BAILII [Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]

England and Wales High Court (Queen's Bench Division) Decisions


You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Loutchansky v Times Newspapers Ltd. & Ors [2002] EWHC 2726 (QB) (12 December 2002)
URL: http://www.bailii.org/ew/cases/EWHC/QB/2002/2726.html
Cite as: [2002] EWHC 2726 (QB)

[New search] [View without highlighting] [Printable RTF version] [Help]


Neutral Citation Number: [2002] EWHC 2726 (QB)
Case No: JS/02/0235

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London WC2A 2LL
12 December 2002

B e f o r e :

THE HONOURABLE MR JUSTICE GRAY
____________________

Between:
Dr Grigori LOUTCHANSKY
- and -Claimant
(1) TIMES NEWSPAPERS Ltd
(2) Peter STOTHARD
(3) David LISTER
(4) James BONEDefendants

____________________

Mr Desmond BROWNE QC and Mr Hugh TOMLINSON QC
(instructed by Olswang, Solicitors) for the claimant
Mr Richard PARKES
(instructed by Reynolds Porter Chamberlain) for the defendants
Hearing dates: 15, 26 November 2002

____________________

HTML VERSION OF HANDED DOWN JUDGMENT
____________________

Crown Copyright ©

    Mr Justice Gray:

    The application

  1. This is an application by the defendants, who are variously the publishers, former editor of and journalists employed by the Times newspaper, for permission to amend the defence in this libel action, in which the claimant is Dr Grigori Loutchansky, to add a plea of justification. The only substantive defence previously pleaded was qualified privilege. But I have ruled that, according to the criteria established in Reynolds v. Times Newspapers [2001] 2 AC 127, that defence is not available to the defendants in the circumstances of the present case.
  2. The legal principles relating to applications for permission to amend made before judgment

  3. I shall start by summarising the relatively familiar principles governing amendments under CPR Part 17, where permission is sought to amend before trial. The broad general principle is that amendments should be allowed so as to permit the real dispute between the parties to be adjudicated upon, provided that any prejudice to the opposite party can be adequately compensated for in costs. But, while that principle holds good, it is nowadays clear that regard must also be had to the public interest in seeing that the efficient administration of justice is not harmed: see the notes in the White Book at 17.3.5 and Worldwide Corporation v GPT (2.12.98, CA unreported). It appears from the notes at 17.3.6 that the prospect of an amendment succeeding must be real as opposed to fanciful. The impact upon other litigants of allowing an amendment must be considered. As it was put in Charlesworth v Relay Roads Ltd [2000] 1 WLR 23 at 238:
  4. "(a) While it is no doubt desirable in general that litigants should be permitted to take any reasonably arguable point, it should by no means be assumed that the court will accede to an application merely because the other party can, in financial terms, be compensated in costs; (b) as with any other application for leave to amend, consideration must be given to anxieties and the legitimate expectations of the other party, the efficient conduct of litigation, and the inconvenience caused to other litigants."

  5. There are a number of authorities bearing on the particular considerations which arise where a late application is made to plead justification in defamation actions. The cases pull both ways. It remains the position that, as was stated by Lord Denning MR in Associated Leisure v Associated Newspapers [1970] 2 QB 450, 466E:
  6. "When a defendant seeks to plead justification at a late stage, his conduct will be closely enquired into. The court will expect him to have shown due diligence in making his enquiries and investigations The court may well refuse his application if he has been guilty of delay or not made proper enquiries earlier."

  7. Moreover, in Bower v Maxwell (8.5.1989, unreported, CA) Woolf LJ recognised the particular strain on a libel claimant whose legitimate expectation of an early trial is threatened by a late application for permission to amend to add a plea of justification
  8. Against that there is the consideration that vindication is of questionable value if it is obtained against a defendant who has been unable to advance a case that the libel was true In Basham v Gregory (21.2.1996, unreported, CA) Lord Bingham said:
  9. "The plaintiff brings this action to vindicate his reputation, no doubt hoping that a jury will accept that he has been seriously libelled and award him damages appropriately. There must, I think, be a serious question as to how valuable a vindication is if it is one against a defendant who is not able to advance the defence he would wish."

    Sir Thomas also pointed out that a successful claimant in a libel action ordinarily obtains injunctive relief with a consequent restriction on the freedom of publication of the defendants, which may be undesirable where a defendant has not had the opportunity to make good whatever defence he has. I recognise the importance of these considerations in the present case. But, as Sir Thomas Bingham MR went on to say in Basham, and as Eady J reiterated in Cook v News Group Newspapers [2002] EWHC 1070 QB, the vindication point is not a trump card.

    Post-judgment applications for permission to appeal

  10. The authorities cited thus far concern applications for permission to amend made before judgment. As will shortly be seen, the present application came at a time when the action was in limbo I had given judgment on liability but the Court of Appeal had upheld the defendant's appeal and remitted the case to me for reconsideration. Such reconsideration would have taken place some months ago, were it not for events over which the claimant's side had no control. As it turned out, the application to amend preceded my reconsideration of the privilege issue by a very short head (in fact less than a week). In those circumstances there was some debate whether or not the principles laid down in Ladd v Marshall [1954] 1 WLR 1489 applied. In that case Denning LJ summarised the test for introducing fresh evidence on appeal:
  11. "To justify the reception of fresh evidence or a new trial, three conditions must be fulfilled: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible."

