Navigator Equities Limited & Anor. v Oleg Vladimirovich Deripaska

In contempt proceedings based on undertakings to the court, the applicant must prove every essential element beyond reasonable doubt. The alleged breach must be confined to the allegations properly particularised in the application. Where liability depends on foreign law, the relevant law must be pleaded and proved as fact. Expert evidence will usually be required where the foreign-law issue is central, the concepts lack an English-law analogy, broader legal principles may be relevant, or the statutory material is translated. Undertakings enforced by contempt must be clear in context, but lack of clarity is immaterial where every possible construction would involve a breach. Voting by a registered shareholder is generally not dealing with or disposing of shares, although exceptional cases may arise.

The claimants brought a contempt application against the defendant based on undertakings given in connection with a worldwide freezing order. The undertakings concerned shares in EN+ Group PLC held by B-Finance Limited and required the defendant not to impede their preservation and subsequent sale for enforcement purposes.

The alleged contempt arose from B-Finance voting in favour of resolutions to continue EN+ as an international joint stock company governed by Russian law. The claimants alleged that the re-domiciliation automatically cancelled the relevant Jersey shares and replaced them with shares in a new Russian company. The central issues were whether that legal consequence had been proved to the criminal standard and, if so, whether the defendant’s conduct breached the undertakings.

1. Application dismissed. The claimants failed to prove beyond reasonable doubt that re-domiciliation from Jersey to Russia automatically cancelled the shares covered by the undertakings or created a new company. The court therefore made no finding on contumaciousness.
2. Contempt proceedings require heightened procedural fairness. The applicant must prove that the defendant knew the undertaking’s terms, acted in breach of it or failed to comply with it, and knew the facts constituting the breach. Knowledge that the conduct amounted to contempt is unnecessary. The court may draw inferences only where the inference is one that no reasonable person would fail to draw.
3. An undertaking enforced by contempt must be sufficiently clear and certain. Its natural and ordinary meaning must be assessed in context, including the historical context and the object of the undertaking. The court is confined to the allegations set out in the application notice and cannot determine an unpleaded alternative breach.
4. The effect of re-domiciliation was a matter of Jersey and Russian law. Foreign law had to be pleaded and proved as fact. The absence of expert evidence was particularly significant because the Russian-law issue was central, there was no clear English-law analogy, the result might depend on wider Russian corporate or securities law, and the relevant statute was available only in translation.
5. The Jersey Companies Law showed that a company continuing overseas ceased to be a company incorporated under Jersey law but did not thereby cease to exist or automatically cancel its shares. The available material concerning the Russian IC Law was consistent with continued corporate existence, a change of governing law and name, and preservation of share ownership. Dematerialisation replaced certificates with electronic records and did not itself cancel the underlying shares.
6. The alleged breaches all depended on automatic cancellation of the shares, which had not been proved. The alternative allegation that voting itself was a dealing or disposal also failed. Ordinarily, voting by a registered shareholder in exercise of its voting rights is not dealing with or disposing of the shares. The wider meaning of “direct enforcement” was discussed but was immaterial to the result.

• Court of Appeal: The earlier strike-out decision in the same litigation was reversed on the basis that subjective motive was not a ground for striking out a contempt application: [2021] EWCA Civ 1799. The Court of Appeal did not determine the substantive merits.
• High Court (Commercial Court): The present liability trial concluded that the alleged breaches were not proved and dismissed the contempt application.