurred by him as a result of, or arising from the acts of third parties or other intervening acts, whether wrongful or otherwise, including, for the avoidance of doubt, the events in Romania complained of by the Claimant."
"Duty to indemnify the employee
"The relationship of employment imposes a duty on the employer to indemnify or reimburse the employee against all expenses, losses and liabilities incurred by the employee in the execution of his employer's instructions or within the authority granted to him by the employer, or during the reasonable performance of his employment. Thus an employer who failed to insure his vehicle in respect of third party risks was obliged to indemnify his employee who drove the vehicle in the course of his employment and who was held liable to a third party injured by his negligent driving. Nor, it was held in Reid v Rush & Tompkins Group plc, is the employer under any implied obligation to advise an employee working overseas to arrange his own insurance cover against accidents. But there is no general duty to keep the employee insured against all third party risks or to indemnify the employee against liability for his or her own negligence. Ancient authority suggests that if the act or omission of the employee was manifestly unlawful, he or she is not entitled to such an indemnity; but he may still be entitled to an indemnity from his employer if the act was apparently lawful or he was ignorant of the facts which made it unlawful and could not be presumed to know that the particular transaction was unlawful."
"An employer is under an implied duty to indemnify or to reimburse the employee, as the case may be, against all liabilities and losses and in respect of all expenses incurred by the employee either in consequence of obedience to his orders, or incurred by him in the execution of his authority, or in the reasonable performance of his duties of his employment. Notwithstanding the fact that an employee was acting in the course of his employment, he may lose his right of indemnity or reimbursement where the liabilities or expenses did not arise out of the nature of the transaction which he was employed to carry out, but were solely attributable to his own default or breach of duty, or where, by reason of his conduct, he has forfeited his right to receive any remuneration for his services.
"If the employer requires the employee to perform an act which, unknown to the employee, is unlawful[24], the employee is entitled to be indemnified by the employer against any damage suffered in consequence of its unlawful nature.[25], Even where the transaction is prima facie unlawful, he is entitled to his indemnity if he was led to believe by the employer, and was justified in believing, that in the circumstances of the case the transaction was one in which he might lawfully engage …."
"Reimbursement of Expenses and Indemnity from Liabilities Incurred in Course of Agency
"7-057 Subject to the provisions of Article 63, every agent has a right against his principal to be reimbursed all expenses and to be indemnified against all losses and liabilities incurred by him in the execution of his authority: and where the agent is sued for money due to his principal, he has a right to set off the amount of any such expenses, losses or liabilities, unless the money due to the principal is held on trust. There is, it seems, no implied indemnity in respect of loss suffered by an agent from torts committed against him by third parties in the course of the agency.[26]
"Comment
"7-058 The rule here given is normally stated in such general terms, but its juristic basis may require attention. In the nineteenth century, actions at law were based on the common count for money paid, and it was not often necessary to distinguish between contractual and what would now be called restitutionary claims. At the present day it could matter how the claim was classified in a particular case.
"Contract
"7-059 Where the agency agreement is contractual, the agreement to reimburse and indemnify in return for what had been requested, if not express, can be regarded as an implied term of the contract that operates unless clearly excluded. There is thus no difficulty in such cases in holding that the principal is liable to reimburse and indemnify the agent for all payments made and liabilities incurred within the agent's express or implied authority. This would include not only payments that the principal is legally bound to make, but also payments which the agent is legally bound to make though the principal would not be liable for them, cases where the agent is bound by the usage of a market, cases where the agent makes an authorised but gratuitous payment on the principal's behalf, cases where the agent makes a payment which could not have been enforced but which there is a strong and legitimate pressure to make, cases where the agent, though under a liability, has as yet not had to meet it, and cases where a payment is reasonably but mistakenly made by the agent. Cases where the agent acts beyond his instructions, or interferes without request, would not however be included."
(1) There is an indemnity implied in law into contracts of employment or agency unless expressly excluded;
(2) This implied indemnity imposes on an employer or principal a duty to indemnify the employee or agent in respect of expenses and liabilities reasonably incurred by him in carrying out duties within the scope of his employment or agency;
(3) It covers payments made or to be made to third parties, but does not cover consequential financial losses of the type claimed by the Claimant. In particular, it does not cover financial losses caused by the acts of third parties, wrongful or otherwise;
(4) Where there is an indemnity implied as a matter of law into the contract, there is no scope for a wider indemnity implied in fact;
(5) Alternatively, any indemnity implied in fact would have to satisfy the test for implication of terms into a contract, which is laid down in Marks & Spencer plc v BNP Paribas Services Trust Company (Jersey) Ltd [2015] UKSC 72; [2016] AC 742, where there are three conditions for implication: (i) that the term is reasonable and equitable; (ii) that it is necessary to give business efficacy or so obvious that it goes without saying; and (iii) that it is capable of clear expression;
(6) An indemnity in equity may arise from particular relationships, but there is no scope for it where the parties are in a contractual relationship, and an indemnity is implied in the contract;
(7) Even if there was scope for an equitable indemnity where the parties are in a contractual relationship, the scope and content of that indemnity would be governed by the contract.
"The position is, accordingly, that although the duty of a master to his servant may extend to warning him of unavoidable risks of physical injury, it has not hitherto been extended to the taking of reasonable care to protect the servant from economic loss. Apart from Deyong v Shenburn [1946] K.B. 227 and Edwards v West Herts Group Hospital Management Committee [1957] 1 W.L.R. 415, which were mentioned in argument, we were not referred to any case in which the court has considered and rejected any such claim and no doubt the reason for that is not only the limitation of the duty, as stated, to personal safety but also the fact that it must be rare for any matter of economic loss to have been arguably caused by a breach of duty of the master without it being a breach of contract. If a servant is to have a claim in tort against his employer in respect of economic loss it must be based upon some special factor in the circumstances or in the relationship between them which justifies the extension of the scope of the duty to cover such a claim or upon a separate principle of the law of tort which imposes such a duty."