  12. Although strictly speaking Ladd v Marshall does not apply because, for the reason already explained, judgment had not and could not have been entered against the defendants before the application for permission was issued, Mr Richard Parkes (to whose argument in support of the amendment I would like to pay particular tribute) sensibly conceded that the court should apply the Ladd v Marshall criteria. He submits that, as the trial judge, I have the power to allow even a substantial amendment after judgment, so long as the judgment has not been perfected. Mr Desmond Browne QC, who appears with Mr Hugh Tomlinson QC for the claimant, accepts that this is so.
  13. It is plain that a strong case will be required before an application for permission to amend at so late a stage will be allowed. In Charlesworth, where the application came between judgment and the drawing up of the order, Neuberger J said at 238:
  14. "(4) .. .Because it is inherently contrary to the public interest and unfair on the other side that an unsuccessful party should be able to raise new points or call fresh evidence after a full and final judgment has been given against him, it would generally require an exceptional case before the court was prepared to accede to an application where the applicant could not satisfy the three requirements in Ladd v Marshall... (6) The court should be astute to discourage applications which involve parties seeking to put in late evidence, but cases where new evidence is found after judgment is given and before the order is drawn up will be comparatively rare."

  15. That approach is in line with that adopted by the Court of Appeal in Stewart v Engel [2000] 1 WLR 2268. The majority held that in cases where judgment had been obtained (in that case summary judgment) the jurisdiction to reopen it was to be sparingly exercised and only where there were exceptional circumstances or strong reasons for doing so, since finality and the doing of justice requires justice to all parties in the litigation.
  16. Of course, the position in the present case is somewhat different because, fortuitously, the defendants were just able to lodge their application before my reconsideration of the privilege issue. I nevertheless consider that the observations in Charlesworth and Stewart are in point.
  17. The broad nature of the case sought to be advanced

  18. Before dealing with the chronology, I should summarise the broad nature of the case of justification sought to be advanced. There are two articles complained of, although it will for present purposes suffice if I deal only with the first. It was published on 8 September 1999. The defamatory meanings attributed to the article on behalf of the claimant are as follows:
  19. "The [article] meant and was understood to mean

    (a) that the claimant was the boss of a major Russian criminal organisation;

    (b) that the claimant, through Nordex, the company he owned weapons;

    (c) that the claimant, either personally or by means of companies owned or controlled by him, was involved in the criminal laundering of billions of dollars from Russia; alternatively, by his conduct, the claimant had given reasonable cause to suspect him or the companies he owned or controlled of involvement in the criminal laundering of billions of dollars from Russia."

  20. The defamatory meaning which the defendants now seek to justify is:
  21. "that the claimant, through companies which he owned and/or controlled, has been involved in the criminal laundering of large sums of money; alternatively that, by his conduct as owner and/or controller of such companies he has given reasonable cause to suspect him or those companies of involvement in the criminal laundering of large sums of money".

  22. It is to be noted that the defendants do not seek to justify either the allegation that the claimant was the boss of a major Russian criminal organisation or the allegation that he was, personally or through his company, involved in the smuggling of nuclear weapons.
  23. Lateness

  24. The claimant opposes the application on a number of grounds including lateness, prejudice and the absence of any reasonable prospect of success for the plea of justification. I shall say something about each of these contentions in turn, starting with lateness.
  25. The milestones can be briefly summarised as follows: the two articles complained of were published on 8 September and 14 October 1999 respectively. The claimant started these proceedings on 6 December 1999. As I have recorded, the defence advanced was qualified privilege, the defendants making clear that "it is at present no part of the defendants' case that the claimant is either rightly or reasonably suspected of criminal activity. The defendants at present do not know if such suspicions are justified". The trial began on 19 March 2001. After some days of legal argument, a jury was empanelled on 26 March. After several days of evidence the jury was invited to resolve by its answers a number of disputed facts bearing on the privilege claim. In the light of such answers as the jury was able to provide, on 27 April 2001 I delivered a judgment to the effect that the defence of qualified privilege failed. As I have said, on 5 December 2001 the Court of Appeal allowed the defendants' appeal against my judgment and remitted the matter to me for reconsideration. The defendants nevertheless sought permission to appeal that decision of the Court of Appeal (as well as other decisions where the Court of Appeal had upheld my rulings). The House of Lords having eventually refused permission, the way became clear for the issue of privilege to be reconsidered by me. The first opportunity for that hearing to take place arose on 14 November 2002. On 7 November 2002 the application for permission to amend was served.
  26. It is apparent from the witness statement of Ms Evans of the defendants' solicitors that her clients first learned of an investigation by Italian police into "Operation Spiderweb" in mid-June 2002, when a report to that effect was published in the Swiss and Russian press. Subsequently on 9 July 2002 the defendants came into possession of a report prepared by the Bologna Public Prosecutor's Office dated 29 August 2001 ("the Bologna document"). I mention that document in particular because it appears to me that almost everything which is contained in the proposed particulars of justification derives from it. Whilst I accept the evidence in the sixth witness statement of Ms Evans that further enquiries were made and some further documents were gathered in the period between 17 June 2002 and 14 November 2002, they did not in my view amount to very much. Indeed Ms Evans describes the report of the Public Prosecutor as the "basis of the application" No indication was given by the defendants to the claimant or to his solicitors of these enquiries and investigations. There was no prior notification that the application was going to be made.
  27. Mr Browne for the claimant describes the application to add an entirely new case some 19 months after the trial as "unprecedented"; he is critical of the delay which elapsed since mid-June 2002 and of the failure of the defendants to give any indication of their intention to make the application.
  28. I accept that the fact that the application is made so long after judgment was initially given is certainly a factor to be taken into account: see Bower and Charlesworth. There is also some, albeit limited, scope for criticism both of the time it took to re-cast the relevant passages from the Bologna document as particulars of justification and of the decision of the defendants to say nothing to the claimant's side about the forthcoming application to amend to plead justification.
  29. The prejudice to the claimant if the amendment is allowed

