Joint Stock Company "Aeroflot- Russian Airlines" & Anor v Berezovskaya & Anor

This judgment deals with an application notice dated 8 November 2013, issued by Joint Stock Company “Aeroflot – Russian Airlines” (to which I will refer as “Aeroflot”) and The Government of the Samara Region of the Russian Federation (to which I will refer as “Samara”). The application is made in a claim in which the Claimant is Aeroflot alone, although the application notice states that Aeroflot and Samara are the “Claimants”. In the first instance, I will consider the position of Aeroflot alone and I will then consider the position of Samara separately at the end of this judgment.

The background to the application is as follows. Mr Boris Berezovsky (“the deceased”) died on 23 March 2013. He left a will which named five persons as executors. Three of those persons have renounced probate. The other two are the First and Second Respondents. The First Respondent is the daughter of the deceased. The Second Respondent is the former partner of the deceased, by whom she has two children.

Before his death, the deceased was the defendant in various proceedings, including proceedings brought against him by Aeroflot and Samara. Following the death of the deceased, at a time when no one had come forward to become an active representative of his estate, I appointed receivers of his estate. That was on 29 April 2013. Those receivers are still in position today.

On or about 5 August 2013, Ms Berezovskaya applied to the court for a grant of administration of the estate ad colligenda bona or, in the alternative, pursuant to section 116 of the Senior Courts Act 1981. That application came before me on 4 September 2013 when it was opposed by Aeroflot and Samara. Shortly before that date, on 2 September 2013, Aeroflot (but not Samara) issued the present proceedings claiming that it was a creditor of the estate and seeking an order for the administration of the estate, alternatively an order under section 116 of the Senior Courts Act 1981, passing over any claim of Ms Berezovskaya or Ms Gorbunova to a grant of probate or of administration and appointing the receivers as administrators.

At the hearing on 4 September 2013, Aeroflot and Samara made a wide range of submissions as to why it would be inappropriate for the court to appoint Ms Berezovskaya to represent the estate. Amongst those submissions, it was said that the estate was hopelessly insolvent, that the estate ought to be administered in the best interests of the creditors and that the receivers were more appropriate than Ms Berezovskaya to act as administrators for that purpose. Aeroflot and Samara relied on the various reports which had been made to the court by the receivers in support of their contention that the estate was insolvent. At that hearing, Ms Berezovskaya made a wide range of submissions as to why it was appropriate to appoint her as the administrator of the estate. She disputed the contention that the estate was insolvent. She subjected the receivers’ reports to critical analysis and submitted that it would emerge that the estate was comfortably solvent.

At the hearing on 4 September 2013, I would have preferred to have come to a conclusion as to whether Ms Berezovskaya should or should not be appointed as the administrator of the estate. However, in view of Aeroflot’s then recent application and in view of the fact that I was not asked to rule upon that application at that hearing, I felt constrained to leave open until a later hearing of that application the question whether it would be appropriate to appoint Ms Berezovskaya as the administrator of the estate. I considered in the light of the arguments as to the issue of the solvency of the estate that the outcome of that application might well turn on the court’s assessment of the solvency of the estate. I directed that Ms Berezovskaya’s application should be heard at the same time as Aeroflot’s application. However, I did appoint Ms Berezovskaya to be an administrator in relation to certain matters involved in the estate and, in particular, certain litigation to which the estate was a party.

Since 4 September 2013, the parties have taken steps to prepare for the forthcoming hearing of Ms Berezovskaya’s application and of Aeroflot’s Part 8 claim. There has been no determination by the court as to whether Aeroflot has locus standi to make its Part 8 claim or to oppose Ms Berezovskaya’s application. Nor has there been any final determination as to the matters which will be influential when dealing with those applications. However, the application which is the subject of the present judgment was argued, on all sides, on the basis that the further hearing will involve some investigation of the solvency of the estate and that Aeroflot will make submissions on that and other subjects.

Accordingly, the various interested parties have put in evidence on the subject of the solvency of the estate. First of all, I have had various reports from the receivers recording their understanding of the position. They have given their reasons for concluding that the estate is insolvent, or at the lowest, may well be insolvent. That position is adopted by Aeroflot but is very much disputed by Ms Berezovskaya. She wishes to rely on a witness statement, dated 9 October 2013, of her solicitor (Mr Hastings) which, amongst other things, seeks to deal with the assets and the liabilities of the estate and concludes that the estate is comfortably solvent.

Mr Hastings’ original witness statement exists in an unredacted form and in a redacted form. I was originally shown the redacted form. More recently, Ms Berezovskaya has served a revised version of the redacted witness statement. It was said that this was appropriate because, by reason of court orders involving third parties, Ms Berezovskaya and Mr Hastings have become free to refer to matters which were originally redacted. Indeed, it is said that this second version of the redacted statement, perhaps unintentionally, reveals matters as to the position of the AP Family which are the subject of the present application notice. I need not go into that matter in this judgment and I will proceed on the basis of the first version of the redacted witness statement and ignore for the purpose of this judgment the second version of the redacted statement.

The redacted form of the witness statement was made available to Aeroflot. The redacted statement, between paragraphs 37 and 78, referred to an actual or a potential asset belonging to the estate under the heading the “AP Settlement”. This was explained as a reference to a settlement agreement entered into by the deceased with the Third to Sixth Respondents (to whom I will refer as “the AP Family”). The statement said that the terms of the settlement were highly confidential and that the parties to it were not able to disclose those terms without permission, unless obliged to do so pursuant to a court order. Although the subject of this settlement was apparently discussed over many paragraphs in the unredacted statement, the vast majority of those paragraphs and, it would seem, all matters of detail, were redacted. The redacted statement concluded on this topic by referring to the receivers’ reports, which had also referred to this settlement, and suggesting that the receivers’ conclusions could not be relied upon in this respect.

