England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE HILDYARD)

		Royal Courts of Justice Strand London, WC2A 2LL
		22 December 2015

1. LORD JUSTICE ELIAS: This is an appeal brought by Vitaly and Julia Arkhangelsky from the order of Hildyard J, a Chancery Judge, an order dated 27 November 2015.
2. By that order the judge refused to grant an adjournment and refused to order advanced payment of costs by the Bank to provide for legal representation of the appellants and concluded that in his view it was possible for him to conduct a fair trial in accordance with Article 6 even if he did not order the costs of legal representation as was requested by the Appellants.
3. This is a very complex case. There are apparently about 150 Lever Arch files. I am told there are 10,000 documents. The case is planned for 11 weeks and is to start at the beginning of next term on 11 January.
4. The Bank, that is Respondents to this appeal but the Claimants in the substantive appeal, seek judgment against the Defendants both as guarantors of debts and as principal debtors.
5. The Appellants, who are the Defendants in the substantive case, say that they have been subject to a fraudulent conspiracy perpetrated against them by the Claimants which has driven them from Russia, which has left them seriously impoverished, which has included harassing actions and dishonest representations, and in which the Claimants have acted effectively in cahoots with the authorities in Russia to seek to prevent the Appellants being able effectively protect their rights.
6. Apparently the Appellants are currently subject to what is called a red notice from Interpol. I should say that notice applies to the First Appellant, not the Second Appellant, as I understand it. That means he is wanted for arrest with a view to extradition. It is alleged that he has a form of asylum in France and that he can conduct this trial by way of video link from France. He has a McKenzie friend, Mr Pavel Stroilov, who appeared before me this morning and I have to say, looking through his skeleton and the way he has conducted the case, has done so with considerable intelligence and he displays an outstanding understanding of the relevant legal principles.
7. Let me turn to the substance of this appeal. Although the judge did not deal with this in his order, I agree with Mr Stroilov that in fact it seems to me it would have been better had he approached the question of Article 6 before going on to consider the question of the costs of representation.
8. The question relating to the costs is this. The Applicants say they need £1.5 million for legal representation, expertise and other disbursements. That sounds very small given the scope of the trial, but they do have solicitors who are prepared to act on a contingency basis and, as I understand it, counsel has also agreed to act on limited contingency basis. But they need to be put into some funds before they are in a position to commence this litigation at all and before they can take advantage of those offers. The sum identified is in the region of £1.5 million.
9. It is, of course, a highly unusual application. There is a power, as the judge recognised, under CPR 44.2 for costs to be awarded by a trial judge in exceptional circumstances. Traditionally it is done in the Chancery jurisdiction in Beddoe type applications in some cases, for example, where beneficiaries bring some claim against a pension fund or where minority shareholders are bringing a claim against a company and that kind of thing. It is clear, however, from the authorities that the jurisdiction is in principle wider than that. It seems to me the judge did recognise that fact.
10. But it is highly unusual for costs to be awarded in anticipation of the trial before any facts have been determined and in circumstances where the judge rejected a contention that he should order costs in pursuance of CPR 25.7 on the basis that it would be an interim payment pursuant to CPR 25.7 on the basis that there would be a sufficiently successful outcome as far as the Appellants are concerned. That is not challenged in this appeal.
11. Let me turn to the approach to the Article 6 point. What is said is this, in substance. This is such a complicated case, and I have been given this morning various detailed sheets showing the complications as between various companies who play a part in the litigation, that there cannot possibly be a fair trial for a litigant who has been representing himself. It is said that there has to be to some extent equality of representation.
12. The Bank and Mr Savelyev, who has become a Claimant in the substantive application, are represented by leading counsel and a team of junior counsel backed by very experienced solicitors. It is said that in a case like this to put them against individuals who are not represented, who cannot even attend court and have to conduct matters from a distance via a video link is wholly unsatisfactory; and indeed is so unsatisfactory that the only proper conclusion the judge could have reached was that there could not be a fair trial and that the case should be stayed.
13. Alternatively, this links into the point about costs, if there could not be a fair trial, then that would be a reason why the judge should have exercised his costs discretion. I accept that whether or not there could be a fair trial is highly relevant to the question of whether the judge should have exercised his discretion under 44.2, which is why I agree it would have been better to consider that first. But it ought not to have affected the judge's analysis of the fair trial issue under Article 6.
14. The judge in dealing with the Article 6 point very frankly identified various concerns he had about the trial. He mused in his judgment about the difficulties of identifying precisely what the principles ought to be that he should consider. He made the obvious point that there would be considerable difficulties facing individual litigants in this case.
15. He had regard to the authorities, in particular the case of R (Gudanaviciene) v Director of Legal Aid Casework [2015] 1 WLR 2247 in which the Court of Appeal summarised the general principles applicable in this area. In particular, he applied certain dicta by Chadwick LJ in the case of Perotti v Collyer-Bristow [2003] EWCA Civ 1521. That case was concerned specifically with the problem of a fair trial in circumstances where the litigant is in person. Chadwick LJ said in effect that the test under Article 6 is:

"Whether a court is put in a position that it really cannot do justice in a case because it has no confidence in its ability to grasp the facts and principles of the matter on which it has to decide. In such a case it may well be said that a litigant is deprived of effective access... because, although he can present his case in person, he cannot do so in a way which will enable the court to fulfil its paramount and over-arching function of reaching a just decision."