  30. If the amendment were to be allowed, the defendants would no doubt be ordered to pay the costs thrown away by the amendment. But in the circumstances of the present case that would not go very far to alleviate the prejudice to the claimant of having to face what would in effect be a second trial of liability.
  31. As will become apparent later in this judgment, the particulars of justification raise a large number of complex issues relating to the ownership and control of and the relationships between numerous companies. The plea of justification will also necessitate an investigation into the nature of and reasons for a large number of transactions. The disclosure which the defendants are likely to seek may well be vast. Whilst it is not easy to foresee how many witnesses will be required, it is safe to assume that the trial will last many days. The entire process will add significantly to the already massive costs incurred by both parties to this litigation.
  32. . But the evidence suggests that the claimant is a wealthy man and the expense of a second trial is perhaps not the major cause of prejudice to him if the amendment were to be allowed. It has throughout been made clear on his behalf that his primary purpose in bringing this action is to vindicate his reputation and to do so as rapidly as possible. The proceedings have already been on foot for nearly three years. If the amendment is allowed, it is unlikely that a trial of the issue of justification would take place until the latter of part of 2003. Even that prognosis may be optimistic, given that, according to their solicitor, the defendants are not yet in possession of the evidence required to support the defence. It is said that it will or may be necessary to seek evidence by means of letters of request addressed to the criminal prosecutor in Italy and to seek further documents by means of an action for discovery in the USA. In the meantime the legitimate expectation of the claimant that he would be able, upon the determination of the privilege issue, to achieve the vindication which he seeks will be denied: see Bower; Ketteman v Hansel Properties Ltd [1987] 1 AC 189 per Lord Griffiths at 220D.
  33. Whilst it is my view that significant prejudice will, for the reasons given, be occasioned to the claimant if the amendment were to be allowed, Mr Parkes is right to point out that the claimant neither resides nor carries on business within the jurisdiction. His reputation here can therefore properly be said to be limited. Moreover, there is no evidence from him of any adverse effect upon him due to the protracted nature of the litigation.
  34. The merits of the proposed plea of justification according to the defendants