At around the same time as she served the redacted witness statement, Ms Berezovskaya applied to the court for directions as to her ability to rely on evidence as to the AP Settlement, notwithstanding the confidentiality agreement with the AP Family. That application came before me on 25 October 2013 when I adjourned it for one week. Thereafter, on 30 October 2013, Ms Berezovskaya and the AP Family agreed a form of order which I then made. Under the agreed order, the AP Family permitted Ms Berezovskaya to disclose what was described as the “AP Confidential Information” to certain persons who included the lawyers acting for Aeroflot and Samara, but not to Aeroflot and Samara themselves. The relevant information was defined by reference to letters passing between solicitors. These letters did not form part of the court’s order. At the hearing of the present application, I was provided with the relevant letters. This was done without objection from any party and in accordance with the decision in Science Research Council v Nasse [1980] AC 1028 which permits the court to inspect confidential information to enable it to form a view as to whether it ought to be disclosed to another party to litigation, in accordance with the principles laid down in that authority and to which I will refer in greater detail later in this judgment. The AP Family subsequently explained to me that there was a possible inaccuracy in one respect in that information but it is not necessary for me to explain that point in this judgment.

The unredacted form of the witness statement was then made available to Aeroflot’s lawyers, as contemplated by the order of 30 October 2013. However, Aeroflot’s solicitors have returned the unredacted witness statement to the solicitors for Ms Berezovskaya, asserting that their retention of the unredacted witness statement at a time when they could not disclose the same to Aeroflot placed them in a conflict of interest with their client. I did not hear argument as to whether they were legally correct in that respect and therefore I will not consider that point further.

Before I consider the rival arguments on the present application, it might be helpful to make some general comments as to the relevance of the evidence which might be given in relation to the solvency of the estate. These remarks are necessarily general and are provisional in advance of the evidence being complete and in the absence of argument on the substantive applications of Ms Berezovskaya and of Aeroflot. Speaking provisionally, I can see that there might be considerable difficulty in coming to a view as to the precise position as to the assets and the liabilities of the estate. The issues between the parties as to the solvency of the estate include issues as to whether certain assets are beneficially owned by the estate or by third parties. Further, there are issues as to whether the estate has liabilities to third parties. Most of the relevant third parties are not parties to the substantive applications of Ms Berezovskaya and of Aeroflot and they have not been invited to participate in those applications, so it is not expected that they will put forward any case at the hearing of those applications. No doubt, the court will be asked to consider what is said by those who are then represented and the court will have to decide what to make of the conflicting evidence as to the rights and obligations of third parties and the effect on the solvency of the estate. It seems at least possible that the court will consider that it cannot reach any confident conclusion on at least some of the disputed matters. I will refer later to the importance of the specific evidence as to the AP Settlement if that evidence is put before the court on the substantive applications.

Aeroflot’s position is that it is unsatisfactory for it to have to deal with the substantive applications on the basis that Aeroflot does not have access to the unredacted witness statement, even though its lawyers can have access to it. Aeroflot says that it cannot be advised by its lawyers as to the unredacted witness statement and it cannot give instructions as to what is to be done in response to it. Accordingly, it submits that the substantive applications must be dealt with either on the basis that the unredacted statement is freely available to Aeroflot or that it cannot be used at all at the hearing of those applications. In the application notice which is the subject of this judgment, Aeroflot seeks an order to give effect to one or other of those alternatives. At the hearing of this application notice, Aeroflot submitted that the better alternative was to prevent Ms Berezovskaya from relying upon the unredacted statement.

Ms Berezovskaya’s position is that she very much wishes to rely upon the unredacted statement. She does not wish to place Aeroflot at a disadvantage as a result of its inability to have access to the unredacted statement (in circumstances where the unredacted statement is restricted to Aeroflot’s lawyers) and so far as she is concerned, she accepts that Aeroflot should be shown the unredacted statement, if she is free to do so. If, however, she is not free to show the unredacted statement to Aeroflot, then she would wish to be given permission to rely upon the unredacted statement in circumstances where it is available to Aeroflot’s lawyers, but not Aeroflot itself.

The position of the AP Family is that the terms of settlement and the other evidence which Ms Berezovskaya wishes to rely upon are highly confidential. The settlement was expressly the subject of a confidentiality agreement. The AP Family wish Ms Berezovskaya to honour that confidentiality agreement. If she does not observe that agreement, the AP Family say that their interests would be significantly harmed.

The AP Family do not apply for an injunction against Ms Berezovskaya to restrain her from acting contrary to the confidentiality agreement. It may be they do not do so because the confidentiality agreement (the exact terms of which I have not seen) appears to contemplate that the estate may disclose the confidential information pursuant to a court order to that effect. Accordingly, the AP Family submit that their rights in relation to the confidential information are to be protected by the court applying the test laid down by the rules and by the case law to the effect that confidential information should only be made available to others if it is “necessary” to make it available for the fair disposal of the substantive applications. Applying that test, the AP Family submit that disclosure of the confidential material is not necessary and therefore, it should not be shown to Aeroflot with the consequence that Ms Berezovskaya should not be allowed to rely upon it for the purpose of the outstanding applications. However, the AP Family do not seek to go back on the agreed order made on 30 October 2013 which allowed Ms Berezovskaya to disclose the confidential information to the lawyers for Aeroflot but proceeding in that way would depend on the court being prepared, contrary to the submissions of Aeroflot, to consider the unredacted statement at a hearing where the confidential information was not available to Aeroflot, but only to their lawyers.

