Earlier posts have looked at the issue of aggressive correspondence. Others have looked at the issues of conduct, refusal to mediate and questions relating to indemnity costs. I am grateful to David Turner QC for drawing my attention to a judgment that draws many of these issues together.  The judgment of Mrs Justice Rose in PJSC Aeroflot – Russian Airlines v Leeds & Anor (Trustees of the estate of Boris Berezovsky) & Ors [2018] EWHC 1735 (Ch).

“… it is, fortunately, “out of the norm” for a litigant and its legal representatives so to lose sight of any basic standard of decent and compassionate behaviour as to send a letter in those terms. It is all the more shocking given that it seems very unlikely that at the time the letter was drafted and sent, Aeroflot had no inkling that the next day it would serve a notice of discontinuance, abandoning all claims against Mr Glushkov’s estate.”


The claimant brought an action alleging that the defendants misappropriated large sums of money from it. After several years of litigation (during which one of the defendants died) and  much interlocutory wrangling the matter was listed for a 28 day trial starting 10th April 2018. This incorporated four days reading time with the evidence with opening submissions and evidence due to start on the 16th April 2018. Just before 5.00 pm on Friday 13th April the claimants served a notice of discontinuance. Because it had obtained an injunction the claimant required permission of the court to discontinue. The real issue at the hearing was whether or not the claimant should pay costs on the indemnity basis.


The judge considered whether the “principle” in Clutterbuck and Paton v HSBC plc & others [2016] 1 Costs LR 13 applied, briefly “where a claimant proceeds with allegations of serious dishonesty and fraud against a defendant and discontinues those claims without explanation, an order for indemnity costs should usually follow”.  The judge held that this was not a “rule”, however the principle was a sound one – and applied with more force in the current case.


  1. Mr Davenport submits that there is no such principle or rule and that every case must be considered on its own merits. He seeks to distinguish Clutterbuck on the basis that the claimant there had failed more than once to provide a satisfactory draft of its proposed amended particulars and had issued a notice of discontinuance the day before the strike out application was due to be heard.
  2. In my judgment that is no basis for distinguishing Clutterbuck from the present case. On the contrary, the present case is stronger given that the allegations of fraud were pursued over eight years and the proceedings were prosecuted vigorously up to a few hours before the whole claim was abandoned the afternoon before the trial. I accept Mr Davenport’s submission that it would be going too far to refer to “the rule in Clutterbuck” as Mr Tregear did. But I respectfully consider that the approach in Clutterbuck is sound. Where a claimant makes serious allegations of fraud, conspiracy and dishonesty and then abandons those allegations, thereby depriving the defendant of any opportunity to vindicate his reputation, an order for indemnity costs is likely to be the just result, unless some explanation can be given as to why the claimant has decided that the allegations are bound to fail.


The judge then considered whether indemnity costs should be awarded because proceedings were “out of the norm”.

Conduct of proceedings “out of the norm”
  1. The second basis on which the Defendants invite the court to award them indemnity costs is by applying the more familiar test described by Tomlinson J (as he then was) in Three Rivers DC v Bank of England [2006] EWHC 816 (Comm)[2006] 5 Costs LR 714 at [26]. The principles enunciated there refer to circumstances which take the case “out of the norm” – a formulation that has proved useful in many subsequent decisions. Conduct need not be such as to attract moral condemnation but includes whether it was reasonable for the claimant to raise and pursue particular allegations and the manner in which the claimant pursued its case and its allegations. As to manner, Tomlinson J referred to where allegations of dishonesty are pursued aggressively over an extended period of time and where the claimant maintains those allegations without apology to the bitter end. He referred also to cases “where a claimant commences and pursues large-scale and expensive litigation in circumstances calculated to exert commercial pressure on a defendant” only later to suffer a resounding defeat. I was also referred to other helpful summaries of the principles to be applied in Bank of Tokyo-Mitsubishi Ufi Ltd v Baskn Gida Sanayi Ve Pazarlama AS [2010] 5 Costs LR 657 at [26] – [29] per Briggs J; Elvanite Full Circle Ltd v Amec Earth & Environmental (UK) Ltd [2013] EWHC (TCC) at [16] per Coulson J and Bank of Ireland v Watts Group Plc [2017] EWHC 2472.
  2. Mr Davenport referred me to a line of authorities where the court considers the appropriate award for the costs of a successful but dishonest party, typically a claimant who succeeds in establishing an entitlement to some compensation but who has in part put forward a dishonest, fraudulent case. He referred me to Briggs J’s explanation of the applicable principles in Bank of Tokyo-Mitsubishi at [19], Hutchinson v Neale [2012] 5 Costs L.O. 588 [28] and Sulaman v Axa Insurance plc [2010] CP Rep 19 [17]-[18].
  3. I do not consider that those cases have any relevance to the present inquiry. Aeroflot is not the successful party here; it must be treated as having suffered the same kind of resounding defeat that Tomlinson J had in mind in Three Rivers. I reject the submission which appeared to follow from references to these authorities that an order for indemnity costs in the current circumstances can only be made if it can be shown that the misconduct of the paying party gave rise to wasted costs.
  4. Applying the principles set out in those cases I have no hesitation in concluding that Aeroflot should pay the Defendants’ costs of this litigation on the indemnity basis.


