RECOVERY PARTNERS GP LIMITED & Ors. v IRAKLI RUKHADZE & Ors.

An interim payment application is discretionary even where the statutory or procedural preconditions are met. After a carefully conducted case management conference has directed a full trial of disputed issues, a later heavy application seeking summary resolution of those issues will generally be refused unless there has been a material change of circumstance or an exceptional reason connected with substantive or procedural justice.

The court must also be satisfied that the proposed payment is no more than a reasonable proportion of the likely final judgment. A fiduciary’s obligation to account is not confined to benefits of the kind the principal could itself have obtained. It extends to benefits obtained by reason of, or using, the fiduciary position, opportunity or knowledge, subject to any properly established equitable limitation.

The claimants had obtained judgment on liability after a trial before Cockerill J, reported at [2018] EWHC 2918 (Comm). The defendants were held liable for breaches of fiduciary duties arising from their involvement in a recovery-services business opportunity. The claimants elected an account of profits, and a quantum trial was listed for October 2021.

The claimants applied under CPR 25.7 for an interim payment of US$95 million. They relied on their assessment that the final account was likely to exceed US$128.5 million. The defendants disputed the scope and value of the account and relied on several arguable defences. The central issues were whether the late application should be entertained and, if so, what payment would constitute a reasonable proportion of the likely judgment.

1. Application refused in substance, but limited interim payment ordered. The court refused to entertain the claimants’ application for US$95 million as presented. It ordered interim payments totalling US$4.5 million, payable within 28 days: US$2.7 million by Mr Rukhadze, US$1.17 million by Mr Alexeev and US$630,000 by Mr Marson.
2. Case management and delay. CPR 25.7 gives the court a discretion even where a precondition for an interim payment is satisfied. A carefully considered case management order represents the court’s conclusion on the appropriate procedural means for resolving the litigation and creates a reasonable expectation that the case will proceed accordingly. A later application which seeks, in substance, summary determination of issues reserved for trial should not generally be entertained without a material change of circumstance or good reason. In this case there had been neither. The application was brought late, imposed substantial prejudice and disrupted the agreed trial preparation.
3. Merits and reasonable proportion. The court could not conclude on the limited material that the claimants were clearly likely to defeat the defendants’ arguments concerning the nexus between receipts and the breaches, the scope of the account, a possible profit-sharing arrangement, the alleged wait-and-see defence, improper conduct by Mr Jaffe, or an equitable allowance for skill, effort and risk. Those matters required trial. Nevertheless, the defendants’ own position indicated that a substantial judgment was likely, and US$4.5 million was no more than a reasonable proportion of it.
4. Fiduciary accounting. The suggested limitation of Mr Marson’s liability to asset-management fees could not succeed. The governing principle, supported by Chan v Zacharia, Boardman v Phipps, Regal (Hastings) Ltd v Gulliver and Keystone Healthcare Ltd v Parr, is that the account extends to benefits obtained by reason of or through the fiduciary position, opportunity or knowledge, and is not confined to benefits the principal could itself have obtained.
5. The court expressed no concluded view on whether a wait-and-see principle could limit the taking of an account, or on how difficulty in paying a larger interim payment might affect the discretion.

This was a first-instance Commercial Court decision on an interim payment application. The judgment records an earlier liability judgment by Cockerill J in [2018] EWHC 2918 (Comm), followed by case management orders directing an account-of-profits phase and a quantum trial. The present court ordered limited interim payments and declined to determine the disputed quantum issues summarily.