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||Neutral Citation Number:  EWHC 2503 (Comm)
||Case No: CL-2017-000117
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
||Royal Courts of Justice
Rolls Building, 7 Rolls Building
Fetter Lane, London EC4A 1NL
B e f o r e :
MR. JUSTICE TEARE
|| Lolita Vladimirovna Danilina
||- and -
||(1)Vladimir Anatolevich Chernukhin
(2) Navigator Equities Limited
(3) Vadim Kargin
Graham Chapman QC and Tom Ford (instructed by Byrne and Partners LLP) for the Claimant
Jonathan Crow QC, James Weale and Fraser Campbell (instructed by Clifford Chance LLP) for the First and Second Defendants
Iain Pester (instructed by PCB Litigation LLP) for the Third Defendant
Hearing dates: 12 and 13 September 2018
HTML VERSION OF JUDGMENT APPROVED
Crown Copyright ©
Mr. Justice Teare :
- This is an application by the Defendants for an order that the Claimant provide further security for the Defendants' costs of defending the claims which have been brought against them.
- It is first necessary to recount the history of the Defendants' applications for security for costs. The Second and Third Defendants issued an application for security for costs on 14 June 2017 with a view to it being listed at the first CMC on 7 July 2017. Security was sought in tranches. The Third Defendant issued a separate application for security for costs on 3 July 2017. However, there was insufficient time to hear the application at the CMC. It was not heard until 8 December 2017 when security was sought for the costs incurred prior to that date. Judgment was handed down on 19 January 2018 by Cockerill J. who awarded the First and Second Defendants security in the sum of £700,000 and the Third Defendant security in the sum of £90,000 in respect of the costs up to and including the trial. The Defendants appealed against that order and, on 30 July 2018, the Court of Appeal found in favour of the Defendants. The Court of Appeal ordered that the security so far provided (pursuant to the order of Cockerill J.) should be treated as a payment on account of security for the costs of the action, with the Commercial Court to assess the figure in which such security should be ordered. Thus on 7 August 2018 the First and Second Defendants issued their application for security for their costs of the action and on 8 August 2018 the Third Defendant issued his application for security for his costs of the action. Those applications were listed to be heard on 12 September 2018 on an urgent basis in circumstances where the 4 week trial of these proceedings was due to commence on 26 November 2018.
- The applications were heard on 12 and 13 September 2018 along with two applications by the Claimants for orders concerning disclosure and the issue of letters of request to the courts of Jersey and Guernsey. I gave judgment on those two further applications on 12 and 13 September 2018 but there was insufficient time to give judgment on the applications for security for costs.
- In the light of the proceedings before Cockerill J. and the Court of Appeal there is no dispute that in principle the Defendants are entitled to security for their costs. Indeed, it is accepted by the Claimant that she will be required to provide some additional security. Thus the question before the Court is how much security is it fair and just to order.
The amount sought
- Although the First and Second Defendants by their application sought security in the sum of £3,741,101, being 100% of their incurred and expected costs (after deducting £700,000 paid on account), it was recognised by the time of the hearing that such demand was unrealistic. Instead, a sum equal to 85% of their incurred and expected costs (after deducting £700,000) was sought. That percentage was sought on the basis that if the Claimant's claim failed it was very likely that costs would be ordered to be assessed on the indemnity basis. Thus security was sought in the sum of £3,179,936.
- The Third Defendant by his application initially sought security in the sum of £809,217.66 but, for the same reason as the First and Second Defendants (but using a percentage of 90%), reduced his claim to £728,295. (My understanding is that those figures allow for the payment which has already been made on account of the Third Defendant's costs.)
- The submissions of the parties concerned a number of topics said to be relevant to the assessment of the sums in which security for costs should be ordered. I shall seek to deal with each in turn.
- On behalf of the Claimant Mr. Chapman QC submitted that the claims for security should be on the basis of 60% of the incurred and expected costs because it was impermissible for the court to consider whether indemnity costs would be ordered. That would involve delving into the merits of the claim which was something the court could not do on an application of this nature.