The judge then looked at the manner of the correspondence as a whole.
(ii) Aggressive pursuit of Mr Glushkov, Mr Jenni and Mr Glushkov’s estate
    1. The Forus Defendants and the Glushkov estate also rely on the unusually aggressive stance adopted by Aeroflot in these proceedings. They object in particular to the derogatory references to Mr Jenni, the Swiss lawyer who was involved in the setting up of the Forus Group in spring 1991 in Lausanne. Aeroflot referred to Mr Jenni as “the convicted fraudster” relying for that on his conviction in Switzerland of aiding and abetting the commission of what Aeroflot referred to as “the Andava fraud”. Andava was a company formed by Mr Berezovsky and Mr Glushkov in 1994 which Aeroflot had earlier alleged was involved in defrauding it of foreign currency revenues.
    2. The proceedings in the Federal Criminal Court in Switzerland were between the Swiss Federal Prosecutor’s Office and Aeroflot as claimants against Mr Jenni and various third parties including Forus Holding SA. Mr Jenni was charged with “unfaithful management and money laundering”. From that judgment it is clear that:
a. the court confirmed that no accusation of embezzlement of money had been filed, and concluded that the actions outlined in the bill of indictment did not fulfil the criteria defining embezzlement. There was no basis for the court of its own motion to pursue such an accusation: para 3.
b. The court accepted that Mr Glushkov had owed duties to Aeroflot which he had violated, based on the existence of the Russian judgment which could not be called into doubt. The court held that the question whether Mr Glushkov’s superiors in Aeroflot had known about the benefit he gained from his involvement with Andava was irrelevant to the proceedings before it. Such knowledge on the part of Aeroflot senior management would have been an obstacle to criminal liability for fraud under Swiss law but did not nullify the breach of fiduciary duty. But, the court said as Mr Jenni “is not being charged with fraud or aiding or abetting fraud, but with unfaithful management or aiding and abetting unfaithful management” the legal and circumstantial issues under Russian law regarding fraud were irrelevant: para 4.2.2(b).
c. The court found that it had been proven that Mr Jenni played a central role in the establishment of the Andava group and the design of the transactions which comprised the relationship between Andava and Aeroflot. There was no basis for finding that he did not know that Mr Glushkov was acting in breach of his duties towards Aeroflot and Mr Jenni was therefore found guilty of aiding and abetting unfaithful management by contributing to the withdrawal by individuals in senior positions at Aeroflot of large amounts of money from the company for their personal gain: para 4.2.4 and 6.4.
d. He was sentenced to 21 months prison sentence suspended for two years and a substantial fine.
    1. Having read the Swiss court’s judgment in full, I accept Mr Tregear’s submission that references to Mr Jenni being a “convicted fraudster” were offensive and unwarranted. In the Aeroflot skeleton argument served a few days before the proceedings were discontinued Aeroflot again referred to Mr Jenni as having been “involved in the Forus Fraud ‘on the ground level'”.
    2. As far as Mr Glushkov is concerned, I have already described how these proceedings were pursued relentlessly against him despite his painful and debilitating illness, and his programme of frequent hospital appointments which sometimes prevented him from attending court. In a short statement to the court at the hearing of this indemnity costs application, Mr Warents described the distress of Mr Glushkov’s children and civil partner and how this was “compounded by the knowledge that for many years during which Mr Glushkov’s health was deteriorating, Mr Glushkov had struggled to defend himself against what he saw as a politically motivated campaign of persecution by Aeroflot and the Russian state”.
