Addleshaw Goddard loses in mammoth CFA case Berezovsky v Abramovich
Mrs Justice Gloster has thrown out claims totalling $5bn brought by Russian oligarch Boris Berezovsky against Chelsea FC owner Roman Abramovich, handing a huge defeat to Addleshaw Goddard.
Boris Berezovsky
In her ruling, Gloster J told a packed courtroom at the Rolls Building that Berezovsky had been an unreliable witness whose “I blame my lawyers” excuse was not convincing.
Addleshaws secured Berezovsky as a client in 2010, when the firm agreed to bankroll the mammoth litigation on a conditional-fee structured deal (8 November 2010). While the details of the arrangement are unclear, the firm stood to gain a substantial uplift should Berezovsky have won but will now take a lower percentage of fees as he has lost. The case is thought to have generated total fees in excess of £100m. It is believed that Addleshaws took out legal expenses insurance to cover the risk of losing.
Gloster J slammed Berezovsky’s conduct stating that his claim relied heavily on his evidence, which she said was wholly unreliable.
She stated: “I found Mr Berezovsky an unimpressive, and inherently unreliable, witness, who regarded truth as a transitory, flexible concept, which could be moulded to suit his current purposes
“At times the evidence which he gave was deliberately dishonest; sometimes he was clearly making his evidence up as he went along in response to the perceived difficulty in answering the questions in a manner consistent with his case; at other times, I gained the impression that he was not necessarily being deliberately dishonest, but had deluded himself into believing his own version of events.”
It comes just weeks before Berezovsky is due to launch the second tranche of his proceedings, which will take place in the chancery court against the estate of Arkady ‘Badri’ Patarkatsishvili alongside Russian metal magnate Vasily Anisimov and investment company Salford (29 August 2012).
Roman Abramovich
Earlier this year Berezovsky’s counsel in the commercial proceedings, One Essex Court’s Laurence Rabinowitz QC, withdrew from the chancery round citing prior diary commitments (24 January 2012).
Berezovsky brought two claims against Abramovich, who was represented by Skadden Arps Slate Meagher & Flom partner Paul Mitchard QC and Jonathan Sumption QC, formerly of Brick Court Chambers.
At the heart of Berezovsky’s claims were allegations that Abramovich coerced him into selling his 21.5 per cent share in Russian oil company Sibneft at a significantly reduced price and that the defendant had broken promises over a deal involving Russian aluminium company RusAl.
Gloster J said the claims should be thrown out in their entirety after Berezovsky’s legal team failed to substantiate any of his claims.
On the matter of RusAl she concluded: “I have decided that Mr Berezovsky did not have any entitlement to make any claims, or potential claims, against Mr Abramovich […] in relation to RusAl.”
Berezovsky was in court this morning to hear the ruling, in which he was told: “On occasions he tried to avoid answering questions by making long and irrelevant speeches, or by professing to have forgotten facts which he had been happy to record in his pleadings or witness statements. He embroidered and supplemented statements in his witness statements, or directly contradicted them. He departed from his own previous oral evidence, sometimes within minutes of having given it.”
Gloster J said Berezovsky could not place blame on his legal team for his own confusion.
The hammer blow appears to have come after Sumption revealed to the court through cross examination that Berezovsky’s witnesses stood to gain financially from an outcome in his favour.
“A particular example of his lack of credibility as a witness,” Gloster J said of Berezovsky, “was his initial denial in cross-examination that any of his witnesses stood to gain financially, if he were to be successful in the commercial court action.
“In fact that was untrue. Two of Mr Berezovsky’s witnesses, Dr Nosova and her husband Mr Lindley, a solicitor, stood to gain very substantially if Mr Berezovsky were to win these proceedings.”
By contrast, Abramovich was a competent witness, the judge said, adding: “Where he had relevant knowledge, he was able to give full and detailed answers; he took care to distinguish between his own knowledge, reconstructed assumptions and speculation. He was not afraid to give answers which a less scrupulous witness would have considered unhelpful to his case.”
Berezovsky’s legal team is considering the judgment and is believed to be looking at whether an appeal can be lodged.