  35. Time did not permit Mr Parkes to explain in his written skeleton argument the structure of the proposed plea of justification. But he made good that omission with admirable clarity in his oral argument. Because of the requirement under Ladd v Marshall that I assess the credibility of the evidence, it is, I believe, agreed by the parties that I must evaluate the strength of the case disclosed in those particulars and the supporting material.
  36. The defendants accept that the case on justification is very largely dependent on the Bologna document which is entitled "Bologna Public Prosecutor's Office Anti-Mafia District Division", so that is a sensible starting point. It is a request for pre-trial detention of a large number of individuals including the claimant. It starts by listing the names of 150 people who are said to have been indicted of various counts identified by letters of the alphabet The list includes the claimant, who is said to have been indicted of counts A and B. Count A alleges that the claimant, along with about 70 others, "joined in a criminal enterprise consisting of no less than three participants and conspired to commit multiple crimes including those they are charged with in counts B and C". Count B alleges that a similar number of individuals, again including the claimant, "joined in a criminal enterprise and conspired to executing (sic) operations within the same fraudulent scheme, ie they either substituted or transferred funds, property or any valuable return resulting from unlawful activities they were not involved in and performed any other operation aimed at concealing the illegal source of such proceeds". Mr Parkes accepted that, at least to an English lawyer, the charges appear odd and imprecise.
  37. The Bologna document runs to 232 pages There are relatively few references to the claimant personally or even to his company Nordex. But it is the defendants' case that the claimant controls a number of the companies mentioned in the report, notably Kama Trade France SA ("Kama France") and Temirtrans Service SA ("Temirtrans France"). Although the particulars of justification reproduce a good deal of other material from the Bologna document, the argument before me centred on those two companies, rightly so, in my view for the viability of the proposed plea of justification appears to me to stand or fall by reference to those companies.
  38. Starting with Kama France, the defendants' proposed case is that the claimant "controlled" that company. That control is said to arise in the following way: according to the statuts of Kama France, one of the founding shareholders of the company was Kama Trade AG ("Kama Switzerland"), which is recorded as owning 49 per cent of the shares of Kama France. That would not ordinarily give Kama Switzerland control of Kama France. But it is alleged that the managers of Kama France were obliged to obtain the consent of all its shareholders, including Kama Switzerland, to any transaction involving the company. So the defendants say that Kama Switzerland effectively had a power of veto over any transaction in which Kama France was thinking of engaging. Kama Switzerland is said to be a member of the Nordex group of companies, which is admittedly owned and controlled by the claimant. Another link between the claimant and Kama France which is relied on by the defendants is that another substantial shareholder in Kama France is a man named Marissov, who is said to be a director of and shareholder in another Nordex company called IFS Fracht-Service ("IFS").
  39. The defendants' case is that Kama France engaged in the transactions which are referred to in paragraphs 18 and 24 of the particulars of justification. The impugned transactions consist in the transfer to its subsidiary Alpha Technics Sarl ("Alpha") of large sums received by Kama France from Temirtrans France and Temirtrans Switzerland. Because at the material times Kama France is recording as having had a nil turnover and Alpha is said to be a small provincial timber company, the inference is invited by the defendants that these transactions were money-laundering (although in paragraph 24 of the particulars of justification an alternative inference is asserted, namely that Kama France was acting as a "banker" for Alpha).
  40. It is alleged in paragraph 25 of the particulars of justification that Kama France has a substantial shareholding in Temirtrans France. Both are said to have offices at the same address in the Champs Elysees in Paris. It is alleged that, as in the case of Kama France, the managers of Temirtrans France were obliged to obtain the consent of all shareholders to any transaction involving the company. Another shareholder in Temirtrans France was IFS, although its holding was only four per cent. It is nevertheless the defendants' case that, either through Kama France or through IFS (which is a Nordex company) or both, the claimant "controlled" Temirtrans France Another shareholder in Temirtrans France (as well as in Kama France) was a man named Toussot, who is alleged to be the claimant's "creature". The defendants also rely on the fact that in 1999 Temirtrans Switzerland became a shareholder in Kama France.
  41. The impugned transactions in the case of Temirtrans France consist of the individual transactions pleaded in paragraphs 35 to 38 of the particulars of justification and a series of "multiple transfers" through accounts held at the bank of New York between a variety of companies at the centre of which is said to have been an Italian company based in Rimini called Prima SRL ("Prima"). The transfers by Temirtrans to Prima are listed at paragraph 47 of the Particulars The sums involved are relatively large Those transactions are said to have the characteristic of money-laundering. Reliance is placed by the defendants on the re-use of the same invoice numbers arid on the fact that the money transferred is alleged to have been paid on by Prima to a Bahamian company, which had substantial dealings with the holders of the accounts at the Bank of New York to which I have referred. The defendants rely in paragraphs 52 and 53 of the particulars on a further series of matching transfers by Temirtrans France and Alpha in favour of Prima. The defendants assert that Temirtrans France and Alpha were working together. One of the latter transfers is alleged to have been the subject of a conversation taped by the Italian police, in the course of which there was a discussion about the routing of the money. This gives rise, on the defendants' case, to the inference that the transaction was a dishonest movement of money designed to conceal its true origin and destination. One of the participants in the taped conversation was Mr Igor Beresovsky, who is alleged to have been working for or on behalf of the claimant. It is not, however, suggested that there was any mention of the claimant or Nordex in the course of this (or any other) taped conversation.
  42. According to paragraph 69 of the particulars the conclusion to be drawn from, amongst other things, the transactions which I have summarised, is that the claimant has at all material times been the controlling figure, through a network of companies which he controls directly or indirectly, behind a web of related transfers of very substantial amounts of money which exhibit the classic signs of money laundering.
  43. The application of the Ladd v Marshall criteria to the proposed plea of justification

  44. It is not disputed on behalf of the claimant that the evidence on which the proposed plea of justification is based, mainly the Bologna document, could not have been obtained in time for use at the original trial. As pointed out earlier, the defendants first became aware of it in June 2002.
  45. But Mr Browne contends that neither the second nor the third criterion in Ladd v Marshall is satisfied he says that, even if evidence supporting the case advanced in the particulars were to be given at a future trial, it would not probably have an important influence on the result. He further contends that the requirement that the evidence in support of the plea of justification be apparently credible is not satisfied either. Mr Browne describes the evidence as "a mish mash of hearsay, inference and supposition". In the context of this case, it is convenient to consider those two contentions together. The questions to which they give rise include the likelihood (or otherwise) that the defendants will obtain evidence to support their particulars and the strength (or otherwise) of their case for saying that the claimant was implicated in the impugned transactions.
  46. The Bologna document was, as I have said, a request to a judge for the pre-trial detention of a large number of individuals including the claimant. It is not itself evidence. But it would seem that the Italian police have obtained access to a large number of documents relating to the relationships between the companies mentioned and to transactions including those to which I have referred. Ms Evans of the defendants' solicitors frankly accepts in her fifth witness statement that "the defendants are not yet in possession of all the evidence required to support a plea of justification". That appears to me to be something of an under-statement. The defendants are not in possession of any documents which underlie the Bologna documents. Such other documents as have been obtained by the defendants consist for the most part of company searches. Ms Evans goes on to say that she has received assurances that the Prosecutor will respond to letters of request. Resort to that procedure would presumably not be possible unless a plea of justification were on the record. Reference is also made to the possibility of an action for disclosure in the US.
  47. As things stand at present there is a distinct paucity of evidence (as opposed to second-hand reports and assertions) to support what is pleaded in the particulars of justification. Whether the defendants would be able to gain access to the underlying documents by one route or another is debatable. It would certainly take a very long time.
  48. Moreover, as is rightly pointed out on behalf of the claimant, it appears from paragraph 25 of the Bologna document that such of the impugned transactions as went through the Bank of New York accounts were "to transfer and receive money in violation of Russian currency control regulations and to promote a variety of schemes to defraud the Russian government of customs duties and tax revenues". I do not consider that this amounts to money-laundering in the sense in which that term is ordinarily used, that is, transferring money in such a way as to disguise the fact that it represents the proceeds of crime. I accept that there are references elsewhere in the Bologna document to "other criminal activities" but these are not particularised.
  49. Account must also be taken of the outcome of the request for pre-trial detention made in the Bologna document. According to the evidence of Mr Tench of the claimant's solicitors, the first and second requests dated 29 August and 14 December 2001 were refused by Judge Zuffa on 8 January 2002. A third request was granted by her in relation to some individuals, but not the claimant, on 31 May 2002. Although it is said by the defendants that the earlier requests failed on a technicality (the nature of which is not specified), it appears from a version of the Bologna document dated 24 January 2002 that the reason for the refusal was that
  50. "The basis of the assessments about the mafiosi character of the company, which are mentioned, cannot in any way be verified, since they are not founded on concrete circumstances, whilst the other elements mentioned are not specific indications by reason of their merely speculative character."

