Benyatov v Credit Suisse Securities (Europe) Ltd

This is the judgment on the Defendant’s application under CPR 3.4(2)(a) to strike out the Claimant’s claim and/or for summary judgment under CPR 24.2. In the alternative to the dismissal of the claim, the Defendant seeks a conditional order for £1.15 million and/or an order for security for costs.

The Claimant claims over £46 million by way of loss of earnings, following his conviction in 2013 in Romania where he worked for the Defendant. The Claimant, who is now resident in the United States of America, claims this sum by way of (i) implied or equitable indemnity; and/or (ii) damages for breach of (a) implied duties in his contract of employment; and/or (b) a duty of care to protect him from economic losses and criminal conviction arising from the performance of his duties as an employee; and/or (c) assurances of support.

The application before me lasted two and a half days. Over seventy cases or textbook extracts were cited to me. The length of this judgment is an indication of the difficulty of many of the issues raised. On any view, this is an unusual application for a strike out or summary judgment.

The Claimant commenced employment on 15 December 1997 as an

In 2000 he returned to London to run European Emerging Markets Utilities for the Defendant.

In 2001 the Claimant started travelling to Romania for Credit Suisse business.

In 2005 the Claimant entered into the contract of employment in effect at all material times. His job title was “Managing Director (class of 2005)”. He was to work within the European Energy Group, Corporate & Investment Banking Division.

According to paragraphs 27 and 28 of his witness statement the Claimant worked on the privatisation of three companies in Romania before the transaction which led to his downfall.

From about 2005 the Claimant began working for the Defendant on the privatisation of the Romanian state-owned S.C. Electrica Muntenia Sud SA.

In about May 2006 the Claimant was promoted to Head of European Emerging Markets. For further background in respect of the period up to his arrest, see paragraphs 26 to 29 of the Particulars of Claim which I have set out at paragraph 94 below.

The Claimant described the circumstances of his arrest and detention in paragraphs 38 to 40 of his witness statement:

“38.

In November 2006 I had travelled to Bucharest for two reasons: first to discuss the Romgas and Romtelecom privatisation mandates, and second to help Ministry of Energy officials with their presentation to the new government on the privatisation of Petrom that had taken place a few years previously.

“39.

I was staying in the Hilton Hotel in Bucharest. In the early hours of 22 November 2006, I awoke to knocking at my hotel room door. I got out of bed, went to look through the spyhole in the door and was shocked to see masked men with machine guns on the other side of the door. I ran to the telephone and called the operator, who sent security up to my room. Hotel security confirmed that the individuals outside my door were secret police officers with a warrant for my arrest. I put on some clothes and opened the door. I was arrested and immediately led away from the hotel in handcuffs, without having any opportunity to contact my family, colleagues or the US Embassy.

“40.

I was detained in a jail in Bucharest for 56 days, over the Christmas and New year period, during which time I was placed in a cell with serious criminals; two were heroin dealers and another was a serial burglar. After that I was placed under ‘house arrest’ – forbidden from leaving the city of Bucharest – until August 2007.”

As set out in that passage, the Claimant was arrested on 22 November 2006.

On 24 November 2006 the Chief Operating Officer and General Counsel of

Steps were taken by Credit Suisse to protect their and the Claimant’s interests.

In August 2007 the Claimant was permitted to leave Romania.

In September 2007 the Claimant was charged with espionage and the

The Claimant continued in the employment of the Defendant, moving in June

In November 2013 there were hearings in the Romanian Court, which led to the Claimant’s conviction on 3 December 2013. He was then sentenced to 10 years’ imprisonment.

This was rapidly followed on 5 December 2013 by the revocation by the

Following the conviction, the Defendant took a number of steps to try to assist the Claimant. These included the engagement of a consultancy firm founded by a former cabinet minister in the last Labour Government. It is a measure of

On 1 December 2014 the Defendant wrote to the Claimant and a colleague of the Claimant as follows (Footnote: ³):

“We share your frustration at the process to date, your anxiety regarding the final outcome of the case, and your desire to exhaust every appropriate avenue that could enhance the chances of a positive outcome in the case.

“The bank has examined a range of options to support a positive outcome, including the option you alluded to of having a prominent individual express our concerns regarding the irregularities and due process issues of the case, and the signals a decision to uphold the convictions would send regarding the business and judicial climate in Romania.

“The bank has reached a settled view that this type of intervention is not appropriate in advance of a final verdict. There is significant risk that prior to the conclusion of the case, such an intervention could be misconstrued as attempting to influence the Romanian judicial process, with negative consequences for the case outcome and the reputation of the bank. The current Romanian political climate and government transition heightens this risk. Relevant diplomatic stakeholders have advised on the basis of recent events of a similar nature, that it would be unadvisable to pursue such an intervention.

“However, we are exploring options for additional avenues Credit Suisse might pursue in the unfortunate event of a negative decision, such as a presidential pardon, an application to the European Court of Human Rights, and direct representations to appropriate individuals and authorities in Romania, the US, EU and elsewhere on your behalf. Following a verdict, such direct representations would not bear the same risks.

“Please be assured that we will continue to provide support to you during these extraordinary circumstances.”

As I explain in more detail below, the Claimant relies upon this letter as founding a case based upon variations to his contract of employment and/or collateral warranties.

Following hearings in December 2014, on 27 January 2015 the Romanian Supreme Court replaced his existing conviction with a new one for the instigation of disclosure of professional secrets or non-public information.

In January 2015 the Claimant moved to the United States of America.

On 13 June 2015 the Defendant dismissed the Claimant on grounds of redundancy.

On 26 June 2015 the Claimant submitted an appeal for annulment of his conviction. This was funded by the Defendant.

On 24 July 2015 an application was made by the Claimant to the European Court of Human Rights in respect of the trial process in Romania. This also was funded by the Defendant.

On 20 January 2017 the Claimant submitted a “revision application” to the Romanian court. Again this was funded by the Defendant.

On 8 August 2018 the Claimant submitted a further revision application to the

In December 2018 the Claimant submitted “several further appeals for annulment”, again at the Defendant’s expense.

As I understand the position, the appeal processes in the Romanian courts have not yet been exhausted. The application to the European Court of Human Rights has not yet been determined.

I should emphasise that the Claimant has at all stages protested his innocence and the Defendant has never suggested that he was wrong to do so.

I was told that the Defendant has spent more than £10 million on fees for representation and advice for the Claimant (and his two former colleagues in a similar position) and that the Defendant continues to pay the legal fees for the

The proceedings were commenced on 22 January 2018. (Footnote: ⁵)

I return below to set out the nature of the claim put forward and the bases upon which it is advanced.

The Defence was served on 21 March 2018 (Footnote: ⁶) accompanied by a Request for

On 21 May 2018 an extensive Response to Defendant’s Part 18 Request for Further Information of the Claim Form and Particulars of Claim made on 21

On 29 May 2018 the Claimant served a Reply. (Footnote: ⁸)

On 5 October 2018 the Claimant served a Response to Defendant’s Part 18 Request for Further Information of the Claimant’s RRFI dated 21 May 2018

On 22 March 2019 there was a Case Management Conference. In preparation for that CMC counsel for the Defendant submitted a skeleton argument. This made no suggestion of any application to strike out the claim. On the contrary the proposals contained in the skeleton argument clearly contemplated the case proceeding to trial:

I am told that at the end of the hearing leading counsel then appearing for the

The Master gave permission to adduce expert evidence in accordance with paragraph 28.1 of the Defendant’s counsel’s skeleton argument (Footnote: ¹¹). Directions were given towards a trial with a trial window opening on 2 June 2020 (Footnote: ¹²).

At the end of the March CMC there were various matters left outstanding, including issues as to the parties’ costs budgets. Accordingly a Costs and Case Management Conference was listed for 3 July 2019.

On 10 June 2019, the Defendant filed and served the application which I am currently considering. That application having been filed, Master Davison released the hearing of the application to a Judge and indicated that any other case management issues should not be dealt with before the application.

On 9 October 2019 Moulder J. directed (amongst other directions) that the trial date should be vacated. (Footnote: ¹³)

Counsel for the Claimant have helpfully set out in detail the principles applicable to strike out and summary judgment, and I gratefully accept and adopt that exegesis.

The Defendant’s Application Notice (Footnote: ¹⁴) seeks an order for summary judgment pursuant to CPR 24.2, which provides as follows:

“The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if—

(a)

it considers that—

(i)

that claimant has no real prospect of succeeding on the claim or issue; …

(b)

there is no other compelling reason why the case or issue should be disposed of at a trial.

(Rule 3.4 makes provision for the court to strike out a statement of case or part of a statement of case if it appears that it discloses no reasonable grounds for bringing or defending a claim.)”

CPR 24 is supplemented by CPR PD24, which includes further procedural requirements applicable to summary judgment applications in paragraph 2.

The burden of proof rests on the applicant, see ED&F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472 at [9] and White Book 2019 at 24.2.5, by reference to CPR PD24 para 2(3).

The Court of Appeal confirmed in AC Ward & Sons Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098; [2010] Lloyd’s Rep. I.R. 301 at [24] that the proper approach to be taken by the Court on summary judgment application is conveniently summarised by Lewison J in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]. Relevant considerations include the following:

Complex claims, cases relying on complex inferences of fact, and cases with issues involving mixed questions of law and fact where the law is complex are likely to be inappropriate for summary judgment: see Three Rivers District

Further, the general rule (which can be called the “Altimo” principle”, based on Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2011] UKPC 7 [2012] 1 WLR 1804, see [84] and the authorities there cited) is that it is not normally appropriate in a summary procedure such as an application to strike out or for summary judgment to decide a controversial question of law in a developing area, particularly because it is desirable that the facts should be

Where disputed issues are such that their conclusion largely depends upon the expert evidence relied on by each side, an application for summary judgment will usually be inappropriate particularly where the exchange of experts’ reports has not yet occurred and joint statements of the experts have not yet been produced: see Hewes v West Hertfordshire Hospitals NHS Trust [2018] EWHC 2715 (QB) [45]-[50].

