Magdeev v Tsvetkov

On an application for strike out or summary judgment, the court must assess whether the claim has a realistic prospect of success without conducting a mini-trial. It may determine a short point of law or construction where the evidence is sufficient, but complex factual disputes should ordinarily proceed to trial.

A conspiracy claim seeking damages equal to a liability which, on the claimant’s own case, would be cancelled by set-off or circuity of action discloses no recoverable loss. Reflective loss principles also bar claims by a shareholder or contingent creditor for losses which duplicate the company’s loss. Legal costs incurred preparing the same proceedings are not recoverable as damages absent a separate cause of action.

Mr Tsvetkov brought an additional claim against Mr Gaynulin alleging unlawful means conspiracy or conspiracy with the predominant purpose of injuring him. The alleged losses included his liability under two agreements with Mr Magdeev, employment-related losses, sums allegedly owed by EKLG, and investigation expenses.

Mr Gaynulin applied to strike out the claim or obtain summary judgment. He argued that the claim was self-defeating, barred by reflective loss, and factually incoherent. The application was determined on the pleaded case and proposed amendments, before trial.

1. Strike out and summary judgment. The court applied the principles summarised in Easyair Limited v Opal Telecom Limited [2009] EWHC 339 (Ch). A claim must have a realistic, rather than fanciful, prospect of success. The court must avoid a mini-trial, while recognising that it need not accept unsupported factual assertions without analysis. A short point of law or construction may be decided summarily where the evidence is sufficient.
2. The pleaded loss in the Conspiracy Claim was the amount of Mr Tsvetkov’s liability to Mr Magdeev. If the alleged conspiracy with Mr Magdeev were established, the Primary Claim would be defeated by set-off or circuity of action, leaving no monetary liability and therefore no recoverable loss against Mr Gaynulin. The claim was accordingly struck out and summary judgment entered on that basis.
3. The same conclusion followed in relation to liability under the Second Agreement. The pleaded facts supporting the conspiracy substantially overlapped with the alleged breach of an implied condition that Mr Magdeev would not obstruct the sale of the Diamond. Assuming the pleaded facts in Mr Tsvetkov’s favour, the defence would succeed.
4. Under the law stated by the Court of Appeal in Marex Financial Ltd v Sevilleja [2018] EWCA Civ 1468, reflective loss extended to relevant claims by creditors and shareholders. The Employment Loss and Turetskiy Loss were claims by a shareholder or former shareholder in the capacity of employee or contingent creditor and were therefore barred. The Giles v Rhind exception required legal impossibility, which was not shown.
5. The Investigation Loss consisted of solicitors’ costs incurred in preparing the same conspiracy proceedings. Such costs were not recoverable as damages because they arose from the same cause of action and were properly matters for costs, not damages. The distinction between recoverable investigation work and litigation preparation did not assist Mr Tsvetkov.
6. Ground 3 was rejected. The wider transaction alleged by Mr Tsvetkov did not necessarily make the Second Agreement a sham or render personal liability fanciful. Questions concerning the parties’ intentions and any fiduciary relationship were factually and legally complex and unsuitable for summary determination.
7. The claim concerning the Primary Claim was struck out and dismissed by summary judgment. The proposed Employment Loss, Turetskiy Loss and Investigation Loss were likewise found to have no realistic prospect of success. Mr Tsvetkov was given liberty to apply in relation to the Employment Loss and Turetskiy Loss if the Supreme Court’s decision in Marex Financial Ltd v Sevilleja changed the applicable law.