  51. The defendants claim that the request has been re-submitted to the judge. Doubt is cast on that claim on behalf of the claimant. Whilst it is true that there is an unstamped version of the original request for detention which bears the later date of 10 July 2002, its terms are not materially different from the original request. In those circumstances it is difficult to see that there is any real prospect of success for the resubmitted application. In her eighth witness statement Ms Evans records a policeman as having said that the claimant is "accused but free" and that the case will now simply proceed to trial in the ordinary way. There is, however, no evidence of any steps having been taken against the claimant since the refusal of the application for his pre-trial detention.
  52. Accordingly the position in Italy appears at present to be that there is an ongoing investigation. No warrant for the arrest of the claimant has been issued. Apart from what is said in the Bologna document (see paragraph 24 above), there is no evidence of any charge or indictment having been preferred against the claimant. No request has been made to the claimant by the authorities for an interview or for answers to any questions.
  53. I come then to the impugned transactions, starting with those involving Kama France which I have detailed at paragraph 27 above. It is to be noted that the way that the case is put in the fifth witness statement of Ms Evans of the defendants' solicitors is that the claimant "falls under suspicion" because the Champs Elysees companies (including Kama France) are controlled by him. The assertion of suspicion falls well short of the case that the claimant is guilty of money-laundering, which is the primary meaning asserted in the defendants' statement of case. It is also to be noted that the case advanced in paragraphs 18 and 24 of the particulars is based on inference.
  54. The defendants' case depends on the proposition that it is sufficient to give the claimant control over Kama France that the consent of its shareholders (including Kama Switzerland) was required to any transaction involving the company. But the defendants confess in the particulars that they cannot presently say whether that is so because of the company's articles or a shareholder agreement or a board resolution. They have no evidence to support their case. They are driven to rely on the unsourced assertion at page 195 of the Bologna document that "company rules including a clause requiring the manager to get consent from all the partners even to accomplish deeds connected with ordinary business". The articles of association of Kama France do not appear to support that assertion. If the Italian police are correct in their understanding of the "rules" of the company, it is difficult to see how Kama France could have carried on business.

  55. The case advanced on behalf of the claimant is that at the time of the impugned transactions Kama Switzerland was no longer a shareholder in Kama France. The reason, according to the claimant, is that its 49 per cent shareholding had been transferred on 28 December 1996 by Kama Switzerland to a company, Transilux Holding SA ("Transilux"), in which it is not suggested by the defendants that the claimant had any interest. According to the witness statement of Mr Tench, that transaction came about when Mr Marissov, previously an employee of Nordex, took over the business of Kama Switzerland by means of what was in effect a management buy-out. If that be right, it cannot of course be said that the claimant had any control over the impugned transactions.
  56. A great deal of time was spent in debating whether the claimant's claim about the sale of the Kama France shareholding was true. The transfer document produced by Mr Tench was dismissed by the defendants as a forgery. There is, however, no suggestion that the claimant was responsible for any defect in this or any other document. The same charge of forgery was made in relation to a document obtained by the defendants from the French equivalent of the company registry. That document on its face shows that Transilux has replaced Kama Switzerland in the list of founding shareholders. There was a dispute between the French lawyers consulted by the parties whether it is or is not the practice to alter the names of the founding shareholders in the statuts of a company. In addition the defendants relied on the inclusion, after the alleged disposal of its shareholding, of the name of Kama Switzerland in what is said to be a list of shareholders who are creditors of the company (albeit in the case of Kama Switzerland in a very small sum). The defendants were unable to offer any explanation why, if no disposal had taken place, the name of Transilux appears in the same list. The defendants rely further on what Mr Marissov is said in the Bologna document to have told police about his relationship with the claimant at the time of the alleged share sale. The defendants maintain that what Marissov is recorded as having said is inconsistent with a friendly management by-out.
  57. I cannot of course resolve these disputes. But I am entitled to take account of the fact that, in order to sustain this part of their plea of justification, the defendants are constrained to reject the claimant's case as a lie and to dismiss as forgeries documents which are inconsistent with their suspicions about the claimant.
  58. As to the impugned transactions involving Temirtrans France, the defendants face some of the same difficulties as confront their case in relation to Kama France. I have already mentioned the reference in the witness statement of Ms Evans to the claimant having "fallen under suspicion". That comment applies equally to the Temirtrans France transactions since it was another Champs Elysees company. As already noted, the defendants' case in relation to the transactions involving Prima is that they were "characteristic" of money-laundering. No such allegation is made in paragraphs 34 to 37 which concern the transactions to or through the Bank of New York accounts. The matching transactions pleaded in paragraphs 51 and 52 of the particulars are said to be "compatible" with the making of transfers for the purposes of money-laundering.
  59. Just as in the case of Kama France, the defendants face the difficulty that in order to establish the claimant's control of Temirtrans France, they have to rely on the unverified assertion in the Bologna document that all the shareholders have to consent to any transaction involving the company (cf paragraph 40 above). In the case of Temirtrans France, the control was more remote, depending, as I understand it, on Kama France's shareholding in Temirtrans France and a further four per cent of Temirtrans France held by IFS. The claimant's case is, as I have said, that the claimant disposed of his indirect interest in Kama France on 28 December 1996.

