Berezovsky v Abramovich

This is the judgment of both of us, delivered as a result of a joint case management conference in the four cases identified in the heading to this judgment. One of those cases (“the Abramovich Action”) is proceeding in the Commercial Court. The other three cases are proceeding in the Chancery Division. Those last three cases are not formally consolidated, but they all raise related issues and are being case-managed together by an assigned judge, (Mann J). The circumstances of this unusual hearing are as follows.

The Abramovich Action and the other three actions have all been identified as raising common questions of fact. A short analysis of the actions and certain common areas of fact can be seen from the judgment of Mann J in the three Chancery actions, dated 14^th May 2010 ([2009] EWHC 1176) with which this judgment should be read. That judgment identified the need to consider whether, and to what extent, all four cases needed to be managed together. We adopt the same definitions and abbreviations as appear in that judgment. As a result of that judgment, the parties approached the judge in charge of the Commercial Court (Gross J) and he gave directions which enabled a joint hearing of a CMC in each action to take place on the same occasion, with a judge from each of the Commercial Court and Chancery Division sitting together with a view to arriving at a joint determination of the proper way of addressing the correct way of dealing with the existence of those common issues.

The result was a hearing conducted by us over two days on 27^th and 28^th July 2010. We heard submissions from the various parties and this judgment is our joint judgment, delivered by each of us sitting in our respective jurisdictions.

The nature of the actions and the areas of common fact appear sufficiently from the earlier judgment of Mann J. We do not set them out again; that judgment should be read into this one for those purposes. No doubt armed with Mann J’s judgment as to the most serious areas of “overlap”, various groups of defendants have put forward proposals for trying what they describe as the “Rusal issues” within the Abramovich Action in a manner which allows the Chancery Division parties to participate in the Abramovich Action on those issues and which binds them in relation to findings made on them. The principal proponents of this idea are the Family Defendants and the main defendants in the Metalloinvest Action (Mr Anisimov and his associated companies). They were supported in their submissions by the Interim Administrators and by the Salford Defendants. Mr Abramovich’s advisers, having at first expressed misgivings about expanding the Abramovich Action to accommodate more defendants, now adopt the stance that Mr Abramovich would be content for the defendants in the various Chancery actions to participate in the Abramovich Action in relation to the Rusal issues, and shares the view that the Commercial Court action ought to be tried first (i.e. before the various Chancery Division actions).

Mr Berezovsky’s initial stance in relation to this application was to say that the two sets of claims should proceed on their own separate tracks towards their own separate trials. There was no case for joining any of the Chancery Division actions with the Abramovich Action. Having protested at the earlier CMC in the Chancery Division that he should not be burdened with two simultaneous trials, at the hearing before us Mr Berezovsky changed his mind and propounded the suggestion that the two sets of actions should be conducted simultaneously, starting in October 2011; the Abramovich Action is provisionally fixed for that date in any event. However, at the hearing before us, his case became more accommodating and encompassed more alternatives. His preferred course remained for the two sets of proceedings to continue in parallel, each being self-contained, subject perhaps to evidence in one being allowed to be used as evidence in the other. Alternatively, all overlapping issues (of which he said there were a number) should be tried in the Abramovich Action; and in the further alternative the consideration of the point should be put off until next year when disclosure and exchange of witness statements in each action had occurred and a more informed choice could be made.

The defendants in the Chancery Division actions have identified the “Rusal issues” as being important issues which arise in both the Chancery Division proceedings and in the Abramovich Action. They are said to be issues which are central to one of the two main planks of Mr Berezovsky’s claim in that action and they will have to be determined therefore. They also arise in the Main Action and in the Metalloinvest Action in the Chancery Division. There is a serious risk of the issues being determined differently in the two different sets of proceedings if each proceed on their own way, not least because there are likely to be live witnesses in the Abramovich proceedings (and particularly in relation to an important meeting at the Dorchester Hotel in 2000) who would not be available, or at least not willingly so, in the Chancery Division proceedings. The Rusal issues as they are currently formulated are set out in the appendix to this judgment. That is not necessarily the final and best definition of them, but it suffices for present purposes.

