Joint Stock Company "Aeroflot Russian Airlines" v Berezovsky

This is an application made by Aeroflot in an action with claim number HC10C04393. In that action Aeroflot claims against seven defendants, the first of whom is Mr. Boris Berezovsky. The relief which is sought on this application is not directly the subject matter of that action. Indeed, the defendants in that action are not made respondents to the application with which I am dealing. The application has been made following the death of Mr. Berezovsky which occurred on 23^rd March 2013. Mr. Berezovsky left a will. In that Will he named five executors. Three of the five executors have declined to apply for a grant of probate. They have renounced their office of executor. That leaves two other persons named as executors in the will, namely Miss Gorbunova and Miss Ekaterina Berezovskya. I have been taken to the terms Mr. Berezovsky’s will and I have noted the beneficial interests which are provided for in that will.

This application is made by Aeroflot, naming two respondents, namely Miss Gorbunova and Miss Berezovskya. Steps have been taken to give notice where possible to the beneficiaries under the will. It seems therefore that sufficient has been done to bring before the court for the purpose of this hearing persons who have a direct interest in the outcome of this application.

The application by Aeroflot is for the appointment of a receiver in relation to the estate of Mr. Berezovsky. The court, it is accepted, has jurisdiction to make that appointment. The jurisdiction is conferred in particular by section 37 of the Senior Courts Act 1981. There is no issue before me as to the locus standi of Aeroflot to make such an application. I have been shown cases where an application of this kind has been made by a creditor of the estate. In the present case Aeroflot has not established or, it would say, not yet established, that it is a creditor of the estate. Nonetheless, no issue has been argued as to its ability to make the application for the appointment of a receiver.

The application notice of 18^th April 2013 had attached to it a very detailed wide-ranging draft order which was the form of order originally sought by Aeroflot. The application was heard by me at an ex parte hearing on the following day, 19^th April 2013. I declined to make any order ex parte apart from directions as to the future hearing of the application. However, the discussion which took place on 19^th April 2013 led to a certain amount of reconsideration by Aeroflot of the form of relief which it sought. I am told that on the following Monday, 22^nd April 2013, Aeroflot’s solicitors served on the respondents to the application a revised form of order, and the form of order which has been considered at this hearing today was further revised and sent under cover of a letter from Aeroflot’s solicitors on Friday last, 26^th April 2013.

The issues which have been addressed in argument today have been as follows. Should the court appoint a receiver? If so, whom should it appoint? If a receiver is appointed, on what terms should the receivers be appointed to act? The principal issue that has taken time is as to the identity of the receivers. Aeroflot have throughout proposed the two named persons, members of Grant Thornton UK LLP be appointed as receivers. Miss Gorbunova has been represented at the hearing by Mr. Legge QC and Miss Haren. The position they have taken, a position that was arrived at only in the course of the morning before the hearing, was that Miss Gorbunova did not oppose the appointment of receivers and did not oppose the appointment of the two named members of Grant Thornton. It has also been possible, certainly so far as Aeroflot and Miss Gorbunova are concerned, to reach a substantial consensus as to the terms of the appointment.

However, Miss Gorbunova is not the only respondent and not the only interest which I have to consider before I make an order of the kind which is sought. Miss Ekaterina Berezovskya has consulted solicitors - the firm of Taylor Wessing. Taylor Wessing have written a letter which they have asked Aeroflot’s solicitors to draw to the attention of the court. That is a letter dated 25^th April 2013. In that letter Taylor Wessing, after a certain amount of preamble and explanation, state that Miss Berezovskya is prepared to accept, on an interim basis, the appointment of an independent professional in effect as a receiver of the estate. However, Taylor Wessing go on to withhold their agreement to the appointment of the two members of Grant Thornton LLP. Various other names of possible appointees are identified.

Having considered the detailed evidence relied upon by Aeroflot both at the last hearing and again in preparation for this hearing, I am persuaded that it is appropriate to appoint a receiver of the estate in this case. Currently there is no one in post to represent that estate, and I am satisfied that things may possibly need to be done without further delay such that it is appropriate to have receivers in position able to act on behalf of the estate.