  60. As for the transactions themselves, it appears from the particulars of justification at paragraph 54 and following that the defendants largely base their case on the number of the transfers; their lack of apparent compatibility with normal commercial activities; the reuse of the same invoice numbers and the taped telephone conversation involving Mr Beresovsky. The case is based in large part on inference and the proposition that Mr Beresovsky acts on the direction of the claimant. The latter proposition appears to be based on nothing more than Mr Beresovsky's one per cent shareholding in Kama France and his role as co-manager of Alpha, of which 51 per cent was owned by Kama France.

  61. I am conscious that I have not dealt with the entirety of the lengthy and convoluted particulars of justification. Instead I have concentrated on those parts of their case on which the defendants place the greatest reliance. In my opinion the remaining particulars add very little of substance to the case of justification. There is for instance in my view no valid basis for the assertion that Berezovsky or Tossou acted on the direction of the claimant.

  62. The defendants' alternative case: reasonable grounds for suspicion

  63. The defendants' alternative case is that, even if they cannot justify the meaning that the claimant was guilty of money-laundering, they can justify the lesser meaning that by his conduct he gave reasonable cause for suspicion of such misconduct. In reliance on Shah v Standard Chartered Bank [1999] QB 241; Bennett v News Group [2002] EMLR 38 and Chase v News Group Newspapers [2002] EWLHC 1101 QB, Mr Browne contended that, in cases where reasonable grounds for suspicion are relied on by way of justification, the following three principles apply:
  64. i) the defendants must focus upon some conduct of the claimant that in itself gives rise to suspicion (the so-called "conduct rule");

    ii) it is not permitted to rely upon hearsay; and

    iii) the defendant cannot plead as supposed "grounds" matters post-dating publication.

  65. After the conclusion of the oral argument, however, the Court of Appeal handed down judgment in Chase v News Group Newspapers Ltd [2002] EWCA Civ 1772. The parties have submitted helpful written submissions as to the effect of that decision on the propositions of law summarised in the preceding paragraph and as to the impact of the decision on the facts of the present case. There appears to me to be broad agreement between the parties as to such alterations as have been made by the decision in Chase to the law in this area. They may be summarised as follows:
  66. i) of the hearsay rule, Brooke LJ in Chase said at paragraphs 41-42 that in Shah May LJ could not have had the provisions of the Civil Evidence Act 1995 in mind when he said that allegedly credible hearsay may not contribute to proof that there are reasonable grounds for suspicion. Brooke LJ continued that, provided that the requirements and safeguards of the 1995 Act and CPR Part 33 are observed, a defendant may now in theory adduce hearsay evidence of whatever degree in an attempt to prove the particulars of justification.

    ii) in relation to the conduct rule, Brooke LJ affirmed at paragraph 48 that in general the defence must focus on some conduct of the claimant giving rise to suspicion. However, he added the caveat that in some cases the defendant might rely on "strong circumstantial evidence implicating the claimant which might amount, objectively speaking, to the requisite grounds for reasonable suspicion" (see paragraph 51).

    iii) the rule prohibiting reliance on matters which occurred after publication is unaffected by Chase. It appears to me to make good sense: why should a defendant who had reasonable grounds for suspicion at the time of publication be deprived of them by reason of subsequent events and conversely why should inadequate grounds be capable of being bolstered by events which occurred after publication?