When deciding whether the respondent has some real prospect of success the Court should not apply the standard which would be applicable at the trial, namely the balance of probabilities on the evidence presented: see Royal

The word “compelling” was added in July 2000, although the White Book 2019 at para 24.2.4 confirms that “Although the inclusion adds clarity to the ambit of summary judgment it does not appear to alter it in substance”. The

Where the case has or may have wider ramifications beyond its particular facts that can provide a compelling reason for a trial. In A C Ward & Sons Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098 at [35], the Court of Appeal upheld a refusal to rule upon a short point of construction of the terms of an insurance contract where those terms were said to be standard terms which were widely used in the insurance market (amongst other reasons for rejecting the submission that there was no prospect of success).

As a preliminary matter, the Court of Appeal explained in Partco Group Ltd v

The Defendant’s Application Notice seeks an order to strike out the claim under CPR 3.4(1)(a) and (b), but presumably it means under CPR 3.4(2)(a) and (b), which provide as follows:

“(2)

The court may strike out a statement of case if it appears to the court—

(a)

that the statement of case discloses no reasonable grounds for bringing or defending the claim;

(b)

that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings;”

These principles are expounded further in CPR PD3A, paras 1.4 and 1.5 of which provide as follows:

“1.4

The following are examples of cases where the court may conclude that particulars of claim (whether contained in a claim form or filed separately) fall within rule 3.4(2)(a):

(1)

those which set out no facts indicating what the claim is about, for example “Money owed £5,000”,

(2)

those which are incoherent and make no sense,

(3)

those which contain a coherent set of facts but those facts, even if true, do not disclose any legally recognisable claim against the defendant.

1.5

A claim may fall within rule 3.4(2)(b) where it is vexatious, scurrilous or obviously ill-founded.”

The following principles are relevant to this head of CPR 3.4(2):

Paragraph 3.4.3 of the White Book 2019 says: “Although the term “abuse of the court’s process” is not defined in the rules or practice direction, it has been explained in another context as “using that process for a purpose or in a way significantly different from its ordinary and proper use” (Attorney General v Barker [2000] 1 F.L.R. 759, DC, per Lord Bingham of Cornhill, Lord Chief Justice).”

Examples of abuse of process arguments are given in paragraph 3.4.3 of the White Book 2019, but none of them have any relevance to the present case, for example where litigation is conducted in a manner designed to undermine the object of a fair trial (such as relying on forged documents and perjured evidence), or where matters are already res judicata, or the claim involves a collateral attack on a previous decision or is of such limited value to the

A statement of case which discloses no reasonable grounds may also be an abuse of the court’s process, and may also justify summary judgment. As seen from the above discussion of the relevant legal principles, there is no exact dividing line between strike out and summary judgment, and some similar considerations apply to both, although there are different considerations relevant to each.

As to the timing of any such application, pursuant to para 2.7 of CPR PD 23A generally, “Every application should be made as soon as it becomes apparent that it is necessary or desirable to make it”.

The timing of summary judgment or strike out applications are dealt with specifically in CPR 26PD, para 5.3(1), and CPR PD 3A para 5.1, which

Before turning to the substance of the applications before me, I should deal first with some procedural matters raised by the Claimant.

Firstly, it is said that contrary to the requirements of CPR PD24, there is no concise statement of any point of law or provision in a document on which the applicant relies or other grounds in support of its summary judgment/strike out application.

As to this point, it seems to me that the witness statement of Ms. Maria Banks which accompanied the application sufficiently set out the nature of the applications and the grounds for the applications.

Further, by the time that the matters were argued before me it was clear that the Claimant’s counsel fully understood the way in which the applications were being put. Accordingly, there is no strength in this objection.

Secondly, it is said that the application is Delphic in brevity and that the only parts of the Particulars of Claim to which Ms Banks specifically took objection were addressed in the Claimant’s application to amend.

As a matter of procedure, I think that this objection has some substance.

Thirdly, it is said that the applications were made after undue and wholly unexplained delay.

As paragraphs 64 and 65 above record, the CPR require applications such as these to be made promptly, and certainly by the date of any Case Management Conference.

There were undoubtedly significant delays in this matter. Mr Goulding attempted to explain these delays by reference to the Requests for Further Information and steps concerning cost budgeting (Footnote: ¹⁵), but I did not find those explanations convincing or sufficient.

I note that in the witness statements of Ms Banks which were placed before me there was no explanation of the delay in making the present applications.

I have drawn attention at paragraph 40 above to the information placed before the court on the CMC indicating agreement that there should be expert evidence (albeit that the scope of that evidence was in some measure disputed) and that the window for the hearing of the case should be fixed.

None of this was consistent with an intention at that stage for applications for summary judgment or strike out being made. At that stage Mr. Goulding was not acting for the Defendant, but the Defendant was represented by leading and junior counsel of great distinction.

Mr. Goulding referred me to one authority as to the approach of the court where there has been delay in making an application for summary judgment.

The case relied upon was Brinks Ltd v Abu-Saleh [1995] 1 W.L.R. 1478. In that case Jacob J. said (at pages 1480H -1481H):

“What then is the rule as regards delay and Order 14? It is said that the plaintiffs have delayed so much, and the case is so close to trial, that I should regard the application as an abuse of process. Now it is true that normally plaintiffs use Order 14 shortly after they commence proceedings, normally, but not always, before a defence is filed. But there is nothing in the rules precluding an application at a later stage in the proceedings. I do not see why delay, of itself, should be a relevant matter. If there is no “defence to the claim” or the defendant cannot show that there is an “issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of that claim” then delay can make no difference. Of course in some circumstances delay in proceeding summarily, coupled with an adoption of the procedures for full trial, may well suggest a weakness in the plaintiff’s case or may even suggest some other reason for trial. But it would be that weakness or reason, not the delay itself, which led to refusal of the application. Moreover the plaintiff may well, having indicated an intention to go to full trial and then having incurred his own costs and caused the defendant to incur his in going down that route, have to suffer a penalty in costs if he brings his Order 14 application late. But otherwise I can see no objection to a late application for judgment under Order 14. Indeed, in some cases, and I think this is one, its use may be commendable as saving both the extra costs and time involved in a full trial. If these defendants truly have no defence it is worse than pointless for them to be present at the trial, which will be complex enough without them. The plaintiffs are right to clear the decks as far as possible before trial.”

That case was under the old, pre CPR, rules. Mr Goulding told me that he had not been able to find any equivalent dictum in any case under the new rules. (Footnote: ¹⁶)

In my view I should approach the application of that case to the present with some caution since, as set out at paragraphs 64 and 65 above, the CPR now contain specific provisions which require such applications to be made promptly.

However, there appear to me to be points in that judgment which are still relevant.

Firstly, if a judge on applications such as those now before me forms the view either that there is no defence to a claim (the position being considered by Jacob J.) or that a claim has no realistic chance of success (the argument before me) then court time should not be wasted on hearing the evidence nor should costs of trial be incurred unnecessarily.

Secondly, in many cases a late application may result in an adverse costs order being made against the applicant, even if otherwise successful.

But, thirdly, the fact that an application is made late may be telling as to the true view of the applicant as to the merits of the application being made.

There is another point not made by Jacob J., particularly where the target of an application for summary judgment is an individual litigant rather than a corporation, namely that a court should be reluctant to deny that litigant his or her day in court when the other party’s conduct has caused that litigant to

In this case the Defendant, with all the resources of one of the world’s most distinguished financial corporations at its disposal, and advised and represented by counsel and solicitors at the top of their professions, waited without any adequate explanation before making its applications. By its actions it led any reasonable observer (and the Court when giving directions at the CMC on 29 March 2019 (Footnote: ¹⁷)) to believe that a trial would take place at which expert evidence would be heard.

Those actions are inconsistent with a firmly held belief that there was no part of the claim made which should go to trial.

In those circumstances it seems to me that I should be particularly circumspect about accepting submissions that the case should not go forward to trial.

That said, as set out below, I have come to the conclusion that there are parts of the case as presently pleaded which should not be permitted to go to a full trial on the evidence.

The Particulars of Claim as presently drafted contain at paragraph 59 a claim for a mandatory injunction and specific performance.

The Claimant accepts that these claims will not be pursued.

The Particulars of Claim presents the claim under the following heads:

The following background facts are pleaded in paragraphs 26 to 29 of the Particulars of Claim which seem to me to be relevant to all the ways in which the case is put forward: (Footnote: ¹⁸)

“26.

At all material times, Mr. Benyatov was an employee in good standing with the Defendant who faithfully and diligently served the Defendant. In particular:

“26.1

It has never been suggested by the Defendant that in relation to his work in Romania he acted otherwise than within the limit of his instructions and authority at all times.

“26.2

He was paid his salary in accordance with Clause 3; and received bonuses until 2011 in accordance with Clause 4.

“27.

From about 2001 onwards, Mr. Benyatov was required by the Defendant to visit and carry out work in Romania pursuant to clauses 8 and 9 of the Contract. He was involved on behalf of the Defendant in providing advisory services and access to capital in respect of various substantial transactions in Romania, including in particular privatisations of Petrom and Distrigaz (which were state-owned energy companies).

“28.

From about 2005, Mr. Benyatov worked for the Defendant on the proposed privatisation of another Romanian state-owned company: S.C. Electrica Muntenia Sud SA. The Defendant was acting for the eventual purchaser, Enel SpA, an Italian Company.

“29.

Unknown to him at the time, during his work for the Defendant in Romania, Mr Benyatov was the subject of covert surveillance by Romanian security forces along with two other of the Defendant’s employees, various Romanian officials and other non-Romanian citizens. A criminal investigation was instigated against him and others in or about 21 November 2006.”

As I set out below, a draft amended pleading has been placed before the Court, but I consider first the pleading in its unamended form.

Paragraphs 19 to 21 of the Particulars of Claim plead: (Footnote: ¹⁹)

“19 The following terms were implied into the Contract as a matter of law, fact or business efficacy. At all material times, the Defendant owed to Mr. Benyatov the following duties:

“19.1

To indemnify Mr Benyatov in respect of all losses, costs, expenses and claims he has suffered arising from or in consequence of performing his duties on its behalf. This obligation continues after the termination of the Contract in respect of the duties performed by Mr Benyatov as an employee and/or agent of the Defendant.