That brings me to the identity of the persons who will be appointed pursuant to my order of the appointment of receivers. The procedure which was adopted by the applicant Aeroflot, whilst it is perhaps understandable given the hostile litigation to which Aeroflot is a party, is not in my judgment the appropriate procedure to adopt in a case of this kind. What the court is concerned with on an application of this kind is the question of what is in the best interests of the estate and interested parties in the estate, who include the beneficiaries under the will, but who also include creditors and possibly potential creditors. The focus should be on the best interests of the estate considered in that way. The application which was made by Aeroflot was not made from that standpoint. The application which was made by Aeroflot was from the standpoint of a hostile litigant seeking to control the activities of the rival party to the litigation. The thinking behind the order that was sought by the application was very much in terms of the freezing jurisdiction of the court with a receivership order in support of that freezing jurisdiction. That gave rise to an entirely different approach to the whole question of a receivership of the estate. It also caused Aeroflot and those advising it to seek to control very much the identity of the receivers who would be appointed. Aeroflot’s approach (stated or unstated) appeared to be that it needed protection from Mr. Berezovsky, and now his estate, and a receiver should be put in to control Mr. Berezovsky’s estate and protect Aeroflot. That is not the function of the receiver that I intend to appoint in this case.

The way in which Aeroflot went about the appointment of this receiver has contributed to some extent to the difficulties there have been in the parties collaborating and agreeing on who should be appointed. There were difficulties because Aeroflot gave to Grant Thornton confidential information which it then did not permit Grant Thornton to share with the other interested parties, nor even to share with the court. It is said that Aeroflot gave privileged information to Grant Thornton and it will not permit that privileged information to be disseminated more widely. It is also the case that Aeroflot’s solicitors sought to control the activities of Grant Thornton, so that Grant Thornton could not, independently, meet and discuss their appointment with interested parties in the absence of Aeroflot’s solicitors.

Notwithstanding these difficulties, my considered conclusion at the end of the day is that in all the circumstances of this case the right persons to appoint are the two named persons at Grant Thornton. Those two named persons have been given information and are further advanced towards an effective appointment and action under an appointment than any other rival candidate. Indeed, there is no rival candidate presently before the court. If I decline to appoint the two persons at Grant Thornton at this hearing today, there would have to be an adjournment to enable further enquiries to be made and steps to be taken before the court would have before it rival candidates to consider on their merits.

I have been particularly concerned by the fact that one party to hostile litigation against the estate of Mr. Berezovsky has given information to Grant Thornton which it will not permit Grant Thornton to communicate to the court. That goes a very long way to reduce the court’s confidence in the appointment of Grant Thornton as wholly independent persons to hold the ring between the various interests in the estate. However, in the course of the discussion I asked Mr. Marshall QC, one of the leading counsel acting for Aeroflot, whether he could reassure the court that Grant Thornton had not been given by Aeroflot any information which could be considered to be adverse to the interests of the two respondents or indeed any of the beneficiaries under the will. I was duly given that reassurance. I wish to make it clear I am relying heavily on that reassurance in making the decision which I make. Against the circumstances which I have now described I am persuaded, notwithstanding initial reluctance and hesitation, to appoint the two individuals at Grant Thornton to be the receivers for the estate in this case.

I want to refer to a number of matters for the avoidance of all possible doubt. Grant Thornton may feel that they are experienced office-holders and that they know very well what I will now say. Perhaps they do not need to be reminded, but I think for the avoidance of doubt and to introduce greater clarity to their future activities, I will say the following. The receivers are to act on behalf of the estate. Their duties are to the estate and indirectly to the beneficiaries and creditors. Aeroflot might be a creditor. It has certainly not yet established that it is a creditor of the estate. The estate is engaged in hostile litigation with Aeroflot. It is likely to be in the interests of the estate to oppose the interests of Aeroflot. I cannot predict whether there will come a point when the interests of Aeroflot and the interests of the estate may coalesce, but given the hostility of the litigation, that does not appear to be the present or likely future position.

Aeroflot are not the client of the receivers. Aeroflot are not entitled to give instructions to the receivers. Any information which Aeroflot has previously given the receivers is no better and no worse than information given to the receivers by any third party pursuing the third party’s own self-interest. The information may be reliable or it may be wholly unreliable and harmful to the estate. It will be for the receivers acting independently of Aeroflot to assess the information and decide how to react to it.

Having made the decision to appoint receivers and to appoint the two individuals at Grant Thornton, I need to refer to the terms of the order which the court will make. I have been taken by counsel appearing at the hearing today in detail through the draft order. Some parts were not contentious; other parts are not to be ordered in accordance with the draft before me but they are to be in accordance with a draft which Mr. Legge QC and Mr. Marshall QC have communicated to each other and which will be agreed.

As regards the costs of the receivers I will make the order that until further order the estate will pay such reasonable remuneration, reasonable costs and expenses, properly incurred by the receivers. Counsel are to lodge an agreed minute of order for the court to approve and then the order will be sealed and made.

