Integrity, independence, and culture: not a Russian problem, a professional problem

The Navigator Equities v Deripaska [2020] EWHC 1798 (Comm) provides an interesting account of a troubling case. It raises questions about the conduct of the case by a Clifford Chance partner. It left me wondering if the SRA needs to conduct a thematic review of the area. And whilst it is tempting to ask again does Big Law have a Russian problem, or perhaps an acting out for unsavoury people problem (such as Green or Weinstein), it seems to me to also raise important questions about professional culture in commercial litigation and the very really problem of maintaining professional independence and judgment in high stakes, hard fought, litigation.

The broader context of the case can be shortly summarised from the judicial summary:

“Mr Justice Andrew Baker considered an application by the claimants to commit the defendant, Mr Deripaska, to prison. The parties were involved in a long-running dispute concerning a valuable central Moscow property. The main issue between the parties was whether the Second Claimant, Mr Chernukhin, was a party to a shareholder agreement governing the joint venture through which the property was owned. An arbitral tribunal decided that he was but the issue was effectively re-litigated before Teare J at a trial of a challenge to the arbitration award under s67 of the Arbitration Act 1996 (‘the s67 Proceedings’). The arbitrators ordered, and Teare J upheld, that Mr Deripaska buy out Mr Chernukhin (see [2019] EWHC 1173). The appeal to the Court of Appeal was dismissed on 6 February 2020 ([2020] EWCA Civ 109). It is subject to a pending application for permission to appeal to the Supreme Court.”

There is also, to my non-practitioner eye, an odd complexity to the legal teams, but for our purposes we can concentrate on the fact that a partner from Clifford Chance acted for the Claimants who were bringing Contempt proceedings against the defendant, a Mr Deripaska. As will become more important than one might imagine, the claimants’ solicitors, and the same team within that firm, had conduct of all the prior proceedings too: the original proceedings and the contempt application. Quotes from hereon are from the main judgment in the contempt application unless otherwise indicated.

Mr Justice Andrew Baker considered an application by the claimants to commit the defendant, Mr Deripaska, to prison. The parties were involved in a long-running dispute concerning a valuable central Moscow property. The main issue between the parties was whether the Second Claimant, Mr Chernukhin, was a party to a shareholder agreement governing the joint venture through which the property was owned. An arbitral tribunal decided that he was but the issue was effectively re-litigated before Teare J at a trial of a challenge to the arbitration award under s67 of the Arbitration Act 1996 (‘the s67 Proceedings’). The arbitrators ordered, and Teare J upheld, that Mr Deripaska buy out Mr Chernukhin (see [2019] EWHC 1173). The appeal to the Court of Appeal was dismissed on 6 February 2020 ([2020] EWCA Civ 109). It is subject to a pending application for permission to appeal to the Supreme Court.

Now for the uninitiated it is worth mention that an application for contempt involves seeking an order that someone, “be committed to prison or sanctioned in any other manner. It is thus ‘quasi-criminal’: chokey may result.

The bottom line here is that the judge held that the Claimant’s team conducted the application in a way unfair to the defendant. And that, “the proper inference to draw is, and I find, that the contempt application was issued and has been pursued by the claimants out of and in pursuit of the second claimant’s deep-rooted personal animosity towards the defendant.” This was a misstep in law (“contempt proceedings …may be struck out as abusive if brought “otherwise than for the legitimate motive of seeking enforcement [of the injunction or undertaking], or bringing to the court’s attention a serious rather than purely technical contempt”) and raising questions of professional competence as well as professional ethics (See the SRA’s guidance on Balancing Duties in Litigation on excessive litigation). Moreover, the applications was, “pursued in aggressive, partisan fashion, as if it were just the latest round in this long-running, ‘no-holds barred’, commercial litigation wrestling match.”

It gets worse: “in my judgment that [one of the claimant’s] argument[s] has been and is being deployed by the claimants to vex and harass the defendant, not in order to draw serious misconduct to the attention of the court so as to allow the court to take its own view on what, if any, sanction it should attract in the public interest. Regular readers will know, of course, that solicitors are required to act in ways that “uphold the constitutional principle of the rule of law, and the proper administration of justice” and “in a way that upholds public trust and confidence in the solicitors’ profession” (SRA principles).  

The judge notes a number of ways in which the solicitors should have acted: “it was incumbent on the claimants to prosecute the contempt application dispassionately as guardians of the public interest.” And that they could have better achieved the likelihood of that by asking a fresh team of lawyers to handle the contempt (the judge did not consider the costs of that, but did indicate this was not a requirement of such applications). They needed to be “scrupulously careful” in their handling of allegations of dishonesty even though, “Mr. Deripaska had been very much on the wrong end of the dispute to date, with adverse findings, including as to his honesty in certain respects.” Walking the line, dear lawyers, also involves not kicking a man when he is down. There are, I think too, some carefully worded thoughts for judges encouraging them not to do the same when conducting cases and for counsel before them to discourage it.

The Clifford Chance partner clearly had a difficult time in cross-examination because the judge finds:

“I do not find it possible to see how she failed to see that what she was saying was misleading, unless it be because she saw her and her affidavit’s function, as I regret to say in my judgment she did, as being to advance as forcefully as possible the best case she could argue for her client why Mr Deripaska should be found to have been in contempt.”