“19.2

Not, without reasonable and proper cause, to act so as to destroy or seriously damage the trust and confidence between

employer and employee;

“19.3

To support Mr Benyatov in the performance of his

duties;

“19.4

To protect and safeguard Mr Benyatov from obvious risks to his safety and well-being arising as a consequence of the performance of his duties;

“19.5

To take every step to assist and support Mr. Benyatov in ameliorating the effect of any sanction imposed on him as an individual in consequence of the performance of his duties under the Contract, save in circumstances (which do not apply here) where it was terminated for gross misconduct.

“19.6

Alternatively, it was an implied term that the Defendant would not terminate the Contract so as to deprive Mr. Benyatov of the benefit of the terms in the preceding paragraph 19.5 (Footnote: ²⁰).

“19.7

To exercise any contractual discretion rationally, reasonably (i.e. not contrary to the Wednesbury standard) and/or giving due consideration to (Footnote: ²¹) Mr. Benyatov’s legitimate expectations. For the avoidance of doubt, it is contended that this obligation applied to the exercise of any discretion about matters previously governed by or arising in consequence of the performance of the Contract even after its termination.

“20.

Further or alternatively, the obligation to indemnify Mr. Benyatov under paragraph 19.1 in all the circumstances arises in equity.

“21.

Pursuant to Section 6 of the Human Rights Act 1998, the above obligations must be interpreted and applied by the Court in a way that is compatible with Article 8 of the ECHR (respect for private and family life) and Article 1 of Protocol No. 1

(peaceful enjoyment of possessions).”

The claim at paragraph 19.1 of the Particulars of Claim is a claim to be entitled to an indemnity. The indemnity sought is set out at paragraph 55 of the Particulars of Claim as follows: (Footnote: ²²)

“In consequence of the foregoing breaches of contract and/or of equitable duties and/or duties of care, Mr. Benyatov has suffered and continues to suffer loss and damage, in respect of which he is entitled to indemnification and/or damages, including the following:

“55.1

Lost income as a result of being unable to work as a senior finance professional since the termination of his employment on 13 June 2015 to date. Mr Benyatov’s expected average earnings as a senior finance professional without having been convicted in Romania would have been on average US$3-5m, and higher if all had gone well. Using the figure of US$4m, his lost income for the two years since the end of his employment is approximately US$8m, or £6m;

“55.2

Lost future income as a result of being unable to work as a senior finance professional in the future. Mr Benyatov’s future loss of earnings for the next 13 years (until Mr Benyatov is 65 years old) equates to approximately US$52m, or £39m at current exchange rates;

“55.3

A failed property transaction in London in September 2015, whereby Mr Benyatov was unable to obtain mortgage finance to complete purchases of Plots 46 (a 3-bed penthouse at £1.55m) and 47 (2 bed at £0.9m) Amberley Waterfront, W9 2JY, because of his convictions. Mr Benyatov lost £145,000 of the deposits paid, and costs and expenses of approximately £80,000. Mr. Benyatov had plans to develop these properties into a single unit, which would have a present value of approximately £3.5m. Accordingly, Mr. Benyatov has lost the difference in value of the purchase price and the current value of what would have been the developed property, minus development costs of approximately £100,000, resulting in a total loss of approximately £950,000.”

In respect of the claim for an implied right to indemnity as a term of the contract, the Defence pleads at paragraph 15.1: (Footnote: ²³)

“As to paragraph 19.1, it is admitted that there was an implied duty on the Defendant to indemnify the Claimant in respect of expenses and liabilities reasonably incurred by him in carrying out his duties as the Defendant’s employee and within the scope of his authority. Paragraph 19.1 is otherwise denied. More particularly, it is denied that the Defendant had any or any implied obligation to indemnify the Claimant in respect of losses, costs, expenses or claims incurred by him as a result of, or arising from the acts of third parties or other intervening acts, whether wrongful or otherwise, including, for the avoidance of doubt, the events in Romania complained of by the Claimant.”

Accordingly, it is common ground that some right to indemnity was implied into the Claimant’s contract of employment. The issue between the parties is, what is the extent of that indemnity?

Both parties referred me to textbook authority both in respect of the indemnity to which an employee is entitled and that to which an agent is entitled.

In the 33^rd edition of Chitty on Contracts at paragraph 40-114 the learned editors say this:

“Duty to indemnify the employee

“The relationship of employment imposes a duty on the employer to indemnify or reimburse the employee against all expenses, losses and liabilities incurred by the employee in the execution of his employer’s instructions or within the authority granted to him by the employer, or during the reasonable performance of his employment. Thus an employer who failed to insure his vehicle in respect of third party risks was obliged to indemnify his employee who drove the vehicle in the course of his employment and who was held liable to a third party injured by his negligent driving. Nor, it was held in Reid v Rush & Tompkins Group plc, is the employer under any implied obligation to advise an employee working overseas to arrange his own insurance cover against accidents. But there is no general duty to keep the employee insured against all third party risks or to indemnify the employee against liability for his or her own negligence. Ancient authority suggests that if the act or omission of the employee was manifestly unlawful, he or she is not entitled to such an indemnity; but he may still be entitled to an indemnity from his employer if the act was apparently lawful or he was ignorant of the facts which made it unlawful and could not be presumed to know that the particular transaction was unlawful.”

In that passage, the word “nor” at the beginning of the sentence dealing with the Reid case, to which I refer below, reads somewhat oddly, as also does the word “but” at the beginning of the next sentence. A matter for consideration raised by that passage is the overlap between an employer’s obligation to indemnify and an employer’s obligations in tort.

In the Employment section of Halsbury’s Laws of England at paragraph 39 is

As I have said, I was also referred to passages from textbooks relating to the position of agents. Of those references, I need only set out the following from Article 62 in the 21^st Edition of Bowstead on Agency:

“Reimbursement of Expenses and Indemnity from Liabilities Incurred in Course of Agency

“7-057 Subject to the provisions of Article 63, every agent has a right against his principal to be reimbursed all expenses and to be indemnified against all losses and liabilities incurred by him in the execution of his authority: and where the agent is sued for money due to his principal, he has a right to set off the amount of any such expenses, losses or liabilities, unless the money due to the principal is held on trust. There is, it seems, no implied indemnity in respect of loss suffered by an agent from torts committed against him by third parties in the course of the agency. (Footnote: ²⁶)

“Comment

“7-058 The rule here given is normally stated in such general terms, but its juristic basis may require attention. In the nineteenth century, actions at law were based on the common count for money paid, and it was not often necessary to distinguish between contractual and what would now be called restitutionary claims. At the present day it could matter how the claim was classified in a particular case.

“Contract

“7-059 Where the agency agreement is contractual, the agreement to reimburse and indemnify in return for what had been requested, if not express, can be regarded as an implied term of the contract that operates unless clearly excluded. There is thus no difficulty in such cases in holding that the principal is liable to reimburse and indemnify the agent for all payments made and liabilities incurred within the agent’s express or implied authority. This would include not only payments that the principal is legally bound to make, but also payments which the agent is legally bound to make though the principal would not be liable for them, cases where the agent is bound by the usage of a market, cases where the agent makes an authorised but gratuitous payment on the principal’s behalf, cases where the agent makes a payment which could not have been enforced but which there is a strong and legitimate pressure to make, cases where the agent, though under a liability, has as yet not had to meet it, and cases where a payment is reasonably but mistakenly made by the agent. Cases where the agent acts beyond his instructions, or interferes without request, would not however be included.”

As is said in paragraph 7-058 of that passage, “the rule here given is normally stated in such general terms”. The issues in the case before me require the Court to drill down to see what limits the law places upon the right to indemnity. This is not easy on the authorities.

For the Defendant, Mr. Goulding Q.C. puts forward seven propositions:

Of these seven propositions: (1) and (2) are not in dispute; (3) is very much in dispute, and requires detailed consideration; I accept proposition (5), which qualifies proposition (4); and I agree with propositions (6) and (7).

In support of proposition (3), Mr. Goulding does not refer to any English authority relating to indemnities, although he does refer to an Australian decision, to which I return below. He does, however, rely upon three English cases as to the scope of the duty of care owed by an employer to an employee.

The first is Reid v Rush & Tompkins Group plc [1990] 1 W.L.R. 212 (“Reid”).

Ralph Gibson L.J. gave the leading judgment, held at page 227D-228F that neither of the implied terms alleged were to be implied. He also rejected the claim based upon alleged duties of care in tort, saying at page 221F-H:

“The position is, accordingly, that although the duty of a master to his servant may extend to warning him of unavoidable risks of physical injury, it has not hitherto been extended to the taking of reasonable care to protect the servant from economic loss. Apart from Deyong v Shenburn [1946] K.B. 227 and Edwards v West Herts Group Hospital Management Committee [1957] 1 W.L.R. 415, which were mentioned in argument, we were not referred to any case in which the court has considered and rejected any such claim and no doubt the reason for that is not only the limitation of the duty, as stated, to personal safety but also the fact that it must be rare for any matter of economic loss to have been arguably caused by a breach of duty of the master without it being a breach of contract. If a servant is to have a claim in tort against his employer in respect of economic loss it must be based upon some special factor in the circumstances or in the relationship between them which justifies the extension of the scope of the duty to cover such a claim or upon a separate principle of the law of tort which imposes such a duty.”

He also rejected the suggestion that the employer had voluntarily assumed responsibility going beyond the normal relationship of employer and employee, and continued by considering the general duty of the defendant as employer, concluding at page 231E-F:

“I have had much difficulty in concluding that the general duty at common law upon a master to take care for the protection of his servant’s physical well being cannot be extended by decision of the courts to include protection for the financial well being of his servant in special circumstances where the foreseeable financial loss arises from foreseeable physical injury suffered in the course of the employment and the duty would extend only to a warning of a special risk. If this view be right the only way in which an employer’s general duty of care – and I emphasise that I am referring only to the general duty of care which arises out of the relationship – will be capable of extension to cover financial loss will be by legislation, or by a contractual term, express or implied on the particular facts, or by a term which the court is able to say must be implied by law.”

At page 232C-F Ralph Gibson L.J. emphasised the difficulty of holding a duty of care to exist where such a duty was not contained in any express or implied term of the contract of employment.

