Danilina v Chernukhin & Anor [2018] EWHC 39 (Comm)

Case No CL-2017-000117[2018] EWHC 39 (Comm)IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTOF ENGLAND AND WALES (QBD)COMMERCIAL COURTVenue Royal Courts of Justice, Rolls BuildingLondon EC4A 1NLDate 19 January 2018
Before
Mrs Justice Cockerill
Between
LOLITA VLADIMIROVNA DANILINAClaimantVLADIMIR ANATOLEVICH CHERNUKHINDefendantNAVIGATOR EQUITIES LIMITEDDefendantVADIM KARGINDefendant
GRAHAM CHAPMAN Q.C. and TOM FORD (instructed by Byrne & Partners) for ClaimantJONATHAN CROW Q.C. and JAMES WEALE (instructed by Clifford Chance) for First and Second DefendantsIAIN PESTER (instructed by PCB Litigation) for Third DefendantHearing Hearing dates: 8 December 2017
JudgmentMrs Justice Cockerill :Background
[1]The applications before me are for security for, respectively, the First and Second Defendants’ costs and the Third Defendant’s costs. They arise in relation to a claim brought by the Claimant, Mrs Danilina, which has been listed for a four-week trial at the end of 2018, jointly with another action with which it has extensive factual and legal overlap.[2]The factual background to these claims and to this application can be found in more detail in the judgments of Teare J at [2017] EWHC 3052 (Comm) and Miss Sonia Tolaney QC (sitting as a Deputy Judge) at [2017] EWHC 2740 (Comm).[3]For present purposes I need only recite the following facts, which give context to the arguments contained in this judgment.[4]The current proceedings are proceedings which are related to and have been joined with arbitration proceedings which involve a dispute between the well-known wealthy Russian businessmen Mr Chernukhin and Mr Deripaska. It concerns companies called Navigator Equities Limited (i.e. the Second Defendant); and Filatona Trading Limited which were joint venture vehicles. Under a Shareholders Agreement dated 31 May 2005 (“the SHA”) each of the companies held 50% of Navio Holdings Limited, which in turn held the parties' stake in TGM, the owner of a valuable real estate site in central Moscow.[5]At the heart of the dispute is the position of Ms. Danilina, who was named as party to the SHA and described as the beneficial owner of Navigator. She was at the time in a close relationship with Mr Chernukhin. It is the case of Mr Chernukhin that she was, to the knowledge of Mr Deripaska, a nominee for Mr Chernukhin. Her case is that she was indeed the beneficial owner of Navigator and a party to the SHA in her own right.[6]In 2009 a dispute between Mr Chernukhin and Mr Deripaska resulted in, according to Mr Chernukhin, a forcible takeover of TGM's business premises by Mr Deripaska on 14 December 2010. Thereafter, there emerged a proposed deal whereby Mr Deripaska would buy out Mr Chernukhin's interest for US$100 million. But that deal never took place. Mr Chernukhin commenced arbitration proceedings in London pursuant to the terms of the SHA.[7]Mr Deripaska disputed that Mr Chernukhin was party to the SHA and hence that the tribunal had jurisdiction. This preliminary issue was determined by a very experienced tribunal (J. William Rowley QC, Christopher Symons QC (presiding) and Michael Brindle QC) ("the Tribunal") in an Award dated 16 November 2016 (“the First Award”). The Tribunal held that Mr Chernukhin was party to the SHA and that Mr Deripaska had put forward a case which he knew to be untrue. The Tribunal also held that Navigator itself had the right to claim relief for the alleged breaches of the SHA.[8]Following the First Award, Mr Deripaska and Filatona issued proceedings pursuant to s.67 of the Arbitration Act 1996 as against Navigator, Mr Chernukhin and Navio on 14 December 2016 ("the s.67 proceedings").[9]These current proceedings arise against the further background of two agreements dated 23 December 2016 and known as the Loan Agreement and the Option Agreement. Under their terms Mr Deripaska agreed to pay Ms. Danilina US$2 million in consideration of Ms. Danilina(i) producing evidence in support of Mr Deripaska's case in the arbitration;(ii) not cooperating with Mr Chernukhin; and(iii) instituting proceedings against Mr Chernukhin for the purpose of establishing that Ms. Danilina, not Mr Chernukhin, was the beneficial owner of Navigator. Mr Deripaska agreed to finance those proceedings. In the event that Ms. Danilina established title to Navigator he promised to pay her a further $10 million for her share of Navigator.[10]These proceedings (“the Danilina Proceedings”) were then commenced in this court on 22 February 2017. Since July 2017 it has been ordered that the two actions be managed together.[11]The substantive arbitration hearing took place in March 2017. In a further Award dated 20 July 2017 (“the Second Award”) the Tribunal held that Mr Deripaska had acted oppressively towards Mr Chernukhin and ordered Mr Deripaska to buy out Mr Chernukhin's interest in Navio for $95,181,285.[12]In these proceedings there are two sets of issues. The first set of issues overlaps with those in the s. 67 proceedings. But Mrs Danilina also brings claims (known as "the Family claim") based on allegations that, in or around 2007, when her relationship with Mr Chernukhin ended, she and Mr Chernukhin agreed that assets accumulated during the course of their relationship and regarded as family assets would be divided as agreed between them. It is Mrs Danilina’s case that she and Mr Chernukhin agreed that Mr Chernukhin would implement this agreement (“the 2007 Agreement”), and that she had mistakenly understood and was led to believe that he was (at least partly) performing this agreement through the creation of a trust (“the Sanderson Trust”); when in fact he did not do so. Mrs Danilina makes claims for breaches of trust, contract and fiduciary duty as against Mr Chernukhin.[13]It follows that the claims in this action are worth many millions of dollars.