The proposal of the relevant defendants is that, so far as those issues arise in the Chancery Division actions, they should be determined in, and at the same time, and before the same judge, as the Abramovich Action. The defendants are to be at liberty to participate in that trial on and in relation to those issues, and will give disclosure and may give oral evidence in relation to those issues. That gives them their right to participate. The counterbalancing feature, which they accept (and indeed support), is that they should be bound by the findings in the Abramovich Action on those issues. Proper trial management of that action will prevent the defendants from straying beyond the bounds of what is necessary in order to allow that participation. They would not have a free hand to participate in all the issues in that trial. The defendants say that proceeding in that way would be a proper way of dealing with the most significant area of overlap between the various sets of proceedings, would avoid inconsistent results in the two actions on those issues, would be workable, would be fair and would not lengthen the Abramovich action to an unacceptable extent. There is a commensurate saving in court time and court resources, and the costs of the parties will be less. It goes with this proposal that the Commercial Court action should be tried first, retaining its present proposed trial date of October 2011. This course also avoids the unfairness which might otherwise arise out of the parties in one action (and in particular the parties in the action going first) not having all the evidence and information available in the other.

Mr Berezovsky, through Mr Rabinowitz QC, submits that is too simple an analysis. Mr Rabinowitz sought to demonstrate that trying the Rusal issues would not work and would not achieve the stated objectives. While he accepted that there was a significant area of overlap between the two sets of proceedings, including the Rusal issues, it was not as significant as the defendants sought to make out. Mr Berezovsky’s main case on the Rusal assets was said to be based on an agreement reached in 2004 and not the Dorchester Hotel agreement of 2000.

Perhaps most significantly, Mr Rabinowitz sought to demonstrate that it was far too simplistic to suppose that the Rusal issues could provide an appropriately self-contained vessel in terms of trying relevant common issues, and only those issues. The Abramovich trial would inevitably involve a consideration of the alleged Joint Venture between Mr Berezovsky and Badri and it would be strange, if not wrong, for the other defendants not to be bound by findings in relation to that issue as well. There were other issues which one could see were common to the two actions. He took as an example events in 2004 which are said to amount to an express agreement as to how the Rusal proceeds should be reinvested. That point would be likely to arise in the Abramovich Action, and inevitably arose in the Main and Metalloinvest Actions. Thus the Rusal issues were not an appropriate delineation of relevant common issues if the aim was to avoid inconsistent decisions. Other common issues were said to arise too – for example, questions arising out of dividends paid by Rusal.

He also took timing points. As appears from Mann J’s earlier judgment, Mr Abramovich sought to strike out the Abramovich Action. That application failed, but permission to appeal to the Court of Appeal had now been given. That appeal will take place in January. The result of that appeal might not come until March or April 2011. It was not suggested that that delay of itself would imperil the October trial date, but there was a possibility of a further appeal to the Supreme Court. If that were to occur then there would inevitably be considerable further delay. The trial would have to wait many months until that appeal had been heard, and while that might be inevitable in relation to the Abramovich Action, it would also postpone the trial of the remaining issues in the Main Action if that trial was to come on after the Commercial Court action. The better course was for the present to allow both trials to take place simultaneously in October 2011 (subject, of course, to the Commercial Court action being delayed by appeals).

His second timing point related to the possibility of an appeal in the Abramovich Action on the Rusal issues. If the plan was to have the Rusal issues tried in the Abramovich Action, then such an appeal would require the further adjournment of the Main and Metalloinvest Actions, with yet further delay to Mr Berezovsky’s claims.

This resulted in Mr Rabinowitz taking the stance identified above.

The cases before us present a pattern of serious, heavy and very complex litigation. There are some clear areas of overlap, and some less clear areas. As Mr Rabinowitz acknowledged, there is no single, perfect, obviously right solution. All one can do is find the answer which is least bad. That may be an uncomfortable conclusion, but it is true on the facts of these cases.

There is no doubt that there is a significant area of facts which will overlap as between the Chancery Division actions on the one hand and the Abramovich Action on the other. The possible ways of catering for that range from, at one extreme, a trial of them all together to, at the other, letting each set of proceedings take its course with no joint case management. In between there are regimes such as that proposed by the defendants in this case, whether confined to the Rusal issues or whether encompassing other issues as well (or even instead).

The first of those extremes can be dismissed at this stage. No-one has suggested it, and it is not the right way of proceeding. The resulting proceedings would be too wide in range to be fair to the parties, or indeed (probably) to be sensibly triable, even though in purist terms it would be the only way of avoiding the possibility of conflicting decisions on common issues or questions of fact.

So the question becomes whether the two sets of actions should be allowed to continue in their own respective ways, or whether steps should be taken to have at least some of the overlapping issues dealt with only once.

In order to determine this it is necessary to consider what the overlapping matters are. We use the word “matters” here to include both things that are strictly in issue as pleaded issues, and other points that will be likely to arise, on the evidence, as important or significant matters of fact and as to which there is a dispute which will probably need to be addressed in both sets of cases.