It is important to note that the decision in Reid arose in the context of alleged obligations to warn about lack of insurance. That context is emphasised in the passage of Ralph Gibson L.J.’s judgment at page 223G-H:

“….it is not necessary to decide whether …the plaintiff would have demonstrated an arguable case for showing that it would be just and reasonable to impose the new duty necessary for the plaintiff’s case. There are, I think, substantial difficulties when consideration is given to the current legislation to which I have already referred. In a number of contexts Parliament has legislated to protect people from the risks of uncompensated injury. Compulsory employer’s liability insurance has been imposed. Save for certain limited exceptions that duty does not extend to employment out of this country. Even in the limited and modest terms of a duty to warn it might be difficult to impose by judicial decision a duty on employers in respect of their servants working abroad, which relates to loss through injuries suffered where the employer is not responsible, having regard to the fact that Parliament has not imposed an obligation to insure even in respect of injuries for which the employer would be liable.”

Next, Mr. Goulding referred to the decision of the Court of Appeal in Greenway v Johnson Matthey plc [2016] EWCA Civ 408; [2016] 1 W.L.R. 4487 (“Greenway”). The first question was whether on the facts of the case the claimants had suffered physical injury in a case where the claimants were employed by the defendant at chemical plants on processes resulting in their exposure to platinum salts to a greater extent than they should have been. Medical evidence was that an individual who had been sensitised to platinum salts was not limited in any way in the course of his life, except that he had to avoid circumstances for further exposure with the risk of progressing to full blown platinum allergy. The Court of Appeal held that there was no actionable physical injury. The Supreme Court later overruled the Court of

At paragraph [37] Sales L.J. said:

“… The classic formulation of the duty owed by an employer to an employee is focused on protection of the employee from physical injury, not protection from economic harm (albeit if there is physical injury then damages may be recovered for consequential loss of earnings), and this is true in both contract and in tort … Having regard to the general policy reasons which inform the analysis of whether a standard term or duty of care should be implied into a contract of employment, in my view the proposed term or duty to hold the employee harmless from economic loss should not be taken to be implied.”

He rejected submissions that certain terms should be implied (see paragraphs

Mr. Goulding also referred to the decision of the Supreme Court in JamesBowen v Commissioner of Police of the Metropolis [2018] UKSC 40; [2018] ICR 1353 (“James-Bowen”). I shall return to this case in other contexts below, but I did not find it of assistance in determining the scope of the implied right to indemnity.

Mr. Goulding’s short point on these three cases is that if there is an implied right of indemnity of the width contended for by the Claimant, the reasoning in all of these cases would be otiose, since in each case the Claimant(s) could simply have claimed an indemnity for losses arising out of their employment, without having to seek to establish an implied term or duty to take care to avoid financial loss.

That tension emerges clearly from the decision of the New South Wales Court of Appeal in National Roads and Motorists’ Association v Whitlam [2007] NSWCA 81 (“Whitlam”): this is the case which I have referred to at footnote 26 above as being the authority cited by Bowstead for the proposition that

“there is, it seems, no implied indemnity in respect of loss suffered by an agent from torts committed against him by third parties in the course of the agency.”

In that case the respondent, Mr. Whitlam, had been President of the appellant association. In the course of his duties as President, Mr. Whitlam participated in a recorded television interview with Mr. John Lyons, a journalist from Channel Nine. The recording of the interview was not transmitted in its entirety. Rather, it was edited, and Mr. Whitlam’s words were interspersed

Mr. Whitlam sued both 2GB and Channel Nine for defamation. In those proceedings he incurred legal expenses. In the proceedings with the association Mr. Whitlam was claiming an indemnity in respect of those legal expenses.

There was an express indemnity in his contract. The provisions were quite complicated, but put shortly the issue for the Court was whether there was a “liability” which was defined as “any loss, liability, cost, charge or expense”.

The submission which the court had to consider was that damage to reputation and consequential loss of earning capacity and injury to feelings were the type of “loss” that fell within the indemnity.

The reasoning of the court led it to consider the scope of an indemnity under the general law. It was the submission of counsel for Mr. Whitlam that there is a general principle of law that a person acting on behalf of another is entitled to be indemnified for loss that they may suffer as a result of so acting.

The court referred to the following statement of Earl of Halsbury LC in

At paragraph [89] the court considered the case of Famatina Development

Unsurprisingly, Mr. Goulding relies upon paragraph [94] of that judgment, which echoes his submissions in respect of the trio of UK cases to which he referred as set out above.

So far as counsel’s researches have revealed, Whitlam has not been the subject of comment or consideration in any English case, textbook or article.

At the conclusion of the hearing before me, Mr. Ciumei Q.C., who appeared for the Claimant, drew my attention to an article written by counsel for Mr. Whitlam (Justin Gleeson S.C. and Nicholas Owens): Dissolving Fictions: What to Do with the Implied Indemnity? (2009) 25 Journal of Contract Law.

It became apparent that not only had Mr. Goulding not had an opportunity to consider that article, but neither had Mr. Ciumei save in a most cursory way. Accordingly I invited further submissions on Whitlam and on the article. This resulted in two further rounds of written submissions.

Both in his oral submissions and in his written submissions, Mr. Ciumei relied upon older authority as to the scope of the indemnity implied into contracts of agency and of employment.

First, Fletcher v Harcot (1622) (20 Jac. 1) Hutton’s Sep 55; 123 E.R. 1097. In that case Fletcher (an innkeeper) complied with a request from Harcot (a sheriff) to hold Batersby as a prisoner at his inn. Batersby subsequently brought an action for wrongful imprisonment against Fletcher, which he spent £10 defending. Fletcher was held to be entitled to that sum from Harcot. The case report is short.

In Adamson v Jarvis (1827) 4 Bing. 66; 130 E.R. 693 the plaintiff was an auctioneer. He was the subject of a successful claim by the true owner of goods sold by him in good faith on the instructions of Jarvis. He was held to be entitled to an indemnity from Jarvis in respect of the damages claim brought by the true owner of the goods (£1,195) and the sum of £500 “in and about defending the same action so brought against him as last aforesaid, and in and about taking and pursuing other necessary proceedings made incumbent upon him in consequence of the said sale and the said recovery”. In his judgment, Best C.J. said (at page 695 in the English Reports):

“The Defendant, who had induced the Plaintiff to make this sale by his false representation and request to sell, and who, after the sale, continued to assert his right to sell, and confirmed the agency of the Plaintiff by accepting from him the residue of the proceeds of the sale, had no right to dispose of this property. The consequence has been, that the Plaintiff, supposing, from the Defendant’s false representations, he had an authority which he had not, and, acting as the Defendant’s agent, has rendered himself liable to an action at the suit of the true owner of the goods, and has been obliged to pay damages and costs, whilst the Defendant, the sole cause of the sale, quietly keeps the fruits of it in his pocket.

“It has been stated at the bar that this case is to be governed by the principles that regulate all laws of principal and agent: Agreed: every man who employs another to do an act which the employer appears to have a right to authorise him to do undertakes to indemnify him for all acts which would be lawful if the employer had the authority he pretends to have. A contrary doctrine would create great alarm.”

In Frixione v Tagliaferro (1856) 10 Moo. 175 PC, the plaintiff entered into a contract with a third party as agent for the defendant. The third party sued the plaintiff successfully. It was held that the plaintiff was entitled to be reimbursed the judgment sum under an implied warranty and was awarded interest for being kept out of his money. In the opinion of the Rt. Hon.

In The James Seddon (1866) LR 1 A&E 62, the master of a ship, whilst at a foreign port with a homeward bound vessel, incurred expenses in defending himself against a charge of murder maliciously brought by two of the crew, whom he had censured for misconduct. The master was tried and acquitted but was bound over in the sum of £10 to prosecute the two men for perjury.

He was held to be entitled to recover both the expenses of his defence and the

In Lacey v Hill (1874) L.R. 18 Eq. 182 the question was whether a stockbroker who had purchased stock on behalf of a principal was entitled to sell the stock when the principal proved to be insolvent. Part of the argument before the court was a suggestion that an agent’s right to indemnity did not arise in the absence of an actual payment in respect of which the indemnity is claimed.

The James Seddon was considered at first instance in Famatina. As already summarised in Whitlam (see paragraph 126 above), that case concerned an employee who was engaged to make a report for the company that engaged him. When that report was presented, and orally elaborated on to the board, a company director who was unfavourably commented on in the report sued the employee for libel and slander. That action did not succeed, but the employee incurred costs in defending it. At first instance, Sargent J. said this:

“The further question then arises whether there is, as contended by counsel for Mr. O’Driscoll, a common law principle under which a servant is entitled to be indemnified by his employer for any loss occasioned to him in the performance of anything which it may be his duty to do. The law as stated in Macdonell on Master and Servant, 2^nd ed. p. 144, is this: “A master is bound to indemnify his servant for all expenses incurred or loss sustained in obeying his lawful orders,” That is a far more limited proposition, and one which could only be applicable, if at all, to the present case if I had found as a matter of fact that the company ordered Mr. O’Driscoll to make a report with reference to the conduct of Mr. Pape. As I have already said, I come to the conclusion that the company never did order Mr. O’Driscoll to do anything of the sort. I cannot find that the right of indemnity extends, as alleged on behalf of Mr. O’Driscoll, to indemnify a servant from the consequences of doing anything that it may be his duty to do. If that were so, I think there would have been ample authority to be found in the books, because it frequently happens that it is the duty of one servant to report a breach of duty on the part of some other servant, and if there had been any principle under which the person making the report was entitled to be indemnified by the employer against the consequences of that report, such as a libel or slander action, I think there would have been instances to be found in reported cases.” He concluded (at page 281):

“In the present case it is in my opinion quite impossible to say that Mr. O’Driscoll was defending an action on behalf of his principals; he was defending, and it turned out successfully defending, an action on his own behalf which originated out of reports made by him in the execution of a duty which he owed to his employers but not in direct obedience to their orders; and I cannot find that any case has gone the length of deciding that a servant is entitled to be indemnified by his master against expenses of that character.”

The Court of Appeal allowed an appeal. The entirety of the reported judgment of Lord Cozens-Hardy M.R. is as follows:

“LORD COZENS-HARDY M.R. said that Mr. O’Driscoll was much more than a servant of the company and the duties imposed upon him were far wider than those of a consulting engineer. He was undoubtedly appointed to be the agent of the company for many purposes and all he had done was done in pursuance of his duties as agent. Therefore he came within the well settled rule that an agent had a right against his principal, founded upon an implied contract, to be indemnified against all losses and liabilities, and to be reimbursed all expenses incurred by him in the execution of his authority.”