Security for Costs: the context

[14]Pursuant to CPR 25.13(2), the court “may make an order for security for costs” if:
“it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and (i) one or more of the conditions in paragraph (2) applies …”
[15]For present purposes the relevant sections of paragraph (2) are as follows: “(a) the claimant is– resident out of the jurisdiction; but not resident in a Brussels Contracting State, a State bound by the Lugano Convention, a State bound by the 2005 Hague Convention or a Regulation State, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982 … (f) the claimant is acting as a nominal claimant, other than as a representative claimant under Part 19, and there is reason to believe that he will be unable to pay the defendant’s costs if ordered to do so”.

resident out of the jurisdiction; but

[16]The Defendants say that an order for security for costs, effectively in the full amount of the anticipated costs of the action, is appropriate here under either or both of these heads.

The "Resident out of the jurisdiction" head

[17]There is no dispute that the jurisdictional hurdle in sub-section (a) is satisfied in this case.[18]In relation to that sub-section, the Defendants drew my attention to the following points from the White Book at 25.13.6.[19]Firstly they concede that in general, security for costs under this head is fixed by reference to the additional costs associated with enforcing against the claimant’s assets based outside of a Convention jurisdiction: Nasser v United Bank of Kuwait [2002] 1 WLR 1868 (CA). However, that starting point can be departed from. For example in De Beer v Kanaar & Co (No. 1) [2001] EWCA Civ 1318; [2003] 1 WLR 38, at [73], and [89] – [91]. It was there said that where there has been a lack of probity on the part of the claimant and there was a “risk” that an order for costs would be difficult or impossible to enforce, then it may be appropriate to award security representing the entirety of the defendant’s estimated costs. In the context of enforcement in Russia, there are no relevant treaties as to enforcement in place.[20]Secondly they remind me that formal evidence is not always required in order to prove the obstacles or difficulties of enforcement which may arise (Nasser paragraph 64). Whilst there must be some proper basis for considering that such problems exist, the court will take note of obvious realities.[21]Thirdly there is the question of the appropriate test. On this they rely on the judgment of Gloster LJ in Ras al Khaimar Investment Authority v Bestfort Developments LLP [2016] EWCA Civ 1099 [2017] CP Rep 9 resolving the controversy which had previously surrounded this issue. This establishes (see paragraph 77) that an applicant seeking an order for security on the basis that he would face obstacles or additional burdens in enforcing an order for costs against the respondent, is not required to prove that such obstacles or additional burdens are “likely”; instead the threshold test the evidence has to satisfy is one of “real risk”.[22]The Defendants also relied heavily on the portion of the White Book commentary at p 809 which cites Simaan v Pilkington Glass [1988] 2 WLR 761 as authority for the proposition that the court “must” take into account the prospects of success. This, they submitted, authorises and indeed requires me to consider the merits of the application.[23]My attention was also drawn to the judgment of Gross J (as he then was) in Texuna International Ltd v. Cairn Energy [2004] EWHC 1102 (Ch): “23(ix). As to the applicant for security demonstrating the risk (Nasser, at [67]) of additional obstacles to or burdens of enforcement in a country outside the zone, evidential requirements will necessarily depend on the facts of the individual case: Nasser, at [64]. Satellite litigation is undesirable so that in some cases the Court will no doubt be content to take notice of obvious realities or to draw commonsense inferences, without formal evidence. But, ordinarily, even if the Court is minded to take a broad brush, commonsense approach, it will be necessary for the applicant at least to show some evidential basis for the conclusion that there would be a realistic risk of additional obstacles or burdens in the way of enforcement in a country outside the zone; it will be recollected that Nasser, at [63], precludes the Court from making any inflexible, generalised assumption … xi) Nasser, where applicable, clearly points to relating the quantum of security to the extra burden of enforcement outside the zone, rather than to the likely costs of the case — though in jurisdictions where enforcement is effectively impossible, the two may be indistinguishable. It is neither here nor there that Nasser does not in all cases serve to limit the security to the amount of the extra burden; in certain situations, it may be wholly impractical to seek to do so. For the avoidance of doubt, save exceptionally, the Court is still likely to wish to have evidence of the likely costs of the case,(1) for reasons of proportionality,(2) as a cross-check and(3) because in some cases, as already discussed, it may remain appropriate to order security by reference to that sum. 28. … On the essentially undisputed evidence before me, if the need arose for the taking of any such enforcement measures centred on Russia, they would be difficult, time consuming and expensive. Even the initiation of any such steps would add a significant burden of cost and delay. In my judgment, the likelihood of this risk materialising is not such as to warrant my ordering security in the amount of the likely costs of the action; but the consequences of this risk, should it materialise, are sufficiently grave as to warrant a significant sum featuring in my order so as to guard against it”.