- On behalf of the First and Second Defendants Mr. Crow QC accepted that the court could not delve into the merits of the claim. But he submitted that if the Claimant lost at trial it is highly likely that costs will be ordered to be assessed on the indemnity basis because the Claimant would have given evidence which she would have known to be false because there was no room for a mistaken recollection.
- To resolve this matter it is necessary to bear in mind the nature of the Claimant's claims. She has two.
- The first, described as the TGM claim, concerns the indirect beneficial ownership of a Russian company, a former state-owned textiles factory which holds valuable real estate in Moscow. Ms. Danilina claims to be, through Navigator Equities Limited, the Second Defendant, the beneficial owner to the extent of 50%, the other 50% being owned by Mr. Derispaka, a wealthy Russian businessman. Her claim is supported by the terms of a shareholders' agreement made in 2005 relating to Navio Holdings Limited, the joint venture vehicle which was to develop the real estate. But the First Defendant, Mr. Chernukhin, another wealthy Russian businessman, claims that he is the beneficial owner of Navigator so that he and Mr. Deripaska were the indirect beneficial owners of the real estate held by TGM. The Claimant was, he says, only the nominal party to the shareholders' agreement. The disputed 50% interest is said to be worth of the order of $100 million.
- The TGM claim is also brought against the Third Defendant. He was also signatory to the shareholders' agreement.
- The second claim, described as the Family Assets claim, concerns the beneficial ownership of assets held in trust. The Claimant claims that pursuant to an agreement between her and the First Defendant, made in 2007 when their relationship had come to an end, the assets accumulated during their relationship were to be divided as agreed between them. She claims that she has a beneficial interest in assets held by a certain trust pursuant to the 2007 agreement. The First Defendant disputes the 2007 agreement.
- The question on this application is whether an order for costs on the indemnity basis is a reasonable, not a speculative, possibility such that it is appropriate that the security ordered by the court should reflect that possibility. That does not involve a consideration of the merits of the claims. On the contrary it assumes that the Claimant loses her claims.
- Upon that assumption it appears to me to be unlikely that the Claimant's TGM claim, if it fails, would have been dismissed because it was founded upon a mistaken recollection by her that she was the beneficial owner of a very valuable asset. It is more likely that if she loses her claim it would be because her evidence was dishonest. Similarly, if she loses her Family Assets claim it is unlikely that that would have been because she had a mistaken recollection of agreeing that assets acquired during the Claimant's and First Defendant's relationship were to be divided between them. There thus appears to me to be a reasonable possibility that costs will be ordered to be assessed on an indemnity basis in the event that the Claimant loses her claims.
- Mr. Chapman submitted that the recent, and late, disclosure by the First Defendant of documents concerning events in 2007 supports the Claimant's case and suggests that if she loses the case that may have been brought about by a mistaken recollection by her rather than by the giving of dishonest evidence. It appears arguable that the recent disclosure supports her case, certainly the Family Assets claim. But even if they support both that claim and the TGM claim an order for indemnity costs, in the event that the claims fail, appears to be a reasonable possibility such that it is appropriate that the security ordered by the court should take that possibility into account. That conclusion does not involve an assessment of the merits of the claims but simply an appreciation of the nature of the claims. I do not say that indemnity costs will be ordered, only that there is a reasonable possibility that they will be.
- Where there is no possibility of costs being assessed on an indemnity basis or where such possibility is no more than speculative the courts generally make orders for security for costs by reference to 60-70% of the incurred and expected costs. Cases noted by Mr. Crow suggest a range of 60-75% but my experience suggests that 60-70% is more usual. It appears to me that where there is a reasonable possibility of indemnity costs the order should be made (at any rate in this case where very substantial costs are involved) by reference to about 75% of the incurred and expected costs. Criticisms were made of the quantum of costs claimed both by the First and Second Defendants and by the Third Defendants; see, for example, paragraph 29 of Ms. Boulton's seventh witness statement dated 5 September 2018. A reduction of 25% takes proper account of those criticisms.
- 75% of the First and Second Defendants' costs of £4,441,101 is £3,330,826.01. 75% of the Third Defendant's costs of £899,217 is £674,413.
