PJSC Tatneft v Gennady Bogolyubov & Ors

The claimant applies for permission to re-amend its particulars of claim. This is my judgment on that application which was argued yesterday. Trial will be two years from now, and apart from this application the court is today set to conduct a first CMC in the case. The proceedings are, though, more than two years old already thanks to the time that has been taken up by a very substantial initial contest about the arguability of the claim and hence inter alia its sufficiency to support freezing orders.

That contest generated a lengthy judgment of Picken J in November 2016, [2016] EWHC 2816 (Comm), and a judgment of the Court of Appeal on an appeal against Picken J's decision, handed down in October 2017, [2017] EWCA Civ 1581. This comparatively short judgment will assume familiarity with those judgments and that will save substantial time in setting out matters of background and history.

The decisive issue on the application is whether the re-amendments proposed by the claimant, if allowed, would amount to or involve the making by it of a new claim for the purposes of CPR 17.4, section 35 of the Limitation Act 1980 and the Foreign Limitation Periods Act 1984. That is the decisive issue in my judgment because:

That said, as to discretion, I do record that in my judgment this application has been made much later than it should have been, and the claimant dealt inadequately and unsatisfactorily with the defendants' fair and entirely predictable complaint in that regard. Against the long history of the initial contest in the claim to which I have already referred, there was, amongst other things, a substantial argument before both Picken J and the Court of Appeal as to whether a first set of amendments should be permitted. That argument gave rise to questions whether the amendments would introduce a new claim, whether, if so, it would be one arising out of the same or substantially the same facts as the existing claim, and whether, if so, discretion should be exercised to allow it. The argument was of course in other respects different to the argument before me precisely because that set of amendments, in fact allowed in the Court of Appeal, was different to the proposed re-amendments now sought to be introduced.

In those circumstances, as I say, in my judgment it was both fair and entirely predictable that the defendants would complain, amongst other things, that the re-amendments now being proposed were being proposed only some 10 months after the judgment in the Court of Appeal, as part of the run-up to the present hearing. As a matter of evidence, the only response provided by the claimant to the inevitable criticism I have just indicated, that the re-amendments now proposed should have been brought forward much earlier and, on any view, in time to be considered as part of that prior substantial interlocutory skirmish, was a one-sentence paragraph in the witness statement of Mr Larizadeh of Akin Gump LLP, the claimant's solicitors, which read as follows:

That wholly failed even to begin to answer the obvious gist of the complaint, which was not that the claimant had had an application ready to issue but had sat on it, but why it had not had an application ready to issue a year, or 18 months or more before. On instructions, and it may be in part from his own recollection as he has been involved, it would seem, substantially throughout, Mr McGrath QC, on behalf of the claimant, informed the court that it had, through legal advice as to Ukrainian law, an indication of the possibility of (to put it neutrally at this stage) the new line or lines of pleading now sought to be introduced by way of re-amendment as long ago as in June 2017, a month before the case was argued in the Court of Appeal. It was submitted by Mr Howard QC on behalf of the second defendant, whose submissions were adopted by the other defendants, that the chronology Mr McGrath then indicated thereafter should be taken to indicate either an informed and tactical decision not to tell the Court of Appeal anything about the possible new lines of argument or, alternatively, an incompetent failure to think through how the matter should be presented. Without needing to reach any conclusion as to whether either of those is a well-founded inference, certainly, as it seems to me, no good reason has in fact been provided to the court why the proposed re-amendments were only introduced into the proceedings in August of this year.

The claimant's claim alleges a liability, by nature tortious, under Article 1064 of the Russian Civil Code. Paragraph 85 of the amended particulars of claim, it is agreed, provides for present purposes a sufficient statement of the requirements for the imposition of liability fixed by Article 1064: "The necessary elements of a claim under Article 1064 of the RCC are: (i) infliction of harm to the claimant; (ii) an unlawful act on the part of the defendant; (iii) causation between the act of the defendant and the harm suffered by the claimant; (iv) guilt of the defendant (either intention or negligence). The first three elements are to be proved by the claimant. Once the claimant has proved the relevant elements of the existence of the fourth element (i.e. guilt) is presumed, it is then for the defendant to prove that he did not act intentionally or negligently in causing the harm."