[24]Applying these principles to the facts, the First and Second Defendants say that I should put the merits and the wider picture first.[25]They contend that this claim is being funded by Mr Deripaska and is being pursued for his benefit and that it would be unjust for Mr Deripaska to hide behind Mrs Danilina’s position and rely upon her alleged impecuniosity as a means of avoiding an order for security for costs.[26]They also say that Mrs Danilina has clearly not been candid about her financial position. Initially, it was asserted on her behalf that the reason for the delay in bringing a claim was a consequence of her limited means, but that claim appeared to be undermined by the fact that she had instructed Dentons in early 2016. Furthermore she now asserts that she is the owner of a property in Russia worth around $7 million but fails to explain how, if that be the case, she could not have used some of it to fund her claim (worth about $100 million) in respect of Navigator.[27]They submit that in the light of these somewhat unsatisfactory shifts and the fact that there is no suggestion that Mrs Danilina has assets anywhere outside Russia, the Court should take Mrs Danilina’s initial evidence, to the effect that she has no substantial means and that she is reliant upon Mr Deripaska for the funding of this litigation, at face value.[28]They also say that the court can and should take the view that the prospects of Mrs Danilina establishing her ownership of Navigator are weak. There is an Award of a distinguished Tribunal on these issues. They say if there was a good claim it is extremely odd that Mrs Danilina has waited such a long time before asserting her claim. So far, despite the progress of the litigation, they say nothing has emerged which was not already in the arbitration evidence, and accordingly the court should be content to conclude that a similar result is likely in the litigation.[29]They also submit that Mrs Danilina’s case on the Family Claim is similarly weak. They say that her pleaded case is nebulous and that it bodes ill for her prospects of success that she cannot identify the date of the 2007 Agreement or the assets which she says formed part of that agreement. They also say that she has thus far failed to explain how she obtained ownership of any such assets. They submit that she has not produced a single contemporaneous document which supports her case and that her case contradicts her own previously stated position, for example to the Moscow police and the Supervisory Board of TGM.[30]The second part of the test under this head of the jurisdiction is the issue regarding obstacles to enforcement.[31]Each of the parties has provided evidence from Russian lawyers in relation to the difficulties which would be faced by the Defendants seeking to enforce an order for costs in Russia (assuming of course that there are any assets to enforce against). Mrs Danilina has relied upon evidence from a Russian law firm, Egorov Puginsky Afanasiev and Partners (“EPAM”), the First and Second Defendants on evidence from Clifford Chance's Moscow office (“CC Moscow”), and Mr Kargin upon a report of Mr Kulkov of Kulkov Kotilov and Partners.[32]The First and Second Defendants suggested that I should treat the evidence from EPAM with caution because EPAM is Mr Deripaska’s long-standing personal law firm in Moscow and the EPAM report was apparently provided to Mrs Danilina by Mr Deripaska’s English lawyers, Bryan Cave. Furthermore, the Tribunal in the First Award found that EPAM was involved in the instruction of a private investigator who used improper/unlawful means to obtain confidential information about Mr Chernukhin and his family. They note that the supplemental memorandum from CC Moscow confirms that, in its opinion, EPAM’s conclusions represent “an oversimplification and do not reflect the extent of the uncertainty and difficulties in enforcing an English judgment in Russia”.[33]They submit I should instead rest upon the notes prepared by CC Moscow which they submit establish the following propositions which are not seriously in issue: i) In order for a foreign judgment to be enforced in Russia it must be recognised and enforced by a competent court. ii) There is no reciprocal enforcement convention or treaty as between the UK and Russia. iii) Reciprocity is established on a case-by-case basis (and existing case law is limited). iv) The time-frame for the initial enforcement proceedings is 1-2 months depending on which court hears the claim. However, that period is liable to be extended significantly inter alia by any appeal. CC Moscow referred to one recent case in which enforcement proceedings took nearly two years. This is leaving aside any delay caused by service on Navigator, a BVI entity.[34]This, they say, establishes that enforcement in Russia is a slow process with an irrecoverable element of expense, and there is a power to and hence a risk of refusal of enforcement even if reciprocity is proved.