"I have had much difficulty in concluding that the general duty at common law upon a master to take care for the protection of his servant's physical well being cannot be extended by decision of the courts to include protection for the financial well being of his servant in special circumstances where the foreseeable financial loss arises from foreseeable physical injury suffered in the course of the employment and the duty would extend only to a warning of a special risk. If this view be right the only way in which an employer's general duty of care – and I emphasise that I am referring only to the general duty of care which arises out of the relationship – will be capable of extension to cover financial loss will be by legislation, or by a contractual term, express or implied on the particular facts, or by a term which the court is able to say must be implied by law."
"….it is not necessary to decide whether …the plaintiff would have demonstrated an arguable case for showing that it would be just and reasonable to impose the new duty necessary for the plaintiff's case. There are, I think, substantial difficulties when consideration is given to the current legislation to which I have already referred. In a number of contexts Parliament has legislated to protect people from the risks of uncompensated injury. Compulsory employer's liability insurance has been imposed. Save for certain limited exceptions that duty does not extend to employment out of this country. Even in the limited and modest terms of a duty to warn it might be difficult to impose by judicial decision a duty on employers in respect of their servants working abroad, which relates to loss through injuries suffered where the employer is not responsible, having regard to the fact that Parliament has not imposed an obligation to insure even in respect of injuries for which the employer would be liable."
"… The classic formulation of the duty owed by an employer to an employee is focused on protection of the employee from physical injury, not protection from economic harm (albeit if there is physical injury then damages may be recovered for consequential loss of earnings), and this is true in both contract and in tort … Having regard to the general policy reasons which inform the analysis of whether a standard term or duty of care should be implied into a contract of employment, in my view the proposed term or duty to hold the employee harmless from economic loss should not be taken to be implied."
"Where the nexus between parties is founded in a contractual relationship, as here, it is the contract which they have made with each other which is the primary source and reference point for the rights they have and the obligations they owe each other. Although a duty of care in tort may run in parallel with the contractual duty and have the same content, it is difficult to see how the law of tort could impose obligations in this area which are more extensive than those given by interpretation of the contract which the parties have made for themselves. The usual rule is that freedom of contract is paramount, and if the parties have agreed terms to govern their relationship which do not involve the assumption of responsibility for some particular risk, the general law of tort will not operate to impose on the employer an obligation which is more extensive than that which they agreed."
"It is a general principle of law that when an act is done by one person at the request of another which act is not in itself manifestly tortious to the knowledge of the person doing it, and such act turns out to be injurious to the right of a third party, the person doing it is entitled to an indemnity from him who requested that it should be done."
The court then commented (at [86]):
"As so expressed, that principle does not assist Mr Whitlam. What he did at the expense of NRMA, relevantly for present purposes, was to give the interview. His giving the interview did not turn out to be injurious to the rights of a third party – rather, as the interview was used, it turned out to be injurious to his own interests."
"[Famatina] concerned an employee who was engaged to make a report for the company that engaged him. When that report was presented, and orally elaborated on to the board, a company director who was unfavourably commented on in the report sued the employee for libel and slander. That action did not succeed, but the employee incurred costs in defending it. He was held entitled to recover those costs from the company, upon the basis, expressed by Lord Cozens-Hardy MR at 292, that.
"an agent had a right against his principal, founded upon an implied contract, to be indemnified against losses and liabilities, and to be reimbursed all expenses incurred by him in the execution of his authority."
"That case is, it seems to me, merely an example of the principle stated in Sheffield Corporation v Barclay."
"93. Mr Gleeson submits that, while the case law so far has all been concerned with a situation where an indemnity applies to a legal liability incurred to a third person, or to an action taken in the actual performance of an office, there are "no reasons to think that the operation of the general principle should be limited to that narrow class of loss".
"94. In my view, there are good reasons of principle why the right of indemnity does not extend as far as Mr Gleeson submits it should. If the general principle stated by Bowstead & Reynolds were applied so that "losses" included losses of types that can be compensable by action in tort at the suit of the person who suffered the loss, the civil law would be very different to what it in fact is. If, for instance, "losses" included the type of damage that is remediable by an action seeking damages for personal injury, the mere fact that A had requested B to do a task, and B was injured in the course of performing it, would mean that B was entitled to be indemnified by A for the injury he had suffered. Any such entitlement would sweep aside those aspects of the law of tort that require there to have been a recognised tort committed by A before B is entitled to be compensated by A for his injury. It would mean that, in the paradigm case in which worker's compensation payments are made, where a worker in the course of carrying on his duties is injured, the worker would have had a right of indemnity under the general law from his employer just because the employer had requested him to do the task in the course of which he was injured, quite independently of any obligation created by the worker's compensation legislation, and the indemnity would be to provide a full indemnity, not merely the limited scale of benefits conferred by workers' compensation legislation. I do not believe that a general principle of law that alters the civil law in such radical ways, exists but has hitherto gone unrecognised."
"The Defendant, who had induced the Plaintiff to make this sale by his false representation and request to sell, and who, after the sale, continued to assert his right to sell, and confirmed the agency of the Plaintiff by accepting from him the residue of the proceeds of the sale, had no right to dispose of this property. The consequence has been, that the Plaintiff, supposing, from the Defendant's false representations, he had an authority which he had not, and, acting as the Defendant's agent, has rendered himself liable to an action at the suit of the true owner of the goods, and has been obliged to pay damages and costs, whilst the Defendant, the sole cause of the sale, quietly keeps the fruits of it in his pocket.
"It has been stated at the bar that this case is to be governed by the principles that regulate all laws of principal and agent: Agreed: every man who employs another to do an act which the employer appears to have a right to authorise him to do undertakes to indemnify him for all acts which would be lawful if the employer had the authority he pretends to have. A contrary doctrine would create great alarm."
"In order to entitle an agent to recover from his principal … he must show, first, that the loss arose from the fact of his agency; secondly, that he was acting within the scope of his authority; and thirdly, that the fault was not attributable to any fault or laches on his part. If the Appellant can establish these facts, it is plain that he is entitled to recover …."
