A “GENERAL INCREASE IN HOSTILITY AND AGGRESSIVENESS IN THE CONDUCT OF DISPUTES”: CLAIMANT’S APPLICATION TO COMMIT STRUCK OUT AS AN ABUSE OF PROCESS

The judgment in  Navigator Equities Ltd & Anor v Deripaska [2020] EWHC 1798 (Comm) emphasises that there is a particular duty on a party bringing committal proceedings.   The judgment has very important things to say about the way in which committal proceedings were brought and the attempt by the claimant to “load the dice” in relation to these “quasi-criminal” proceedings.  The judge was highly critical of the way that the committal proceedings had been brought and the manner in which the evidence, and the application itself, was presented.

“In the working generation of 30 years or so during which I have been engaged in commercial dispute resolution in this jurisdiction, principally in this court and in London arbitrations, there has been a significant general increase in hostility and aggressiveness in the conduct of disputes. The taking of any and every point, good or bad, and other failures to display proper independence from the litigating client, is treated too often as if it were a normal or appropriate adjunct of well funded, hard fought, business disputes, particularly if there are issues of dishonesty involved.”

“the contempt application was presented to the court in a heavy-handed, aggressively partisan fashion, that was inappropriate, vexatious and unfair to Mr Deripaska.”

THE CASE

The claimant brought committal proceedings alleging breach of certain undertakings given by the defendant. The defendant applied that these be struck out as an abuse of process.

THE IMPORTANT OF NEUTRALITY AND FAIRNESS WHEN BRINGING A COMMITTAL APPLICATION

Mr Justice Andrew Baker held that committal proceedings were brought were quasi criminal in nature. That placed particular duties on the party bringing those proceedings.

1. Contempt proceedings have a particular and distinctive character. They are civil proceedings but bear several important hallmarks of criminal proceedings. They have been described, I think aptly, as quasi-criminal in character: Jelson Estates v Harvey [1983] 1 WLR 1401 at 1408C-G; Masri v Consolidated Contractors International Co Sal et al. [2010] EWHC 2640 (Comm) at [22]. The hearing is not to be equated with a criminal trial and the process is not to be equated with a private prosecution (Masri at [21]). But the quasi-criminal character of this particular species of civil litigation process has important consequences.

2. One consequence I have already identified, namely that the court recognises the particular capacity of contempt applications or the threat of contempt applications to be used vexatiously by litigants to further interests that it is not the function of the contempt jurisdiction to serve. That leads to the obvious materiality, at all events if there is some reason to question it on the facts of a given case, of the ‘prosecutorial motive’ of a claimant / applicant pursuing a contempt charge. It is troubling that in this case Ms Berard appears not to have understood that relevance, and that the claimants adopted their misguided stance that it was irrelevant in order to seek to justify being unforthcoming and evasive about the extent of Mr Chernukhin’s knowledge of the Redomiciliation prior to the May 2019 Letter.

3. A further consequence is that the claimant / applicant pursues a contempt charge as much as quasi-prosecutor serving the public interest as it does as private litigant pursuing its own interests in the underlying dispute. The claimant / applicant needs to understand that; and if it is legally represented, as here, the legal representatives need to understand that their role as officers of the court is acutely pertinent, even if (to repeat) the process is not to be equated with a private prosecution in a criminal court. Thus, it appears to have struck Teare J as obvious in the long-running Ablyazov litigation that the quasi-prosecutorial role of the claimant / applicant in pursuing a contempt charge means its proper function is to act generally dispassionately, to present the facts fairly and with balance, and then let those facts speak for themselves, assisting the court to make a fair quasi-criminal judgment: JSC BTA Bank v Ablyazov [2012] EWHC 237 (Comm) at [15].

THE STRIKING OUT OF THE APPLICATION

The judge held that the application for committal had not been brought fairly or appropriately.  The application was struck out.  There is more than a passing criticism of the way in which the committal proceedings were brought, the “evidence” adduced, the witness statement made and the manner in which the application was conducted.