[35]They also point to the report of Mr Kulkov (on behalf of Mr Kargin), as giving several examples of cases in which recognition and enforcement was denied by the Russian courts on the ground of insufficient proof of reciprocity. Mr Kulkov's report they say also demonstrates that: i) Although English judgments may be recognised and enforced in Russia on the basis of reciprocity the standards for establishing reciprocity vary. ii) There are a number of grounds to deny recognition and enforcement irrespective of reciprocity (including violation of Russian public policy, service issues, and jurisdictional issues). iii) Proceedings for the recognition and enforcement may take a long time, especially if non-Russian entities are involved in foreign proceedings, inter alia because of requirements that they should be involved in and served with any Russian proceedings on recognition and enforcement. iv) Execution of the foreign judgment will, even if recognised, require execution proceedings to be initiated before a court; and different courts may be involved depending on where assets are located. This may significantly add to the time and costs necessary for effective execution of the foreign judgment[36]Moreover, EPAM’s conclusions are based on the practice of the Arbitrazh Court. It is by no means clear that the Arbitrazh Court would have jurisdiction to determine any claim against Mrs Danilina. That depends on whether or not she holds the status of an “entrepreneur” – a point which Mrs Danilina has not addressed.[37]In terms of identifying other obstacles, the First and Second Defendants say that Mrs Danilina’s evidence in relation to her assets and means cannot be relied upon and that the exercise of identifying enforceable assets in Russia will be fraught with practical and legal difficulty.[38]That, they say, will be compounded to the extent that Mr Deripaska is able to influence any judicial proceedings. They point me to the conclusion of the Tribunal in its Second Award that Mr Deripaska was “prepared to go to considerable lengths to influence individuals and the evidence they might give … and/or to affect the outcome of the Arbitration”. They also cite Cherney v. Deripaska [2008] EWHC 1530 (Comm), where Christopher Clarke J concluded that there was a “significant risk” that Mr Deripaska would seek to influence the outcome of proceedings brought against him in Russia.[39]Overall they submit first, that the position is that if there is no difficulty or obstacle in the way of enforcement the cases establish that the amount of security which should be ordered is any extra cost of enforcement (which is not regarded as an obstacle per se). On this they say that it is striking that Mrs Danilina has not herself attempted to put any figure on the additional costs of enforcement in Russia and that I should infer that the reason she (or her lawyer at EPAM) has not done so is because the sum would not be favourable to her. So far as the figures mentioned by CC Moscow as representing the “rough costs” of pursuing an enforcement claim generally in Russia, they say that the present case is very far from a run of the mill case, and it will inevitably require input from English lawyers as well as Russian lawyers.[40]More fundamentally, they submit, whatever the costs of issuing proceedings in Russia, the outcome is inherently uncertain. As a matter of law if there is an obstacle to enforcement then the question in relation to security is not one of extra cost and it is appropriate to seek (and to grant) security for the full amount. They submit that it is not necessary to establish a real risk of impossibility of enforcement to enter this territory; it is sufficient to show a real risk of a difficulty or obstacle.[41]Here they say it is common ground that there will be difficulties – for example the need to prove reciprocity and some irrecoverable cost. Added to this there are other possible problems: delay, the possibility of appeals or the option which the court has to refuse enforcement.[42]The Third Defendant adopted much of what was said on behalf of the First and Second Defendants, but focussed first on the distinct points arising vis a vis him, reminding me that Mr Kargin is only involved with the claim so far as it related to the Navigator aspects, not the "Family Claim".[43]He submits that the thrust of the evidence in the reports overall is that there is a real risk of obstacles in the way of enforcement and points to the fact that the materials supplied by the Russian lawyers demonstrate that enforcement issues not infrequently go to the Supreme Court. That, he submits, demonstrates the real risk of obstacles – where there is a settled practice of enforcement there could be no need for such resort to high legal authority. He prays in aid one case where enforcement has been ongoing since 2009 and is still not concluded. He also points to the fact that one of the judgments relied on by Mrs Danilina is one where, while it may be arguable as to whether reciprocity was established, enforcement was actually refused on two separate procedural grounds. This he says illustrates the very real risks involved in enforcement in Russia.[44]As to the problems in this case, he adds to the submissions of the First and Second Defendants the point that, in the absence of clarity as to Mrs Danilina's assets, proceedings to establish the existence of such assets may well be necessary – with consequent further cost and delay.