"the causing these men to be censured and chastised for their insubordination was part of the bounden duty of the master. Having fulfilled this duty, out of the performance of it comes manufactured a false charge. I differ entirely from the argument of Mr. Brett, that this is a remote and not a direct cause. The very cause which originated the charge against the master was the performance of his own duty in correcting these very men for their misconduct, and the false charge emanated instantly from it, and there were no intervening circumstances whatsoever which would cause it to be considered remote."
"Last of all it is said this is a liability as distinguished from an actual payment, and that the agent or person entitled to be indemnified has no remedy. Whatever may be the case at law (as to which I say nothing, because it is not necessary) it is quite plain that in this Court any one having a right to be indemnified has a right to have a sufficient sum set apart for that indemnity."
"The further question then arises whether there is, as contended by counsel for Mr. O'Driscoll, a common law principle under which a servant is entitled to be indemnified by his employer for any loss occasioned to him in the performance of anything which it may be his duty to do. The law as stated in Macdonell on Master and Servant, 2nd ed. p. 144, is this: "A master is bound to indemnify his servant for all expenses incurred or loss sustained in obeying his lawful orders," That is a far more limited proposition, and one which could only be applicable, if at all, to the present case if I had found as a matter of fact that the company ordered Mr. O'Driscoll to make a report with reference to the conduct of Mr. Pape. As I have already said, I come to the conclusion that the company never did order Mr. O'Driscoll to do anything of the sort. I cannot find that the right of indemnity extends, as alleged on behalf of Mr. O'Driscoll, to indemnify a servant from the consequences of doing anything that it may be his duty to do. If that were so, I think there would have been ample authority to be found in the books, because it frequently happens that it is the duty of one servant to report a breach of duty on the part of some other servant, and if there had been any principle under which the person making the report was entitled to be indemnified by the employer against the consequences of that report, such as a libel or slander action, I think there would have been instances to be found in reported cases."
He concluded (at page 281):
"In the present case it is in my opinion quite impossible to say that Mr. O'Driscoll was defending an action on behalf of his principals; he was defending, and it turned out successfully defending, an action on his own behalf which originated out of reports made by him in the execution of a duty which he owed to his employers but not in direct obedience to their orders; and I cannot find that any case has gone the length of deciding that a servant is entitled to be indemnified by his master against expenses of that character."
"LORD COZENS-HARDY M.R. said that Mr. O'Driscoll was much more than a servant of the company and the duties imposed upon him were far wider than those of a consulting engineer. He was undoubtedly appointed to be the agent of the company for many purposes and all he had done was done in pursuance of his duties as agent. Therefore he came within the well settled rule that an agent had a right against his principal, founded upon an implied contract, to be indemnified against all losses and liabilities, and to be reimbursed all expenses incurred by him in the execution of his authority."
"Famatina is actually an extension to the formulation of the indemnity set out earlier by Campbell JA in his judgment in Whitlam (derived from Sheffield Corporation v Barclay), in that the actions of the claimant (as agent of Famatina) were not in fact injurious to the third party (the managing director). So the indemnity covers situations where the third-party interaction does not result in injury to the third party, but only loss to the person entitled to be indemnified."
"It has always been an implied term that the master will indemnify the servant from liability arising out of an unlawful enterprise upon which he has been required to embark without knowing that it was unlawful."
"well settled rule that an agent had a right against his principal, founded upon an implied contract, to be indemnified against all losses and liabilities, and to be reimbursed all expenses incurred by him in the execution of his authority."
Obligation of Trust and Confidence
"16. The mutual obligation of employer and employee not, without reasonable and proper cause, to engage in conduct likely to destroy or seriously damage the relationship of trust and confidence required between employer and employee is a standardised term implied by law into all contracts of employment rather than a term implied from the particular provisions of a particular employment contract: Mahmud v Bank of Credit and Commerce International SA…….. It was described by Lord Nicholls of Birkenhead in Mahmud… as a portmanteau concept. In that case the House of Lords considered it the source of a more specific implied obligation on the part of the employer bank not to conduct its business in a dishonest and corrupt manner, the breach of which gave rise to a cause of action for damage to the economic and reputational interests of its employees. Similarly, in Eastwood v Magnox Electric plc [2004] ICR 1064; [2005] 1 AC 503 the House of Lords recognised an obligation on an employer, in the conduct of his business and in the treatment of his employees, to act responsibly and in good faith ….
"17. ….
"18. Although in Mahmud…. the House of Lords derived from the mutual implied contractual obligations of trust and confidence an implied obligation owed by the bank to its employees not to conduct a dishonest or corrupt business and held that damage to reputation resulting from breach sounded in damages, this is at a considerable remove from a duty to exercise care in the conduct of business so as to avoid economic or reputational damage to employees. This point was, in fact, emphasised by Lord Nicholls in a cautionary footnote, at p 618:
"there are many circumstances in which an employee's reputation may suffer from his having been associated with an unsuccessful business, or an unsuccessful department within a business. In the ordinary way this will not found a claim of the nature made in the present case, even if the business or department was run with gross incompetence. A key feature in the present case is the assumed fact that the business was dishonest or corrupt.
"19. [Referring to Scally v Southern Health and Social Services Board [1991] ICR 771; [1992] 1 AC 294] … It is significant that the House of Lords did not base its decision on a more general duty of care owed by an employer to protect the economic interests of employees.
"20. Similarly, in Crossley v Faithful & Gould Holdings Ltd [2004] ICR 1615 the Court of Appeal refused to derive from the mutual duty of trust and confidence a standard obligation, implied by law as a term of all contracts of employment, which requires an employer to take reasonable care for the economic well-being of his employers….."
"Further, as a particular incident of this implied term, the Defendant owed to Mr. Benyatov the following duties:
"19.2.1 that it would not conduct business in Romania in a way that risked being determined as unlawful (i.e. contrary to Romanian law);
"19.2.2 not to require him to embark on any such unlawful enterprise or potentially unlawful enterprise;
"19.2.3 that it would not conduct a business that placed him (and/or any other employee) at risk of criminal conviction in consequence of faithfully, diligently or properly carrying out his (or their) duties; and/or
"19.2.4 not to expose him to criminal conviction in consequence of faithfully, diligently or properly performing his duties for the Defendant."