1. 1. Adopting the approach, then, that this contempt application ought to have been prosecuted dispassionately and even-handedly as an application brought solely in the public interest and not to serve any partisan agenda of the claimants’, and that particular care was called for not to allow an appearance of unfairness to be created because of what was said in court on 3 July 2019, I can now set out the features that I concluded had come together to render the application an abuse of the process of the court.

   2. Firstly, the claimants refused to be open with Mr Deripaska or with the court as to the extent of their awareness of the Redomiciliation from time to time, and as a result failed to explain to the court why they were content with the Undertakings although Mr Chernukhin knew the Redomiciliation was in prospect, as I find he did, before they were lodged with the court and the WFO was discharged. Allied to that, there was no dispassionate, self-critical appraisal of the possibility of pursuing Mr Deripaska alleging contempt once the errant notion initially promulgated by RPC that the Undertakings would need to be discarded following the Redomiciliation had been put to bed. Mr Deripaska was deprived thereby of a real prospect that a fair decision might have been taken not to pursue committal proceedings.

   3. Secondly, the claimants’ evidence in support of the contempt charge was in material respects misleading or not the whole truth, or both of those together. For example:

(i) There was no mention of the involvement of Quinn Emanuel, although their involvement was plainly relevant (even if the claimants were not waiving any legal advice or litigation privilege), or Mishcon de Reya.

(ii) It failed to mention Ms Berard’s own personal knowledge of the (proposed) Redomiciliation prior to the May 2019 Letter. Further, it gave the very clear impression that neither Mr Chernukhin nor any of his advisers knew anything about it prior to that letter. That was seriously misleading. Ms Berard in cross-examination refused to accept as much and I am not prepared to say she was not being honest in her answers. I note that the same wrong impression, that the claimants knew nothing of the Redomiciliation prior to the May 2019 Letter, had been given to the Jersey court and to Teare J in June/July 2019 via Ms Berard’s fourth affidavit. I do not find it possible to see how she failed to see that what she was saying was misleading, unless it be because she saw her and her affidavit’s function, as I regret to say in my judgment she did, as being to advance as forcefully as possible the best case she could argue for her client why Mr Deripaska should be found to have been in contempt.

(iii) Even on Ms Berard’s explanation of that last matter, namely that she had not meant to convey a lack of prior knowledge of or understanding about the Redomiciliation, only a failure to appreciate that it might be said to impact on the Undertakings, (a) her affidavit was thus not the whole truth she should have given to the court, and (b) the lack of candour was significant, since her explanation was substantially exculpatory for Mr Deripaska. That would have been so in any event, but especially in circumstances where the case to be presented to the court was to include claims that Mr Deripaska’s breach was obvious, flagrant, egregious, and compounded by his failure to admit his supposedly self-evident guilt.

(iv) The Further Information provided under Part 18, as RPC sought to probe on behalf of Mr Deripaska this question of what the claimants or their advisers knew, when, about the Redomiciliation, was variously incomplete, incorrect, misleading, or lacking a sufficient foundation for the statement of truth Ms Berard signed under it. As a result, a ninth affidavit of Ms Berard came to be sworn that claimed, inaccurately, that there were no undisclosed known adverse documents (other than three documents exhibited). This was all in a context where, as cross-examination revealed, there had been no disclosure effort by Clifford Chance beyond trusting Mr Chernukhin’s instructions, though he had at least some history in the litigation of being untrustworthy in relation to disclosure. As Mr Pillow QC submitted, I could not be confident that the claimants had provided a full or truthful account about Mr Chernukhin’s knowledge, understanding and (it would appear) lack of concern about the Redomiciliation prior to the May 2019 Letter. I could not say that Mr Deripaska was being given a fair or sufficient opportunity to test that important aspect of the case.

(v) The case for Mr Deripaska being in contempt naturally led the claimants to say, as Ms Berard felt able to say in a seventh affidavit in August 2019 in support of an application, in effect, to interrogate Mr Boswall for the purpose of what became the contempt application, that “It was extremely important to the applicants that the shares, which were the subject of the undertakings, were physically held in RPC’s offices and related to a Jersey company“. Yet the claimants’ position in June 2018 had been, and Ms Berard’s third affidavit had then said in terms, that it did not matter where the share certificates were.