The full judgment is expected to be made available in two weeks.
For more on the lawyers working in the lucrative Russian sector see feature: The Bear and the Bar
Reaction:
John Reynolds, partner and head of litigation at White & Case in London: “The Berezovsky v Abramovichcase is not one which sets legal precedent, while the facts of the case and the evidence given at trial concern business dealings more than 10 years ago. The significance of this case and today’s judgment is summed up by Berezovsky’s reported comment outside court today: “I believe in the system”. These parties chose to resolve a Russian-based dispute in the English courts and other Russian parties have chosen similarly. In doing so, they have followed the path trodden by international investors and business venturers over two centuries. This case is a very visible example of the respect that global businesses have for the English judicial system and illustrates why English choice of law and jurisdiction clauses remain a feature of international commerce.”
Steven Gray, barrister at 7 Bedford Row: “Mrs Justice Gloster’s conclusions expressed in particularly robust terms are damning against Mr Berezovsky. Importantly, they are also likely to make an appeal for Mr Berezovsky particularly difficult to pursue. A trial judge, who hears the evidence, is almost always better placed to assess issues of reliability and credibility, than an appellate court, which cannot hear evidence. Accordingly, the Court of Appeal is ordinarily very reluctant to interfere with such decisions. It is likely that these are findings which Mr Berezovsky will have very great difficulty in overturning. If so, the strongly worded judgment may have more far-reaching consequences. Russian oligarchs may well be less willing to wash their dirty laundry in public and risk suffering the reputational damage which is bound to follow.”
Philippa Charles, litigation partner Mayer Brown: “Although Mrs Justice Gloster suggested that there may have been more to the Berezovsky/Abramovich relationship than had been placed before the court by either party, her conclusion based on the witness evidence was that the elements relied on by Berezovsky - in particular a series of ‘highly contested’ oral agreements – did not amount to a relationship amounting to contract or trust either as a matter of Russian or English law. Gloster J recognised that in these big commercial cases, the witness statements are the result of ‘microscopic’ work by lawyers who left no evidential stone unturned, unaddressed or unpolished, and that this could lead to some discrepancy between the written statements and evidence given on the stand. In the case of Mr Berezovsky, that discrepancy was too great and damaged the weight which could be given to his evidence. For other parties locked in disputes about informal business arrangements of this nature, the case highlights the critical importance of witness credibility – and indeed of bringing claims promptly so as to bring memories which are as fresh as possible to court. Berezovsky’s reaction to the judgment suggests an appeal may well be considered, although the grounds for that are at present unclear. I suspect this isn’t the last we’ve heard of this case, or indeed of the influx of Russian and Eastern European oligarchs litigating in London’s High Court.”
Readers' comments (34)
Anonymous | 31-Aug-2012 11:25 am
No surprise as to the verdict!!
Why on earth AG did this on a CFA basis is beyond me - silly silly mistake!!
Unsuitable or offensive? Report this comment
Scott Halborg | 31-Aug-2012 11:42 am
A hard-hitting verdict no doubt, but no reflection on the superb effort and skill by the Berezovsky legal team. Addleshaws are a commercial firm who are prepared to take a gamble; that they have guts and are prepared to take a loss occasionally will now be evident to all they come across. It will do them little harm in the long run. And there is always the inevitable appeal...It isn't all over yet.
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 11:47 am
I thought they took out insurance to cover this eventuality, so not so silly?
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 11:53 am
Appeal? Seriously? Have you read Gloster J's assessment of Berezovsky as a witness? I can't remember reading a more damning assessment.
As this case all boils down to one guy's version of events against another's, the fact that the trial judge has made these findings of fact makes the judgment pretty much unappealable.
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 11:54 am
But that will only cover thier opponents costs and disbursments not thier own.
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 11:55 am
The insurance is almost certainly just to protect Beresovsky against adverse costs orders and to cover his own disbursements. I'd be amazed if the cover extended to AG's costs.
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 11:55 am
The question is, how did they find an insurance company willing to take the risk. . . perhaps they are the silly ones?