Apportionment of costs between this case and Mr. Deripaska's s.67 arbitration claim
- An arbitration has taken place between Mr. Chernukhin and Mr. Deripaska pursuant to the terms of the shareholders' agreement. In that arbitration Mr. Chernukhin sought an order that Mr. Deripaska purchase his interest in Navio on the grounds of "oppression". Mr. Deripaska challenged the right of Mr. Chernukhin to commence the arbitration against him. He alleged that Ms. Danilina was his joint venture partner. By an award dated 16 November 2016 the tribunal held that Mr. Chernukhin, not Ms. Danilina, was the beneficial owner of Navigator (and hence of 50% of the shares in the joint venture company, Navio, which owned the Russian company TGM) and therefore that he was the substantive party to the 2005 shareholders agreement and thereby entitled to commence arbitration pursuant to its terms. On 14 December 2017 Mr. Deripaska issued a challenge to the arbitrator's jurisdiction pursuant to section 67 of the Arbitration Act 1996 on the grounds that Ms. Danilina, not Mr. Chernukhin, was the substantive party to the shareholders agreement. After the tribunal made its award on jurisdiction it proceeded to determine the merits of the claim. By an award dated 20 July 2017 it decided in favour of Mr. Chernukhin and ordered Mr. Deripaska to pay him some $95 million plus interest and costs.
- The issue in the s.67 challenge to the jurisdiction of the tribunal is the same as the issue in the Claimant's TGM claim and so the challenge and the claim are being heard together. It was therefore necessary, when the First and Second Defendants were assessing their incurred and expected costs, to apportion costs between the challenge and the claim. With regard to incurred costs the apportionment was made and recorded at the time the costs were incurred. Future costs have been apportioned 65% to the claim and 35% to the arbitration challenge. This apportionment was made by the First and Second Defendants' solicitors and represents, I was told, their best estimate of a fair and just apportionment. It was also used when seeking security for costs from Mr. Deripaska. Mr. Chapman submitted that the arbitration challenge should bear a greater portion of the costs than 35%.
- The question is whether the 65/35 split is within the range of reasonably likely possibilities such that it is appropriate to use it for the purposes of making an order for security for costs. The evidence from the First and Second Defendants' solicitors suggests that it is.
- So far as incurred costs are concerned it is to be noted that pleadings were required in the claim but not in the arbitration claim. But more significantly (as it appears to me) it is to be noted that this action involves not only the TGM claim but also the Family Assets claim. Thus one would expect the costs of defending the claims to be greater than the costs of the arbitration challenge.
- Also, it appears to me to be reasonably possible that the TGM claim is responsible for the greater part of the costs of defending the claims. It is a very substantial claim and reflects the very substantial and, it seems, bitter dispute between Mr. Chernukhin and Mr. Deripaska. The suggested apportionment of 65/35 is consistent with the TGM claim generating 70% of the costs and the Family Assets claim generating 30% of the costs, which appears to me to be reasonably possible. If the TGM costs are apportioned 50/50 between the claim and the arbitration challenge (which would appear sensible since each raises the same issue) that would mean the claim and the challenge each bearing 35% of the costs attributed to the TGM issue. When the 30% attributable to Family Assets claim is added that gives rise to an overall apportionment of 65/35. This broad brush analysis suggests to me that the 65/35 apportionment made by the First and Second Defendants' solicitors is within the range of reasonably likely apportionments which might be made at the end of the trial. It might not prove to be the correct apportionment at the end of the day but it appears to me to be a reasonably likely possibility which can, for that reason, properly be taken into account when making the order for security for costs.
Is it probable that an order for security in an amount in excess of £1.1 million would stifle the claim ?
- The Claimant has provided a witness statement dated 6 September 2018 in which she has stated that the maximum amount of further security which she can provide is £1.1 million. She has stated that she has no regular income and that she has invested in a company known as Artel but that Artel has not made sufficient profits to provide her with an income. She has stated that she has funded her living expenses by selling jewellery, art and her Moscow flat. Those assets were exhausted, she has stated, by December 2016. Thereafter she entered into certain agreements with Mr. Deripaska.
