Filatona Trading Ltd & Anor v Navigator Equities Ltd & Ors

A disclosed and identified principal may enforce, and be bound by, a contract made by its authorised nominee or agent. The principal is excluded only where the contract or its surrounding circumstances clearly and unequivocally show that the named agent alone was intended to have contractual rights and obligations.

Naming the agent, defining named parties, or using an entire-agreement clause will not alone achieve that result. The contract must be construed in its factual and commercial context. A post-trial strike-out for abuse of process remains available only in very exceptional circumstances and requires a properly advanced application.

The appeals concerned a shareholder agreement governing a joint venture. The agreement named Ms Danilina as the beneficial owner of Navigator, but the judge found that she had signed as nominee for Mr Chernukhin, whose identity and role as the true joint venture partner were known to Mr Deripaska.

After an arbitral tribunal upheld its jurisdiction over claims brought by Mr Chernukhin and Navigator, the Deripaska parties brought a challenge under section 67(1)(a) of the Arbitration Act 1996. Ms Danilina also claimed that she, rather than Mr Chernukhin, held the contractual rights. Teare J rejected those claims in [2018] EWHC 173 (Comm).

The central issue was whether the agreement's terms and context excluded Mr Chernukhin, as a disclosed and identified principal, from exercising rights under it.

1. The appeals were dismissed. The judge was entitled to find that Mr Chernukhin, not Ms Danilina, was the principal party to the shareholder agreement. He could therefore exercise its contractual and arbitral rights. The section 67 jurisdiction challenge and Ms Danilina’s competing claim consequently failed.

2. A principal whose identity and interest are known to the counterparty may sue and be sued on a contract made by an authorised agent. Although the authorities concerning undisclosed principals supplied a useful starting point, the position of a disclosed and identified principal is stronger. There is no need for a commercial assumption where the counterparty knew that the agent acted for the principal and accepted that arrangement.

3. The parties may nevertheless agree that the agent, rather than the known principal, is exclusively bound. A party asserting that result bears a heavy burden of persuasion. The agreement must contain clear and unequivocal language, or the circumstances must clearly demonstrate that the principal was excluded. This reflects the general constructional presumption that parties do not abandon common-law rights and remedies without clear words.

4. The shareholder agreement did not meet that standard. Its preamble, the use of Ms Danilina’s name, the entire-agreement clause, the non-transfer provision, and the supplementary agreement did not state that only named persons could sue or be sued. Properly construed against the factual findings, the agreement was intended to bind the person who could provide Navigator’s required funding and was known to be the true beneficial owner. Its relational features and Ms Danilina’s operational role did not alter that conclusion.

5. The respondents’ additional submission that the claims should have been struck out because of the agreement under which Ms Danilina gave dishonest evidence also failed. A court may strike out for abuse at the end of a trial only in very exceptional circumstances. No sufficiently formal application had been made. The judge was entitled instead to treat the misconduct as relevant to credibility and costs, and to award indemnity costs.

• Court of Appeal (Civil Division): Appeals dismissed. The court upheld the conclusion that Mr Chernukhin was entitled to enforce the shareholder agreement as the disclosed and identified principal of the named nominee.
• High Court, Commercial Court: Teare J dismissed the section 67 jurisdiction challenge and Ms Danilina’s TGM claim: [2018] EWHC 173 (Comm).