No bonus's at AG next yr then no doubt. . .
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 12:01 pm
It will be interesting to see if the gamble continues and who pays for the lost income.
Is it all covered by by the CFA ?
Will some heavy weights join the list of 24 ?
Will they act for B....... again on this basis ?
Only time will tell - However AG are a decent firm at end of day and will live to fight another day.
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 12:04 pm
Presumably this will be a charge in the accounts that depresses profits. More redundancies next year?
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 12:09 pm
This must have cost the firm several million in fee's. I would imagine redundancies are almost certain.
Shame as AG is a great firm.
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 12:23 pm
I assume AG did it on a CFA becuase it is the only way a low tier litigation firm like them would get the instruction
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 12:51 pm
It is a short sighted and commercially suicidal view to think that CFA always equals no win, no fee. It has to be a value proposition for both the law firm and the client.
Any significantly reduced fee (perhaps that just covers the standard cost of the legal team doing the work) that then has an additional (and conditional) fee on success, would be a CFA and sounds a more likely route that a commercially astute law firm would take, don't you think?
And as to anons comment at 12:09, surely the reduction in fee income would already for the most part have have been factored in to last years accounts?
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 12:52 pm
Wasn't the background to the CFA something like: Berez ditches Stephenson Harwood and turns to star AG litigation partner. Star litigation partner miffed at not making Senior Partner leaves to set up boutique firm with a view to taking Berez case. AG management panics and offers Berez CFA deal to keep the work.
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 2:01 pm
Anonymous | 31-Aug-2012 12:52 pm: that's exactly the background apart from the bit where AG offer up-and-coming partner who has the real relationship with BB an equity partnership so he doesn't jump ship with star partner. Also the bit where BB has no liquidity despite being filthy rich, owes squillions to AG and everything gets renegotiated so AG has a pop at a fee uplift to offset the inevitable write-off if BB loses. Hasn't paid off and this is one non-appealable judgment.
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 2:19 pm
So you're saying this was not a partial CFA (where AG still get paid a discounted base rate even in the event of a loss) but a full CFA (i.e. AG don't get paid any base costs at all if they lose)? Jesus......
Unsuitable or offensive? Report this comment
Tim | 31-Aug-2012 2:49 pm
Many commercial clients insist on CFA's for such cases - I know of one large City firm in particular who undertake CFA work (but plainly do not promote the fact).
Let's hope that the ATE insurer has the capital adequacy to sustain such a heavy loss.
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 4:07 pm
1. Is Anonymous | 31-Aug-2012 2:01 pm absolutely sure that AG are not on a discounted fee arrangement? 2. Does anyone know who the ATE insurer was?
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 4:26 pm
The BBC is quoting a costs lawyer saying that the combined costs could be £150 million. I wouldn't want to be on the losing end of a CFA of any kind at that sort of level
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 5:11 pm
I see that in the Gazette Addleshaws are hurriedly peddling the line that this was no win, smaller fee. Ahem, much smaller fee? And is it ever recoverable from their client? Their PR advisers seem to have been onto the Lawyer too, as this has now been added in to the story above. Great firm, but no need to protest too much surely?... Better to take it on the chin and just accept you lost?! Will the other cases be ditched now though?
Unsuitable or offensive? Report this comment
Anonymous | 31-Aug-2012 5:31 pm
My understanding is that AG are on a discounted fee arrangement of some sort. They had no choice but to agree to this once it became clear that BB couldn't pay the bills but tried to spin it as being "creative" with funding solutions to their clients. Very substantial (but not total) write-off now in prospect because BB's liquidity position has not improved. These are the rumours - who knows whether they are true.
"Anonymous | 31-Aug-2012 2:01 pm"
Unsuitable or offensive? Report this comment
Rob | 1-Sep-2012 6:08 am
Good to see that Gloster J wasn't intimidated by the guy in sunnies!
Unsuitable or offensive? Report this comment
Anonymous | 1-Sep-2012 9:01 am
WHEN YOU DANCE WITH THE DEVIL...........