Paragraphs 19.3 to 19.6 of the Particulars of Claim
"19.3 To support Mr Benyatov in the performance of his duties;
"19.4 To protect and safeguard Mr Benyatov from obvious risks to his safety and well-being arising as a consequence of the performance of his duties;
"19.5 To take every step to assist and support Mr. Benyatov in ameliorating the effect of any sanction imposed on him as an individual in consequence of the performance of his duties under the Contract, save in circumstances (which do not apply here) where it was terminated for gross misconduct.
"19.6 Alternatively, it was an implied term that the Defendant would not terminate the Contract so as to deprive Mr. Benyatov of the benefit of the terms in the preceding paragraph 19.5."
"Paragraphs 19.3-19.5 are denied as free standing implied terms, save that it is admitted and averred that there was an implied obligation on the Defendant to take reasonable care not to expose the Claimant to risks of personal and psychiatric injury which were reasonably foreseeable and which the Defendant could guard against by proportionate measures. This obligation ceased on the termination of the Claimant's contract of employment."
Paragraph 19.7 of the Particulars of Claim
"19.7 To exercise any contractual discretion rationally, reasonably (i.e. not contrary to the Wednesbury standard) and/or giving due consideration to[34] Mr. Benyatov's legitimate expectations. For the avoidance of doubt, it is contended that this obligation applied to the exercise of any discretion about matters previously governed by or arising in consequence of the performance of the Contract even after its termination."
"As to paragraph 19.7:
"15.5.1 It is admitted that, in principle, if the Defendant was required by the terms of the Claimant's contract of employment to exercise a discretion, it was an implied term that the Defendant would not do so capriciously, irrationally or perversely;
"15.5.2 No admission is made as to the relevance of this implied term, however, given that there was no relevant term of the Claimant's contract in relation to the matters complained of; and
"15.5.3 It is denied that it was an implied term that the Defendant would exercise any contractual discretion in accordance with the Claimant's legitimate expectations. As a matter of law, any legitimate expectations on the part of the Claimant (as to which no admission is made) are no more than relevant factors in the exercise of any contractual discretion, alongside, inter alia, the Defendant's own interests and any other relevant matters."
"50. Further or in the further alternative, and in the circumstances of this case, the appointment of a prominent individual as set forth above and the cost of the same is within the scope of the implied obligation at paragraph 19.1 above and/or is and would have been the proper application of any discretion in respect thereof on the principles set out in paragraph 19.7 above. Accordingly, the failure to appoint and pay for the appointment of such an individual is a breach of the said implied obligation by the Defendant."
"51. Further, on each and every occasion that the Defendant exercised a discretion as to whether or not to take any of the steps set forth above and decided not to, that discretion was exercised irrationally, unreasonably and in breach of Mr Benyatov's legitimate expectations and in breach of the implied term set forth at paragraph 19.7 above. The legitimate expectation of Mr Benyatov that the Defendant would support him to the fullest extent possible and in accordance with any external advice was reinforced by the contents of the letter dated 1 December 2014 from Mr de Boissard and the oral assurances provided to Mr Benyatov on behalf of the Defendant by Mr Philip, Mr Kyriakos-Saad, Mr Mazzucchelli and Mr Granetz.
"52. In particular, the following exercises of discretion fall within the scope of the breach stated in the preceding paragraph:
"52.1 The decision of the Defendant in or about 1 December 2014 to do nothing further at that stage to help Mr Benyatov;
"52.2 The decision or decisions of the Defendant in Q2 2016."
Obligations under the contract of employment with the Defendant: conclusions
Obligations arising under the letter dated 1 December 2014
"On 1 December 2014 Gaël de Boissard ("Mr de Boissard") wrote on behalf of the Defendant. The following terms of the letter took effect as variations of the Contract and/or as a collateral contract with the Defendant with the Defendant in consideration of which Mr. Benyatov remained in the service of the Defendant, namely that the Defendant:
"23.1 Would engage a prominent individual to express the Defendant's concerns regarding the irregularities and due process issues of the criminal case in Romania against Mr. Benyatov directly to the Romanian authorities after a final verdict;
"23.2 Would explore options for additional avenues that might be pursued in the unfortunate event of a negative decision in the criminal case in Romania against Mr. Benyatov, such as having the prosecution and/or conviction withdrawn or otherwise nullified, an application to the European Court of Human Rights, and direct representations to appropriate individuals and authorities in Romania, the USA, EU and elsewhere on his behalf;
"23.3 Would exhaust every appropriate avenue that could enhance the chances of a positive outcome for Mr. Benyatov in relation to the Romanian criminal case against him;
"23.4 Would continue to provide support to Mr Benyatov during these extraordinary circumstances."
Obligations arising from oral assurances
"Mr Benyatov was given binding oral assurances in terms that the Defendant would take all steps necessary to ensure a satisfactory resolution to the events in Romania. These assurances took effect as variations of the Contract and/or as collateral contracts with the Defendant in consideration of which Mr Benyatov remained in the service of the Defendant. These assurances were given by the following four senior managers of the Defendant:
"24.1 Michael Philipp (then CEO of Europe) gave the oral assurances when he visited Mr Benyatov in Romania in 2006. He also made clear that the Defendant took Mr Benyatov's situation very seriously. In addition, he assured Mr Benyatov that his job was safe.
"24.2 Fawzi Kyriakos-Saad (who replaced Mr Philipp as CEO of Europe) also visited Mr Benyatov in Romania. On a number of occasions he gave assurances that the Defendant would do everything it could to help him.
"24.3 Marco Mazzucchellli (Head of Investment Banking Europe, and Mr Benyatov's direct manager) met with Mr Benyatov when he returned from Romania and assured him that the Defendant understood the gravity of the situation and that Mr Benyatov could count on the Defendant's full support.
"24.4 Marc Granetz (co-head of Investment Banking) visited Mr Benyatov in Romania and also met him after he had left Romania in or around early 2008, and offered him assurances of the Defendant's support."