- Pursuant to an Option Agreement (entered into 10 days after Mr. Deripaska had issued his section 67 challenge) Mr. Deripaska agreed to pay the Claimant $2 million (in quarterly instalments of $500,000) in consideration of the Claimant (i) producing evidence in support of Mr. Deripaska's case (in the arbitration with Mr. Chernukhin), (ii) not cooperating with the Defendants and (iii) instituting proceedings against the Defendants to establish that she, not Mr. Chernukhin, was and is the beneficial owner of Navigator. Pursuant to a Loan Agreement (entered into at the same time) Mr. Deripaska agreed to finance the Claimant's claim up to $3 million subject to Mr. Deripaska agreeing upon the identity of her lawyers and being kept informed of progress and strategy.
- The Claimant has said that she has used the funds from the Loan Agreement to pay the security ordered by Cockerill J. and that by April 2018 all of the $3 million had been spent on legal fees. The funds from the Option Agreement have been used for her living expenses and other personal liabilities. All that remains, she has said, is $150,000 which she needs for living expenses. However, she added that she had invested $800,000 in a loan to a business.
- She has stated that between April and July 2018 she took out a credit line of £5 million from a Moscow based bank secured on her main residence, valued at $7 million. The undrawn balance is £3.5 million. She has her own legal costs of £2.4 million to pay and so can pay no more than £1.1 million by way of further security.
- In addition she has other assets including two flats in St. Petersburg and a flat in Pechory. They have, she says, modest values and it would in any event take time to realise further loans secured by such properties.
- The burden is on the Claimant to establish the probability that her claim would be stifled if she were ordered to pay more than £1.1 million as further security for costs and her evidence has to be full, frank, clear and unequivocal; see Al-Koronky v Time Life Entertainment Group  EWHC 1688 (QB) at 31. Some of the more recent authorities to the same effect are noted in Accident Exchange and another v Mclean and others  EWHC 1533 (Comm) at paragraphs 10-13.
- There was much criticism by the Defendants of the very few documents disclosed by the Claimant in support of her evidence. However, it is to be borne in mind that her evidence had to be prepared hurriedly in circumstances where the application for additional security had been issued in August 2018. Following that criticism a further statement was provided on 12 September 2018 (the day on which the application was heard). That exhibited a copy of the public register evidencing the charge on her home in favour of the Development Capital Bank. Certain further information, and additional documentation, was given.
- The position remains that much of her evidence is unsupported by documentation. However, it seems tolerably clear that she has mortgaged her main residence, which suggests that she has no other source of liquidity. Mr. Chapman indeed submitted that it was to be inferred that mortgaging her home was the only way in which she was able to fund these proceedings. Some doubt was cast upon the inferences to be drawn from the fact of that mortgage by the suggestion that the bank responsible for the loan had some connection with Mr. Deripaska. The chairman of its supervisory board was a university classmate with Mr. Deripaska.
- The difficulty with drawing inferences from the fact of the mortgage is that there has not been exhibited any correspondence between the Claimant and the bank leading up to the credit line of £5 million. Nor have the terms of the credit line been exhibited. If the loan provides for regular payment of interest it is difficult to know how the bank could be satisfied that such payments would be made if Ms. Danilina has no regular income. The Claimant says that the agreement itself is kept by the bank. It is difficult to believe that the Claimant does not also have a copy of the facility agreement which is secured on her main residence. What has been exhibited is a letter dated 5 September 2018 (signed by the chairman of the board of the bank, not the chairman of the supervisory board who was at university with Mr. Deripaska) which refers to an "additional credit line", a reference which the Claimant accepts she cannot explain even though the letter was, she says, requested to show to the court the remaining balance of the facility. It does not refer to a loan facility of £5 million. There has also been exhibited another letter from the bank dated 17 July 2018. That was obtained for use in the Court of Appeal hearing but it also makes no reference to the amount of the loan facility. The Claimant has said that that was deliberate. She wished to avoid disclosing the amount.