In Whitlam, the New South Wales Court of Appeal held that this case was merely an example of the principle stated in Sheffield Corporation v Barclay [1905] AC 392, namely that it was an example of an indemnity granted in respect of an act carried out by one party at the request of another “which turns out to be injurious to a third party”. As the article referred to above suggests, and as the Claimant submits in this case:

“Famatina is actually an extension to the formulation of the indemnity set out earlier by Campbell JA in his judgment in Whitlam (derived from Sheffield Corporation v Barclay), in that the actions of the claimant (as agent of Famatina) were not in fact injurious to the third party (the managing director). So the indemnity covers situations where the third-party interaction does not result in injury to the third party, but only loss to the person entitled to be indemnified.”

It is also significant that the Court of Appeal in Famatina did not accept the first instance judge’s restriction of the scope of the implied indemnity.

Next, reference was made to the House of Lords decision in Lister v Romford Ice and Cold Storage Co. Ltd [1957] A.C. 55. In that case Lord Tucker said, at page 595:

“It has always been an implied term that the master will indemnify the servant from liability arising out of an unlawful enterprise upon which he has been required to embark without knowing that it was unlawful.”

It is noticeable in this review of authority how little discussion there is of the extent of the scope of the right to indemnity implied between employer and employee or between principal and agent.

It is clear that the underlying principle is that set out in the pithy judgment of the Court of Appeal in Famatina (see paragraph 140 above), namely that there

That formulation distinguishes between, on the one hand, indemnity against losses and liabilities, and, on the other, reimbursement of expenses.

Much reliance has been placed by the Defendant upon the Whitlam case. Insofar as that case holds that under the general law of indemnity Mr. Whitlam was not entitled to be indemnified against his legal expenses, I have some difficulty in reconciling it with the English cases of Fletcher v Harcot, Adamson v Jarvis, Frixione v Tagliaferro and The James Seddon, none of which were cited to the NSW court. It also seems to me difficult to reconcile its interpretation of Famatina with that case itself. Accordingly, I question whether an English court would come to the same conclusion on the facts.

On the other hand, paragraph [94] of the judgment of the NSW Court of Appeal seems to me to raise a real problem as to the interrelation of the right to indemnity as formulated in the cases and in the textbooks with the law of tort as to circumstances in which an employee can recover damages against an employer.

In their post-hearing submissions counsel for the Claimant contended that the

For their part, counsel for the Defendant contended that there is no implied indemnity in respect of loss suffered as a result of acts done by third parties, where that loss is not an amount paid or to be paid to third parties. They conclude in their submissions served on 18 December 2019 that in light of (a) the total absence of any authority in which losses other than sums paid or payable to third parties were recoverable, and (b) the good reasons set out in Whitlam why they should not be, it is clear that the lost earnings and other losses claimed are irrecoverable as a matter of law under the indemnity implied into the Claimant’s employment contract.

The Defendant’s applications before me lasted two and a half days. As this judgment shows, there were many and difficult issues raised. Whilst I had a considerable body of authority cited to me, in the event the Claimant’s formulation of the limits to the right to indemnity only came after the conclusion of the oral argument.

There can be no doubt that any ruling on the scope of the right to indemnity would be a matter of considerable importance in the law of employment and of agency. The review of authority above shows that there has been no recent English exploration of the scope of the right to indemnity, and the older authority does not set out with any clarity what are the limits on that scope.

The Defendant’s formulation of the limit on the principle is arguably inconsistent with the dictum of Lord Cozens-Hardy MR set out at paragraph 140 above and with the cases where an employee or agent has recovered his own losses in the form of legal defence costs.

As set out above, I am required to consider whether the claim has a “realistic” as opposed to a “fanciful” prospect of success – see Swain v Hillman [2001] 1 All E.R. 91. I find myself unable to say that the Claimant’s relatively recent argument as to the scope of the right to indemnity has only fanciful prospects of success.

In my view, the arguments illustrate that this case falls within the “Altimo” principle (see paragraph 52 above), since any decision as to the scope of the right to indemnity would itself be a decision on a controversial question of law in what would then be a developing area.

Further, this seems to me be a case in which it is desirable for the facts to be found first. In the Response to the Defendant’s Part 18 Request for Further

In coming to the conclusion in the previous paragraph, I have in mind that on the Claimant’s case the Claimant, although innocent of any crime, has already

For these reasons, with one significant exception, I do not think it is appropriate to strike out the claim based upon an implied indemnity. The exception is the claim pleaded at paragraph 55.3 of the Particulars of Claim (Footnote: ²⁸) in respect of a failed property transaction. In my judgment the loss there alleged is too remote from the Claimant’s employment to be the subject of the implied indemnity.

As set out above, paragraph 19.2 of the Particulars of Claim alleges that the Defendant owed to the Claimant a duty not, without reasonable and proper cause, to act so as to destroy or seriously damage the trust and confidence between employer and employee. (Footnote: ²⁹)

The existence of the term is admitted in paragraph 15.2 of the Defence. (Footnote: ³⁰)

The breaches of this term are pleaded at paragraphs 47.1 to 47.8 of the Particulars of Claim. (Footnote: ³¹)

Paragraph 47.1 simply pleads a failure to indemnify, and in that sense adds nothing to the claim for an indemnity which I have already considered. It seems to me unlikely that a claim for an indemnity on this basis would succeed if the claim based upon an implied indemnity were to fail.

Paragraphs 47.2 to 47.8 are all concerned with the steps taken by, or not taken by, the Defendant once the Claimant had been arrested.

In answering this claim, Mr. Goulding again refers to the quartet of cases to which he had also referred in respect of the indemnity claim: Reid; Crossley v

For this purpose it is sufficient for me to refer to the last in the series, the James-Bowen case. In the judgment of Lord Lloyd-Jones JSC at paragraphs [16] to [20] he reviewed the authorities:

“16.

The mutual obligation of employer and employee not, without reasonable and proper cause, to engage in conduct likely to destroy or seriously damage the relationship of trust and confidence required between employer and employee is a standardised term implied by law into all contracts of employment rather than a term implied from the particular provisions of a particular employment contract: Mahmud v Bank of Credit and Commerce International SA…….. It was described by Lord Nicholls of Birkenhead in Mahmud… as a portmanteau concept. In that case the House of Lords considered it the source of a more specific implied obligation on the part of the employer bank not to conduct its business in a dishonest and corrupt manner, the breach of which gave rise to a cause of action for damage to the economic and reputational interests of its employees. Similarly, in Eastwood v Magnox Electric plc [2004] ICR 1064; [2005] 1 AC 503 the House of Lords recognised an obligation on an employer, in the conduct of his business and in the treatment of his employees, to act responsibly and in good faith ….

“17.

….

“18.

Although in Mahmud…. the House of Lords derived from the mutual implied contractual obligations of trust and confidence an implied obligation owed by the bank to its employees not to conduct a dishonest or corrupt business and held that damage to reputation resulting from breach sounded in damages, this is at a considerable remove from a duty to exercise care in the conduct of business so as to avoid economic or reputational damage to employees. This point was, in fact, emphasised by Lord Nicholls in a cautionary footnote, at p 618:

“there are many circumstances in which an employee’s reputation may suffer from his having been associated with an unsuccessful business, or an unsuccessful department within a business. In the ordinary way this will not found a claim of the nature made in the present case, even if the business or department was run with gross incompetence. A key feature in the present case is the assumed fact that the business was dishonest or corrupt.

“19.

[Referring to Scally v Southern Health and Social

Services Board [1991] ICR 771; [1992] 1 AC 294] … It is significant that the House of Lords did not base its decision on a more general duty of care owed by an employer to protect the economic interests of employees.

“20.

Similarly, in Crossley v Faithful & Gould Holdings Ltd [2004] ICR 1615 the Court of Appeal refused to derive from the mutual duty of trust and confidence a standard obligation, implied by law as a term of all contracts of employment, which requires an employer to take reasonable care for the economic well-being of his employers…..”

Mr. Goulding also referred to the lengthy analysis at paragraphs [28] to [33] in the same judgment to the significance of the possibility of conflicting interests.

Whilst those passages were contained in a section of the judgment primarily concerned with whether a duty of care was owed by the employer in tort, in

In my view, insofar as the implied term as to trust and confidence is deployed so as to attack the Defendant’s actions or lack of actions after the Claimant was arrested, it would in my view represent a considerable extension of the law in a manner which would be against the trend of the authorities referred to above. In this case, examination of the Defendant’s conduct after the arrest involves considerations of great sensitivity involving, as the evidence before me shows, contacts and possible contacts at very high levels within governments and diplomatically. Those contacts were particularly sensitive because there was a legitimate concern that the Defendant should not be seen to attempt to interfere with the integrity of the Romanian court processes.

It might be that if the Defendant had taken no steps whatever to protect the Claimant’s interests once he had been arrested a different case might have been available: I need not speculate further on that, because on any view the Defendant made considerable efforts to assist including the expenditure of large sums supporting the defence of the Claimant and his colleagues.

For these reasons, the breaches alleged at paragraphs 47.2 to 47.8 should not be allowed to proceed further.

However, in a draft amendment to the Particulars of Claim, a proposed amendment was placed before me to plead the following in paragraph 19.2: (Footnote: ³²)

“Further, as a particular incident of this implied term, the Defendant owed to Mr. Benyatov the following duties:

“19.2.1

that it would not conduct business in Romania in a way that risked being determined as unlawful (i.e. contrary to Romanian law);

“19.2.2

not to require him to embark on any such unlawful enterprise or potentially unlawful enterprise;

“19.2.3

that it would not conduct a business that placed him (and/or any other employee) at risk of criminal conviction in consequence of faithfully, diligently or properly carrying out his (or their) duties; and/or

“19.2.4

not to expose him to criminal conviction in consequence of faithfully, diligently or properly performing his duties for the Defendant.”

Associated with that proposed amendment are extensive amendments in the form of new paragraphs 47.9 to 47.15 concentrating on the pre-arrest period.