Duties of care in tort
"Mr Benyatov was owed a duty of care in tort by the Defendant to protect him from economic losses arising from the performance of his duties. Further or alternatively, the Defendant owed Mr. Benyatov a duty of care not to expose him to criminal conviction in the performance of his duties for the Defendant. In particular, the Defendant had a duty:
"25.1 to perform an adequate risk assessment in relation to the risks faced by Mr Benyatov performing his duties on behalf of the Defendant in Romania;
"25.2 to advise him of risks in relation to covert surveillance in Romania;
"25.3 to intervene adequately in Romania to demonstrate Mr Benyatov's innocence to:
"25.3.1 the relevant prosecutorial and/or judicial authorities, and/or
"25.3.2 to individuals or political authorities with power to withdraw the prosecution against Mr Benyatov due to the lack of any meritorious claim against him; and
"25.4 generally to take reasonable care to protect him from criminal convictions and the resulting financial losses."
(1) In the ordinary run of cases, courts consider what has been decided previously and follow the precedents (unless it is necessary to consider whether the precedents should be departed from). In cases where the question whether a duty of care arises has not previously been decided, the courts will consider the closest analogies in the existing law, with a view to maintaining the coherence of the law and the avoidance of inappropriate distinctions. They will also weigh up the reasons for and against imposing liability, in order to decide whether the existence of a duty of care would be just and reasonable: [29].
(2) Generally, a person does not owe a duty of care to prevent another from being harmed by the conduct of third parties: [37].
(1) The duty of care in tort is unsustainable as it is not alleged to arise under the contract;
(2) The duty to advise and protect the Claimant in respect of the risk of financial loss from working abroad is contrary to binding authority, namely Reid;
(3) The courts have consistently rejected a duty on an employer to protect an employee from economic losses;
(4) The duties are concerned with the prevention of harm to the Claimant by third parties: the courts have drawn an important distinction between harming another and taking steps to prevent another being harmed by a third party. A duty of care is far less likely to arise in the latter case;
(5) The factual matrix militates against the alleged duties: as at the date of the contract in 2005, the Claimant had worked in Russia as Head of Russian Oil and Gas (1997-2000); run the Defendant's European Emerging Market Utilities (from 2000); and provided advisory services and access to capital in respect of various substantial transactions in Romania for 4 years (2001-2005), including in particular the privatisations of state-owned companies. The contract expressly provided that he may be required by the Defendant to work overseas. There is nothing in this factual matrix or the Claimant's pleaded case to support an assumption by the Defendant to protect him from economic losses arising from, or not to expose him to criminal conviction in, the performance of his duties;
(6) The limit of the Defendant's liability following dismissal is governed by express contractual terms;
(7) An extension of the duties owed by the Defendant would not be fair, just or reasonable:
a) The duties for which the Claimant contends are far reaching. For a global institution such as the Defendant they would impose onerous burdens in respect of large numbers of employees, who routinely work in many foreign countries and for which they are highly remunerated. They could potentially expose such institutions to huge liabilities for loss of earnings to many employees stretching many years into the future. As such, the damages sought by the Claimant of over £46 million could be multiplied many times over if the floodgates were opened;
b) Moreover, the duties contended for once criminal proceedings are commenced overseas are invidious and unworkable. It is alleged, for example, that the Defendant had a duty to intervene adequately in Romania to demonstrate the Claimant's innocence to the prosecutorial and/or judicial authorities. It would not be fair, just or reasonable to put the Defendant in the position of having to intervene in the criminal justice process of a sovereign foreign country, in this case an EU Member State, especially in circumstances where the Defendant conducts business through other employees in that country.
(1) Whether the Defendant carried out any (or any meaningful or adequate) risk assessment prior to sending the Claimant to Romania. The Claimant's evidence will be that it did not;
(2) Whether the Defendant perceived, or reasonably could have perceived, certain risks that its employees (and, more specifically, the Claimant) may have faced when carrying out the 2005-2006 Electrica Muntenia Sud SA privatisation in Romania. The parties already have permission to call expert evidence on the existence and foreseeability of the risks of that transaction, as well as steps that the Defendant should have taken to mitigate those risks. This expert evidence is crucial to the claim. Note that the need for expert evidence was agreed between the parties and the only dispute at the CMC was as to the scope of that evidence. In view of the relevance of this evidence not only to the claims for breaches of duties of care, but also to the scope of the admitted indemnity and contractual duties as applicable to this case, this is fatal to the Defendant's applications for summary judgment and strike out. Factual evidence on this topic from employees of the Defendant other than the Claimant, including senior executives responsible for managing risks to the Defendant and its employees, will also be required;
(3) What steps the Defendant took in response to the Claimant's arrest, detention, prosecution and conviction;
(4) Whether the steps taken by the Defendant following the Claimant's arrest were likely to be effective in ameliorating his situation. Answering this question will require evidence from someone with expertise in Romanian security and political lobbying;
(5) What was said to the Claimant by various senior employees of the Defendant when they visited him in Romania while he was under arrest.
"The relationship between the plaintiff and the defendants could hardly be closer. Subject to what I have to say hereafter, it also appears to be uncontroversial that if an employer, or former employer, by his failure to make proper inquiries, causes loss to an employee, it is fair just and reasonable that he should be under an obligation to compensate that employee for the consequences. This is the position if an employer injures his employee physically by failing to exercise reasonable care for his safety and I find it impossible to justify taking a different view where an employer, by giving an inaccurate reference about his employee, deprives an employee, possibly for a considerable period, of the means of earning his livelihood. The consequences of the employer's carelessness can be as great in the long term as causing the employee a serious injury."
"in addition to foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of 'proximity' or 'neighbourhood' and that the situation should be one in which the court considers it fair, just and reasonable that the court should impose a duty of a given scope upon the one party for the benefit of the other."
"that Romania was a high risk market in relation to political risk, deep issues of corruption and a poorly functioning judiciary, with a concomitant risk of political exposure in deal-making, particularly in respect of privatisation, and in circumstances where individuals exploited the internal security and police forces and/or the legal system and processes and/or the judiciary to target competitors and political/business adversaries, with the risk that Mr Benyatov might be caught up in such matters, the Defendant had a duty of care to perform an adequate risk assessment in relation to the risks faced by Mr Benyatov."