At the hearing of the application notice, Aeroflot was represented by Mr Davenport QC and Mr Casey, Ms Berezovskaya was represented by Mr Winter and the AP Family were represented by Mr Henderson. I am grateful to them for their helpful submissions.

The AP Family submitted that the test which should be applied for the purpose of deciding whether Ms Berezovskaya should be permitted to rely on the AP Confidential Information and to disclose it to Aeroflot is that identified in Science Research Council v Nasse [1980] AC 1028. No other party submitted that I should apply any different test. This case concerned the power of an industrial tribunal to order disclosure by the employer party to the employee party of confidential material concerning other employees. It was held that the power of the tribunal in relation to disclosure of documents was essentially the same as the power of the courts in that respect, so that an order for disclosure should only be made if disclosure were necessary for disposing fairly of the proceedings. The House of Lords in that case also restated, following earlier authority, that the fact that the documents were confidential to the party in possession of the documents, or to third parties, did not confer any privilege against an order for disclosure. The court was described as having a “discretion” as to whether to order disclosure. It was said that in the exercise of that discretion, the court should have regard to the fact that the documents were confidential and that to order disclosure would involve a breach of confidence. Where a court was impressed with the need to preserve confidentiality in a particular case, it should consider carefully whether the necessary information could be obtained by other means, not involving a breach of confidence. It could also consider special measures such as redactions and a private hearing of the proceedings or the relevant part: see per Lord Wilberforce at 1065 – 1066. As to the process involved in taking account of the confidentiality of the documents, Lord Wilberforce said at 1067 D – F:

“It is sometimes said that in taking this element into account, the court has to perform a balancing process. The metaphor is one well worn in the law, but I doubt if it is more than a rough metaphor. Balancing can only take place between commensurables. But here the process is to consider fairly the strength and value of the interest in preserving confidentiality and the damage which may be caused by breaking it; then to consider whether the objective - to dispose fairly of the case - can be achieved without doing so, and only in a last resort to order discovery, subject if need be to protective measures. This is a more complex process than merely using the scales: it is an exercise in judicial judgment.”

This test involves the court in asking and answering a series of questions:

As I understand it, the confidential material which Ms Berezovskaya wishes to deploy in the substantive applications relates to the sums already paid by the AP Family pursuant to the settlement, the sums remaining to be paid, the times when those further sums will fall due to be paid, what will trigger the liability of the AP Family to make the further payments and the sources of the further payments. The AP Family say that all these matters are confidential but disclosure to Aeroflot of, in particular, the facts as to the triggers for the liability to pay and, even more so, the sources of the payments would be significantly damaging to the AP Family.

Putting on one side for the moment the AP Family’s evidence as to its concerns about such disclosure, I consider that the information on which Ms Berezovskaya wishes to rely will certainly be material, and probably highly material, in the substantive applications. As I understand it, substantial sums are involved. It may be that if the court felt that the estate was certainly going to receive substantial outstanding sums then the estate would be solvent. It may be the case that the court could reach that conclusion on the basis of the AP Settlement even if it had to regard as more imponderable the many other issues as to the rights and obligations of third parties. The evidence as to the AP Settlement might be considered to be rather more cogent and capable of being assessed as compared with much of the other evidence as to whether assets are beneficially owned by third parties and whether the estate is liable to third parties in the various ways claimed by third parties. After all, it seems reasonably clear that the AP Family have bound themselves contractually to comply with the terms of settlement. Indeed, it is possible that the evidence as to the sums due under the settlement will carry the day on the question of the solvency of the estate.

As I have explained, the AP Family are particularly concerned at disclosure of information as to the sources of the payments under the settlement. I have therefore considered whether it might be possible to treat such information differently from the rest of the confidential information as to the settlement. Could it be said that information as to the sources of the payments is immaterial, or much less material, so that it is not “necessary” for the fair disposal of the outstanding applications? The difficulty in taking that view is that the solvency of the estate may well turn out to be closely bound up with the ability of the AP Family to make the outstanding payments under the settlement as they fall due. If their ability to make these payments were called into serious question, then it might be appropriate to discount the amount of the payments due under the settlement to reflect the degree of risk or uncertainty that the AP Family might not be able to make those payments in full, or at all. As I understand it, Ms Berezovskaya wishes to assert (by using the confidential information) that the AP Family will be able to make those payments and no discount, alternatively not much discount, will be appropriate. I do not know at this stage if Aeroflot will be in any position to challenge that evidence if it is given but I cannot rule out the possibility that Aeroflot would have relevant evidence to give on that subject, if the confidential information were provided to it.

As explained by Lord Wilberforce in the passage cited above, I must consider fairly the strength and value of the interest in preserving confidentiality and the damage which might be caused by breaking it. In relation to the question of possible damage to the AP Family, they relied on evidence contained in witness statements prepared by Mr Marson and Mr Mabbott.

Mr Marson has signed two witness statements which have been referred to as “Marson 1” and “Marson 2”. On 17 December 2013, the solicitors for the AP Family wrote to the solicitors for Aeroflot enclosing Mr Mabbott’s witness statement but not enclosing Marson 1. The letter stated that Marson 1 would be provided to Aeroflot’s solicitors and counsel, if they agreed to be bound by the same conditions which applied to the AP Confidential Information in accordance with the order of 30 October 2013. Aeroflot’s lawyers were not prepared so to agree and, accordingly, Marson 1 was not provided to them.

