Addleshaw Goddard loses in mammoth CFA case Berezovsky v Abramovich
31 August 2012 | By Katy Dowell
28 January 2013
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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.
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).
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
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.”