"These stark differences between the interests of employer and employee strongly suggest that it would not be fair, just or reasonable to impose on an employer a duty of care to defend legal proceedings so as to protect the economic or reputational interests of his employee."
"failed to intervene adequately in Romania to demonstrate Mr Benyatov's innocence to the relevant prosecutorial and/or judicial authorities, and/or to individuals or political authorities with power to withdraw the prosecution against Mr. Benyatov due to the lack of any meritorious claim against him."
Breach
Causation
(1) That the breaches, if established, were not the effective or dominant cause of the Claimant's loss;
(2) That liability will not be imposed for a breach of duty where the act of a third party amounts to a novus actus;
(3) That the dominant and effective cause of the Claimant's loss was the conviction.
Remoteness
Proposed Amendment
"An amendment is sought pursuant to CPR 17.1(2)(a) and/or (b). In addition to the responsive amendments prefigured in VB1 §9 [2/22/201], the reasons for the amendments are in addition to the responsive points referred to at §9 VB1 are:
"78.1 Correcting the typos and wrong cross-references as highlighted by the Defendant in their RFIs;
"78.2 Seeking to address Master Davison's point that a lack of particularisation informed his decision not to allow expert evidence in relation to the Defendant's conduct after the arrest of the Claimant;
"78.3 Clarification and particularisation of the existing claims, including in the light of expert evidence currently under preparation (as ordered by Master Davison).
"79. As to the latter points, the Claimant notes that exchange of expert reports was due on 13 March 2020. It is therefore, unhelpful to have to make amendments before that evidence is closer to finalisation. The Claimant would have preferred to do so in an orderly fashion once that was done. Nevertheless, in response to the Defendant's application, that process has been accelerated at the risk of detriment to the Claimant in order that the Court at this hearing has a fuller appreciation of the impact that such evidence is likely to have on the contours of this litigation and in particular as to the existence and scope of the implied duties and indemnity and in relation to causation."
"So what I would like to do in amendment is as
follows: we haven't made a formal application to amend,
and we have explained, when we provided this document,
that it was to fulfil several purposes.
One, to deal with the points that we promised we
would deal with. We promised when they made their
application we would drop the injunction point and that
we would take the information on quantum in the schedule
and we would put it in the pleading so that there was no
longer an inconsistent case, one case.
I obviously stand by that, so I seek permission to
do that. I ought to have permission to do that, (1)
because making the case consistent I can't see how they
could ever object to us putting the quantum case in, and
dropping a whole head of relief, again they can hardly
object to that, so that ought to stand.
Beyond that, with one exception which I will come
to, the rest of our proposed amendments were put forward
on the basis, and we explain this in correspondence,
that we wanted to have a draft available at this hearing
to be able to show how, in our view, the case was
developed by having access to some preliminary expert
evidence.
We said we're not terribly happy about doing that,
because we haven't finalised the evidence, so it is not
an ideal way forward, but the amendments we put forward
were directed, at least in part, to that end.
We also wanted to, basically, beef up our
particulars so we could support the application for
additional expert evidence that in my submission the
Master had suggested, if we wanted to go that route, we
really needed to do that.
So those are all things we would like to do, but we
don't formally have to do them right now, because they
are not necessary responses to this strike-out
application.
If our case were to be found wanting, if it is
defective, then your Lordship will appreciate, it is
well understood, and there is a reference in
the White Book to an authority confirming this, it is in
the White Book, page 82, paragraph 3.4.2, a party should
have the opportunity to fix their case facing
a strike-out, and if they can't then they get struck
out. In my submission we are not in that territory.
The two bits that do fall away on account of the
strike-out application, it's the injunction, well we are
dropping that, and then putting the quantum information
in, we have done that.
The rest is really what we would like to do. And
since I don't have a formal application, my suggestion
is I don't deal with that now. What we do is, if we do
survive this strike-out, if there isn't a summary
disposal, we will do that at the CMC.
I have listened to my learned friend's complaints
about the lack of particularity he says still exists.
I will do my best to fix that if I get the opportunity,
if this case is still going after this hearing."
Strike out and Summary Judgment: Conclusions
(1) I decline to strike out the claim for an indemnity;
(2) The claim in paragraphs 19.2 which I understand at present to be connected to post-arrest actions or inactions on the part of the Defendant will be struck out, subject to any permission granted hereafter to amend;
(3) Paragraphs 19.3 to 19.7 will be struck out;
(4) Paragraphs 23 and 24 may stay in the pleading as a record of events, but subject to amendment to reflect my view that neither paragraph raises a sustainable cause of action additional to those pleaded or, subject to amendment, to be pleaded under paragraphs 19.1 and 19.2;
(5) The first sentence of paragraph 25 will be struck out;
(6) Paragraph 25.3 will be struck out;
(7) I will consider any amendment proposed to paragraph 25.4 to reflect the conclusions in this judgment;
(8) Paragraphs 47.2 to 53 will be struck out;
(9) Paragraph 54.3 will be struck out;
(10) I will consider any amendment proposed to paragraph 54.4 to reflect the conclusions in this judgment;
(11) Paragraphs 55.3 and the third sentence of paragraph 56 will be struck out;
(12) Paragraph 59 will be struck out.
Conditional Order
(1) "[T]he court must not impose a condition requiring payment into court or the provision of security with which it is likely to be impossible for the defendant to comply", a principle that had been reaffirmed by the Supreme Court in Goldtrail Travel Ltd (in liquidation) v Onur Air Tasimacilik AS [2017] UKSC 57, [2017] 1 WLR 3014, [12] (see [45]);
(2) The respondent bears the burden of establishing on the balance of probabilities that it would be unable to comply with a proposed conditional order, and in doing so "must show, not only that it does not itself have the necessary funds, but that no such funds would be made available to it" (see [46]–[47]);
(3) Males L.J. cited (at [53]) a passage from Anglo-Eastern Trust Ltd v Kermanshahchi [2002] EWCA Civ 198, in which Brooke L.J. had stated that, where an applicant for summary judgment applied in the alternative for a conditional order, this may be considered to be "a sign of weakness" in the summary judgment application as the purpose of the application "is to persuade the court that the defendant has no real defence", whereas a conditional order presupposes that there is a reasonable prospect of success. The same passage (also cited by Males L.J.) stated that an application for a conditional order of £1 million was "out of the ordinary".