[45]For Mrs Danilina it is submitted that the high point for the Defendants’ argument is the statement that “it is difficult to predict with certainty whether a particular English judgment will be enforced in the Russian Federation”. That, it is said, is not enough to satisfy the test. Mrs Danilina does not accept that there does in fact remain a real risk that enforcing a judgment for costs will be costly or difficult in the Russian Federation, but that if any order for security is appropriate the Court should certainly not exercise its discretion, to make the wider order for security sought.[46]On the position as to enforcement risks, she relies on the evidence of EPAM that they did not find a single case in the last 5 years where recognition and enforcement of an English judgment was not finally granted due to a failure to prove reciprocity and the fact that such refusals as they did find were for reasons which would not be relevant in this action. She notes that since 2014, the Supreme Court of the Russian Federation has on 4 occasions confirmed the recognition and enforcement of English court judgments on the basis of reciprocity.[47]She submits that the correct position is that both the courts of general jurisdiction and so-called “arbitrazh” courts deal with the recognition and enforcement of judgments rendered by non-Russian Courts and both courts will recognise and enforce a non-Russian judgment on the basis of the principle of reciprocity.[48]She submits that the Defendants’ evidence broadly favours the likelihood of enforcement, pointing to numerous examples of cases where enforcement has taken place with not one English judgment being turned down on the basis of reciprocity. The possibility of non-enforcement for public policy reasons is conceded, but it is said that there is no suggestion that that could be relevant here. While some costs may not be recoverable and there may be some delay, there is no real risk of it not taking place at all.[49]On the question of the relevance of the merits the Defendants' approach is said to be wrong as a matter of law. Mrs Danilina submits that in fact investigation of the merits on a security for costs application is strongly discouraged and points me to Appendix 10 of the Commercial Court Guide. This she says reflects the true state of the authorities, in particular KearyDevelopments v Tarmac Construction [1995] 3 AER 534 which indicates at [4] that one should not examine the merits in detail unless there is an apparent high probability of success or failure and Kahanghi v Nourizadeh [2009] EWHC 2451 (QB) which notes that a court is unlikely to order security when there is a high degree of probability the claim will succeed.[50]In any event she says the merits of the claim are not weak. The starting point is the SHA to which she is named as a party. The position in the arbitration is, she says, not to the point given that she was not a party and no-one sought to cross-examine her.[51]So far as the Loan and Option Agreements are concerned, she submits that there is nothing particularly out of the way in them, and that they include the type of clauses one might expect in a funding agreement. There is no blanket prohibition on communication: consent to settlement cannot be unreasonably withheld by Mr Deripaska. The Option Agreement is a straightforward option conditional on establishing ownership interest[52]Further, as to amount of security (if ordered), she says that, as noted in Blackstone’s Civil Practice at 67.16, “The discretion has to be exercised applying the overriding objective, and by affording a proportionate protection against the difficulty identified by the ground relied upon as justifying security for costs in the case in question”. That points to an order only in the amount of additional costs. Here a proportionate protection would be to order the sum of €120,000, being an appropriate figure reflecting the additional costs for enforcing a judgment for costs in Russia on the basis of the Defendants’ own figures.[53]In any event she submits it cannot be right that the Defendants be secured for each and every cost they have already incurred in these proceedings (and presumably all other costs going forward), without regard to the hourly rates charged, without regard to the reasonableness and proportionality of their costs and without regard to whether such costs would ever be properly recoverable. At the very least if security is to be referable to whole costs, a reduction for taxation should be made and security should be ordered in tranches.[54]The Claimant also relies on a number of points which she says militate against the exercise of the discretion, if the jurisdictional hurdle is crossed. In particular she notes that the First and Second Defendants will in any event be investigating and litigating many of the TGM aspects of the claim, as a result of the three Arbitration Claims. Therefore, by analogy with the judgment of Newey J (as he then was) in Chuku v Chuku [2017] 2 Costs LR 267 at [31], [36]-[37], this is a case in which the TGM issues will still have to be fought out by the First and Second Defendants and accordingly an order for security against Mrs Danilina serves to constitute simply a tactical (and oppressive) advantage to D1 and D2.[55]She also submits that this is a case in which she lacks funds due to very actions of the Defendants with which these proceedings are concerned in relation both to TGM and her broader claims to family assets: see Jacob J at [16] in Watford Petroleum v. Interoil Trading SA [2003] EWHC 1806 (Ch).