If permission were to be given to make these amendments or similar amendments, it could only be on the basis that they disclose a realistic case suitable to go forward to trial. As will be seen below, Mr. Cuimei has in effect withdrawn these amendments for the moment. My conclusion is that the case as presently pleaded in respect of the alleged breaches of the implied term of trust and confidence is unsustainable.

To reiterate, paragraphs 19.3 to 19.6 of the Particulars of Claim allege:

“19.3

To support Mr Benyatov in the performance of his

duties;

“19.4

To protect and safeguard Mr Benyatov from obvious risks to his safety and well-being arising as a consequence of the performance of his duties;

“19.5

To take every step to assist and support Mr. Benyatov in ameliorating the effect of any sanction imposed on him as an individual in consequence of the performance of his duties under the Contract, save in circumstances (which do not apply here) where it was terminated for gross misconduct.

“19.6

Alternatively, it was an implied term that the Defendant would not terminate the Contract so as to deprive Mr. Benyatov of the benefit of the terms in the preceding paragraph 19.5.”

The breaches of paragraphs 19.3 to 19.5 are the same as those alleged of paragraph 19.2.

In respect of paragraphs 19.3 to 19.5, the Defence pleads at paragraph 15.3: (Footnote: ³³)

“Paragraphs 19.3-19.5 are denied as free standing implied terms, save that it is admitted and averred that there was an implied obligation on the Defendant to take reasonable care not to expose the Claimant to risks of personal and psychiatric injury which were reasonably foreseeable and which the Defendant could guard against by proportionate measures. This obligation ceased on the termination of the Claimant’s contract of employment.”

Insofar as the pleaded case seeks to attack the post-arrest actions or inactions of the Defendant, in my judgment it fails for the same reasons as the case under the implied term of trust and confidence. In substance, the terms alleged at paragraphs 19.3 to 19.5 are best regarded as allegations of particular aspects of the portmanteau term: in this respect I agree with the first sentence of paragraph 15.3 of the Defence.

If the case under paragraph 19.5 fails, so also must the parasitical claim under paragraph 19.6. Accordingly, I do not need to consider the effect of the House of Lords decision in Johnson v Unisys Limited [2001] UKHL 13, [2003] 1 AC 518 on this part of the Claimant’s case.

As set out above, this pleads as follows:

To exercise any contractual discretion rationally, reasonably (i.e. not contrary to the Wednesbury standard) and/or giving due consideration to (Footnote: ³⁴) Mr. Benyatov’s legitimate expectations. For the avoidance of doubt, it is contended that this obligation applied to the exercise of any discretion about matters previously governed by or arising in consequence of the performance of the Contract even after its termination.” 180. There is limited acceptance of this term in paragraph 15.5 of the Defence: (Footnote: ³⁵)

“As to paragraph 19.7:

“15.5.1

It is admitted that, in principle, if the Defendant was required by the terms of the Claimant’s contract of employment to exercise a discretion, it was an implied term that the Defendant would not do so capriciously, irrationally or perversely;

“15.5.2

No admission is made as to the relevance of this implied term, however, given that there was no relevant term of the Claimant’s contract in relation to the matters complained of; and

“15.5.3

It is denied that it was an implied term that the Defendant would exercise any contractual discretion in accordance with the Claimant’s legitimate expectations. As a matter of law, any legitimate expectations on the part of the Claimant (as to which no admission is made) are no more than relevant factors in the exercise of any contractual discretion, alongside, inter alia, the Defendant’s own interests and any other relevant matters.”

The point raised in paragraph 15.5.3 has been accepted by the Claimant and reflected in the change to paragraph 19.7 which I have footnoted.

In line with the Defence, the Defendant’s attack on this part of the Claimant’s case has focussed on the alleged breaches of this term, which are set out in paragraphs 50 to 52 of the Particulars of Claim. (Footnote: ³⁶) First, paragraph 50:

“50.

Further or in the further alternative, and in the circumstances of this case, the appointment of a prominent individual as set forth above and the cost of the same is within the scope of the implied obligation at paragraph 19.1 above and/or is and would have been the proper application of any discretion in respect thereof on the principles set out in paragraph 19.7 above. Accordingly, the failure to appoint and pay for the appointment of such an individual is a breach of the said implied obligation by the Defendant.”

The context of this allegation is that, as set out at paragraph 38 of the pleading, the Defendant had received advice from international strategic consultants that “the step most likely to be effective was for the Defendant (and not an individual) to engage a US statesperson or former senior member of the US administration (Colin Powell was one suggestion) to engage with the

To continue with paragraphs 51 and 52: (Footnote: ³⁸)

“51.

Further, on each and every occasion that the Defendant exercised a discretion as to whether or not to take any of the steps set forth above and decided not to, that discretion was exercised irrationally, unreasonably and in breach of Mr Benyatov’s legitimate expectations and in breach of the implied term set forth at paragraph 19.7 above. The legitimate expectation of Mr Benyatov that the Defendant would support him to the fullest extent possible and in accordance with any external advice was reinforced by the contents of the letter dated 1 December 2014 from Mr de Boissard and the oral assurances provided to Mr Benyatov on behalf of the Defendant by Mr Philip, Mr Kyriakos-Saad, Mr Mazzucchelli and Mr Granetz.

“52.

In particular, the following exercises of discretion fall within the scope of the breach stated in the preceding paragraph:

“52.1

The decision of the Defendant in or about 1 December 2014 to do nothing further at that stage to help Mr Benyatov;

“52.2

The decision or decisions of the Defendant in Q2 2016.”

Paragraphs 51 and 52 reflect paragraphs 23 and 24 of the Particulars of Claim set out below.

What paragraphs 50 to 52 do is to select various possible courses of action which the Defendant might have chosen to pursue and allege that any decision by the Defendant not to do so was irrational or unreasonable.

In my view this is not a permissible approach. In each case, the steps open to the Defendant had pros and cons. There is nothing in the pleaded case which supports a case that the only rational or reasonable course to take was the particular identified course.

Further, I have already decided above that the Claimant’s case under the implied term of trust and confidence must fail in respect of the allegations related to the Defendant’s post-arrest actions or lack of action. In my judgment the Claimant cannot sidestep those difficulties through the term pleaded at paragraph 19.7.

For the reasons set out above, I do not accept that the claim pleaded in respect of the implied indemnity should be struck out. However, I do accept that the other ways in which the claims are presently put forward under the contract of employment should be struck out, subject to the possibility of being rescued by amendment.

Even if I had reached a different conclusion in respect of paragraphs 19.2 and following as presently pleaded, those claims would present substantial difficulties in respect of causation, as explained below.

Paragraph 23 of the Particulars of Claim pleads: (Footnote: ³⁹)

“On 1 December 2014 Gaël de Boissard (“Mr de Boissard”) wrote on behalf of the Defendant. The following terms of the letter took effect as variations of the Contract and/or as a collateral contract with the Defendant with the Defendant in consideration of which Mr. Benyatov remained in the service of the Defendant, namely that the Defendant:

“23.1

Would engage a prominent individual to express the

Defendant’s concerns regarding the irregularities and due process issues of the criminal case in Romania against Mr. Benyatov directly to the Romanian authorities after a final verdict;

“23.2

Would explore options for additional avenues that might be pursued in the unfortunate event of a negative decision in the criminal case in Romania against Mr. Benyatov, such as having the prosecution and/or conviction withdrawn or otherwise nullified, an application to the European Court of Human Rights, and direct representations to appropriate individuals and authorities in Romania, the USA, EU and elsewhere on his behalf;

“23.3

Would exhaust every appropriate avenue that could enhance the chances of a positive outcome for Mr. Benyatov in relation to the Romanian criminal case against him;

“23.4

Would continue to provide support to Mr Benyatov during these extraordinary circumstances.”

Paragraph 23 of the Particulars of Claim lifts the contents of the Defendant’s letter of 1 December 2014 (Footnote: ⁴⁰) and taking references from that letter contends that those terms of the letter took effect as variations of the contract of employment or as a collateral contract.

This is, in my judgment, a case which has no realistic prospects of success.

Firstly, as Mr. Goulding pointed out, the pleading does not accurately reflect the contents of the letter.

Secondly, it is only the fourth paragraph that expresses any view as to any course to be adopted in the future – and that only talks of “exploring options”.

Thirdly, and connected with the second point, the letter is not in terms which, objectively viewed, could be regarded as a contractual offer capable of acceptance – nor is there any pleaded case of acceptance of the terms.

Finally, whilst I accept the Claimant’s argument by reference to Hershaw v Sheffield City Council UKEAT/0033/14/BA (16 July 2014) that there can be cases where sufficient consideration can be given for a variation to a contract of employment such as a change in salary by the employee continuing in employment, it is difficult to elevate that to a general principle that mere continuance in employment will in all cases amount to sufficient

In my view, the last three elements which I have identified must all be considered together: was what is said to be a variation of the contract of a nature which viewed objectively would be regarded as a variation, rather than

Taking all these elements together, I find it impossible to see an arguable case either for a variation to the contract of employment or for a collateral contract. However there can be no objection to paragraph 23 remaining in some form in the pleading as a statement of the history of what happened to the Claimant.

Paragraph 24 of the Particulars of Claim pleads: (Footnote: ⁴¹)

“Mr Benyatov was given binding oral assurances in terms that the Defendant would take all steps necessary to ensure a satisfactory resolution to the events in Romania. These assurances took effect as variations of the Contract and/or as collateral contracts with the Defendant in consideration of which Mr Benyatov remained in the service of the Defendant. These assurances were given by the following four senior managers of the Defendant:

“24.1

Michael Philipp (then CEO of Europe) gave the oral assurances when he visited Mr Benyatov in Romania in 2006. He also made clear that the Defendant took Mr Benyatov’s situation very seriously. In addition, he assured Mr Benyatov that his job was safe.

“24.2

Fawzi Kyriakos-Saad (who replaced Mr Philipp as CEO of Europe) also visited Mr Benyatov in Romania. On a number of occasions he gave assurances that the Defendant would do everything it could to help him.

“24.3

Marco Mazzucchellli (Head of Investment Banking Europe, and Mr Benyatov’s direct manager) met with Mr Benyatov when he returned from Romania and assured him that the Defendant understood the gravity of the situation and that Mr Benyatov could count on the Defendant’s full support.