The Article 1064 liability alleged is a liability to S-K, said by the claimant to have been its sales agent in respect of crude oil supplied by the claimant to UTN, a Ukrainian refinery company. The claimant claims it is entitled to sue upon that liability as S-K's assignee. The proposed re-amendments do not touch the claimant's alleged title to sue as assignee. They go to the underlying liability, if any, of the defendants to S-K, in respect of which the claimant claims to be able to sue.

The defendants rely on Blue Tropic Limited v Chkhartishvili [2016] EWCA Civ 1259 at [49] for the proposition that whether the proposed re-amendments would bring in a new claim must be assessed by reference to what the law governing the claim, here Russian law, says are the essential ingredients of liability. That is true so far as it goes, but for this hearing none of the parties alleged, let alone evidenced, any particular principle of Russian law as to what is of the essence of a cause of action for present purposes.

The claimant relies on a number of authorities, including Berezovsky v Abramovich [2011] 1 WLR 2290, Aldi Stores Limited v Holmes Buildings Plc [2005] PNLR 9 and Harland and Wolff Pensions Trustees Limited v AON Consulting Financial Services Limited [2010] ICR 21 for a proposition that to add additional or different heads of loss to an existing claim for loss resulting from tortious conduct is not to plead a different cause of action. It will not be necessary to decide whether the claimant's proposition is good law in such unqualified terms, or if it is not, precisely what qualifications may apply to it. The point to make at this stage is only that I have been given no basis to find that any different proposition obtains under Russian law as regards liability under Article 1064.

To the extent therefore that the defendants argued that since the claimant's proposed re-amendments raise new allegations as to what loss was suffered or how it was suffered they necessarily raise a new claim, I disagree.

For the claimant, then, the submission was that the proposed re-amendments do not seek to amend at all the wrongful conduct alleged by the existing pleading, let alone do they add to it or otherwise change it in any essential respect. Rather, the claimant contends, the proposed re-amendments do no more than add to or vary what has been alleged hitherto as to how precisely that wrongful conduct caused harm to S-K. What is more, the general nature of the harm allegedly caused is unchanged, says the claimant, namely a failure on S-K's part to be paid what it was owed in respect of oil supplied by the claimant to UTN in 2007.

Superficially there might appear to be some force in the claimant's submission, because the wrongful conduct that has been alleged against the defendants to date is their respective involvement, as alleged, in what the claimant says was the diversion of funds paid by UTN to Taiz and Tekhnoprogress, away from S-K; and no re-amendment is proposed to the paragraphs by which the claimant pleads that diversion of funds or the means by which it is said to have been achieved. Likewise, the paragraphs by which the claimant pleads each defendants' alleged involvement in all of that.

However, care must be taken to consider the substance of what has been pleaded and what is now proposed to be pleaded by reference to its content, rather than considering merely where and how that content is presented within the pleading, which is a matter of form.

The substance of the wrongful conduct presently alleged by reference to the content of what is pleaded is that in 2009 UTN was caused or procured to pay to Taiz and Tekhnoprogress, in aggregate, the amount it was liable to pay in respect of oil supplied to UTN by the claimant in 2007 but not paid for by UTN at the time, which amount was then stripped out of Taiz and Tekhnoprogress for the benefit ultimately of the defendants. It is of the essence of that claim that the payments actually made by UTN discharged its liability in respect of the 2007 oil supplies, subject only to the question whether UTN should have been paying S-K rather than Taiz and Tekhnoprogress, that question being raised by the 2008 Assignment and conflicting judgments as to its validity handed down in the Russian and Ukrainian courts. The claim under Article 1064, then, is that this diversion amounted to or involved unlawful conduct and caused harm to S-K.

