Overview
This was the latest twist in a bitterly fought long running dispute between Mr Oleg Deripaska and Mr Vladimir Chernukhin, with the judge noting that the evidence of all the key witnesses had been unreliable and at times dishonest. The case is notable for involving a claim against a law firm, a fraudulent report and the successful invocation of ‘Norwich Pharmacal’ relief.
Background
Mr Oleg Deripaska, the owner of Filatona Trading Ltd (‘the Deripaska Parties‘) and Mr Vladimir Chernukhin, owner of Navigator Equities (‘the Chernukhin Parties‘) had entered into a joint venture agreement concerning a Russian textiles company, OJSC Trekhgornaya Manufaktura (‘TGM‘) in 2005. By 2010 the relationship between the parties had broken down and the Deripaska Parties took control of TGM. The Chernukhin Parties alleged unfair prejudice and began arbitration, requesting the Deripaska Parties buy out the Chernukhin stake in TGM. A tribunal held that the Deripaska Parties’ conduct had been unfairly prejudicial, and they were ordered to buy out the Chernukhin Parties’ interest for approximately US$90 million.
Whoever is careless with the truth in small matters cannot be trusted in important matters.”
Albert Einstein
s. 68 Arbitration Act 1996
In 2020, the Chernukhin Parties began proceeding against the Deripaska Parties under s.68 of the Arbitration Act 1996, to try to have the quantum of the buy-out award reassessed due to alleged fraud committed by the Deripaska Parties. They alleged that the Deripaska Parties had supressed a Russian language report (‘the Report‘) from May 2016 which related to the redevelopment of the TGM site. The Chernukhin Parties argued that had the contents of this Report been known then the quantum of the buy-out amount would have been US$395 million, and they intended to use this Report to obtain the additional US$300 million from the Deripaska Parties.
The Report
The Chernukhin Parties had received the Report from their solicitors, Quinn Emanuel Urquhart & Sullivan UK LLP (‘Quinn Emanuel‘), who had in turn obtained the report from an unidentified London-based intelligence consultancy (‘the Consultancy‘).
The Deripaska Parties alleged that the Report was in fact a forgery and sought an order that Quinn Emanuel disclose the identity of the Consultancy to assist them in identifying the ultimate source of the Report, which might even have been from inside their own organisation.
Norwich Pharmacal Relief
The Norwich Pharmacal principle gives the Court the jurisdiction to allow a prospective claimant to obtain information in order to seek redress for an arguable wrong.
The requirements were recently summarised in Collier v Bennett [2020] EWHC 1884 (QB) as follows:
- the applicant must demonstrate a good arguable case that a form of legally recognised wrong has been committed against them by a person (the Arguable Wrong Condition);
- the respondent must be mixed up in, so as to have facilitated, the wrongdoing (the Mixed Up in Condition);
- the respondent must be able, or likely able, to provide the information or documents necessary to enable the ultimate wrongdoer to be pursued (the Possession Condition); and
- finally, requiring disclosure from the respondent must be an appropriate and proportionate response in all the circumstances of the case (the Overall Justice Condition).
Overall Justice Condition
With the first three threshold tests satisfied, the court considered the final requirement, whether requiring disclosure was proportionate and reasonable in the circumstances. The Court concluded that the production of the Report amounted to “serious wrongdoing… calculated to deceive the court… in an attempt to impose a wrongful additional financial liability… of some US$300 million” and as such, there was a strong public interest in allowing the Deripaska Parties to vindicate their legal rights, as well as acting as a deterrent to others considering similar wrongdoing in the future. The claim for Norwich Pharmacal relief was granted as the Deripaska Parties had no other way of seeking redress to the wrong committed against them.
Outcome
The s.68 claim was withdrawn by the Chernukhin Parties, suggesting they accepted that the Report was not genuine, and they did not seek to challenge this. Indeed, it was widely accepted after hearing the evidence that the Report was a forgery, “a false document… used as a genuine document” created to cause considerable loss to the Deripaska Parties.
The Court also rejected the argument that this information was privileged on the basis that revealing the source did not mean disclosing the content of a privileged communication, although here the content had already been disclosed under the s.68 proceedings.
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