“24.4

Marc Granetz (co-head of Investment Banking) visited Mr Benyatov in Romania and also met him after he had left Romania in or around early 2008, and offered him assurances of the Defendant’s support.”

For present purposes, the factual matters alleged are accepted as factually accurate.

In my view, paragraph 24 suffers from the same deficiencies as paragraph 23.

Further, as set out below, both paragraphs 23 and 24 face considerable causation problems.

Paragraph 25 of the Particulars of Claim pleads: (Footnote: ⁴²)

“Mr Benyatov was owed a duty of care in tort by the Defendant to protect him from economic losses arising from the performance of his duties. Further or alternatively, the Defendant owed Mr. Benyatov a duty of care not to expose him to criminal conviction in the performance of his duties for the Defendant. In particular, the Defendant had a duty:

“25.1

to perform an adequate risk assessment in relation to the risks faced by Mr Benyatov performing his duties on behalf of the Defendant in Romania;

“25.2

to advise him of risks in relation to covert surveillance in Romania;

“25.3

to intervene adequately in Romania to demonstrate Mr Benyatov’s innocence to:

“25.3.1

the relevant prosecutorial and/or judicial authorities, and/or

“25.3.2

to individuals or political authorities with power to withdraw the prosecution against Mr Benyatov due to the lack of any meritorious claim against him; and

“25.4

generally to take reasonable care to protect him from criminal convictions and the resulting financial losses.”

The Defendant’s starting point is that an employer owes no duty (a) to protect an employee from economic loss; or (b) to inform an employee of the risk of loss, caused by a third party, when working abroad.

There is a considerable overlap between the Defendant’s arguments on the implied term of trust and confidence and its arguments on duty of care. In particular, at the heart of the Defendant’s submissions are the decisions to which reference has already been made of Reid; Crossley; and James-Bowen.

Reference was also made to Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4; [2018] AC 736. The submission made was that in that case the Supreme Court emphasised two important points:

The Defendant contends that the Claimant’s claim is, in substance, a claim to recover damages for breach of an alleged duty owed by the Defendant of a responsibility to protect the Claimant from economic losses. It submits that the claim has no real prospect of success for the following reasons:

The Claimant’s submissions start from examination of the position as to whether there is an implied indemnity of sufficiently wide scope and as to the application of the implied term of trust and confidence. Specifically in respect of the claim in relation to tortious duties of care, the Claimant contends that there are a number of areas of factual dispute which will require a trial hearing factual and expert evidence. The factual disputes include the following:

Paragraph (2) above sets out in full the Claimant’s argument in paragraph 47.2 of his counsel’s skeleton argument as I regard the matters set out therein to be of particular significance. See in this regard paragraphs 72 to 90 of this judgment above.

Paragraphs 25.1, 25.2 and (in part) 25.4 are particularly concerned with the obligations upon the Defendant prior to arrest. Lengthy supporting particulars are given at I/tab 6/65-68 and there is substantial overlap with the particulars given in respect of paragraph 19.1 at I/tab 6/52-54 to which I have referred at paragraph 156 above.

Mr. Goulding is right to submit that there is clear authority that an employer is under no general duty to prevent an employee suffering economic loss. See for example per Ralph Gibson L.J. in Reid at page 221H and 231E; per Dyson L.J. in Crossley at [33]; and per Sales L.J. in Greenway at [37] and [39].

However, Mr. Ciumei submits firmly that he is not relying upon any such general duty. In that respect it seems to me that the first sentence of paragraph 25 of the Particulars of Claim goes too far.

However, it is clear that in certain limited circumstances a duty of care is imposed by the law upon an employer to protect an employee against economic loss.

There are two leading cases in this regard. The first is the House of Lords decision in Scally v Southern Health and Social Services Board [1992] 1 A.C. 294. In that case the issue was whether an employer was under a duty to bring to the attention of employees important terms of the employees’ contracts of employment. The House of Lords answered the issues raised in favour of the employees, but Lord Bridge of Harwich, who gave the leading speech, emphasised that the starting point was an analysis of the relevant contracts of employment.

The second case is Spring v Guardian Assurance Plc [1994] ICR 596. In that case the issue was whether an employer owed a duty of care to its employee in giving a reference to another potential employer. In his speech, Lord Woolf said, at page 636 B-C:

“The relationship between the plaintiff and the defendants could hardly be closer. Subject to what I have to say hereafter, it also appears to be uncontroversial that if an employer, or former employer, by his failure to make proper inquiries, causes loss to an employee, it is fair just and reasonable that he should be under an obligation to compensate that employee for the consequences. This is the position if an employer injures his employee physically by failing to exercise reasonable care for his safety and I find it impossible to justify taking a different view where an employer, by giving an inaccurate reference about his employee, deprives an employee, possibly for a considerable period, of the means of earning his livelihood. The consequences of the employer’s carelessness can be as great in the long term as causing the employee a serious injury.”

In my view, the appropriate course for this court to take on this strike out application is to ask whether the Claimant has established an arguable case for the existence of a duty of care applying the well established three limb test set out by Lord Bridge in Caparo Industries plc v Dickman [1990] 2 AC 605 at pages 617-618:

“in addition to foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of ‘proximity’ or ‘neighbourhood’ and that the situation should be one in which the court considers it fair, just and reasonable that the court should impose a duty of a given scope upon the one party for the benefit of the other.”

As to foreseeability, the Claimant’s pleaded case in the Response to the Defendant’s Request for Further Information includes allegations that if the Defendant had carried out appropriate risk assessments, it would or should have known of the political risks which the Claimant would or might face in Romania (see for example I/tab 6/67-68). In particular, the central allegation is that a risk assessment should have been carried out before the Claimant was deployed to Romania, and that if such an assessment had been carried out, it would have revealed (Footnote: ⁴³)

“that Romania was a high risk market in relation to political risk, deep issues of corruption and a poorly functioning judiciary, with a concomitant risk of political exposure in dealmaking, particularly in respect of privatisation, and in circumstances where individuals exploited the internal security and police forces and/or the legal system and processes and/or the judiciary to target competitors and political/business adversaries, with the risk that Mr Benyatov might be caught up in such matters, the Defendant had a duty of care to perform an adequate risk assessment in relation to the risks faced by Mr Benyatov.”

If those allegations are made out, then foreseeability is highly likely to be established.

As to proximity, given that the relationship between the Claimant and the Defendant was that of employee and employer, and if the allegations of foreseeability set out above are proved, then it will not be difficult for the Claimant to establish proximity.

Accordingly, the real issue appears to me to be whether the Claimant has a case with sufficiently arguable prospects to clear the relatively low hurdle which must be cleared to avoid a strike out, that it is fair, just and reasonable to impose the duties of care which the Claimant alleges the Defendant owed.

In considering whether the imposition of the duties alleged is fair, just and reasonable, it is necessary to consider the points raised by the Defendant set

Firstly, it is suggested that the duty of care in tort is unsustainable as it is not alleged to arise under the contract. As to this, I do not accept that it is necessary that the duty arose under the contract – in Spring the giving of a reference did not arise under the contract. In any event, as I have already noted, the Claimant placed before me a draft Amended Particulars of Claim which would align the Claimant’s case in respect of the implied term of trust and confidence with the case in tort.

Secondly, it is said that the claim is contrary to binding authority, namely Reid. There is strength in this, but there have been significant decisions in the

For those reasons, the Claimant has prospects which are more than fanciful of establishing that the court is not bound by Reid to hold that no duty of care existed.

Thirdly, it is said that the courts have consistently rejected a duty on an employer to protect an employee from economic losses. I accept this as a general proposition, but, as pointed out above, there are exceptions to this.

Fourthly, it is said that a duty of care is less likely to arise to prevent a person being harmed by a third party. I accept this also as a general proposition, but there are exceptions, of which Dorset Yacht Co. Ltd v Home Office [1970] A.C. 1004 may be the best known example. Further, the closer the connection or proximity between the parties, the more likely it is that a duty may arise – the close proximity of an employer to an employee is likely to make it easier for a court to find that there is an exception to the general rule.

Fifthly, it is submitted that the factual matrix militates against the alleged duties. This submission takes some but not all of the facts which a court might regard as material: in my view this submission on the part of the Defendant strengthens the Claimant’s submission that the decision as to whether a duty of care exists should be taken after trial on the evidence.

All of the above factors seem to me to be matters which a court would need to consider under the third limb of the Caparo approach, although it may be that other lawyers would approach the analysis differently.

I turn now to the two matters relied upon by the Defendant as showing that an extension of the duties owed by the Defendant would not be fair, just or reasonable.

It is said that the duties for which the Claimant contends are far reaching. The liabilities upon institutions such as the Defendant could be enormous.

At this stage it is not possible to assess just how significant for the Defendant and other banks the imposition of a duty would be, but I accept that it would have a very significant potential. Equally, at this stage it is impossible for the

There is, however, greater merit in the proposition that the duties contended for once criminal proceedings are commenced overseas are invidious and unworkable. There is considerable authority for the proposition that a duty will not be imposed where it may create a conflict between the interests of an employer and employee. See for example paragraph [44] of the judgment of

These policy considerations are strengthened in this case where the steps which it is suggested should have been but were not taken are steps of great political and diplomatic sensitivity. I have difficulty seeing how a court can sensibly investigate allegations of the type set out in paragraph 54.3 which alleges that the Defendant

“failed to intervene adequately in Romania to demonstrate Mr Benyatov’s innocence to the relevant prosecutorial and/or judicial authorities, and/or to individuals or political authorities with power to withdraw the prosecution against Mr. Benyatov due to the lack of any meritorious claim against him.”

This allegation goes much further than an allegation that the Defendant should have taken steps to defend or engage lawyers to defend the Claimant. As I have said, the evidence before me is that the Defendant did that, and continues to do that, at great expense. The allegation goes much further and asserts that the Defendant had a duty to attempt to intervene politically in the prosecution system of a sovereign nation.

Further, any such case must be a claim for loss of a chance. That is not how it is pleaded at present, and no indication was given to me as to how an English court could assess, for example, the likely response of the Romanian government to an informal approach by a retired American Secretary of State.

In my judgment it would not be fair, just or reasonable to impose such a duty.