I shall not lengthen this judgment by going through the particulars of claim in detail. It will suffice for the parties for me to say that what I have said as to the substance and essence of the claim pleaded to date derives from: the claim form (albeit there is an obvious error in the figure stated there for the US$ value alleged to have been wrongly diverted in 2009); the amended particulars of claim at paragraphs 54A, 54B, 55, 74, 80A to 80E and 88, as to the facts alleged to constitute or involve unlawful conduct; and the amended particulars of claim at paragraphs 86, 89 and 89A, as regards how that is said to have caused harm to S-K so as to engage liability under Article 1064.

I am comforted in the view I have taken as to what the existing claim is by the fact that it accords with the views of both Picken J and the Court of Appeal, even if they disagreed in other respects, leading the Court of Appeal to allow the amendments then at issue that Picken J for his part would have disallowed. It is also supported by the description and explanation of its claim that the claimant itself gave the Court of Appeal in its skeleton argument when moving those amendments.

By contrast, the substance of what is now proposed to be pleaded is that the sum UTN was caused or procured to pay to Taiz or Tekhnoprogress, and which was then stripped out of those entities for the benefit ultimately of the defendants, was not the sum UTN was liable to pay but a lesser sum, and so did not discharge UTN's liability, irrespective of the validity of the 2008 Assignment. For it is now proposed to be alleged that UTN's liability extended to amounts payable to reflect the depreciation of the UAH against the US$ and/or for interest, under Article 625 of the Ukrainian Civil Code, and that the defendants caused Taiz and Tekhnoprogress not to act in good faith in their own interests by not claiming payment of any such amounts.

Though this is said on behalf of the claimant to be merely an additional or different alleged way in which the presently pleaded unlawful conduct caused harm to S-K, that to my mind simply does not work. It is an impossibility for payment by UTN of the amount it owed to result in UTN not having paid the amount it owed. It is a separate point that if the 2008 Assignment were valid, payment by UTN of any amount to Taiz or Tekhnoprogress prima facie would not discharge UTN as it would remain liable to S-K as assignee.

The gist of the claim presently pleaded is that UTN paid the full amount it was liable to pay but in a way that diverted that amount from S-K, or enabled the defendants to divert it away from S-K, in circumstances where it ought to have found its way to S-K either by virtue of the 2008 Assignment or by virtue of the original contractual chain if the 2008 Assignment were invalid or inapplicable. In short, in my judgment, although sought by the claimant to be characterised as merely an additionally or differently particularised case of loss, the substance of the proposed re-amendment is to allege additional, different and new wrongful conduct, namely causing or procuring Taiz and Tekhnoprogress not to act in good faith in their own interests in respect of Article 625 amounts they were entitled to claim from UTN.

I add in passing, although not decisive for present purposes, that it is not clear to me how the claimant could advance that claim without averring that the 2008 Assignment was invalid, ineffective or inapplicable. Without such an averment the allegation of an entitlement in Taiz and Tekhnoprogress under Article 625 would, I think, be deficient on the face of the pleading.

Furthermore, the case I have just described, raised by the re-amendments proposed, would be not only new but inconsistent with the existing pleading. The pleading would be embarrassing if allowed to stand in the draft re-amended form proposed, asserting simultaneously, as it then would, that the UAH 2.24 billion paid by UTN both was and was not the full extent of UTN's liability (leaving aside the question to whom that liability was owed as of 2009).

The only coherent way out of that dilemma for the claimant would be to plead alternative cases, the primary case being that the UAH 2.24 billion was not the full extent of UTN's liability. As it seems to me, that could not be done without making apparent that the case the claimant (now) seeks to pursue is a case of two alleged wrongs: (i) unlawful conduct causing or procuring Taiz and Tekhnoprogress not to claim Article 625 sums due to them, which sums, if claimed and paid, would, it would be alleged, have been passed up the chain via Avto to S-K; (ii) unlawful conduct causing or procuring the payment UTN did make to be diverted away from S-K.