Also on 17 December 2013, the solicitors for the AP Family sent to me directly a copy of Marson 1 and a covering letter. That letter explained that Marson 1 was a “private” witness statement which was not to be provided to Aeroflot. When I received the letter I read it and I looked at Marson 1 but only for the limited purpose of seeing the broad nature of its contents. I did not attempt to absorb the detail of Marson 1. It seemed to me that I ought not to read Marson 1 in advance of the hearing as I could see that the communication to me of the contents of Marson 1, which were not to be revealed to Aeroflot, would be controversial and I ought to hear argument as to what I should do before reading Marson 1 any more thoroughly.

On 19 December 2013, I was provided with a copy of Marson 2 and a covering letter which told me that Marson 2 was being provided to Aeroflot. I therefore read Marson 2. At the hearing, I explained that I had not read Marson 1 and I would not read it until I was persuaded by submissions that it would be appropriate for me to do so, at a time when Marson 1 was not to be available to Aeroflot. In the event, the AP Family decided that they were not prepared to disclose Marson 1 to Aeroflot and their counsel did not press me to read Marson 1, but instead made his submissions on the basis of Marson 2.

Mr Marson is the general legal counsel to the AP Family. Marson 2 is a relatively short witness statement and rather than summarise it, it is preferable to set out in full the relevant parts of that statement, as follows:

“6.

The late Mr Berezovsky and the AP family agreed the settlement of litigation between them (the “Settlement”) in September 2012. The terms of the Settlement are confidential, and I am informed that the present application is not for disclosure of, or reliance by Ms Berezovskaya on, the express terms of that agreement, but on the AP Confidential Information (as defined in the Order of Mr Justice Morgan on 30 October 2013).

7.

I was involved in the negotiation of the Settlement on behalf of the AP Family. The confidentiality of the Settlement was an important aspect of it for both the AP Family and Mr Berezovsky. On the AP Family’s part, the confidentiality was not simply about keeping private their family finances. More important was the experience of years of living under the taint that a connection with Mr Berezovsky would have on assets. It is considered toxic in Russia to be in business with, or to do a deal with, Mr Berezovsky and the AP Family have lived with the difficulties of being connected with Mr Berezovsky for many years (notwithstanding that Mr Berezovsky and Mr Patarkatsishvili separated their business interests in 2006, for exactly those reasons).

8.

Since his departure from Russia and his conviction in absentia for fraud and money laundering (among other crimes), attempts have been made to attack Mr Berezovsky’s assets worldwide. Those attacks have often stemmed from the Russian government, and have also been undertaken by Aeroflot (which is majority owned by the Russian government – see page 1 of BM2) in a number of jurisdictions.

9.

It was therefore important that any deal done with Mr Berezovsky would be private, hence why stringent confidentiality restrictions were contained in the Settlement. What the AP Family did not want, and fear would materialise from a disclosure of the terms of the Settlement, was for attacks purportedly aimed at Mr Berezovsky to be aimed at them and assets belonging to them, causing significant destruction of value and potential danger to individuals.

10.

By way of supplement to what I said in Marson 1: the root of the current problem for the AP Family is that there are, even since his death, continuing efforts to attack assets linked, or thought (incorrectly) to be linked, to Mr Berezovsky. The AP Family’s assets have been and continue to be the subject of large scale attacks by the Russian Government on that exact basis. It is exactly those attacks which the AP Family fears will get worse and be more difficult to deal with if the AP Confidential Information is disclosed to Aeroflot or becomes public. Even the publication of information only as to how much has been and will be paid by the AP Family under the Settlement would be prejudicial because by disclosing the amount those trying to link the AP Family to BB would feel themselves able (wrongly) to assert more strongly that there was such a linkage. The Russian State (through the Russian prosecutor’s office) and Aeroflot are the main institutions which are trying to establish such a linkage. The coincidence of their aims, the size and state ownership of Aeroflot, and the vast legal and practical powers wielded by the Russian state means that disclosure to Aeroflot would as a practical matter result in the disclosed material being available for those purposes. I do not by that suggest that breach of the restrictions on use of the witness evidence, or of any express order of the Court governing use of documents would be deliberate on the part of any individual within Aeroflot, but that the size of the organisation and the pressures and desires within Russia to attack anything or anybody which or who might be suggested had a connection to Mr Berezovsky, mean that in reality confidentiality of the information could not be maintained if it was disclosed to Aeroflot. I have less knowledge of the Government of the Samara Region, but it is clearly an organ of the state.

11.

Some of the attacks already undertaken against the AP Family’s assets are set out below. I have in this statement only set out the very headline details or matters which I refer to in more detail in Marson 1, and I have not named the businesses in question so as to not worsen the problems described by giving any false linkage with Mr Berezovsky, for the reasons more fully described in Marson 1.

Attacks on the assets of the AP Family based on alleged links with Mr Berezovsky

12.

The AP Family are the ultimate owners of several large companies which operate in Russia and other countries which used to be in the Soviet Union and are now in the Commonwealth of Independent States (the “CIS”).

13.

Since before the Settlement, and (notwithstanding Mr Berezovsky’s death) to this day, many of those assets have been and are under constant attack by authorities in Russia, and by the authorities in other CIS states (at the instigation of the Russian authorities). In very headline terms, those attacks include the following:

(a)

Freezing injunctions taken out over the shares and property of various companies in both Russia and other CIS states;

(b)

Criminal investigations being opened against senior management of those companies, resulting in individuals having their homes searched, and being forced to flee the countries in which they live for fear of arrest. As well as the personal impact on relevant individuals, the financial and reputational impact of those disruptions for the relevant companies has been significant;

(c)

Freezing of company bank accounts for all payments except tax and payroll payments; and

(d)

The companies being refused financing based on the governmental action, leading to cashflow crises.”