(vi) In that same seventh affidavit (and again in her tenth affidavit), Ms Berard gave the court the impression that the Shares had been tradeable on the London Stock Exchange when En+ was domiciled in Jersey, but no longer after the Redomiciliation. The truth, however, as Ms Berard knew, was that (a) the Shares had never been tradeable, because they were not part of the GDR programme and (b) the GDR programme had been unaffected by the Redomiciliation (the shares that were tradeable through that programme on the London and Moscow Stock Exchanges remained so after En+ became Russian-domiciled), and indeed the lifting of the US sanctions, in which the Redomiciliation played an important role, triggered a substantial bounce-back in the GDR price and therefore, indirectly, in the value of the Shares. I do not find that Ms Berard intended to mislead the court. It may be, as she suggested, this was “sloppy drafting” but, as Mr Pillow QC rightly, with respect, put to her in response, it was sloppy drafting in sworn evidence intended to put a man’s liberty at risk, and had the capacity to mislead the court. My conclusion in sub-paragraph (ii) above applies also here.

(vii) Ms Berard was driven in cross-examination to accept, rightly, that knowing of the (proposed) Redomiciliation did not make it obvious that the Undertakings would be affected. Yet her sworn evidence for the hearing before Teare J on 3 July 2019 was that it was obvious, indeed so obvious it was difficult to see how the Undertakings were not infringed, and that incorrect assessment of the position, it is clear from the transcript of that hearing, influenced Teare J towards the observations he made to similar effect.

1. 1. Thirdly, there is real reason to suppose that Mr Chernukhin instructed Clifford Chance to issue and pursue the contempt charge as an act of revenge for Mr Deripaska’s twin moves in May 2019, i.e. the May 2019 Letter with its seeming attempt, short-lived in the event, to get rid of the Undertakings, and the private prosecution. More particularly in relation to the latter, there is real reason to think that Mr Chernukhin was further incensed by RPC’s refusal to treat it as a matter to be bargained over as part of the resolution of the underlying business dispute, but waited until after the Navio buyout had been completed before then attacking. Mr Chernukhin having refused to offer for himself any explanation for the contempt application, let alone be willing to be tested on it where there was a substantial basis for cross-examination, in my judgment it is right to draw against him the adverse inference that revenge and personal animosity towards Mr Deripaska was the real reason for the contempt application, not any public-minded desire to bring matters to the court’s attention for it to consider the issue of breach and, if relevant, sanction. In my judgment, Ms Berard was honest in her belief that that was not the motivation, but I am not content to treat her assessment of the situation as objective or reliable.

   2. Fourthly, the contempt application was presented to the court in a heavy-handed, aggressively partisan fashion, that was inappropriate, vexatious and unfair to Mr Deripaska.

   3. Ms Berard’s eighth affidavit, sworn and served as the claimants’ only evidence in support of the contempt application, was replete with tendentious comment, argument, and irrelevant but prejudicial material, including multiple references to and quotations from findings of dishonesty made against Mr Deripaska by the arbitrators and in the Section 67 Proceedings that had no place in this contempt trial on the charges relating to Mr Deripaska’s Undertaking. Having presided over her cross-examination, I regret to say I formed the clear view that Ms Berard had come to argue the case for Mr Deripaska to be found guilty of contempt and had a poor, or at any rate variable, grasp of the difference between evidence she could give, evidence she could not fairly give but Mr Chernukhin might have given if it were to be evidence at all, but had chosen not to give, and advocacy.