Decision: Security under (a)

[56]The position in relation to security for costs is one with a surprising number of nuances. The paradigm case in this court is probably one of the impecunious company. In such a case the court simply looks to whether the conditions are made out and considers the discretion issues before turning to the appropriate quantum, which will relate to the costs of the litigation.[57]Matters are more complex where one is considering the position of an individual under sub-paragraph (a). Here the jurisdiction is limited by the wording of the rule and must be exercised in a non-discriminatory fashion. See Nasser v United Bank of Kuwait [2002] 1 W.L.R. 1868 where the court held that, in order to comply with Arts 6 and 14 of the European Convention on Human Rights (“the ECHR”) (preventing discrimination on the grounds of national origin with respect to access to the courts), the English court may only exercise its discretion to order security for costs in a manner that is not discriminatory.[58]So the fact that an individual is domiciled outside the EU does not mean that security for costs in the full amount will follow. The establishment of residence is merely a trigger. The court then has to consider what that fact means in relation to the future enforcement of any costs order.[59]If the court is satisfied that there will be no difficulty on enforcement it would be unusual for the court to order security. This is subject to certain “bad behaviour” riders, as in De Beer.[60]Potential difficulties or burdens of enforcement in the relevant state, which would not be encountered in enforcement in the United Kingdom or a Convention state, are capable of providing objective justification for these purposes.[61]This of course raises the question of what suffices to establish obstacles, difficulties or burdens which can qualify. As to this, one now looks at Ras Al Khaimah paragraph 86: What actually suffices to justify the making of an order will depend on the evidence adduced; “mere possibility” of obstacles to enforcement will usually be insufficient to justify an order for security; but (depending on the evidence) “real risk” will usually, but not invariably, suffice.[62]Further, if enforcement is possible but is there is a real risk that it will take longer or cost more than enforcement in the EU, security will generally be ordered to cover that risk only. This point was recognised in Nasser: paragraph 64: “Even then, it seems to me that the court should consider tailoring the order for security to the particular circumstances. If, for example, there is likely at the end of the day to be no obstacle to or difficulty about enforcement, but simply an extra burden in the form of costs (or an irrecoverable contingency fee) or moderate delay, the appropriate course could well be to limit the amount of the security ordered by reference to that potential burden.” (This passage was endorsed in RasAl Khaimah paragraph 85.)[63]However, where the evidence indicates that there is a real risk of non- enforcement then the court may order security to cover the full likely recoverable amount of costs to date and then later to trial.[64]As to the merits, that is not a matter for this stage. It belongs (if at all) in the final discretionary stage.[65]Here it seems to me that the position falls between the extremes. Despite the submissions of Mr Chapman QC, I do not think it can be said that there is no risk. In my judgment the evidence demonstrates the following things. First, enforcement will cost more, even if matters proceed quite straightforwardly, owing (at least) to the need to prove reciprocity and potentially the need to ensure service of all relevant parties. Secondly not all of those costs will be recoverable. Those are risks which would (subject to discretionary factors) indicate an order relating to costs uplift and partial costs irrecoverability. This would, perhaps, be in the region indicated by CC Moscow, in the low six figures.[66]However, on top of that are other factors which are risks in some degree. These are: i) Risk of refusal for non-reciprocity (low but possible); ii) Risk of refusal for public policy or other procedural grounds (not high, but demonstrated on the authorities); iii) Disputes about enforcement resulting in further delay/expense/legal proceedings (not high but demonstrated on the authorities); iv) Further delay, cost and expense in the execution phase of the proceedings owing to the opacity of the position as to Mrs Danilina’s assets and the potential need to take proceedings in multiple jurisdictions (likelihood and financial extent difficult to judge).[67]Looking at the evidence it does not appear that the risk of a complete failure of enforcement is high, but taking the possibilities of reciprocity and other grounds together a real risk (albeit not at the high end of probability) is, it seems to me, demonstrated.[68]There are no treaties – this gives rise to uncertainty and an element of risk. That risk is supplemented by the evidence I have seen as to Russian courts refusing enforcement on the grounds of insufficient evidence of reciprocity, which is not an established fact but proceeds on a case by case basis, and may therefore be affected by factors peculiar to the case or such matters as the climate of juridical opinion at the time at which enforcement comes to be considered. That risk may be low, as indicated by the absence of any English judgment which has been found to fail on this ground, but is supplemented by the other bases for non-enforcement which it is apparent the Russian Courts have relied on. These risks are again, it seems to me, not high; but they plainly exist and have manifested in identifiable cases. There is therefore a risk; however, I cannot characterise the risk of overall non-enforcement as reaching the level of serious risk advocated by Ms Berard. This seems to me to go some way beyond what the various experts say.