    Section 5 of the Defamation Act

  67. As pointed out at paragraph 13 above the defendants do not seek to justify two of the defamatory allegations of which the claimant complains, namely the allegation that he was the boss of a major Russian criminal organisation and the allegation that he was involved in the smuggling of nuclear weapons. It goes without saying that these are both allegations of great gravity.
  68. Mr Parkes rightly draws attention to section 5 of the Defamation Act, arguing that it would enable his clients to succeed with their defence of justification if they were able to make good the serious charge of money-laundering, even if the other two allegations were not substantiated. Alternatively Mr Parkes submitted, in reliance on Pamplin v Express Newspapers [1988] 1 WLR 116, that, even if the defence of justification failed by reason of the unproven allegations, proof of money-laundering would substantially reduce any damages. It is not for me to say now whether either of those arguments would find favour with the jury. The comment can, however, fairly be made that the inability of the defendants to substantiate either of the two serious allegations which they published in their newspaper has to be treated as a significant further weakness in their case on justification.
  69. Summary of conclusions

  70. I am now in a position to summarise my conclusions. The question is whether, in the exercise of my discretion, I should grant permission to the defendants to amend to add the plea of justification particularised in the draft amended Defence. In the circumstances of the present case, numerous factors have to be taken into account.
  71. I recognise the importance of the principle that the object of the courts is to decide the matters in controversy between the parties, so far as that can be done without injustice to the opposite party. Amendment is not to be regarded as a matter of grace or favour. But recognition has also to be given to the demands and exigencies of the contemporary civil justice system (see paragraph 2 above). It is pointed out on behalf of the claimant that this case has already taken up a great deal of court time.
  72. I acknowledge the force of Mr Parkes's submission that the court should be wary of refusing to permit a defendant in a libel action to advance the defence that he would wish, where the effect would or might be to enable the claimant to obtain vindication of dubious value and an injunction which would have the effect of preventing the defendant from exercising his right to publish that which he asserts to be true. But that cannot be treated as a trump card (see paragraph 5 above). Moreover, the force of the point is diminished if it were to be the case that the defendant cannot put his case higher than that there are reasonable grounds to suspect him of the misconduct alleged. I shall revert to this question later.
  73. As to the effect on the claimant of the burden of having to endure a "second" trial and the continuing strain on him of being embroiled in these proceedings, I agree with Mr Parkes that the claimant may be less susceptible to prejudice of this kind than other litigants. I further accept that he is no doubt a wealthy man so that costs considerations are less important than in other cases. I further accept that such delay as occurred after the Bologna document came to the notice of the defendants was minor and can effectively be disregarded. There is no suggestion of any "overreaching" by the defendants.
  74. Those are considerations which may be said to favour allowing the amendment. I take them into account. But they have to be balanced against factors which point in an opposite direction.
  75. First, there is the question of lateness, that is the stage which the proceedings had reached by the time the proposed amendment was first put forward. I have recited the chronology at paragraphs 15-16 above and I do not repeat it. Even though my judgment was, as it were, reopened by the Court of Appeal, it is clear from the authorities to which I have referred at paragraphs 6-9 above (and not disputed by the defendants) that in circumstances such as obtain here, the jurisdiction to permit a new case to be raised is one which should be sparingly exercised.
  76. Despite the fact that the claimant lives and works abroad and wealthy though he may be, there is inevitably real prejudice for him in having to meet at this late stage (19 months after the "first" judgment) an entirely new case of justification. It is evident from the length and complexity of the particulars that, in order to meet the new case, the claimant would have to devote an enormous amount of time, manpower and money to deal with disclosure, the preparation of witness statements and a lengthy trial.
  77. I have also to consider whether the second and third criteria in Ladd v Marshall are satisfied (or, to put it another way, whether the defence of justification has a real, as opposed to a fanciful, prospect of success). Then there is the related question whether the defendants are likely to be able to adduce admissible evidence to prove their case.
  78. I have come to the clear conclusion that such of the material before the court as is apparently credible falls well short of enabling the defendants to make good their primary case that the claimant has been guilty of money-laundering. Such a case has in my judgment no real prospect of success.
  79. The charge against the claimant that he is guilty of money-laundering is an extremely serious one. The case is almost entirely based on the Bologna document which has been prepared by unidentified officials in the department of the Italian prosecutor. Ms Evans said of the Bologna document in her sixth witness statement that it did not contain "sufficient material" to instruct counsel to prepare a plea of justification. None of the documents or other material which underlie the Bologna document is available. The defendants concede that they are not in possession of the documents required to support a plea of justification. Whatever assurances may have been offered by the prosecutor's office, it must in my opinion be an open question if those documents would or could be made available to the Times hereafter. Indeed it is not clear what materials are in the possession of the prosecutor.
  80. No warrant for the arrest of the claimant has been issued. He has not been interviewed. There is no evidence that he has been charged. There is no evidence of any indictment (or its Italian equivalent) having been prepared, still less served on the claimant. Such information as is provided in the Bologna document as to the case sought to be made against the claimant is admittedly imprecise. To the extent that the case has been put before a judge, it has been rejected, apparently on evidential grounds (see paragraphs 36 and 37 above).
  81. As to what I have termed the impugned transactions, the defendants are confronted by the difficulty that the charge which they seek to justify is money-laundering, whereas in relation to such Bank of New York transactions as are pleaded the Bologna document (which is virtually the only material which they have to go on) the accusation against the claimant appears to consist mainly of breaches of currency control regulations and tax evasion. Without wishing to minimise the latter, it appears to me that there is a material difference between the two (see paragraph 35 above). Breaking currency control regulations and tax evasion are not money-laundering.
  82. The case advanced against the claimant in relation to the transactions in which Kama France and Temirtrans appear to have engaged depends in both cases upon the ability of the defendants to establish that he controlled that company at the material time. But on their own case (see paragraphs 40 and 45 above) the defendants are unable to specify how it comes about that the consent of all shareholders is required to any transaction involving the company. On the face of it such a requirement seems an impractical and unlikely state of affairs.
  83. In relation to Kama France the defendants face the further difficulty (to which I alluded at paragraphs 41 and 42 above) that the claimant asserts that his indirect interest in the company had been disposed of before the impugned transactions were entered into. The assertions that this is a lie by the claimant designed to conceal his interest in Kama France and that the documents which appear to support it are forgeries do not appear to me to have a very substantial foundation.
  84. As to the transactions themselves I have already observed (paragraphs 39 and 44) that the case that they represent money-laundering appears to be based on inference. Moreover there are passages in the defendants' evidence which suggest that the case can be put no higher than that suspicion exists.
  85. Thus far I have addressed the question whether there is apparently credible material to support a case that the claimant is guilty of money-laundering. In my opinion there is not. What of the defendants' secondary case that by his conduct the claimant has given reasonable grounds for suspicion of such criminality?
  86. There is clearly an argument for saying such a defence would not meet the sting of the first Times article, not least by reason of its headline and the juxtaposition of references to serious criminality allegedly involving the claimant. In addition, if the defendants are confined to a case of reasonable grounds for suspicion, their ability successfully to invoke section 5 of the Defamation Act becomes questionable (see paragraphs 50-51 above). Would a jury accept that the charges of smuggling nuclear arms and being a mafia boss engaged in international crime do not materially injure the reputation of the claimant, having regard to the truth of the charge that by his conduct he has given reasonable cause for suspicion of money-laundering? I have my doubts.
  87. 69. I have attempted at paragraphs 48 and 49 above to summarise the authorities which bear on the questions what must be established in order to establish reasonable grounds for suspicion and what evidence may be called by the defendant in support of his case that such grounds exist.