I have the following comments on the contents of Marson 2:

Mr Mabbott’s witness statement was served before Mr Marson signed Marson 2. Mr Mabbott’s witness statement purported to summarise certain parts of Marson 1. In view of the later service of Marson 2, it is not necessary to refer further to Mr Mabbott’s witness statement.

The evidence served on behalf of Aeroflot referred to the Russian Federation’s “contemporary global reputation” in terms of approbation and suggested that the fears expressed in Marson 2 were “entirely unfounded”. In the light of these comments, Mr Henderson, counsel for the AP Family, mentioned (without citing) the decision of Christopher Clarke J in Cherney v Deripaska [2009] 1 All ER (Comm) 333, which was upheld by the Court of Appeal: [2010] 2 All ER (Comm) 456. In that case, the judge found that: (1) the claimant had a well founded fear for his own safety and that he would be more at risk in Russia than in England; (2) there was a significant likelihood that he would be prosecuted if he went to Russia; (3) the defendant might use his influence to encourage the Russian authorities to bring such a prosecution; (4) there was a distinct possibility that the charges against the claimant would be trumped up; and (5) that the claimant would not get a fair trial in Russia. The Court of Appeal added that allegations of a kind which impugned the integrity of a friendly foreign state were not to be made lightly or accepted without the support of positive and cogent evidence. Although Mr Henderson mentioned this case and the findings made on the evidence in that case, he did not submit that I was entitled to rely on the evidence in that case as if it had been evidence served in the present proceedings. He accepted that I had to assess the matter on the basis of the evidence served in the present application. However, it seems to me that if I am to consider Aeroflot’s evidence as to the global reputation of the Russian Federation, I can also, for the purposes of considering the question of reputation, take account of the judge’s findings in Cherney v Deripaska. In the event, I do not think that I should decide this case on the basis of any assessment of the global reputation of the Russian Federation. In his skeleton argument, Mr Davenport, counsel for Aeroflot, mentioned the question of comity with the Russia Federation. On the question of comity, it appears from Cherney v Deripaska that if there is an allegation as to a risk of wrongdoing by a foreign state, the court must assess it but the requirement of comity means that the court ought not to make adverse findings of a risk of serious wrongdoing by a foreign state without positive and cogent evidence to support it. This also appears from the more recent decision of the Court of Appeal in Yukos Capital Sarl v OJSC Rosneft Oil Co (No 2) [2013] 3 WLR 1329.

Before coming to my conclusions, I need to consider whether I have power to place restrictions on the use of AP Confidential Information by Aeroflot and/or their lawyers and, if so, whether there are restrictions which would preserve some of the confidentiality of the information and/or materially assist in reducing any risk of harm to the interests of the AP Family.

As to restrictions on the use of the AP Confidential Information, it must be remembered that if the confidential information is made available to Aeroflot, it will be subject to a number of controls provided for in the Civil Procedure Rules. For example, CPR r. 31.22(1) and (2) provide that, in general, a party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed. CPR r. 32.12 places similar restrictions on the use of a witness statement. CPR r. 39.2 permits a hearing to be in private in certain circumstances, one of which is to preserve confidentiality. Further, under CPR r. 5.4C, the AP Family may apply for restrictions on the ability of a non-party to have access to documents in the case.

There was a discussion before me as to whether I had power to direct, in accordance with the order of 30 October 2013, that the substantive applications should be heard on the basis that the confidential information would be available to Aeroflot’s lawyers but not to Aeroflot itself. I was referred to the decision of the Supreme Court in Al Rawi v Security Service [2012] 1 AC 531 and the decision of David Richards J in McKillen v Misland (Cyprus) Investments Ltd [2012] EWHC 1158 (Ch). I will discuss these authorities later in this judgment. However, I record at this point that, in the light of these authorities, the parties appeared to accept that I should not proceed in that way. On the basis of these authorities, I conclude that I do not have power to conduct the hearing of the substantive applications at which I would consider and act upon the AP Confidential Information, when that information was being withheld from Aeroflot, even though it was available to Aeroflot’s lawyers. In the alternative, I conclude that if I did have such a power this case does not have such extraordinary features which would justify me in exercising it.

That leaves the question whether I could impose different restrictions. The AP Family’s principal submission was that I should not allow any of the AP Confidential Information to be disclosed to anyone within Aeroflot and therefore Ms Berezovskaya should not be allowed to rely upon that information at the hearing of the substantive applications. However, the AP Family had an alternative submission which was that if I allowed Ms Berezovskaya to rely upon that information, then I should impose the following restrictions on the disclosure and use of that information:

“(1)

Restricting the disclosure of the AP Confidential Information, or its redacted or codified version, to a very limited number of persons within Aeroflot (preferably lawyers) – being the persons who are essential to giving instructions in relation to these proceedings

(2)

Such disclosure to be by way of provision of a single hard copy of the AP Confidential Information, or its redacted or codified version, which (as per para. 4 of the 30/10/13 order) should not be permitted to leave one specified office; be inspected only by the named persons and not itself be copied, scanned or otherwise converted into electronic form.

(3)

Extracting or imposing express undertakings or confidentiality orders (i) so as to maintaining confidentiality as per paras. 5 and 6 of the 30/10/13 order and (ii) expressly providing that use shall not be made of it otherwise that for the purpose of these proceedings.