Accordingly paragraphs 25.3 and 54.3 should be struck out as should be

On this basis paragraphs 25.1 and 25.2 survive. However, for the reasons given above in respect of the indemnity claim, in my judgment the loss in respect of a failed property transaction pleaded in paragraph 55.3 is too remote in law to be recoverable.

The Defendant contends that the Claimant has no real prospect of establishing breach of any relevant duty.

This case is set out at paragraphs 44 and 45 of the Defendant’s skeleton argument. I understand that the target of this attack is upon the Defendant’s conduct after the Claimant’s arrest. Given the conclusions which I have reached on that part of the case, the issue as to whether the case on breach can be made out does not arise, although the points raised add strength to my conclusions in that regard.

The Defendant puts forward three inter-related propositions:

In approaching these submissions, the context is the view I have taken about which parts of the case on liability should go forward, namely that only the case reliant upon matters prior to the Claimant’s arrest should proceed.

If that case succeeds on liability, I do not envisage the case on causation to present particular problems since the consequence of the case on liability inherently assumes that the Claimant’s arrest and consequent conviction are matters falling within the Defendant’s obligation to indemnify and/or are the consequences of the Defendant’s breach of duty.

Accordingly, I reject the submission that there is any part of the Claimant’s case which should be struck out by reference to difficulties of causation which would not otherwise fall to be struck out.

However, in respect of the claims relating to the Defendant’s actions and inactions post arrest, my conclusions above are (as I have indicated) underpinned by my perception that those claims fail to address and surmount considerable difficulties as to causation.

In respect of the pre-arrest allegations, I understand the Claimant’s case to be

However, the post arrest case is very different. That case must be a loss of a chance case, although it is not pleaded in those terms. As I have indicated, I do not understand how it is said that the court can assess (for example) what the Romanian government would have done had a distinguished retired United States Secretary of State approached it informally. Other examples come to mind.

Accordingly, in respect of allegations relating to post arrest events, had I not been minded to strike those out on other grounds, I would have been minded to strike them out on this basis.

As set out above, I accept that paragraph 55.3 of the Particulars of Claim should be struck out on the basis that the claim there put forward is too remote.

Paragraph 56 of the Particulars of Claim claims for the cost of mitigating the

In paragraphs 78 and 79 of the Claimant’s counsel’s skeleton argument, it was

Paragraph 9 of Mr Benyatov’s statement which is referred to in paragraph 78 of that skeleton argument deals with two matters: the abandonment of the claim for an injunction and/or specific performance and an amendment to increase the amount claimed by way of lost earnings. (Footnote: ⁴⁴)

During the course of the hearing before me, a draft Amended Particulars of Claim was placed before me. Mr. Goulding indicated that he had objections to the proposed amendment.

At the end of the hearing Mr. Ciumei indicated that he no longer pursued the application in that form: (Footnote: ⁴⁵)

“So what I would like to do in amendment is as follows: we haven't made a formal application to amend, and we have explained, when we provided this document, that it was to fulfil several purposes.

One, to deal with the points that we promised we would deal with. We promised when they made their application we would drop the injunction point and that we would take the information on quantum in the schedule and we would put it in the pleading so that there was no longer an inconsistent case, one case.

I obviously stand by that, so I seek permission to do that. I ought to have permission to do that, (1) because making the case consistent I can't see how they could ever object to us putting the quantum case in, and dropping a whole head of relief, again they can hardly object to that, so that ought to stand.

Beyond that, with one exception which I will come to, the rest of our proposed amendments were put forward on the basis, and we explain this in correspondence, that we wanted to have a draft available at this hearing to be able to show how, in our view, the case was developed by having access to some preliminary expert evidence.

We said we're not terribly happy about doing that, because we haven't finalised the evidence, so it is not an ideal way forward, but the amendments we put forward were directed, at least in part, to that end.

We also wanted to, basically, beef up our particulars so we could support the application for additional expert evidence that in my submission the Master had suggested, if we wanted to go that route, we really needed to do that.

So those are all things we would like to do, but we don't formally have to do them right now, because they are not necessary responses to this strike-out application.

If our case were to be found wanting, if it is defective, then your Lordship will appreciate, it is well understood, and there is a reference in the White Book to an authority confirming this, it is in the White Book, page 82, paragraph 3.4.2, a party should have the opportunity to fix their case facing a strike-out, and if they can't then they get struck out. In my submission we are not in that territory.

The two bits that do fall away on account of the strike-out application, it's the injunction, well we are dropping that, and then putting the quantum information in, we have done that.

The rest is really what we would like to do. And since I don't have a formal application, my suggestion is I don't deal with that now. What we do is, if we do survive this strike-out, if there isn't a summary disposal, we will do that at the CMC.

I have listened to my learned friend's complaints about the lack of particularity he says still exists. I will do my best to fix that if I get the opportunity, if this case is still going after this hearing.”

As set out above, it does seem to me that there are parts of the case which could be rescued by amendment. However, although Mr. Goulding has made some submissions on the draft which he (and the Court) had been provided with, I do not think he had said everything he would have wished to say.

Moreover, in the passage set out above, Mr. Ciumei accepted that there could be further particularisation.

In principle, it seems to me that the Claimant should have an opportunity to draft an amendment in the light of this judgment, upon which the Defendant should have an opportunity to make submissions.

I will invite submissions from the parties as to how they propose the court should proceed.

For the above reasons, subject to the parties’ submissions on the precise form of the order which I should make:

It seems to me that paragraph 58 will also fall away, but I invite the parties’ submissions on this point.

In the alternative to its application for a strike out or summary judgment, the Defendant applies for a conditional order under CPR 3.1(3) and paragraph 5.2 of Practice Direction 24.

Under the old rules prior to the CPR it was a familiar course for the court to adopt to order a defendant to pay money into court in the alternative to summary judgment being entered in the plaintiff or claimant’s favour.

The CPR now enable such an order to be made in the alternative to summary judgment being entered in favour of a defendant: under paragraph 4 of PD24, where the Court considers that a claim may succeed but it is improbable it will do so, it may consider making a conditional order. By virtue of paragraph 5.2 of PD24, such a conditional order may require the claimant to pay a sum of money into court. This is the order sought by the Defendant.

Applications for a conditional order made by a defendant against a claimant are unusual. Researches by counsel have revealed 5 examples of such orders being made: Olatawara v Abiloye [2002] EWCA Civ 998; [2003] 1 W.L.R.

In the 2019 case of Gama Aviation (UK) Ltd v Taleveras Petroluem Trading

I approach this application having decided that significant parts of the Particulars of Claim should be struck out but other parts of the claim have realistic rather than fanciful prospects of success.

A conditional order would only be made in respect of the surviving claims. There is a clear conflict between deciding that a claim has realistic prospects of success and considering that it is improbable that the claim may succeed. Such a conclusion might be more easily reached if the claim turned entirely upon a claimant’s evidence, but this is not such a case: here most of the primary facts appear not to be the subject of much if any dispute. The case is likely to turn upon conclusions of law informed by expert evidence.

In those circumstances, in my judgment this is not a case in which it is improbable that those parts of the claim which survive will succeed.

Accordingly, I decline to make the conditional order sought.

The Defendant seeks an order that the Claimant should provide security for the

The Claimant submits that the following are the applicable principles:

I accept that based upon the authorities cited by the Claimant, these are all material factors.

In the judgment of Hamblen L.J. in Danilina v Chernukhin [2018] EWCA Civ 1802; [2019] 1 W.L.R. 758 at paragraphs [51] and [52] there is the following summary of the principles which a court should apply in an

In that summary, Hamblen L.J. referred to the Court of Appeal decision in

It is material to cite two passages from the judgment of Mance L.J. in that case:

“61.

Returning to rules 25.15(1) and 25.13(1) and (2)(a) and (b), if the discretion to order security is to be exercised it should therefore be on objectively justified grounds relating to obstacles to or the burden of enforcement in the context of the particular foreign claimant or country concerned. The former principle was that, once the power to order security arose because of foreign residence, impecuniosity became one along with other material factors: see the Thune case [1990] 1 WLR 562 cited above. This principle cannot, in my judgment, survive in an era which no longer permits discrimination on grounds of national origin. Insolvent or impecunious companies present a different situation, since the power under CPR 3 25.13(2)(c) applies to companies wherever incorporated and resident and is not discriminatory.”

And

“67.

The risk against which the present defendants are entitled to protection is thus not that the claimant will not have the assets to pay the costs, and not that the law of her state of residence will not recognise and enforce any judgment against her for costs. It is that the steps taken to enforce any such judgment in the United States will involve an extra burden in terms of costs and delay, compared with any equivalent steps that could be taken here or in any other Brussels/Lugano state. Any order for security for costs in this case should be tailored in amount to reflect the nature and size of the risk against which it is designed to protect.”

There is no dispute that the Claimant is resident in the United States of America and that therefore the formal requirements of CPR r 25.13(2)(a) are satisfied.

The Defendant’s case in support of the application is not based particularly upon difficulties of enforcing an award of costs in the Claimant’s place of residence, but rather on the circumstances of the Claimant himself. Four points are made by Mr Goulding:

In a second witness statement dated 5 December 2019, Mr Benyatov set out

I have no reason to doubt the accuracy of that statement of the Claimant’s

As I have said, the amount which the Defendant seeks by way of security is

I have not seen a detailed breakdown of the Defendant’s projected costs, but have no reason to doubt that the estimate of £2,289,474 put forward in paragraph 7 of Ms. Banks’s First Witness Statement (Footnote: ⁴⁷) is of the likely order of

In my view there has been unexplained delay in this application for security for costs being made. The appropriate way of dealing with that delay, in my judgment, is to consider only making any order for security for costs in respect of costs yet to be spent, thus in respect of £1,813,870.

The amount sought by way of security is 50% of the projected costs: accordingly the amount which I consider as the amount which might be secured is in round terms £900,000. It is against that sum that I consider the grounds relied upon in support of the application.

The authorities to which I have referred make it clear that security is to be ordered against the risk of non-enforcement.

I am not satisfied that the Defendant has established that there is a risk of nonenforcement of a cost award in the amount of £900,000. I reach that conclusion for the following reasons:

For those reasons I do not accept that this is a case in which an order for security for costs should be made. However, for completeness I deal with the

For these reasons, the application for security for costs is also refused.