- No bank statements have been disclosed showing the amounts drawn down pursuant to the loan facility. There must be such statements. If efforts have been made to obtain a letter from the chairman of the bank for use in this application efforts could also have been made to place before the court the terms of the loan facility and a bank statement showing what has been drawn down and when.
- In the result the court has been given very little documentary support for the extent of the Claimant's loan facility from the bank. Mr. Chapman sought to justify or explain the Claimant's reluctance to provide such support by saying that since it was the Claimant's case that the First Defendant had misappropriated her assets her reluctance was not surprising. Nevertheless, the court must, it seems to me, by reason of the absence of documentation which I would expect to be available, exercise caution when evaluating the Claimant's evidence and in drawing inferences from the fact of the mortgage. That is particularly so because there are real grounds for thinking that on a previous occasion the Claimant has misled the court as to her finances.
- In June 2018 the Claimant had to explain her failure to make a costs payment of £55,000 which had been ordered by Knowles J. on 25 May 2018. It was said on her behalf that her delay in making payment was caused by "unexpected logistical difficulties in obtaining a loan". No reference was made to the fact that, as she now says, she must have had at least $150,000 remaining from the $2 million paid to her by Mr. Deripaska pursuant to the Option Agreement. The Claimant states in her most recent statement that she "certainly never intended that the court should be misled" and that at the time she had legal bills of £370,000 to pay. She had a small cash reserve but that was to cover her living expenses in the short term. Nevertheless, the court was not informed that she had $150,000 remaining from the sums advanced under the Option Agreement.
- In addition, there is the circumstance that on her own account she has already spent the greater part of the $3 million advanced by Mr. Deripaska on her own legal fees by April 2018 and that she proposes to spend a further £2.4 million on legal fees. In addition she has invested $800,000 in a business. The expenditure of such sums does not suggest that she is being careful to limit her expenditure which is what one expect her to do if her position were truly as precarious as she suggests it is.
- It is well established that on applications of this nature it is necessary for a claimant to be frank not only about her own finances but also about what she can reasonably be expected to provide from third parties, such as friends and relatives; see Al Koronky v Time Life Entertainment Group at paragraph 31. It is clear from Yorke Motors v Edwards  1 WLR 444 at p. 449H that such third parties may also include "business associates".
- In this case the relevant third party is Mr. Deripaska. It is clear from the agreements he has made with the Claimant that he wishes her to pursue and win these proceedings, or at any rate the TGM claim. He provided money to her to secure her agreement to commence these proceedings and not to cooperate with the Defendants. In addition he has provided money to finance her claim. He has done so, it appears, because he considers that her proceedings will assist him in his dispute with Mr. Chernukhin. In those circumstances it is to be expected that, if there is a risk that her claim may be stayed or struck out because of a failure to provide security for the Defendants' costs, he would provide the necessary security for those costs. Otherwise the $5 million which he has provided to her would be wasted.
- It follows that upon an application for security for costs one would expect the Claimant to give "full, frank, clear and unequivocal evidence" that Mr. Deripaska is not willing or able to provide the security which has been sought. The Claimant has, however, addressed this matter very shortly in her evidence. She has merely said:
"My solicitors and I have approached the representatives of Mr. Deripaska to request that he assist me with the provision of security. We were recently informed that he had not agreed to do so."
- I am unable to regard this evidence as "full, frank, clear or unequivocal." No details are given as to when, how and in what terms the Claimant's solicitors and the Claimant approached the representatives of Mr. Deripaska. No details are given of the persons who were approached. It is not stated when, how or by whom the Claimant's solicitors or the Claimant herself were informed that "he had not agreed" to provide security. As to the statement that "he had not agreed" to provide security it is not clear whether the message was that Mr. Deripaska had not agreed to provide security in response to the Defendants' request or whether the message was that, even if the Claimant's claim would otherwise be stayed or struck out, he would not agree to provide security.
- In these circumstances, having regard to all of the above matters, I am not persuaded that it is probable that if the Claimant is ordered to pay more than £1.1 million by way of further security her claims would be stifled.