This clearly raises a question as to whether the obligation to, “not mislead or attempt to mislead your clients, the court or others, either by your own acts or omissions or allowing or being complicit in the acts or omissions of others (including your client)” under para. 1.4, Solicitors’ Code of Conduct has been breached. There may be a way out of this for her as, “in cross- examination [she] refused to accept” that some of the case put was “seriously misleading” as, perhaps mindful of his advice to other judges not to go too far, Baker J says, “I am not prepared to say she was not being honest in her answers.”

Other problems might be described as overstating ones case, for example, by swearing that, “there were no undisclosed known adverse documents” when “cross-examination revealed, there had been no disclosure effort by Clifford Chance beyond trusting Mr Chernukhin’s instructions, though he had at least some history in the litigation of being untrustworthy in relation to disclosure.” The need to be scrupulous in case handling extends beyond presentation to its preparation. And other ways in which, “the claimants’ evidence in support of the contempt charge was in material respects misleading or not the whole truth, or both of those together.”

Here the judge observes, “I do not find that Ms [X] intended to mislead the court. It may be, as she suggested, this was “sloppy drafting” but, as Mr Pillow QC rightly, with respect, put to her in response, it was sloppy drafting in sworn evidence intended to put a man’s liberty at risk, and had the capacity to mislead the court.” Shades, for those of you who recall it, of the Brett-Leveson exchange about being fantastically precise.

Other problems were found:

“[T]here is real reason to suppose that Mr Chernukhin instructed Clifford Chance to issue and pursue the contempt charge as an act of revenge….”

[T]he contempt application was presented to the court in a heavy-handed, aggressively partisan fashion, that was inappropriate, vexatious and unfair to Mr Deripaska.

One of the solicitor’s affidavits, “was replete with tendentious comment, argument, and irrelevant but prejudicial material.”

And in giving evidence, “I regret to say I formed the clear view that [the Clifford Chance partner] had come to argue the case for Mr Deripaska to be found guilty of contempt and had a poor, or at any rate variable, grasp of the difference between evidence she could give, evidence she could not fairly give but Mr Chernukhin might have given if it were to be evidence at all, but had chosen not to give, and advocacy.”

The judge starts to wind up with a comment which bears scrutiny and weight especially in the offices of the SRA if it has not yet had that scrutiny (my guess is it will have).

“In the working generation of 30 years or so during which I have been engaged in commercial dispute resolution in this jurisdiction, principally in this court and in London arbitrations, there has been a significant general increase in hostility and aggressiveness in the conduct of disputes. The taking of any and every point, good or bad, and other failures to display proper independence from the litigating client, is treated too often as if it were a normal or appropriate adjunct of well funded, hard fought, business disputes, particularly if there are issues of dishonesty involved. Although Ms [X] would not accept this when Mr Pillow QC put it squarely to her, and I am willing to accept from her that she indeed did not see it this way, in my judgment she had lost, or never had, that degree of objectivity and detachment from her client that a fair prosecution of this contempt application, with its quasi-criminal character, required. That lack of objectivity infected also the presentation of the case to the court through the skeleton argument. It was also confirmed by what cross- examination demonstrated to be a willingness on Ms [X]’s part to allege dishonesty against Mr Deripaska in a new claim that has been issued by the claimants, under s.68 of the 1996 Act, seeking to reopen the arbitrators’ finding as to the price that should be paid for the Navio buyout, on the basis of a document obtained by Clifford Chance in circumstances she had not investigated properly and in respect of which she could not say she had evidence for its authenticity.”

It, “illustrates,” he said, “a lack of detached scrutiny…. [I]t was and is my clear view that quasi-prosecutorial judgment here was clouded in just that way, leading to a process that was, and might reasonably be thought by an impartial observer to be, unfair to Mr Deripaska.”

I am encouraging commercial litigators reading that remark, who might be thinking, “It’s okay lads. As long as it’s not contempt proceedings we can still be dicks,” to think again.  The judge does, however, seem to give some succour to this view (accidentally, of course):

Where ultimately the court is asked only to decide the outcome of the business dispute, usually to be expressed in terms of a party or parties being told to pay money to another party or other parties, there may be nothing too unfair about that modern style, regrettable though I regard it nonetheless. But when the court is being asked by a private litigant to consider a charge of contempt of court against the other side, especially against an individual whose liberty the applicant therefore seeks to put at risk, a better standard of conduct is not merely desirable, it is essential to the fairness and the appearance of fairness of the process.

Such hostile adversarialism has detriment beyond the conduct of contempt proceedings, or proceedings where honesty is in issue. It drives up the costs, economic and social, of disputes. And it promotes a culture, knowingly or not, of pulling a fast one, taking advantage, and shading the truth. That is pernicious in all proceeedings, not just lawfare about the reputation of rich folk.

Readers will note that I have not named the Clifford Chance partner. The reason for this is simple. The judge’s comments point towards a serious manifestation of a systemic problem. Blame it on the Russians if you like, but the responsibilities to act are clear. Judges should not tolerate hostile adversarialism. Firms should walk themselves and their clients back from it. The SRA should investigate and prosecute it (I imagine this case is being investigated) and they should give serious consideration to a thematic review because it seems to me we see too many cases where big money, high stakes cases wreak havoc with lawyers’ independence and judgment.

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