(4)

Ordering (subject to any further order of the court, such order shall not be made without at least 7 days notice to the AP Family) that the AP Confidential Information shall not be made public or disseminated outside the specified confidentiality ring and shall not be read to or otherwise provided to the court in a manner which would or might have that result; and in particular that (i) any part of any witness statement containing any of the AP Confidential Information shall not be open to inspection (CPR 32.13); (ii) any witness statement containing any of the AP Confidential Information shall not be put in evidence at a hearing in public (CPR 32.12(2).

Further or alternatively,

(5)

Ordering redaction and/or codification of the most sensitive parts of the AP Confidential Information”

Aeroflot submitted that I did not have power to impose some or all of these restrictions, alternatively, that there were no proper grounds for me to do so. In order to deal with the competing submissions, I need to consider the decision in Church of Scientology v DHSS [1979] 1 WLR 723 and look in more detail at the decisions in Al Rawi v Security Service [2012] 1 AC 531 and Mc Killen v Misland (Cyprus) Investments Ltd [2012] EWHC 1158 (Ch).

Church of Scientology v DHSS concerned three libel actions, brought by the Church of Scientology against the DHSS, in relation to statements made as to the plaintiffs’ treatment of certain mentally ill people. The defendants’ list of documents referred to the medical records of certain patients. The defendants objected to the plaintiffs inspecting those documents on the ground that they were confidential to the patients concerned. The judgment of Brandon LJ contained the following helpful summary of the issues before the Court of Appeal. At 743 C – D, he said:

“Four questions appear to me to arise on this appeal. First, is it shown that, if the plaintiffs are given an unrestricted right of inspection of the defendants' documents, there is a real risk that they would use such right for a collateral and harmful purpose? Second, if so, does the court have power to impose restrictions on the plaintiffs' right of inspection in order to prevent or discourage such use? If the court has such power, third, what kind of restrictions can be imposed? Fourth, what method should the court use to impose them?”

Brandon LJ held in relation to these four questions:

As to the power to impose such restrictions, Brandon LJ added at 743F - H:

“With regard to the second question, the principles applicable are, in my view, as follows. 1. A party to litigation has a prima facie right of unrestricted inspection of the documents of which discovery has been made by the other party so far as may be necessary to dispose fairly of the case or for saving costs. 2. A party is not entitled to use his right of inspection for any collateral purpose. 3. If it is shown that there is a real risk of a party using his right for a collateral purpose, the court has power to impose restrictions on such right in order to prevent or discourage him from doing so. I think that this power is derived from the inherent jurisdiction of the court to prevent abuse of its process rather than from anything in R.S.C., Ord 24 itself. … The power in question appears to have been exercised only, or almost only, in cases involving secret trade processes or analogous matters: see Warner-Lambert Co v Glaxo Laboratories [1975] RPC 354, and the authorities there cited.

In my view, however, the principle on which the power has been exercised in such cases is of general application and applies in particular to a case like the present one where the collateral purpose potentially involved is the harassment of third parties.”

As regards the power of the court to impose such restrictions, Stephenson LJ also said that the source of the power was the inherent jurisdiction of the court to prevent an abuse of its own process: see at 734H – 735D. He added at 739H, in relation to restricting the number of representatives of the plaintiffs who might be allowed to see the disclosed documents:

“But who are the plaintiffs? A company, like the plaintiffs, must act and inspect through agents and I can see nothing outrageous in requiring some limitation on the dissemination of confidential information to a company. Why should confidential information be disseminated and not restricted to as few persons as possible and as necessary for justice and a fair disposal of the action?”

At 746G – H, Templeman LJ agreed that the source of the court’s power to impose such restrictions was its inherent jurisdiction to prevent what might be an abuse of the process of the court.

In Church of Scientology, the court did impose restrictions of various kinds on disclosure of the confidential documents. Stephenson LJ thought that a restriction could be imposed to restrain “a threatened or likely or foreseeable abuse of the process of the court”: see at 742H – 743A; Brandon LJ thought there was in that case “a real risk” of abuse: see at 743E; and Templeman LJ thought that the evidence as to risk was “disturbing” and “not altogether reassuring” and that misuse was “apprehended” and “a strong case” as to risk must be made out: see at 745H and 746F – H.

In Church of Scientology, the issue arose at the stage of disclosure and inspection and the case concerned the restrictions which should be imposed at that stage. However, at least prima facie, the reasoning would appear to apply more generally. After all, if the restrictions were necessary to prevent an abuse of process at the stage of inspection, they might also be necessary at all stages before trial, at the trial and indeed after the trial. If such restrictions were necessary to prevent an abuse of process at these other stages of the litigation, there is no obvious reason why the court should not have power to impose them. Indeed, Stephenson LJ’s remarks, which I have quoted above, do not suggest any inconsistency between the presence of restrictions designed to prevent abuse of process and the fair disposal of the action.

The decision of the Supreme Court in Al Rawi v Security Service [2012] 1 AC 531 is of wide general significance in that it emphatically restates the fundamental importance of open justice and natural justice as essential features of a common law trial. Lord Dyson JSC described what was involved in open justice at [10] – [11] and what was involved in natural justice at [12] – [13]. He distinguished between the procedural approach which might be adopted at an interlocutory stage in an action and the approach required by the principles of open justice and natural justice at the trial of an action in the following passage at [64]:

“Similarly, where the whole object of the proceedings is to protect a commercial interest, full disclosure may not be possible if it would render the proceedings futile. This problem occurs in intellectual property proceedings. It is commonplace to deal with the issue of disclosure by establishing “confidentiality rings” of persons who may see certain confidential material which is withheld from one or more of the parties to the litigation at least in its initial stages. Such claims by their very nature raise special problems which require exceptional solutions. I am not aware of a case in which a court has approved a trial of such a case proceeding in circumstances where one party was denied access to evidence which was being relied on at the trial by the other party.”