The first is the Rusal issues. These turn on a meeting at the Dorchester Hotel in 2000 at which Mr Abramovich, Mr Berezovsky, Badri and others were said to be present and at which they are said to have agreed their respective participation in Rusal. This is one of the ways in which Mr Berezovsky puts his claim to the proceeds of sale of part of the Rusal business 4 years later and assets acquired with those proceeds. It is common ground that these are issues common to the Main Action, the Metalloinvest Action and the Abramovich Action. They are common issues in the sense that they arise in all sets of proceedings on the various pleaded cases. They amount to a very significant area of overlap. If they are tried separately, once in each set of proceedings, then there is a very significant risk that the evidence will be different in each set (the witnesses will be different, at least) and that there will, as a result, be conflicting judicial decisions on them.

Next is the bilateral joint venture agreement between Mr Berezovsky and Badri. This is not a pleaded issue in the Abramovich proceedings, but it was said, and we accept, that it will be part of the background facts advanced by Mr Berezovsky as part of his evidential case. It will be said to explain the events which are central to Mr Berezovsky’s claims to assets in that action. The judge in the Abramovich Action may need to make some findings about it on the way to other more central findings, but it is not technically something which needs to be decided. It is, however, a central issue in the Main Action. Mr Berezovsky’s position on the centrality of this point has shifted from time to time.

Next is said to be events in 2004 which are a further way in which Mr Berezovsky puts his claim to the Metalloinvest assets. He relies on discussions and dealings involving Badri and Mr Anisimov. Whether these provide a basis for Mr Berezovsky’s claim to the Metalloinvest assets is plainly an issue in the Chancery Division actions, and during the course of Mr Rabinowitz’s written and oral submissions in this application they seemed to gain an increased importance to his case. They are not in issue in the Abramovich Action but it is said that they will arise as part of the facts which will be debated in order to prove or disprove the earlier agreement at the Dorchester Hotel. We accept that there is likely to be evidence given in relation to that issue, and that there will be challenges on that issue. Again, the Abramovich Action judge may or may not feel it necessary to make findings about it. It represents a further common issue of fact.

Mr Rabinowitz drew other points to our attention as being potential areas of factual overlap, including one relating to ownership of a Russian bank. We do not go further into this. They represent further possible areas of factual overlap, but they are, taken individually, of less significance than those identified above.

The court is thus faced with these areas of overlap. Since complete joinder of the cases is inappropriate, the question becomes whether or not to do nothing about them (at least for the time being) or whether to adopt a “middle course” which procures that at least some of the areas be tried only once, in one but not both sets of proceedings.

We think that if there is a mechanism which is capable of limiting the number of times significant issues have to be tried, and which is capable of removing the prospect of conflicting findings, then that course should be adopted if that can be done having proper regard to the proper administration of justice and the interests of the parties. It is a waste of court resources, and is not conducive to the reputation of the courts and the due administration of justice, to have issues tried twice unnecessarily. We think that the undesirability of this is most strikingly demonstrated in the present case by considering Mr Rabinowitz’s initial proposals that both sets of proceedings should be heard separately, but starting at the same time (in October 2011). If that were to happen then there would be two very substantial trials proceeding at the same time, probably in the same building, raising to some extent identical central issues, but before different judges, with (potentially) different witnesses in each. That picture is not an obviously acceptable one.

The solution is not, however, straightforward. Since trying them both together is not feasible, there must be a partial joinder only. In order to do that one must identify the scope of that joinder. This is where the difficulty arises. On the complex facts of these cases, there is no plain and obviously right solution. There is a a range of potential solutions each of which has its own significant drawbacks. Mr Rabinowitz pointed out, with some justification, that to join the Rusal issues, and only those issues, in the manner proposed still poses some difficulties in drawing an effective circumscribing line. Thus if the Rusal issues are to be tried once, and once only, in the Abramovich Action, then how far do those issues really take one? And how far will a debate on those issues take the parties into other areas of disputed fact? What will be the effect of the court’s consideration of those other disputed areas? We acknowledge that these are serious questions. The proposals of the defendants do not necessarily produce a result at present which can be presented as a clean surgical transplant with no undesirable side-effects.

Mr Rabinowitz’s first response to this was to say there should therefore be no surgery. He sought to rely on the difficulties in circumscribing the issues appropriately, and said that matters were best left as they are. That was the least bad of a number of unsatisfactory alternatives. If that was not the correct course then, if the Chancery Division defendants were to participate in the Abramovich Action on the Rusal issues, and be bound in relation to them, then they should be bound by findings on the other major issues such as the bilateral joint venture agreement as well. Otherwise it would be unfair, and the objective of removing the risk of inconsistent findings would not be achieved, or at least not sufficiently.