[69]One then has the other less serious but real risks which do in my judgment indicate a very real risk that obstacles (in the broad sense) will go beyond the established factors I have indicated above. These factors indicate a greater risk of increased cost, delay and difficulty.[70]What therefore is the appropriate course in a case where there is (just) real risk of non-enforcement established, but the greater probability is that obstacles will not lead to a complete inability to enforce, but to still further cost,delay and difficulty?[71]In my view one here combines the position as part of a sliding scale with the various discretionary factors (to the extent relevant). Thus there are cases such as De Beer v Kanaar & Co (No. 1) where a marginal risk in combination with lack of probity or established bad conduct may justify a full securing of costs.[72]As to this, I am not persuaded that there is much in the way of significant discretionary factors to take into account in either direction.[73]On the merits I do not consider this a case where the case advanced by Mrs Danilina is so strong that I should move away from the position indicated on risk of enforcement and not order security. In the other direction however, I do not consider this to be so strong a case on the face of it for the Defendants that any further weight should be put into the scale in favour of security.[74]While I appreciate that on the face of it, the existence of the Awards by the distinguished Tribunal indicates that the claim is likely to be difficult, Mrs Danilina did not participate in the arbitration. I also see the force of the submissions made for the Defendants regarding the Family Claim; but such claims are perhaps inevitably difficult to evidence and the claim is still at an early stage. I am not comfortable at this stage taking the view that the merits can be so strongly called in one direction as the authorities, in particular Keary, seem to require. (I should note that I do not accept that the note in the White Book citing Simaan authorises me to diverge from this authoritative guidance.)[75]Nor is this a case where I could say that want of probity indicates a very firm approach on quantum. I do bear in mind the link between this case and Mr Deripaska and the findings regarding him in the Awards. However(i) there is no evidence in this case (unlike in the Cherney case which was at a different time) that he has influence over the Russian judicial system, and nor is that submitted and(ii) Mrs Danilina is not Mr Deripaska - conflating them assumes a contentious point. While the Defendants hold Mrs Danilina’s case in low regard, there is no established or compelling interlocutory case of want of probity on her part.[76]On the other hand, I am not persuaded that the other factors relied on by the Claimant are sound. I do not accept that this is a case where the counterclaim could equally well have been the claim, or that it would continue in the absence of the claim. Nor is this one of the very rare cases where the actions of the Defendants can really be said to have created the impecuniosity of the Claimant. This is a line of argument which refers back to the merits points; and it will be quite rare that this can be established where there is not a promising case on the merits. The Defendants also submit that the absence of TGM dividends since 2010 is not one for which the Defendants are responsible, and they are not trustees of the Sanderson Trust.[77]All in all, I consider that this is a case where a single order of a substantial amount of security to reflect the real (but small) risk of non-enforcement and greater (but less financially extensive) risk of increased cost and delay is the correct approach. This means that the Defendants will be covered for the financial risk of the inevitable and more likely aspects of increased cost and delay. There will not be full security in respect of the costs of the action but the amount ordered goes some way to covering and guarding against the risk of non-enforcement. In reaching this conclusion I am encouraged to observe that this was effectively the approach adopted by Gross J (as he then was) in Texuna. This order should therefore be adequate to cover the position to trial unless there is a change in circumstances as to the risks, which would render another application appropriate.[78]Turning to quantum, the amount sought by the First and Second Defendants is £820,786.32 which is the estimated amount of costs up to and including the CMC. They are clear that there is intent to supplement this going forward. The amount sought by the Third Defendant is £104,741.28 which represents costs up to and including the security for costs hearing, with an intent to supplement this in future.[79]Bearing in mind the risks which I have identified and considered above, their gravity and potential quantum and the likely extent of costs in this case, based on the figures to date, I will make orders for security for costs in the amount of £700,000 and £90,000 in favour of the First and Second Defendants and the Third Defendants respectively.

