ADVERSE INFERENCES FROM ABSENT WITNESSES: ANOTHER EXAMPLE IN THE HIGH COURT

In NRC Holding Limited -v- Danilitskiy [2017] EWHC 1431 (Ch) Robin Dicker QC, sitting as a High Court judge, considered the inferences that should be drawn when a key individual did not give evidence.

THE CASE

The claimant had a default judgment against Mr Danilitskiy for US $5,000,000 plus interest and costs. They sought to enforce the judgment against a property which, it was contended, was beneficially owned by Mr Danilitskiy. That application was opposed b a limited company which stated that it was the beneficial owner of the company.

THE JUDGE’S DISCUSSION OF THE EVIDENCE

The judge reviewed the law as to what principles should be drawn from the fact that Mr Danilitskiy did not give evidence.

The evidence
    1. NRC relied on witness statements from Ashley Messick (“Ms Messick”), a corporate investigator, and Eleni Polycarpou (“Ms Polycarpou”), a Special Counsel employed by Withers, together with the witness statement of Mr Chadwick, to which I have already referred. Ms Messick was cross-examined on her statement by Mr Lord QC for Opal Stem.
    2. Opal Stem relied on the witness statements by Ms Maltseva and Ms Usacheva, to which I have already referred, together with further witness statements from each of them dated 10 February 2017, along with a witness statement by Simon Conroy (“Mr Conroy”), a solicitor with Setfords Solicitors. Ms Maltseva and Ms Usacheva were both cross-examined by Mr Milner for NRC.
    3. Notwithstanding the comments made by Mr Chadwick in his witness statement, Opal Stem did not adduce any evidence from Mr Danilitskiy.
    4. Mr Milner submitted that the absence of any evidence from Mr Danilitskiy was striking. He submitted that it was plain that Mr Danilitskiy had relevant evidence to give and that he could have been expected to provide it. This was particularly so, he said, given that, during the course of her cross-examination, Ms Maltseva confirmed that she remained on good terms with her father and spoke to him from time to time, that he was able to travel and that there was no reason why he could not come to London if he wanted to. Furthermore, in her evidence Ms Maltseva referred to conversations with her father in relation to the Property and associated issues around the time of the transfer of the share in Opal Stem to her in late 2015 and, according to her second witness statement, also when she prepared that statement in February 2017. Despite this, no explanation was provided by Opal Stem as to why Mr Danilitskiy has not provided any evidence.
Burden of proof and adverse inferences
    1. There is an issue as to the legal burden of proof where an application is made to make a charging order final; see National Guild of Removers & Storers Ltd v Jones [2012] EWCA Civ 216 per Pitchford LJ at [11] to [16]. I have, however, reached the conclusion that the decision in this case does not depend on the application of the burden of proof, and I do not need to consider this issue further.
    2. Of more importance, in the present case, is that in Prest v Petrodel Resources Ltd Lord Sumption, in the context of discussing whether and if so when an adverse inference may properly be drawn against a party, said at [44] that, for his part, he would adopt, with one modification that is not relevant in this case, the view expressed by Lord Lowry in R v Inland Revenue Comrs, Ex p TC Coombs & Co [1991] 2 AC 283, 300 that:
“In our legal system generally, the silence of one party in face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party’s failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party, may be either reduced or nullified.”
and also referred, by way of comparison, to Wisniewski v Central Manchester Health Authority [1998] PIQR 324, 340. There is a line of Australian authority to similar effect, see, for example, The Bell Group Ltd (in liquidation) v Westpac Banking Corp (No.9) [2008] WASC 239 at [1003]-[1022].
  1. Mr Milner submitted that, in this case, the Court should draw what he described as a strong adverse inference against Opal Stem. I will return to the question of whether and if so what inferences it is appropriate to draw from the absence of evidence from Mr Danilitskiy when considering the facts.

THE ADVERSE INFERENCE THAT WAS DRAWN

The judge held that the absence of evidence in this case meant that he could properly draw the inference that the evidence of Mr Danilitskiy would not support the defendants’ case.

  1. In the present case, there are various possible reasons why Mr Danilitskiy may have chosen to purchase the Property in the name of Opal Stem. Some of those reasons might have indicated that Opal Stem was intended to be the beneficial owner of the Property and some that it was not. However, although he plainly has relevant evidence to give on this critical question and could have been expected to provide it on behalf of Opal Stem, there is no evidence from Mr Danilitskiy, or indeed anyone else, one way or the other. Nor have I been provided with copies of any board minutes of Opal Stem which assist on this issue, even assuming that such ever existed. In the absence of such evidence, I am not prepared to assume that Mr Danilitskiy intended to transfer the purchase monies to Opal Stem for its benefit nor that he intended Opal Stem to hold the beneficial interest. To the contrary, in my view the appropriate inference which is to be drawn from the decision that he should not give evidence, is that his evidence would not support Opal Stem’s case.
  2. Each case ultimately depends on the facts. In the present case, I conclude that, taking the facts as a whole, the presumption of a resulting trust applies such that, when Mr Danilitskiy purchased the Property in the name of Opal Stem, he and not Opal Stem acquired the beneficial interest. I add that I would have reached the same conclusion on the basis of the available evidence, even if I had not also drawn an adverse inference from Mr Danilitskiy’s failure to give evidence.

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