   4. The claimants’ skeleton argument presented the case to the court as one in which there was “no conceivable defence to the core allegation that Mr Deripaska breached the terms of undertakings given by him and others to the Court” on the supposed basis that the Redomiciliation involved a vote by the shareholders “to export the value of EN+ to an entirely new corporate vehicle situated in a special administrative zone set up within Russia and thus effectively beyond the reach of the English High Court“. But that was not the effect of the Redomiciliation, and when explored it was not even the claimants’ case as to its effect. Further, there was barely a word of how the Redomiciliation had been an instrumental element of a plan that saved En+ from ruin to the very significant benefit of the claimants, though I infer that was appreciated at all events by Mr Chernukhin and explains his lack of concern about the Redomiciliation in prospect until RPC erroneously suggested it would damage the Undertakings. Further examples of the claimants’ clumsy, unfairly partisan, approach include:

(i) It was said to be “now common ground” that Mr Deripaska procured the passing of the shareholder resolution in December 2018, when it was not. That comment relied upon the ambiguous turn of phrase by Mr McGregor to which I referred in paragraph 110 above. Even if the claimants had in mind to argue that it was unambiguous, that paragraph was not in the evidence served in the committal proceedings; and it had been extracted from Mr McGregor with no warning that what he said then might be treated as an admission by his client on a quasi-criminal charge, i.e. without any heed to Mr Deripaska’s rights as putative defendant in committal proceedings. I do not suggest this was some deliberate tactic by the claimants to extract evidence unfairly and then use it against Mr Deripaska, but I do say it was unfair to try to use this evidence as support for a contempt charge. All the more so where the claimants knew from the evidence that was later served in the contempt application that Mr McGregor (had we got to him) would have explained what he had intended to convey by the earlier comment. It may be the claimants had in mind to challenge that explanation, but it was therefore evidently not common ground that Mr Deripaska procured the B-Finance shares to be voted in favour of the Redomiciliation.

(ii) Similarly, it was said to be common ground, when plainly it was not, that the Undertakings were rendered valueless by the Redomiciliation, indeed (again), upon analysis, that was not even the claimants’ case.

(iii) It was trumpeted that neither Mr Deripaska nor RPC gave notice to the claimants of the Redomiciliation until the May 2019 Letter, without acknowledging that there was nothing in that Letter that came as news or was of concern for the claimants except for the errant suggestion, long historic before the contempt application, that the Redomiciliation fatally undermined the Undertakings.

(iv) Wholly inappropriately,

(a) the US Treasury’s allegations of serious criminal behaviour by Mr Deripaska, as recorded in a press release it issued when OFAC imposed sanctions on him in April 2018, were quoted as if relevant to the question of contempt now before the court,

(b) particular adverse conclusions about Mr Deripaska personally within the findings of the arbitrators and of Teare J in the Section 67 Proceedings were replayed, as they had been by Ms Berard in her affidavit, although on the contempt charge they were but inadmissible bad character opinions, and

(c) Teare J’s unguarded observations were paraded as if they were some prima facie proof of contempt, with Mr Millett QC’s signal to the judge that it was not the occasion to consider questions of breach of the Undertaking characterised as Mr Deripaska being “apparently unable and/or unwilling to dispute” Teare J’s “clear view as to [his] conduct“.

I am not conscious of having been influenced by this, indeed I have now concluded that there was no breach of undertaking by Mr Deripaska, having had the benefit of a proper argument about that for which the 3 July 2019 hearing was not the occasion. That does not render the approach other than oppressive.

(v) Mr Deripaska was castigated for consistently refusing to accept in the face of Teare J’s observations that his conduct involved breach of his Undertaking. This means the claimants invited the court to say that Mr Deripaska was prima facie convicted of contempt by those unguarded remarks on a matter not argued, and that his contempt was then confirmed and aggravated by his failure to plead guilty.

(vi) The obviously serious possibility on the evidence that Mr Chernukhin was aware of enough to raise an alarm, had the Redomiciliation really been a problem, yet sat by and did nothing, and that the court might find that relevant, was dismissed out of hand as Mr Deripaska “concocting an elaborate conspiracy theory“.

(vii) As to sanction, the skeleton opened with a submission that if there were a finding of contempt the court should deal with sanction at a separate hearing on a later date. That would have been my approach, had it arisen, and I would have made that clear in advance if asked. Despite that, and without making any enquiry whether sanction should be addressed in the skeleton (the answer would have been no), detailed submissions were outlined about sentence, with a partisan passion that is inappropriate in that context, extending to what were in effect anticipatory reply submissions, where there would be no right of reply, on matters of mitigation likely to be advanced on Mr Deripaska’s behalf. This was epitomised by a submission that if Mr Deripaska prayed in aid the Redomiciliation’s role in freeing En+ from the US sanctions, “any pressure arising from sanctions … was the result of his own status as an international pariah“, one of a number of individual submissions that in my judgment should never have been advanced.