Subsection (f): Nominal Claimant

(f) : Nominal Claimant

[80]However, it might still be that, if the Claimant were identified as a nominal claimant within sub-section (d), an order in a higher amount representing the entire costs of the action would be appropriate. It is therefore necessary to consider this head.[81]In the CPR the expression “nominal claimant” is not defined. The notes to the White Book at 25.13.17 state that:
“A claimant who has assigned the benefit of an action may be a nominal claimant (Semler v Murphy [1968] Ch. 183)”
. In Farmer v Mosely (Holdings) Ltd [2001] 2 B.C.L.C. 572, Neuberger J (as he then was) rejected the argument that the claim in that case had been brought by a nominal claimant on the facts. However, he went on to conclude that a champertous assignment would have rendered the claimant nominal and that:
“I must confess that there is force in Mr Hicks's point that the nominal claimant ground for obtaining security for costs in Rule 25.13(2)(f) may be said to be of precious little value if it can be avoided by ensuring that the person who is the claimant is given some interest in the proceeds of the action even if it is only a relatively small one. It may be that, on different facts, the court would be prepared to give a more extended meaning to the concept of nominal claimant than the cases, to which I have referred, appear to indicate in relation to nominal plaintiff.”
[82]The First and Second Defendants submit that, in all the circumstances of this case, and in particular the terms of the Option Agreement, Mrs Danilina can properly be viewed as a nominee for Mr Deripaska, even though she might (theoretically) have an independent interest in the proceedings. They say where, as here, a litigant has “sold herself” she is in a real sense a nominal claimant in that she is there to bring this claim for his commercial tactical benefit. It was submitted that it would be artificial to make a distinction between an assignment and the Option Agreement – because in reality so long as Mrs Danilina succeeds, Mr Deripaska will inevitably exercise that option, given that the price is considerably below any realistic value of the shares.[83]The First and Second Defendants also suggest that in considering whether Mrs Danilina is a nominal claimant it is also relevant to bear in mind that the court would, alternatively, have jurisdiction to make an order against Mr Deripaska personally pursuant to CPR 25.14(2)(b), insofar as he is funding her claim. Guidance in relation to this was recently provided in The RBS Rights Issue Litigation [2017] EWHC 1217 (Ch). They say that in the light of the Loan Agreement, the practical reality is that Mr Deripaska will be the ultimate provider of security in this case and therefore it may be appropriate to make an order against Mrs Danilina, which will be met by Mr Deripaska.[84]This latter argument I can dismiss at once. It cannot be right to exercise the discretion under (f) on the basis that the requirements for that discretion might not be made out, but the order met the fundamental realities of the case. If the Defendants consider that they can get security from Mr Deripaska under (b), an application under that head is the correct way to pursue that claim.[85]Mr Pester for Mr Kargin draws my attention to Chuku v Chuku [2017] 1 WLR 3137, where Newey J (as he then was) reviewed the authorities related to the meaning of “nominal claimant” in the context of rule 25.13(2)(f) and concluded at [26] that: “a. A person with a significant interest in the outcome of the claim will rarely, if ever, be considered a “nominal claimant” within CPR 25.13(2)(f); b. A personal interest is not, however, essential. While a trustee, executor or personal representative will not be a “representative claimant under Part 19” merely because CPR 19.7A is in point, he still will not ordinarily be a “nominal claimant”, regardless of whether he is also a beneficiary; c. At least typically, there ‘must be some element of deliberate duplicity or window-dressing” for a person to be a ‘nominal claimant’”.[86]Here it is said the substance of the only claim vis a vis the Third Defendant (who is not affected by the Family Claim) is one where Mrs Danilina has assigned her interest via the Option Agreement. Like the other Defendants, he submits that the court should be reluctant to say that the fact of later consideration stops Mrs Danilina being a nominal claimant. It is contended that to so hold would deprive the nominal claimant provision of any meaning. It is also said that, unlike Chuku v Chuku, this is a case where there is an element of window dressing or duplicity. It is said that a case where(i) the funding arrangement has been described by a judge of this court as extraordinary and(ii) where a party is paying to put forward a case found to be false, is window dressing.[87]The Claimant for her part refutes the suggestion that she is a nominal claimant. She says that she has both a significant and personal interest in the outcome of the litigation. She has an interest in earning the full option price under the agreement, and in her claim for equitable damages for the shortfall in the value she gets under that agreement. As to the Family Claim, this is again separate and additional to her arguments regarding her interest in Navigator and TGM. This is not claims to which Mr Deripaska or Filatona are entitled to the fruits under the Option Agreement. She reiterates that her claims are advanced by her in good faith and with evidential support.[88]Further, it is said that nor is there the additional element of deliberate duplicity or window dressing on the part of Mrs Danilina. She disputes the conclusion of the Tribunal. The Loan and Option Agreements were disclosed by Mr Deripaska in the Arbitration immediately after they were executed and were also disclosed by Mrs Danilina in the evidence in support of her application for interim injunctive relief in these proceedings. The fact that the price for her shares is low, she says, simply reflects the straits to which she has been reduced by the actions of Mr Chernukhin

Decision: Nominal Claimant

[89]I will not make any order in relation to this head. The First and Second Defendants acknowledged at the hearing that the application under this head was “pushing the envelope”. They were right to do so. I agree with the Third Defendant to this extent – that his position is logically distinct, and somewhat stronger under this paragraph. But I do not consider that this makes a difference.[90]I am not satisfied that Mrs Danilina is a nominal claimant even as regards the TGM aspect of the claim. The question is whether on the evidence before me Mrs Danilina has a significant interest in the outcome of the action which bears her name. I consider she does.[91]There may be, indeed there plainly are, issues as to whether Mr Deripaska is the primary moving force behind this litigation, but that is to some extent a logically distinct question. The question for me is the interest of Mrs Danilina in the outcome. On this, I accept the Claimant’s submissions that it cannot be said she has no real interest in it. Indeed the Option Agreement, whatever else one may say about it, shows a specific quantifiable interest in the outcome of the proceedings. That amount is not certain to be paid, it is an interest which can only bear fruit in the event she succeeds in the proceedings. Thus Mrs Danilina has an interest in the outcome. Further, at least in theory, Mrs Danilina has a separate claim in damages relating to the difference between the Option Agreement price and the value of her shares. While the claim has been submitted to be bad, I do not understand it to be contended that it is demurrable. She therefore has that second interest in the TGM proceedings.[92]And so far as the First and Second Defendants are concerned, the claims which Mrs Danilina brings in relation to the non-overlapping/Family Claim issues are ones which would, if successful, be only to her benefit. That provides her with a further interest.[93]In the light of this decision I do not need to determine the second limb of the test under this head, which (perhaps unsurprisingly) was not the subject of extensive argument. I will simply note that had it been necessary to do so I should have been inclined to hold that there was reason to believe that Mrs Danilina will be unable to pay the defendants’ costs. The costs in this claim are plainly likely to be very considerable indeed, running into millions of pounds. The position on her assets is far from clear, with a completely unspecific suggestion of property worth $7 million being deployed late in the day and without underlying documentary support. What is known, however, is that she has sought help funding this case. She also positively prays in aid in defending the application her own lack of funds.[94]Accordingly, I shall grant the applications of the Defendants as indicated above, in relation to CPR25.13(2)(a) only.

Cited in 1 later judgment