- Mr. Chapman submitted, by reference to Stavrinides v Cyprus Popular Bank Public Co.  EWHC 313 at paragraph 70, that the risk of stifling should not be presumed to exist just because there has been some failure to satisfy the court as to every potential available source of funding and that the ultimate question, given that it bears upon access to justice, is whether the court is satisfied that the grant of security will not stifle the claim. If this is the ultimate question then, in the unusual circumstances of this case, where Mr. Deripaska, a very wealthy man, has caused Ms. Danilina to bring her claim and has provided finance for her to do so, I am satisfied that the requested security will not stifle her claims.
- It may be that Mr. Deripaska would not be willing to provide security for the costs of defending the Family Assets claim. Although I was told by Mr. Chapman that TGM claim and the Family Assets claim were "not wholly distinct", it may be the case that Mr. Deripaska has no interest in the latter claim. However, in circumstances where Ms. Danilina is able and willing to provide £1.1 million by way of further security that is likely to cover the costs of defending the Family Assets claim.
The counterclaim of the First and Second Defendants
- If a defendant has a counterclaim which would be pursued even if the claimant's were struck out there that is a factor which weighs in favour of a refusal to order security for costs; see Chuku v Chuku  2 Costs LR 267 at paragraphs 29-33 and 37 per Newey J. (as he then was).
- This consideration was argued before Cockerill J. who was unable to "accept that this is a case where the counterclaim could equally well have been the claim or that it would continue in the absence of the claim". Mr. Crow submitted that that was determinative of the point.
- Mr. Chapman submitted that the view of Cockerill J. was not determinative because this court has to exercise its own determination afresh and could not be bound by the views expressed by Cockerill J.
- The court's approach to the decision of Cockerill J. depends upon the nature of her decision. If her decision simply concerned the weight to be attached to a factor when exercising a discretion then there is force in Mr. Chapman's submission. If, however, she decided that a factor was not proved so that no question of weighing its significance arose then there is force in Mr. Crow's submission. That is because, where a matter has been argued and determined, the interests of finality in litigation require that it be respected.
- Cockerill J. held that the counterclaim point was not "sound". She did not accept that this was a case where the counterclaim would continue in the absence of the claim. That is not a question going to the weighing of a factor in the balance. It is a decision that the point does not arise on the facts of the case. It follows that the parties are bound by Cockerill J.'s decision in the absence of a change in circumstances or some other exceptional factor.
- Mr. Chapman submitted that there were two particular reasons why I should reach a different conclusion from that reached by Cockerill J. The first was that he took a point on this hearing which he did not take before Cockerill J.
- Before Cockerill J. Mr. Crow had submitted that:
"There is no world in which my client would be pursuing a counterclaim for a declaration against Ms. Danilina that she does not own things to which he does not have title if she hadn't been suing him."
- Mr. Crow made the same submission before me. Mr. Chapman said that this was not good enough for Mr. Crow had not said what attitude the Defendants would take were the Claimant's claim struck out. I had not appreciated that fine distinction and did not think that Mr. Crow had intended it. However, Mr. Chapman was right to take the point because when I asked Mr. Crow whether his client would pursue his counterclaim if the claim were struck out he said he would have to take instructions. Mr. Chapman told me that he had not taken that point before Cockerill J and that the judge must have decided as she did because the subtle distinction had not been brought to her attention. Nevertheless, having taken instructions, Mr. Crow was able to tell me that if the Claimant's claim were struck out the Defendants would not pursue their counterclaim against her. Thus I, like Cockerill J, consider that this is not a case where the counterclaim would continue in the absence of the claim.
- Mr. Chapman's second point was that there had been a relevant change of circumstance, namely, that the First and Second Defendants had advanced a new counterclaim against the Claimant. Paragraph 71 of the Amended Defence and Counterclaim seeks
"a declaration that the present proceedings have been instigated and prosecuted pursuant to a corrupt and abusive arrangement between Mrs. Danilova and Mr. Deripaska for the collateral purpose of frustrating the Defendants' claims against Mr. Deripaska in Arbitral proceedings and/or the enforcement of awards obtained by them in those proceedings. The Defendants hereby give notice that they intend, following the conclusion of the present proceedings, to issue proceedings against Mrs. Danilova and Mr. Deripaska for tortious damages and/or contempt of court by reference to their participation in that corrupt and abusive arrangement and expressly reserve all their rights in that regard."
