Novoship (UK) Ltd & Ors v Mikhaylyuk & Ors

A secret payment or other undisclosed benefit to an agent, or to a person directed by the agent, is a bribe where it creates a realistic possibility of conflict between the agent’s interest and duty. The payment need not be dishonest, linked to a particular transaction, made directly to the agent, or shown to have influenced the decision.

Full and proper disclosure followed by fully informed consent is required to avoid breach of fiduciary duty. A bribe may taint later transactions while the possibility of continuing conflict remains. The principal may claim an account of profits against the fiduciary and dishonest assister. The fiduciary need not account for profits made by another person unless those profits represent the fiduciary’s own profit or the principal’s loss.

The claimants, Novoship companies and their associated ship-owning companies, sued former general manager Vladimir Mikhaylyuk, Wilmer Ruperti and companies controlled by him, Yuri Nikitin and companies associated with him.

The claims concerned alleged bribes and secret commissions arising from tanker charters to PDVSA, Henriot Finance and Stena, payments relating to the Tula, an allegedly dishonest compromise of unfair-dismissal proceedings, and losses caused by concealed sub-chartering arrangements.

The central issues were whether the payments were bribes, whether Mikhaylyuk breached contractual and fiduciary duties, whether the other defendants dishonestly assisted those breaches or conspired with him, and whether profits from related transactions had to be disgorged.

The court also considered the relevance of earlier proceedings concerning related charter transactions in Fiona Trust v Privalov [2010] EWHC (Comm) 2583.

Disposition. The claimants succeeded on the principal claims. Judgment was entered for the specified sums, with the profits due on the Henriot Finance charters to be determined by account and consequential questions of interest and double recovery reserved.

1. Bribery and fiduciary duty. Mikhaylyuk owed contractual and fiduciary duties to NOUK and the relevant ship-owning companies. Secret payments to Mirador Shipping, Pulley Shipping and Amon were bribes because they were made secretly, at his request or direction, in connection with chartering transactions and created a realistic conflict between his personal interests and his duties. The payments remained bribes even where made to third-party companies.
2. PDVSA charters. The vessels were presented as chartered directly to PDVSA but were in fact chartered to PMI Trading and sub-chartered through Sea Pioneer. This was a dishonest arrangement. Mikhaylyuk was liable for breach of contract and fiduciary duty. Ruperti and his companies were liable for dishonest assistance and conspiracy. The relevant claimants obtained damages and accounts totalling $57,847,602.35. Ruperti was also liable for $1,362,750 arising from false representations that delayed withdrawal of the Sorokaletie Pobedy.
3. Amon payments and related charters. Amon received $410,304.39 in secret commissions. Nikitin and Amon dishonestly assisted Mikhaylyuk’s breaches. The Henriot Finance charters were negotiated during the same period and by the same agent. The corrupt relationship had not been cleansed by disclosure or informed consent, so Nikitin and Henriot Finance had to account for profits from those charters, even though they were concluded at commercial rates and might otherwise have been made.
4. Other claims. Mikhaylyuk had to account for $1,228,898.20 paid by Odin Marine to Pulley Shipping, $158,340 paid in connection with the Tula, and £151,750 paid under the compromised employment proceedings. NOUK and relevant owners also recovered the costs of dealing with ACM Shipping’s claim after Mikhaylyuk improperly excluded that broker.
5. Limits on recovery. Mikhaylyuk was not required to account for profits made by Ruperti, Nikitin or their companies where those profits were not his own and did not represent the claimants’ loss. The corporate defendants used as Ruperti’s alter egos were nevertheless liable to account jointly with him.

not stated in the judgment.