That brings me to the costs of the application of 18^th April 2013 leading to a hearing, as I have described, on 19^th April 2013 and then an inter partes hearing today. Aeroflot says that its costs of this application should be costs out of the estate on the standard basis. Aeroflot also says that Miss Gorbunova’s costs are to be costs out of estate again, I take it, on the standard basis. Miss Gorbunova urges me to take a different approach. She says, as to Aeroflot’s costs, that they are to bear their own costs and that her costs should be paid by Aeroflot in any event. She says that if her costs are to be borne out of the estate they should not be on the standard basis, but should be on the indemnity basis.

By way of background to the applications for orders for costs, I should point out that I have dealt with costs to some extent when the matter was before me on 19^th April 2013. On that occasion, largely because I considered that the ex parte hearing should not have taken place, I ordered Aeroflot to pay Miss Gorbunova’s costs of that ex parte hearing. The hearing began at 2 o’clock on that day. I had been told by Miss Haren, who appeared as counsel for Miss Gorbunova, that she had had the papers delivered to her and had begun to incur costs doing work from earlier on 19^th April 2013, and the order I made provided for Miss Gorbunova to recover the costs incurred on 19^th April 2013, not just confined to the hearing, which began at 2 p.m. So Aeroflot is already the subject of an adverse order for costs in favour of Miss Gorbunova.

In the absence of other considerations, the orders sought by Aeroflot would be the kind of order the court would consider making. This was an application which was or should have been expressed by reference to the best interests of the estate. It has resulted in substantial consensus between Aeroflot and Miss Gorbunova. It was an order that had to be sought. There had to be a hearing. Aeroflot had to prepare for the hearing, so in other circumstances one would make the order that Aeroflot would have sought. Mr. Legge, however, on behalf of Miss Gorbunova, took me through the history of the matter and indicated that if Aeroflot had gone about this application in a different way, Miss Gorbunova would have been saved a substantial part of her costs. I do not think he can say that she would have been saved the entirety of her costs, a point which is made by Mr. Marshall in response.

My decision as regards Miss Gorbunova’s costs is that having given her her costs of 19^th April in the way I have described, the just order is that she should not have her costs against Aeroflot in any event, but that she should recover her costs out of the estate. I will give her her costs on on the indemnity basis rather than on the standard basis. If Miss Gorbunova has her costs of 19^th April 2013, then I am really focusing on the costs since that time. Since that time Aeroflot has adopted a much more appropriate attitude to this application. It served a more appropriate order in draft on 22^nd April 2013. There has been considerable to-ing and fro-ing in the last week. Most of that, if not all of that, would have had to take place in any event if Aeroflot had adopted a more conventional attitude to an application of this kind. In the end I decline to try to separate out from her costs of last week those costs which she would have incurred in any event, and those costs which arguably may have been increased by reason of the way in which Aeroflot went about this application. I consider that justice is done by ordering that Miss Gorbunova’s costs are borne out of the estate in relation to that period, and in relation to the 19^th April I have made my order.

So far as Aeroflot is concerned, the court had jurisdiction to make the order. It had locus standi to apply for it. It had to come to court to get the order made. Even if Miss Gorbunova had agreed everything, the court would still have wished to consider the position of the other beneficiaries, in particular Ekatarina Berezovskya. This hearing has been necessary. There was a gap in representation of the estate. The court is satisfied that it was appropriate to fill that gap. Aeroflot was the only one who applied to fill that gap, and plainly it would have incurred costs in so applying. I will, however, disallow some parts of Aeroflot’s costs. I will disallow their costs of the ex parte application. That means I will disallow the costs Aeroflot incurred in order to be present at the ex parte hearing on 19^th April and to prepare for that ex parte hearing. That description of the matter does not disallow the costs of the application notice and of the evidence in support because the application notice and the evidence in support were necessary for the matter to be dealt with subsequently inter partes. So I will disallow the ex parte costs, if I can describe them that way. As to the other costs, the proper inter partes costs, I do not give Aeroflot the entirety of those costs. I will give them three-quarters of those costs. My thinking is that the way in which the application was presented has led to very much more extensive evidence and evidence of a different character from that which would have been appropriate if this had been a more conventionally based application for the appointment of a receiver. I give, therefore, Aeroflot’s costs to the extent of three-quarters, and disallowing the ex parte costs out of the estate. Those costs will be on the standard basis. Aeroflot is essentially involved in hostile litigation and I do not see that it is appropriate to do anything other than allow costs on the standard basis. Those are the orders which I will make.

I will do a summary assessment of the costs pursuant to the order I made on 19^th April. I have a statement of costs from the solicitors for Miss Gorbunova. I have been taken in detail and with care through the many ingredients in that statement. I am satisfied, looking at it in the round, that the reasonable and proportionate figure on a standard basis is in the sum of £7,500 plus VAT.