- It is correct that this amendment is a change of circumstance. However, Mr. Crow stated that, notwithstanding the language of the first part of this amendment, the Defendants were not seeking the suggested declaration against the Claimant in these proceedings. But the Defendants reserved the right to seek damages for conspiracy from the Claimant and Mr. Deripaska in a fresh action. In those circumstances Mr. Crow submitted that there was no risk of "one-sided litigation".
- Mr. Chapman said that this was "deeply unsatisfactory" and did not remove the risk of "one-sided litigation". That risk was not avoided by saying there would be a new claim rather than a counterclaim in the present proceedings.
- In my judgment, in the event that the Claimant's claims are stayed or struck out on account of a failure to provide security for costs, there would be no risk of "one-sided litigation" against the Claimant. For in that event the Defendants would not be seeking, as Mr. Crow has confirmed, a declaration against the Claimant that she was not the beneficial owner of the 50% interest in the joint venture or that there had been no 2007 agreement regarding family assets. All that would be pursued would be the Defendants' defence of Mr. Deripaska's s.67 arbitration challenge. In the event that the Defendants prevailed they have given notice that they will seek damages from both the Claimant and Mr. Deripaska for conspiracy. That would be a new action in which the Claimant, like Mr. Deripaska, would be able to defend herself against the claim of conspiracy brought against her. Thus there would be no "one-sided litigation".
- For these reasons I am unpersuaded that there is any merit in the counterclaim point.
The intention of the First and Second Defendants
- Mr. Chapman submitted that Mr. Chernukhin's intention is to "oppress the fair pursuit and trial of Ms. Danilina's legitimate and genuine claims". He supported this submission by reference to Mr. Chernukhin's knowledge of her "relatively limited means", his maximising of the costs incurred by her by failing to give proper disclosure and so necessitating disclosure applications by her, his demand for security for costs in the sum of 100% of his incurred and estimated costs and his decision to seek security from her rather than from Mr. Deripaska.
- It seems likely that Mr. Chernukhin is defending the claims brought against him aggressively. That is suggested by his (initial) demand for 100% security. However, he is entitled to request security and has been held entitled to security. The demand for 100% was dropped when this matter came on for hearing. Whilst there are questions to be asked about his approach to disclosure (which were discussed in the context of Ms. Danilina's applications for specific disclosure), it is not possible for me to determine on this application that Mr. Chernukhin wishes to maximise the costs she must incur or that he intends to "oppress the fair trial" of her claims. In any event it has been accepted on her behalf that Mr. Chernukhin is entitled to further security and a further £1.1 million has in fact been offered. In those circumstances I am not persuaded that I should reduce the amount of security to be provided by Ms. Danilina because of what has been alleged about Mr. Chernukhin's intention.
Possible security for a non-party security for costs order against Mr. Deripaska
- Mr. Chapman submitted that on the basis of the Defendants' allegations it would be possible for them to seek a non-party costs order against Mr. Deripaska pursuant to s.51 of the SCA 1981. Further, it would be possible for the Defendants to seek security from Mr. Deripaska in respect of such an order. Moreover, as a result of obtaining a world wide freezing order against Mr. Deripaska in respect of the unpaid arbitral award and the costs of the s.67 proceedings, I was told that Mr. Deripaska had provided security to the Defendants by way of a charge over shares worth $245 million. Mr. Chapman said that if security in support of the suggested s.51 non-party costs order were sought that charge could remain in place as security for the costs of the Defendants in this action. That was a matter to which the court should have regard in determining the present application for security for costs.
- I have had regard to that matter. However, security has not been sought from Mr. Deripaska in support of a possible s.51 non-party costs order. Were it to be sought it might be challenged by Mr. Deripaska. Thus the suggested order for security may or may not be made. In those circumstances I do not regard the possibility as being a reason why the present application should be refused or a reason why additional security should be ordered in a lesser sum than would otherwise have been ordered.