On the claimant's primary case, as it would be, concerning the extent of UTN's liability, both claims would arise for consideration. On what would be its alternative case as to the extent of UTN's liability, only the second claim would arise. As it is, in my judgment, only that second claim has been advanced hitherto and there has been no question of primary and alternative cases as to the extent of UTN's liability. The claimant has advanced only one case as to that. The re-amendments now seek, considering their substance, to add the first claim. That would be to add a new, otherwise time-barred claim, and as I said at the outset if that is right it is not, in my judgment, a claim arising out of the same or substantially the same facts as the existing claim. So it cannot be added now.

That the new claim, as I have concluded it to be, does not arise out of the same or substantially the same facts as the existing claim was not conceded by the claimant, albeit Mr McGrath QC fairly acknowledged that the primary focus of his submissions was very much the contention that there was no new claim. In my judgment, the new claim indeed does not arise out of the same or substantially the same facts as the existing claim essentially for the reasons put forward by Mr Howard QC who, as I have already indicated, by agreement between those appearing for the defendants took the lead in arguing against the re-amendments, that is to say for the reasons set out in paragraphs 30 to 32 of Mr Howard's skeleton argument. In summary, as Mr Howard submitted, the new claim “is conceptually entirely different – being founded on non-payment by UTN, rather than payment by UTN – and requires the investigation of numerous facts and hypotheticals that are different from, and irrelevant to, the existing claim”. Thus, again as he submitted, the new claim requires proof of the following, none of which is involved in the existing claim:

For completeness, I would add that had there been a discretion to exercise on the basis that the re-amendments would introduce a new claim that would otherwise be time barred but which could be permitted because it arose out of the same or substantially the same facts, I would have refused permission for reasons similar to those expressed by Christopher Clarke J, as he was then, also obiter, in Seele Austria GmbH & Co KG v Tokio Marine Europe Insurance Limited [2009] BLR 481 at [61] to [64]. In this case the new claim, on that hypothesis, would be one of, in my view, doubtful merit, involving significant factual inquiries not required by the existing claim, in respect of which there would be real grounds for concern as to the defendants' ability to investigate those factual matters through disclosure, and for which no good reason had been provided by the claimant for not bringing it, if it was to be brought at all, when proceedings were first commenced, a culpable failure seriously compounded by the failure to raise the new claim when seeking to persuade the Court of Appeal, in the event successfully, to allow a different set of amendments.

Those difficulties might just have to be borne in the absence of any time bar defence, as the defendants in substance accepted by not pursuing any objection to the re-amendments if I concluded that they did not involve the making of a new claim at all. But in my judgment, considering everything in the round, those difficulties would make it unfair to deprive the defendants of what would otherwise be a clear time bar defence to what I have concluded to be a new claim. In short, there would not be good reason to allow re-amendments that would have that effect.

In conclusion then, permission to re-amend the particulars of claim is refused and this application is dismissed.

As a coda to this judgment I should deal with a suggestion made for the first time by Mr McGrath QC in oral argument, possibly provoked by interrogation from the bench as to the detail of how the claimant put its case. The suggestion was that under Russian law the measure of damages available to S-K for the wrongful diversion in 2009 of UAH 2.24 billion, then worth US$ 294.2 million, might be US$ 439.4 million, the sum said to have been originally due but unpaid as between Avto and S-K, in the absence of causation between the wrongful diversion of the lesser value and the alleged greater amount of loss.

I am confident that no such claim is pleaded. It would require a plea of Russian law principles as to the measure of damages under Article 1064, and there is none. The passing reference to Article 15 of the Russian Civil Code in paragraph 86 of the amended particulars of claim does not, in my view, suffice. I remain somewhat sceptical whether that truly is the claimant's case, albeit when pressed Mr McGrath confirmed on instructions that it was. If it is, though, and if some different re-amendment were now put forward to plead the necessary case as to Russian law, whether that would be by particularising some case under Article 15 of the Russian Civil Code or otherwise, that might bring sharply into focus the soundness or scope of the claimant's proposition that re-pleading quantum in a tort case does not involve the making of a new claim. But that is all for another day, if any further application is in due course made.