Unsuitable or offensive? Report this comment
Money Circus | 1-Sep-2012 7:17 pm
This case raises questions about the British legal system.
It's accepted that courts should decide cases on the evidence presented within the four walls - though doubtful that it qualifies as part of our unwritten constitution.
But to ignore the world outside the sealed window?
Like an investment banker's sealed module.. misdirected intelligence.. destined to self destruct?
Mrs Justice Gloster came across as a v*****n in a mystifying world.
All you need to know about Mr A and Mr B is adequately explained in the daily press - and, if you only trust lawyers, buttressed by numerous cases.
http://www.guardian.co.uk/world/2004/may/08/russia.football
Unsuitable or offensive? Report this comment
Ashley Balls | 2-Sep-2012 1:09 am
Oh dear! It would be interesting to learn what selection criteria Addleshaws use when offering CFA to clients. Surely client affordability should be in there somewhere. I can almost smell the consulting assignments from here (New Zealand)
Unsuitable or offensive? Report this comment
Anonymous | 2-Sep-2012 8:17 am
Is there anyway I could get a copy of the transcripts of the trial? I would very much like to read Sumption's opening and closing speech.
Unsuitable or offensive? Report this comment
Anonymous | 2-Sep-2012 6:55 pm
AG is a fantastic firm with a stella reputation. This tiny glitch isn't going to affect them at all, and I hope that they will pursue their miserable critics through the courts.
Unsuitable or offensive? Report this comment
Mr Grumpy | 3-Sep-2012 7:52 am
AG should be applauded for their commitment to pro bono. Shame they could not have found a more worthy cause.
Unsuitable or offensive? Report this comment
Anonymous | 3-Sep-2012 10:25 am
Fantastic comments on this article. I am especially enjoying the disgruntled ones from AG insiders spilling the beans on the details of the CFA. As for Anonymous at 2-Sep-2012 6:55 pm, AKA AG PR team, I am afraid that it is not credible to claim this is a "tiny glitch", or that AG is going to sue their critics. Also, try and spell "stellar" correctly. Overall, PR FAIL, but quite amusingly done.
Unsuitable or offensive? Report this comment
Terry | 4-Sep-2012 2:15 pm
Maybe they did mean Stella as plainly they must have had their fill when discussing the benefits of a CFA to the firm for this case.
Unsuitable or offensive? Report this comment
Michael Cook | 4-Sep-2012 3:00 pm
The CFA was not "No win - No fee" but "No win - Lower fee" Not so silly silly.
Unsuitable or offensive? Report this comment
Anonymous | 4-Sep-2012 4:05 pm
Anonymous | 3-Sep-2012 10:25 am: I imagine that some comments derive from the fact that certain members of this (in fact extremely talented and personable) litigation team have been walking around the City as if they own the square mile just because they are on first name terms with an oligarch.
Unsuitable or offensive? Report this comment
Anonymous | 6-Sep-2012 9:12 am
These are the questions I would really like to know the answers to:
1. Did Mr Abramovic unreasonably refuse to mediate and if so will be penalised in costs?
2. Who are the ATE insurers and will they refuse cover on the grounds of Gloster J's comments on Mr Berezovsky's honesty?
3. If there was a discounted fee arrangement between AG and Mr Berezovsky; (a) what was the lower level charging rate?; (b) is there an obligation on Mr Berezovsky to be honest entitling AG to claim its usual fee in default?
4. Are AG very keen to tell the market what the true position is, but prohibited from doing so through obligations of confidentiality to Mr Berezhovsky?
Unsuitable or offensive? Report this comment
Costs Lawyer | 10-Sep-2012 12:22 pm
What was Order in relation to costs??? Party/party costs.
I suggest both of them to review legal costs paid to their lawyers, they must have contemporaneous file notes etc to prove such fees, I think it could be reduced by 50%
Unsuitable or offensive? Report this comment
Anonymous | 12-Sep-2012 7:13 pm
Given the findings of fact against Beresovsky I wonder if the ATE U/Ws will mainatin cover?
Unsuitable or offensive? Report this comment