The stage at which this application is being determined
- The trial of this matter is fixed for 26 November 2018. Thus the court is being asked to determine the question of security for costs some two months before the trial. This circumstance can have particularly onerous and disproportionate consequences. The claimant will already have incurred substantial costs and so, if the effect of security being ordered and remaining unpaid within a short period of time is that the claim will be struck out, the consequences to the claimant will be more onerous than if the order had been made at an earlier stage when substantial costs had not already been incurred; see Vedatech v Crystal Decisions  EWCA Civ 356 at paragraphs 15 and 20 per Ward LJ and paragraph 25 per Longmore LJ.
- I have considered this matter and asked myself whether, on the facts of this case, it is a reason for declining to make a further order for security for costs or for moderating the sum in respect of which security is ordered.
- Although the application is being determined at a late stage that is because of the unusual procedural history of this application. The application was in fact made at a much earlier stage and resulted in an order for security for costs to trial (although that had not been sought by the Defendants). That order was appealed and Ms. Danilina resisted the appeal. The appeal was successful and at the end of July 2018 the Court of Appeal ordered that the amount of security already paid (pursuant to the order of Cockerill J.) be on account of whatever sum was ordered by the Commercial Court. So this is not a case where there is any blame to be attached for the Defendants for the late stage at which the application is being determined.
- However, this issue is not so much about delay as about the increased burden upon a claimant who is ordered to provide security at a late stage in an action when the claimant has already incurred substantial costs. If an order for security for costs leads to a claim being stayed or struck out the burden on the claimant is much greater than if the order had been made at an early stage before substantial costs have been incurred. But the present case is unusual.
- I do not consider that the burden on the Claimant on the facts of this case would be so burdensome or disproportionate that there should be no order for further security or that the amount of such security should be moderated. I have reached that conclusion for two reasons. First, she accepts that she herself can pay £1.1 million from her own (liquid) resources. Second, although Ms. Danilina is not a nominal claimant for the reasons given by Cockerill J., this is a case where Mr. Deripaska, a very wealthy man, has requested that the claim, at any rate the TGM claim, be brought and has already provided $5 million ($3 million under the loan agreement and $2 million under the option agreement) to enable it to be brought. It is likely that, faced with the risk that the claim be stayed or struck out, he would provide additional security for costs. Otherwise the $5 million he has provided would or might be wasted. At any rate, Ms. Danilina has not discharged the burden which lies on her of proving that she is unable to obtain further funding from him. There is no dispute that Mr. Deripaska is a very wealthy man and that it is within his means to provide a further sum by way of security. 75% of the costs of all three Defendants (less the sum paid on account) amounts to some £3.2 million. If Ms. Danilina provides £1.1 million, as she has said she can, there will be a further £2.1 million of security to be provided by Mr. Deripaska. It was not suggested that the provision of such security would be unduly burdensome for Mr. Deripaska. He has already provided security to the First and Second Defendants (for the arbitration award and the costs of the s.67 challenge) by way of a charge over shares worth $245 million. In those circumstances I do not consider that the late stage at which this matter is being determined is a reason for declining to make a further order for security for costs or for moderating the sum which is ordered.
- I have sought to consider all the matters said to be relevant to the assessment of the further sums in respect of which it is just that security be provided.
- Having done so I have concluded that it is just to order security for the First and Second Defendants' costs in the sum of £2,630,826 and for the Third Defendant's costs in the sum of £584,413.
- I have noted Mr. Crow's submissions as to how and when that security should be provided; see paragraph 73 of his skeleton argument. I do not think Mr. Chapman dealt with this matter. I am (provisionally) minded to order that £1.1 million be provided within 14 days (mid-October) and that the balance be provided within 14 days thereafter (end of October). I invite counsel to agree the terms of the order. The £1.1 million should be apportioned between the Defendants in the same ratio as the sums to be paid in respect of the First and Second Defendants' costs and in respect of the Third Defendant's costs bear to the total additional security to be provided.
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