(4) Males L.J. also cited with approval another Court of Appeal decision, Huscroft v P & O Ferries Ltd [2010] EWCA Civ 1483, [2011] 1 WLR 939. In that case, the defendant sought a conditional order for payment into the Court by the claimant. Moore-Bick L.J., citing the previous case of Olatawura v Abiloye [2002] EWCA Civ 998, [2003] 1 WLR 275, warned against encouraging defendants to make "exorbitant applications in misguided attempts to obtaining a conditional order for security for costs" (at [14]). In particular, he stated that the Court's power to make a conditional order should not be treated "as providing a convenient means of circumventing the requirements of Part 25 and thereby of providing a less demanding route to obtaining security for costs", and that the Court when considering whether to make a conditional order "should bear in mind the principles underlying rules 25.12 and 25.13" (at [14]). Moore-Bick L.J. proceeded (at [15]) to cite a passage from the judgment of Clarke L.J. in Ali v Hudson [2003] EWCA Civ 1793, [2004] CP Rep 15, which stated that the "correct general approach" was as follows:
"(i) it would only be in an exceptional case (if ever) that a court would order security for costs if the order would stifle a claim; …
(ii) in any event
(a) an order should not ordinarily be made unless the party concerned can be shown to be regularly flouting proper court procedures or otherwise be demonstrating a want of good faith; good faith being understood to consist … of a will to litigate a genuine claim … as economically and expeditiously as reasonably possible in accordance with the overriding objective; and
(b) an order will not be appropriate in every case where a party has a weak case. The weakness of a party's case will ordinarily be relevant only where he has no real prospect of succeeding."
Security for Costs
(1) A primary factor is whether an order to pay security for costs will be oppressive in that it will stifle a genuine claim;
(2) The court must consider whether the Claimant's want of means has been brought about by any conduct by the Defendant;
(3) The court must consider whether, and, if so, to what extent the Defendant will in fact be hindered in enforcing a costs order against the Claimant;
(4) That the first application for security for costs should be made no later than the first case management conference. Delay is a factor that can affect whether to grant security.
"51. Having regard to the guidance provided by these authorities, the position may be summarised as follows:
"(1) For jurisdiction under CPR r 25.13(2)(a) to be established it is necessary to satisfy two conditions, namely that the claimant is resident (i) out of the jurisdiction and (ii) in a non-Convention state.
"(2) Once these jurisdictional conditions are satisfied the court has a discretion to make an order for security for costs under CPR r 25.13(1) if "it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order".
"(3) In order for the court to be so satisfied the court has to ensure that its discretion is being exercised in a non-discriminatory manner for the purposes of articles 6 and 14 of the Convention: see the Bestfort case [2017] CP Rep 9, paras 50-51.
"(4) This requires "objectively justified grounds relating to obstacles to or the burden of enforcement in the context of the particular foreign claimant or country concerned": see Nasser's case [2002] 1 WLR 1868, para 61 and the Bestfort case at para 51.
"(5) Such grounds exist where there is a real risk of "substantial obstacles to enforcement" or of an additional burden in terms of cost or delay: see the Bestfort case at para 77.
"(6) The order for security should generally be tailored to cater for the relevant risk: see Nasser's case at para 64.
"(7) Where the risk is of non-enforcement, security should usually be ordered by reference to the costs of the proceedings: see, for example, the orders in De Beer's case [2003] 1 WLR 38 and the Bestfort case.
"(8) Where the risk is limited to additional costs or delay, security should usually be ordered by reference to that extra burden of enforcement: see for example, the order in Nasser's case.
"52. I would add the following observations:
"(1) The relevant risks are of (i) non-enforcement and/or (ii) additional burdens of enforcement. A real risk of either will suffice to meet the "threshold" test.
"(2) Some of the authorities refer to difficulties of enforcement. Mere difficulty of enforcement in itself is not enough (save in so far as it results in additional costs and therefore an extra burden of enforcement). The relevant risk is non-enforcement, not difficulty in enforcement and this is the risk to which the test of "substantial obstacles" is directed. The obstacles need to be sufficiently substantial to amount to a real risk of non-enforcement. Difficulties may, however, be evidence of the "substantial obstacles" required for there to be a real risk of non-enforcement.
"(3) Delay is mentioned as a relevant additional burden of enforcement, but it is difficult to see how this can be quantified in terms of security unless it is likely to result in some additional cost or interest burden."
"61. Returning to rules 25.15(1) and 25.13(1) and (2)(a) and (b), if the discretion to order security is to be exercised it should therefore be on objectively justified grounds relating to obstacles to or the burden of enforcement in the context of the particular foreign claimant or country concerned. The former principle was that, once the power to order security arose because of foreign residence, impecuniosity became one along with other material factors: see the Thune case [1990] 1 WLR 562 cited above. This principle cannot, in my judgment, survive in an era which no longer permits discrimination on grounds of national origin. Insolvent or impecunious companies present a different situation, since the power under CPR 3 25.13(2)(c) applies to companies wherever incorporated and resident and is not discriminatory."
And
"67. The risk against which the present defendants are entitled to protection is thus not that the claimant will not have the assets to pay the costs, and not that the law of her state of residence will not recognise and enforce any judgment against her for costs. It is that the steps taken to enforce any such judgment in the United States will involve an extra burden in terms of costs and delay, compared with any equivalent steps that could be taken here or in any other Brussels/Lugano state. Any order for security for costs in this case should be tailored in amount to reflect the nature and size of the risk against which it is designed to protect."