1. 1. In the working generation of 30 years or so during which I have been engaged in commercial dispute resolution in this jurisdiction, principally in this court and in London arbitrations, there has been a significant general increase in hostility and aggressiveness in the conduct of disputes. The taking of any and every point, good or bad, and other failures to display proper independence from the litigating client, is treated too often as if it were a normal or appropriate adjunct of well funded, hard fought, business disputes, particularly if there are issues of dishonesty involved. Where ultimately the court is asked only to decide the outcome of the business dispute, usually to be expressed in terms of a party or parties being told to pay money to another party or other parties, there may be nothing too unfair about that modern style, regrettable though I regard it nonetheless. But when the court is being asked by a private litigant to consider a charge of contempt of court against the other side, especially against an individual whose liberty the applicant therefore seeks to put at risk, a better standard of conduct is not merely desirable, it is essential to the fairness and the appearance of fairness of the process. Though I do not suppose that this is how the claimants’ legal team saw what they were doing, the appearance in this case was of claimants not seeking to put Mr Deripaska fairly on trial for contempt, but of claimants seeking to load the dice against him.

   2. Although Ms Berard would not accept this when Mr Pillow QC put it squarely to her, and I am willing to accept from her that she indeed did not see it this way, in my judgment she had lost, or never had, that degree of objectivity and detachment from her client that a fair prosecution of this contempt application, with its quasi-criminal character, required. That lack of objectivity infected also the presentation of the case to the court through the skeleton argument. It was also confirmed by what cross-examination demonstrated to be a willingness on Ms Berard’s part to allege dishonesty against Mr Deripaska in a new claim that has been issued by the claimants, under s.68 of the 1996 Act, seeking to reopen the arbitrators’ finding as to the price that should be paid for the Navio buyout, on the basis of a document obtained by Clifford Chance in circumstances she had not investigated properly and in respect of which she could not say she had evidence for its authenticity. (I do not mean by that to indicate any view at all whether in that s.68 claim, if pursued, the claimants may ultimately be able to establish the authenticity of the document in question. The point for now is only that the launching of the s.68 claim, when examined, illustrates a lack of detached scrutiny in respect of allegations that Mr Chernukhin wishes to make.)

   3. It would have been better, in my judgment, if the contempt application had not been handled by the same Clifford Chance team that had had conduct of the arbitration, the Section 67 Proceedings and the WFO application (and its various follow-on hearings). Irrespective of any view that might be formed as to the bringing of the private prosecution against Mr Chernukhin, the appropriateness of which would not have been a matter for this court, I commend RPC for setting up separate representation for it. It would have been better if Clifford Chance had done the same for the contempt application, assuming the claimants did not want to use a different firm with no prior involvement. I do not say that is a legal or procedural requirement, but that course having not been taken it was hugely important that judgments to be made on how to prosecute the contempt charge not be clouded by the prior conduct of the dispute, the huge animosity between the lay clients, and the claimants’ prior successes in securing damning findings about Mr Deripaska. With regret, but with the full argument I had the benefit of hearing and in the light of Ms Berard’s cross-examination, it was and is my clear view that quasi-prosecutorial judgment here was clouded in just that way, leading to a process that was, and might reasonably be thought by an impartial observer to be, unfair to Mr Deripaska.

Conclusions

1. For the reasons given briefly at the hearing (paragraph 137 above) and now set out in fuller detail in the final section of this judgment, I dismissed the claimants’ contempt application as an abuse of the process of the court. Thus Mr Deripaska’s cross-application to strike out the contempt application was successful, as recorded by the Order dated 10 June 2020 that was drawn up prior to the argument of the damages claim on the final day of the hearing.

2. For the reasons given in paragraphs 104 to 136 above, I have now concluded and find that Mr Deripaska neither entered into, nor if he did acted or failed to act so as to breach, any relevant contract with the claimants. Their damages claim fails and falls to be dismissed.