    3. Mr Warents also described how Ms Glushkova and Mr Trushin discovered Mr Glushkov’s body at his home at approximately 10:30 pm on 12 March 2018. They had gone to his home after becoming concerned that they had not heard from him for some time. On discovering his body they called for an ambulance and also the police. Mr Warents went on:
“Obviously Ms Glushkova and Mr Trushin found these events extremely distressing. I should say it has not helped that Aeroflot subsequently has been extremely aggressive and unsympathetic in the way that it has dealt with them particularly in correspondence questioning whether there was a will, questioning whether there were any creditors of the estate, in a completely unfeeling and unsympathetic manner, particularly given what has happened since with the discontinuance of the claim”
  1. I agree with that description of Aeroflot’s behaviour. The witness statement of Mr Desai in support of the application issued on 12 April 2018 described how, in the short time since Mr Glushkov’s death, Ms Glushkova and Mr Trushin had been doing their best to work out what was going on in the proceedings and how best to deal with the case. They had also been dealing with their bereavement during this time. Mr Desai then set out such information as he had been able to gather. He said that to the best of the applicants’ knowledge Mr Glushkov had died without leaving a will. They had spoken to close professional associates of Mr Glushkov and believe that he died intestate. So far as they were aware there were no other people with an interest in Mr Glushkov’s estate other than Mr Trushin, Natalia and Dmitrii. They believe that the estate was unlikely to be worth more than £250,000. The applicants, he said, were not in a position to fund any active defence and had no desire to take any active role in the trial either now or in the future. They were prepared therefore for the estate simply to be bound by any order or judgment the court made as a result of the forthcoming trial. They hoped and believed that the claim against the estate could be determined one way or another without further delay or additional cost.
  2. On 12 April 2018 Pinsent Masons wrote to Mr Desai a letter which I regard as shameful. They effectively berate Mr Trushin and Ms Glushkova through their solicitors for failing to come forward sooner, demanding an explanation “by return and in any event by noon tomorrow” why they had left it “so late” to make the application. The letter went on to ask many intrusive and hectoring questions about what contact the clients have had with others about the trial; what efforts they have made to establish whether Mr Glushkov left a will including who is referred to by the phrase “close professional associates” in Mr Desai’s statement; the basis upon which they had reached the view about the value of Mr Glushkov’s estate (which Pinsent Masons describe as “an unsubstantiated belief”); in particular what assets do they consider belong to the estate; what efforts they have made to identify assets; what efforts they have made to ascertain whether there are any creditors of the estate and to establish their views on the suggestion that the trial proceed without the estate being represented; what contact they had made with Mr Glushkov’s former solicitors Boodle Hatfield who might be a substantial creditor of the estate. Finally they demanded to know the basis on which the time estimate of 30 minutes had been given for the application since they considered that a time estimate of at least 2 hours 30 minutes will be required.
  3. The High Court is familiar with high-value litigation being hard fought with no quarter given on either side. But it is, fortunately, “out of the norm” for a litigant and its legal representatives so to lose sight of any basic standard of decent and compassionate behaviour as to send a letter in those terms. It is all the more shocking given that it seems very unlikely that at the time the letter was drafted and sent, Aeroflot had no inkling that the next day it would serve a notice of discontinuance, abandoning all claims against Mr Glushkov’s estate.



