Berezovsky v Abramovich

The Court of Appeal considered interlocutory challenges to the Commercial Court judge's permission for extensive amendments and refusal to grant summary judgment. The central tort pleaded was the tort of intimidation, the ingredients of which were taken from Morgan v Fry: (1) a threat to do something unlawful or "illegitimate"; (2) intention to coerce; (3) actual coercion; and (4) loss as a result. The court applied the tests in section 35 of the Limitation Act 1980 and CPR 17.4 when deciding whether proposed amendments would introduce a new cause of action and thus be time-barred.

The court held that recharacterising an alleged "beneficial" interest under Russian law as an interest arising from a joint activity or other sui generis arrangement did not, of itself, create a new cause of action for the purposes of section 35 and CPR 17.4, and so most amendments were permitted. One alternative restitutionary claim pleaded on a quantum meruit basis was held to be a new claim and permission to plead it was refused. The judge's refusal to strike out the intimidation pleading was upheld: the particulars adequately pleaded implied threats and coercion. The act of state doctrine did not bar inquiry into whether the background events (including alleged pressure in relation to ORT) occurred because the claimant did not ask the court to pronounce on the validity of Russian state acts. Finally, on the Rusal claims it was arguable that English law could be the governing law (including by implied choice) and a late allegation of an express oral choice of English law was permitted as a case management decision.

Background and parties:

• The respondent, Mr Berezovsky, alleged that he held a disposable interest in Russian companies Sibneft and Rusal which, although legally held by Mr Abramovich, were lost or reduced in value because of threats and wrongful dealings by Mr Abramovich. The appellant, Mr Abramovich, sought summary judgment and to prevent late amendments.

Nature of the claims and relief sought:

• In respect of Sibneft the principal cause of action was the tort of intimidation, seeking damages for loss alleged to have been caused by threats inducing the sale of an interest at an undervalue.
• In respect of Rusal the claimant alleged breach of fiduciary duty or contract and sought recovery or an account of proceeds; he relied on English law as the governing law (expressly or impliedly) for trusts or fiduciary obligations relating to offshore holding companies.

Procedural posture:

• Interlocutory appeal to the Court of Appeal from the Commercial Court (Deputy High Court Judge Sir Anthony Colman). The judge below had permitted amendments to the particulars of claim and refused summary judgment. The appeal attacked those decisions.

Issues framed:

1. Whether the proposed amendments to the Sibneft pleading introduced a new cause of action (section 35 Limitation Act 1980 / CPR 17.4 issues) and, if so, whether they arose out of the same or substantially the same facts.
2. Whether summary judgment should be entered dismissing the Sibneft claim.
3. Whether the intimidation pleading properly alleged a threat (as distinct from a mere warning).
4. Whether the act of state doctrine or non-justiciability barred investigation into the events relied upon (notably pressures relating to ORT and the incarceration of Mr Glushkov).
5. Whether the Rusal claims were governed by Russian law (and time-barred) or whether English law applied (expressly or impliedly), and whether an amendment to plead an express oral choice of English law should be permitted.

Reasoning and conclusions:

• The court analysed what constitutes a "cause of action" at a suitable level of abstraction and concluded that changing the legal characterisation of the claimant's interest from a "beneficial" interest (which Russian law may not recognise) to an interest arising under a joint activity or sui generis agreement did not necessarily amount to a new cause of action. The core pleaded wrongful conduct (threat, coercion, disposal and loss) remained the same.
• A restitutionary claim seeking quantum meruit compensation for services said to have enabled Mr Abramovich to obtain the shares was, however, a new claim that went beyond the ambit of the original pleading and was not permitted.
• The intimidation pleading was adequate: the court accepted that threats may be implied from context and that the particulars, read as a whole, properly alleged that Mr Abramovich intended to do what he could to procure the threatened consequences.
• The act of state doctrine did not prevent enquiry because the claimant did not seek to challenge the legal validity of actions of the Russian state but only to establish that certain events occurred; non-justiciability principles did not bar the trial on the pleaded facts.
• The question of the governing law for the alleged Rusal trust/fiduciary arrangements raised issues of fact and contractual and transactional context (including prior and contemporaneous agreements containing English law clauses) so that it was arguable that English law applied by implied choice; the judge's case management decision to allow an amendment to plead an express oral choice of English law was not disturbed.

Appeal allowed in part. The Court of Appeal largely upheld the judge's case management decisions permitting the proposed amendments and refusing summary judgment because the recharacterisation of the claimant's interest did not, as a matter of law, introduce a new cause of action under section 35 of the Limitation Act 1980 and CPR 17.4, and the intimidation pleading was sufficient. However, one alternative restitutionary claim based on quantum meruit was held to be a new claim and permission to plead it was refused. The court also held that the act of state doctrine did not bar inquiry into the occurrences relied upon and that it was arguable that English law governed the Rusal arrangements, so trial was required on those issues.

Appeal to the Court of Appeal (Civil Division) from the High Court of Justice, Queen's Bench Division, Commercial Court (Deputy High Court Judge Sir Anthony Colman). Prior proceedings at first instance reported as [2010] EWHC 647 (Comm) & [2010] EWHC 1511 (Comm). The present decision is reported at [2011] EWCA Civ 153.