The decision in Church of Scientology was cited to the Court of Appeal in Al Rawi but was not mentioned in the judgments of that court and it was not cited to the Supreme Court in that case.

The distinction between the type of restrictions which might be appropriate at the disclosure stage of an action and those which would not be appropriate at the trial of an action was of importance in McKillen v Misland (Cyprus) Investments Ltd [2012] EWHC 1158 (Ch). In that case, the judge had imposed restrictions on the grounds of confidentiality at the disclosure stage; one such restriction was that the documents disclosed by Mr McKillen would only be made available to the other parties’ lawyers and not to the other parties themselves: see at [25] – [26]. The above judgment concerned whether any restrictions should be imposed on the use of the disclosed documents at the trial of the action. Mr McKillen originally submitted that the confidential documents should not be available to the other parties, but only to their lawyers, and that the part of the trial which dealt with the issue which was the subject of those documents should be held in private: see at [2]. The judge considered the statements in Al Rawi as to open justice and natural justice. He then considered Mr McKillen’s original application at [38] – [50]. He said at [41], [42] and [50]:

“41.

In patent and similar cases it may be necessary to limit severely the officers or employees of a party who may have access to the evidence. But as Lord Dyson said, he was not aware of any case in which the trial had proceeded without any access by a party to the evidence, and Mr. Marshall was unable to cite one.

42.

As I mentioned in court on Tuesday, 24 April 2012, I asked the current specialist patent judges, Kitchin LJ, Floyd J and Arnold J, whether they had any experience, either at the bar or on the bench, of such a trial. None of them could remember any instance of it.

…

50.

In the light of the decision and discussion in Al Rawi, it is my view that at common law the court has no jurisdiction to deny a party access to the evidence at trial. But if the jurisdiction does exist, it is in my judgment so exceptional as to be of largely theoretical interest only.”

The citation of these passages from McKillen led to an acceptance by all parties before me that I did not have power to order, alternatively ought not to order, that the hearing of the substantive applications should involve the court considering the AP Confidential Information at a time when that information was not available to Aeroflot, even if it were available to Aeroflot’s lawyers.

In McKillen, the judge had to consider an alternative regime proposed by Mr McKillen as explained at [6] and [51] in the judgment. This alternative regime would have restricted disclosure of the confidential information in that case to a limited number of representatives of the other parties and those representatives should be required to give undertakings to prevent possible misuse of the information. In relation to that alternative regime, the judge said at [52]:

“I take the view that following the intense scrutiny of the legal principles and the evidence before the court, which occurred at the hearing and which is one of the great advantages of an oral hearing, it became apparent for reasons quite other than what was reported by the current patent judges that the application being made by Mr. McKillen was on principle quite unsustainable. But I shall need to consider, and would have needed to consider in any event, the grounds on which the application was made so far as the evidence is concerned and it is of course relevant to do so in the light of what is proposed in that letter.”

The judge then considered the evidence relied upon in support of the suggested alternative regime at [53] – [73] and he then said at [74] – [76]:

“74.

It will be apparent therefore that there was no conceivable basis for an order that the defendants are not to have full access to all the evidence at trial, even assuming that I had jurisdiction to make such an order. Nor is there any basis for a continuation of a regime which denies the defendants access to the documents disclosed by Mr. McKillen which are, as I have mentioned, until used in court, subject to the duty not to use otherwise than for the purposes of the proceedings.

75.

The issue which therefore arises is whether I should accede to the request made in counsel's letter to impose terms on the defendants as regards their access to documents used in open court. I shall not do so for two principal reasons. First, I do not consider that the evidence justifies any such order. Secondly, in so far as any alternative formed part of Mr. McKillen's application, it was touched on very lightly and there was no discussion of the principles applicable and indeed whether the court could and, if so, on what grounds would impose these restrictions in relation to documents used in open court. It seems to me an area in which the court would wish to be satisfied as to the jurisdictional basis of making any such order and the relevant principles. No attempt was made to develop this part of the case and, quite rightly, the defendants' counsel did not respond to a case which had not been put.

76.

I think on both those grounds it would not be appropriate to impose the restrictions suggested.”

The parties before me disagreed as to the interpretation of the passages I have quoted from McKillen. Aeroflot submitted, based on [41], [50] and [52], that the judge had held that he did not have jurisdiction to impose the alternative regime. The AP Family submitted that the judge did not so hold but had considered the evidence as to the need for the suggested alternative regime and had held, on that evidence, that Mr McKillen had not made out a sufficient case for the court to impose the alternative regime; the AP Family relied in particular on [74], [75] and [76].

I consider that the judge in McKillen did not go so far as to rule that he had no jurisdiction to impose the alternative regime, if the evidence relied upon had demonstrated the need to impose that regime to prevent misuse by the other parties of the disclosed documents. Before parting with the case of McKillen, I also comment that that case concerned the confidentiality of a party to the proceedings and not the confidentiality of a non-party, such as the AP Family in the present case.