(1) The Claimant would be unable to satisfy any award of costs made against him;
(2) The Claimant has every reason to try to put his assets out of the Defendant's reach;
(3) The Claimant has a history of using complex and unusual ownership in relation to his assets; and
(4) The Claimant is in the process of converting one of his major assets, a house, into cash and has not provided any detail as to what he plans to do with that money.
"… My assets are as follows:
"11.1 approximately $1m in an account in the United States with Fidelity. This account is what is known as a "401k" account, which is a US private pension account (similar to what in the UK would be known as a Self Invested Personal Pension or SIPP). As this is a pension account, removing funds from it – for example to deposit with the court as security for the Defendant's costs – would incur punitive tax penalties which would significantly reduce the amount available. While I am not an accountant, I understand that, were I to remove funds from this account, I would have to pay approximately 40-50% of the total sums removed in tax;
"11.2 two houses, owned jointly by my wife and I …. These houses are the real estate development I referred to at paragraph 97 of my First Statement. I purchased the land in May 2016, and, together with a mortgage for $1.03m, used my liquid assets to pay for the costs of building the houses, with construction beginning in early 2018. Whilst these houses were being built, I lived in rented accommodation in Los Angeles. Since completion, to save on rent, and as my family has now joined me in Los Angeles, I have moved into one of the houses. The other was marketed for sale, and I have recently accepted an offer of $1.935m in relation to it (given that the two houses are similar I believe that the value of the house that I live in with my family will also be around $2m). I expect to complete the sale of the first property in January 2020 and, after tax and professional fees, to receive approximately £1.75m. …..
"11.3 an account with Lloyds Bank in the UK, containing about £300,000. I have a certain level of residual expenses in the UK (for instance, the fees associated with a storage unit which I cannot empty as that would require me to travel to London, which I cannot do), which I fund from this account. When my wife and son return to Europe (returning to Europe to recharge and reconnect is very important for my wife, who has left her life there to come and live with me in a place which is culturally quite different, and where she has few friends), their expenses are also funded from this account. In addition, this is the account from which I have funded, and continue to fund, my expenses in this litigation (for example, counsel and expert fees). I expect it to be entirely depleted as a result of funding my own costs of this litigation; and
"11.4 residual amounts in certain private equity funds, which total no more than $20,000. I have no control over when these funds are distributed."
(1) I would be reluctant at this stage to force the Claimant to realise the monies in his 401k account because of the tax implications of so doing, but it seems to me realistic to suppose that at the time of any adverse order for costs a sum of around US $500,000 (i.e. the sum of $1m less tax at 50%) would be available – about £378,000 at current rates of exchange;
(2) The Claimant is the half owner of a house which he says is worth $2 million. I am not clear whether the mortgage of $1.03m is still outstanding – if it is, then the net equity is about $1m, of which half is his – thus another £378,000 would be available;
(3) This leaves £144,000 to be found. I have no reason to suppose that that could not be found probably from the sale proceeds of the house which is being sold;
(4) In that regard I do not find the suggestion that there is, on the evidence, a significant risk of the Claimant dissipating his assets convincing. It is true that some years ago he owned a property through a complex structure, but that was known to the Defendant at the time, and appears to me to be no more than the sort of arrangement which an international banker such as the Claimant might adopt for fiscal reasons;
(5) It is of course right that the Claimant might be said to have every incentive to move assets, but that is a long way from establishing that he has any intention of so doing – and, in my view the greater part of the necessary assets to satisfy an award (the two sums of $500,000 referred to above) are of a nature that it is unlikely that they will be dissipated;
(6) I draw no adverse inference from the explanations given by the Claimant in respect of the use of the sales proceeds of the house to be sold. I see no reason to suppose other than that the bulk of those proceeds will remain available in one form or another.
(1) I accept that the application is made late, and have reflected that in my approach set out above;
(2) I do not accept that making an order would stifle the claim in the sense of making it impossible for the action to come to trial: on the contrary, it seems to me that even were an order for security in the sum of £900,000 to have been made, it is likely that sufficient assets would have remained available for the action to proceed;
(3) It is difficult without prejudging the case to say that the Claimant's financial condition was caused by the Defendant. Given my other conclusions on this application, I do not to go further into this difficult area.
Note 1 II/tab 21/157-158 [Back] Note 2 I/tab 4/21/Particulars of Claim, paragraph 38 [Back] Note 15 See for example Transcript Day 3/pages 126-127 [Back] Note 16 Transcript/day 3/page 126 [Back] Note 20 The pleading refers to paragraph 19.4, but this is a clear error. [Back] Note 21 The original pleading says “in accordance with” Mr. Benyatov’s legitimate expectations, but the Claimant has since reformulated this paragraph [Back] Note 24 At this point, footnote 3 to the passage in Halsbury says:
“It is an implied term of the contract of employment that the employer will not order the employee to do an unlawful act ….” [Back] Note 25 At this point, footnote 4 to the passage in Halsbury says:
“Gregory v Ford [1951] 1 All ER 121 (employer required employee to drive vehicle not covered by third party insurance; third party injured by employee’s negligence; implied term in contract of employment that employer would comply with statutory provisions as to motor vehicle insurance; employee entitled to recover from employer damages and costs which he was liable to pay to third party; employer not entitled to indemnity from employee). See also Coulson v News Group Newspapers Ltd [2012] EWCA Civ 1547; [2013] IRLR 116 (agreement following termination included clause guaranteeing indemnity for legal expenses properly incurred by employee as a result of his employment; there was nothing in the criminal nature of the judicial proceedings that did arise to have rendered it objectionable for such an indemnity to have been applied). ….” [Back] Note 26 This sentence ends with footnote 356 which cites the decision of the New South Wales Court of Appeal in National Roads and Motorists’ Association v Whitlam [2007] NSWCA 81 as authority. [Back] Note 34 The original pleading says “in accordance with” Mr. Benyatov’s legitimate expectations, but the Claimant has since reformulated this paragraph [Back] Note 40 See paragraph 21 above and II/tab 23/334 [Back] Note 43 I/tab 6/67-68/Answer 15.4 [Back] Note 45 Transcript/day 3/pages 90 to 92 [Back]