The judge held that the refusal to mediate had no impact upon the award of costs in this case.

  1. Aeroflot’s main argument against the court ordering indemnity costs is that the Forus Defendants refused to mediate the claim. Aeroflot first proposed mediation on 13 July 2016. This was before their expert Mr Dearman had served his first report. The Forus Defendants declined to mediate saying that their resources were already fully stretched, and they could not invest the time and money required to pursue a mediation in parallel with litigating. They invited Aeroflot to make a settlement proposal.
  2. Aeroflot submit that this rejection of mediation was unreasonable and that the court should penalised the Forus Defendants in respect of costs from that point onwards.
  3. Nothing further happened in relation to either mediation or settlement proposals until June 2017. Pinsent Masons wrote to Streathers on 19 June 2017 proposing a face-to-face without prejudice meeting in order to address any concerns which the Forus Defendants might have regarding the cost of mediation. Streathers replied at the end of June rejecting mediation and maintaining the position that they were not prepared to meet face-to-face. They invited Aeroflot to make a written settlement proposal. Pinsent Masons wrote in mid-July 2017 offering to settle the claim for the amount of the Savelovsky Court judgment, namely US$123 million. That offer was made at a time when the expectation was that the trial would commence in October 2017. On 21 July 2017 Streathers refused the offer and invited Aeroflot to withdraw the claim and make proposals to pay the Forus Defendants’ costs.
  4. There was no further discussion about settlement until 21 March 2018 following the dismissal of Aeroflot’s application to adjourn on 12 March. At that point Pinsent Masons offered to accept $9 million in compensation plus 50% of Aeroflot’s costs. That offer was rejected on 4 April 2018. At that point the balance switched to Pinsent Masons indicating that a settlement might be reached which would involve Aeroflot making a substantial payment towards the Forus Defendants’ costs. By the time the claim was discontinued the negotiations had reached the stage by which Streathers indicated a willingness to accept £2.5 million from Aeroflot towards the Forus Defendants’ costs.
  5. Mr Davenport referred me to the importance that the court places on encouraging parties to mediate to avoid costly and time-consuming disputes: see the Chancery Guide paras 5.1, 5.2 and 18.2. He referred me to a number of authorities in which an unreasonable refusal to mediate was a relevant consideration in reducing the level of costs to which the receiving party might otherwise have been entitled.
  6. In my judgment it would be inappropriate to take a refusal to mediate into account. I accept Mr Tregear’s submissions that where allegations of fraud and serious wrongdoing are made, the proceedings are intrinsically unsuitable for mediation. To penalise the Forus Defendants in costs for the stance they took would in effect be penalising Mr Glushkov and the Forus Defendants for insisting on their right to have their reputations vindicated by the decisions of the court following a trial.
  7. In any event I have been case managing these proceedings for some time and I am satisfied there was never any possibility of these parties making any progress in alternative dispute resolution. A heated and voluminous correspondence between the parties was generated by the need to select an independent solicitor simply to sit in Moscow with the witnesses giving evidence by video link. The parties were unable to agree the identity of the solicitor, or her daily subsistence allowance and I was required ultimately to give directions to resolve the matter. There was in my judgment no possibility of them agreeing the identity of a mediator.
  8. Aeroflot also invited the court to make enquiries as to “what lies behind the two Forus companies, situated in the BVI and Luxembourg” before deciding the issue of indemnity costs. I do not agree that any such enquiry is either necessary or appropriate – any more than it is either necessary or appropriate for the court to enquire as to who has been making the decisions relating to Aeroflot’s pursuit of these proceedings and its decision to abandon them.
  9. Finally Aeroflot complain that costs were wasted because the Forus Defendants initially asserted that the claims were governed by Swiss rather than Russian law and Aeroflot had to incur the costs of pleading to Swiss law. It was only later that the Forus Defendants accepted that Russian law applied and also accepted the accuracy of the evidence on Russian law provided by Aeroflot’s expert. I do not regard this as anything more than part of the natural evolution of a case as it proceeds towards trial. It certainly does not weigh heavily in the balance against the factors I have described as pointing in favour of an order for indemnity costs.



  1. I have considered whether it is appropriate to order indemnity costs for the whole of the proceedings or for some shorter period. The Defendants refer to the fact that some months before the start of the trial it became apparent that the evidence supporting the contention that any of Aeroflot’s funds had actually gone missing was seriously undermined by disclosure of documents from EM Finance. Mr Davenport also referred to this somewhat obliquely in his submissions. However, since Aeroflot have declined to explain why they have discontinued these proceedings, they cannot ask the court to infer that the reasons are connected with developments in the evidence which occurred part way through the proceedings. The appropriate order is that Aeroflot pay all the Defendants’ costs to be assessed on the indemnity basis for the whole proceedings.
  2. Mr Glushkov’s costs comprise the fees of Boodle Hatfield who initially acted for him, as set out in the witness statement of Simon Fitzpatrick dated 16 April 2018, Mr Glushkov’s costs as a litigant in person recoverable pursuant to CPR r46.5 and the fees of Charles Douglas acting as representatives for the estate. Clearly, had Mr Glushkov instructed solicitors and counsel to act for him throughout the whole proceedings rather than having acted as a litigant in person since October 2014, Aeroflot would now be facing a liability to his estate of significantly more than they can be assessed as liable to pay. As regards the Boodle Hatfield and Charles Douglas fees, I would hope that the result of any assessment would be that the estate is not diminished materially, if at all, by reason of Mr Glushkov’s or his estate’s liability for these fees. As regards the costs to which the estate is entitled by reason of Mr Glushkov acting as a litigant in person, I note that during the period when I have been case managing these proceedings, he was fully engaged with the case, so far as his health permitted, and that his letters to the court were always courteous, temperate and helpful.