Mr Davenport submitted that the decision in Church of Scientology should be confined to the disclosure stage and could not extend to the substantive hearing of a dispute between litigants. He submitted that following the decision in Al Rawi, restrictions of the kind imposed in Church of Scientology simply could not be imposed so as to apply to a trial or other substantive hearing. I do not agree. Al Rawi is authority for the proposition that a court may not adopt a procedure which conflicts with the fundamental requirement of natural justice. I consider that it remains open to a court to impose restrictions to prevent an abuse of process if those restrictions do not conflict with the requirement of natural justice. Furthermore, it is clear that the requirements of CPR rr. 31.22 and 32.12 do not interfere with the requirement of natural justice. Accordingly, express terms which are designed to ensure compliance with those rules will not interfere with that requirement.

Having considered these authorities, I conclude that I do have power to allow a party to rely on the AP Confidential Information at the hearing of the substantive proceedings in this case, subject to restrictions which are designed to preserve any remaining confidentiality and/or to ensure compliance with CPR rr. 31.22 and 32.12 and/or to prevent an abuse of the process of the court (provided that the restrictions do not interfere with the requirement of natural justice). In some cases, it will be appropriate to require express undertakings to comply with rr. 31.22 and 32.12. In particular, that might be desirable where the confidentiality belongs to someone who is not a party to the proceedings. Further, undertakings might be appropriate where it is important to emphasise the seriousness which the court attaches to compliance with those rules. I consider that it is open to a court in an appropriate case, for the above purposes, to restrict the representatives of a party who are to be given access to the confidential information.

Having directed myself as to the relevant legal principles, I will now consider the result of applying those principles. I will begin by considering the application of the principles identified in Science Research Council v Nasse. I find that the AP Confidential Information is likely to be highly material to the outcome of the substantive applications. I consider that the availability of that information at the substantive hearing is necessary for the purpose of disposing fairly of those applications. I find that there is no alternative way of producing the result that such information is before the court, other than by relaxing the confidentiality restrictions in the AP Settlement Agreement. I consider that I do have power to impose suitable restrictions on the use of the information so as to preserve to the AP Family some of the remaining confidentiality of that information and/or to ensure compliance with rr. 31.22 and 32.12 and/or to prevent an abuse of the process of the court. The imposition of suitable restrictions will not prevent all parties relying upon the information for the purpose of disposing fairly of the substantive applications. The imposition of such restrictions will not conflict with the fundamental requirement of natural justice. Even with such restrictions, Aeroflot will be able to put its case through its lawyers and fully instruct and take advice from those lawyers. Aeroflot will be able to do everything which it needs to do in order to present its case in the substantive proceedings. The court should not be unduly reluctant to impose restrictions which do no harm to anybody but preserve as far as possible the confidentiality of a third party caught up in litigation in which it has no direct involvement. The imposition of such restrictions will help to prevent the possibility of use, i.e. the misuse, of the information for collateral purposes.

The above reasoning supports the imposition of suitable restrictions. In addition, although the evidence is not as detailed as I would have liked, I consider that the evidence in Marson 2 does support a finding that there is some risk of some damage to the AP Family if that information were freely available to all parties, without the restrictions to which I will refer. Even if the substantive applications were dealt with at a hearing in private, there is some risk of leakage from Aeroflot to the Russian Federation which might lead to the kind of consequences feared by the AP Family, as described in Marson 2. I add that I am not in a position to consider whether the apprehended action by the Russian Federation against the AP Family would be legitimate or illegitimate.

So far I have considered the impact of such restrictions on the requirement of natural justice. On the question of open justice, I do not think it is appropriate to make a final decision at this stage as to whether the substantive applications should be heard in public or whether a case can be made out under CPR r. 39.2 for the hearing, or a part of it, to be in private. The right time to consider that question will be at the start of the hearing. The court will then know what information will be referred to at the hearing and can consider whether it will be satisfactory to give directions as to how the hearing can be conducted in public without express reference to the confidential material or whether the proper course is for the hearing or for part of it to be in private.

I will therefore permit Ms Berezovskaya to rely on the AP Confidential Information and I will impose the following restrictions:

As I indicated earlier, I will now separately consider the position of Samara. Although Samara is not a claimant in the Part 8 claim brought by Aeroflot, it appears that it will wish to be heard in opposition to Ms Berezovskaya’s application; no decision has yet been made in relation to the locus standi of Samara to oppose that application.

Much of the above reasoning applies to Samara as it does to Aeroflot. There is a difference between Samara and Aeroflot in that Marson 2 says next to nothing about any risk which disclosure to Samara might pose to the AP Family although it suggests, without any detailed supporting evidence, that disclosure to Samara would pose such a risk.

On the present evidence, the case for imposing restrictions on Samara is less strong than in the case of Aeroflot. The fact remains that the above restrictions if imposed on Samara will not cause any harm to Samara and (using the approach in Science Research Council v Nasse) Samara cannot show that it is “necessary” for it to receive the confidential information free from such restrictions. Further, the restrictions will help to preserve the remaining confidentiality of the AP Confidential Information and prevent any risk which there might be of misuse of that information for collateral purposes. In the result, I consider that I should impose the same restrictions on Samara as those I will impose on Aeroflot.

It was agreed at the hearing of the present application that the court should give case management directions to enable the substantive applications to be considered at an expedited hearing. The directions were largely agreed but there was no determination as to the periods of time needed to comply with the further directions. In addition, the restrictions which I have described in this judgment will require further steps to be taken to identify the named persons who may see the confidential information and those persons will have to give undertakings within a specified time. It may therefore be necessary to have a further short hearing to finalise the necessary case management directions. I will therefore hand down this judgment without any need for the parties to attend and I will arrange for the listing of a further hearing in the week following judgment. That will give the parties time to cooperate and attempt to agree the outstanding directions. If they cannot be agreed, any outstanding matter will be resolved at the scheduled hearing.