  88. I accept in the light of Chase that the so-called hearsay rule has disappeared from this area of the law. It is expressly accepted on behalf of the claimant that the hearsay point now goes only to weight. The Court of Appeal made specific reference to the question of weight at paragraph 43 of the judgment of Brooke LJ. Although the question of weight is of course one for the jury, it seems to me to be questionable, to put it no higher, what weight could properly be given to many of the self-evidently hearsay statements relied on in the particulars. The claimant cites as an example the slender hearsay evidential basis for the assertion in paragraph 20 of the particulars that there is a connection between him and Marissov.
  89. So far as the conduct rule is concerned, the claimant points out, rightly, that the case which is at present sought to be justified is that by his conduct he has given reasonable cause to suspect him. Mr Parkes invites me to allow the defendants to take advantage of the decision in Chase by amending the Lucas-Box meaning at paragraph 1 9A of the Re-Amended Defence to add the words "and/or (b) that there are reasonable objective grounds to suspect him or those companies of involvement in the criminal laundering of large sums of money". For the purpose of the present ruling, I am prepared to treat the pleading as if it did contain those words.
  90. Do the defendants have an apparently credible case for saying that they have strong circumstantial evidence implicating the claimant which might amount, objectively speaking, to the requisite grounds for reasonable suspicion? I have already drawn attention at paragraphs 40-46 above to the weakness of the defendants' case for saying that at the material times the claimant controlled or was the "controlling mind" of either Kama France or Temirtrans. The defendants' case is that the money-laundering was carried out by individuals who are minority shareholders in companies in which they allege that the claimant also had minority shareholdings. That does not appear to me to amount, objectively speaking, to the requisite grounds for reasonable suspicion. It is more akin to guilt by association. Moreover, the defendants cannot claim to be in possession of evidence, circumstantial or otherwise, implicating the claimant in the impugned transactions.
  91. As is conceded, the defendants cannot rely in support of the existence of reasonable grounds for suspicion on events occurring after publication. This appears to me to prevent them relying on the following matters which at present feature in the particulars:
  92. i) the conviction of Peter Berlin and Lucy Edwards in February 2000 and their admissions in the US criminal proceedings (see particulars at paragraphs 1 and 2);

    ii) the statements made by Marissov to the French police in 2001 (paragraph 20);

    iii) the transfers made to Alpha in October 1999 and in 2000 (paragraph 24);

    iv) the Italian investigation into Prima in 2001 (paragraph 42);

    v) the Alpha-Prima transfers in 2000 (paragraphs 53-55); and

    vi) the telephone conversations alleged to have taken place in 2000 (paragraph 57).

    I accept the contention of the claimant that the inability of the defendants to rely on these matters further undermines to a significant extent the defendants' case.

  93. In my judgment there is insufficient admissible and apparently credible material before the court to enable the defendants to make good their case that there existed reasonable grounds for suspecting the claimant to be guilty of money-laundering. In dealing with the application to advance this secondary case, I must also bear in mind the lateness of the application, the prejudice it would cause to the claimant and the real doubt in my mind as to the ability of the defendants to rely successfully on section 5 of the Defamation Act if their case is limited to reasonable suspicion. In all these circumstances I have concluded that I must also refuse permission to amend to plead the alternative case based on the existence of reasonable grounds for suspicion.


BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII
URL: http://www.bailii.org/ew/cases/EWHC/QB/2002/2726.html