We have no hesitation in rejecting Mr Rabinowitz’s alternative proposal. It was not always clear whether it would have involved the parties bringing in the whole of their documentary case on (for example) the bilateral joint venture into the Abramovich Action. If it did then it would expand the Abramovich case to an extent which (at the moment at any rate) is apparently undesirable (if indeed the litigation would remain triable as a result). The joint venture in the Main Action is to be tested by considering a large number of complex financial transactions (or at least that is the present intention), and they would have to be brought in to the Abramovich Action if that issue were to be fully determined there. It would hugely increase the scope of the Abramovich Action. That did not, however, always seem to be Mr Rabinowitz’s proposal. He seemed at one stage to be suggesting that the defendants should all be bound without making their full cases on those issues in the Abramovich Action. That is plainly wrong in principle. We confess that we do not think that this proposal on behalf of Mr Berezovsky was fully thought through. We can reject it at this stage of the argument.

Mr Rabinowitz went on to say that determining the Rusal issues in the Abramovich Action would not be dispositive of the real point, which was whether Mr Berezovsky had an interest in the Rusal proceeds, and the court should not order the trial of issues that will not be dispositive. We reject this submission too. Trial of the Rusal issues will not necessarily dispose of the whole basis of the claim to the Rusal proceeds, because there may remain a claim through dealings in 2004, but it will dispose of the basis of the claim so far as it is founded in the Dorchester meeting, and will result in findings about the Dorchester meeting itself which may impact on subsequent findings about the 2004 events. It will, in our view, be usefully dispositive of the issues involved.

That does not necessarily mean that the trial of the Rusal issues within the Abramovich Action is the right course. Mr Rabinowitz’s other points still have to be considered. It will not remove the possibility of inconsistency of findings in relation to some of the related areas of fact. That is an important point. However, having considered the point we think that, subject to points of delay and timing made below, a trial of the Rusal issues once, and once only, is sensible, achievable, desirable and fair. We agree with Mr Rabinowitz that the choice of alternatives is a choice of the best of a number of unattractive alternatives, but we reach our conclusion for a number of reasons which we express shortly as follows:

So it seems to us that the Rusal issues are sufficiently discrete, sufficiently important and sufficiently common to make it proper to try them once, in the Abramovich Action, with the defendants in the Main Action and the Metalloinvest Action having the opportunity to participate in that action for that purpose and so as to bind all parties by findings made in relation to it.

However, there are also questions of timing to be considered. Mr Rabinowitz sought to demonstrate that there were serious risks as to the timing of all this which would mean that the ultimate trials of Mr Berezovsky’s claims might be delayed to an unacceptable extent. These points cannot be ignored.

First, we have to consider whether the Abramovich trial will be unacceptably extended in length if the Chancery Division defendants are to be given the right to participate on the Rusal issues and to introduce additional evidential material over and above that which would be adduced without them. Mr Berezovsky did not really contend that any lengthening would be excessive and we do not think it would be. Nor does Mr Abramovich so contend, and he has a clear interest in keeping the Abramovich trial within bounds.

Of more concern to Mr Berezovsky was the potential delay from appeals. Various permutations have to be considered.

We therefore find that there is nothing in these timing points which make it unfair or undesirable to adopt a course which otherwise seems appropriate to save costs, save court resources and make sure that at least some points are tried only once. Mr Rabinowitz has drawn to our attention some dicta about the potential dangers of shortcuts taken via the trial of preliminary issues. They sometimes turn out to be a longer way round, not a shortcut. We are alive to that possibility, but we consider that at the moment what we set out below will be a just, economic and fair way of dealing with the possibilities of duplicating trials and conflicting decisions.

We therefore conclude that the appropriate course is as follows:

All this will be enshrined in an appropriate order. However, these arrangements are not writ in stone. It is possible that they will have to be revisited. For example, appeals may require a reordering of events and a reconsidering of the merits of joining issues in this way, or even a complete unscrambling of these arrangements. The contents of witness statements or disclosure may require a reconsideration of the position. It is, for example, possible that evidence given in such statements might point to the desirability of additional issues or factual matters being resolved as overlap issues in the Abramovich Action, in a manner binding on the defendants in the Chancery actions. Other fresh material may require a further review of the merits of the proposals. It may become apparent that the arrangements which we order should be varied, recalled or even expanded. We rule none of this out, and the order should contain a liberty to apply to allow for possible changes. For the present the arrangements just referred to are, in our view, the right ones to make. The position should be reviewed at a further joint CMC in both actions to be held after exchange of witness statements in both actions. We are not suggesting that it is inevitable that changes will occur; we are merely providing the opportunity to whether anything has happened to alter the merits of our current decision.