16. The judge focussed on those words and asked himself whether he considered that he would be able to grasp the essential facts and principles. He recognised the trial would not be as he would have wished if the Appellants were to remain unrepresented. He specifically referred to the difficulties of cross-examining by video link.
17. But his conclusion in the end was that despite these obvious and formidable difficulties, he felt that he could do justice to the case and to the parties and that he could conduct a fair trial. He did, however, recognise that it would require the assistance of constructive contribution from the parties and in particular from the Appellants with the more powerful legal representation.
18. In my judgment, an important feature of the case is his conclusion at paragraph 41 where he says this:

"I make that decision ultimately on the basis of my overall acquaintance and accumulated knowledge of the case with the reserved right that if at any time I consider the trial could not proceed fairly or had to be sliced up or dealt with in some other way, then despite the costs I would feel free to do so."

19. There are two points that arise from those words. The first, which is an important feature here too, is that the judge has lived with this case for some years and he does have a far more detailed knowledge of it than I have or indeed the Court of Appeal could have if it were to hear this appeal. Plainly, weight must be placed on that factor.
20. The second is that it seems to me he is quite properly indicating that the question of a fair trial is not something one simply asks once at the beginning of the trial and forgets thereafter. It is something that may have to be reviewed as the case is continuing. It may affect the way in which the case has to be dealt with. It may no doubt in a extreme case lead a judge to conclude that it simply is not possible in the event, notwithstanding his hopes and aspirations, that a fair trial can be conducted. It is possible that that could become apparent at some stage in the proceedings. If that were so, I think the judge would have no option under Convention jurisprudence other than to bring the case to an end.
21. It is also right to say that although the Appellants are unrepresented now, they have had the benefit of representation and legal advice and expert advice at various stages in the preparation of the case. I am not in a position to know how far that would ease the difficulty of representing themselves in person, but it must plainly assist them in certain respects.
22. Indeed, the judge refers at paragraph 35 to the fact that counsel previously instructed had accepted that the prejudice would not necessarily as be as great as normal for this and other reasons. The judge also considered the question of lack of appearance in fairness, but rejected that submission too.
23. In my judgment, given in particular the fact that the judge is better placed to determine this issue and perhaps most importantly because he has, in my view, effectively indicated that the matter must be kept under review, I do not think there is a realistic prospect of convincing a court that this decision taken in the course of pre-trial review is a matter with which the court should interfere.
24. I do bear in mind the observations of Mr Stroilov when he said that the judge had not asked whether there could be a fair trial, but rather whether it was fairer for a trial to take place than not to take place at all. I do not, with respect, think that is a fair way of reading the judge's decision. He very much had in mind the points which Mr Stroilov made to him and which Mr Stroilov made also to me this morning. It seems to me he has reached a conclusion which this court at this stage is not really in a position to gainsay.
25. It is a very serious matter for a case of this kind, in which, of course, there is a cross appeal which alleges very serious allegations of fraud, should be effectively adjourned forever. The judge felt that was not necessary and that he could conduct a fair trial. At this stage, I think that decision must be respected.
26. I turn to the question of costs. As I have indicated, had the judge come to a different view on the Article 6 point, then it seems to me it would have been highly material to the question of costs.
27. I say in passing I doubt whether a court could order the Bank in this case to pay costs of £1.5 million, though it could no doubt make it a condition of their being allowed to continue the litigation that they should do so. But be that as it may, the essential question is whether the judge was wrong in this case not to award costs.
28. It is fair to say that he dealt with this issue relatively briefly between paragraphs 18 and 22. He did recognise that there is a jurisdiction under CPR 44.2 to allow court costs in these circumstances. He also recognised that the standard case is very much of the kind I have already indicated, the Beddoe v Beddoe type of litigation where proceedings are brought for and on behalf of, or for the benefit of,a company of some form or where there is the equivalent of a common fund such as a matrimonial case.
29. That is obviously not this case. Nor are we dealing with public litigation where the public interest may sometimes justify litigants to be paid costs in advance or be given some assurances as to a limitation on the costs which they are likely to have to face. Here we are in a private litigation.
30. The judge plainly thought that it was simply not appropriate for costs claimed in this amount to be granted, particularly where he had rejected the claim for an interim payment. The judge was right to consider that this was a wholly exceptional case. The real complaint here is that whilst it is an exceptional case, it is so exceptional and the circumstances of the litigation are so unusual that it was one which required a fuller analysis of the relevant arguments than the judge gave it.
31. In particular, Mr Stroilov has identified three matters which he says go to the conduct of the Bank and Mr Savelyev which ought to have been considered by the judge in reaching the view he did. He rightly points out that CPR 44.2 requires the judge to have regard to the conduct of the parties.
32. The judge referred to this in general terms, principally in the Article 6 discussion, but he said:

"I have not in the end sought to balance the respective criticisms made by one party against the other."

33. Mr Stroilov says there are three matters which are undisputed. Firstly, that the Respondent has refused mediation. Secondly, that it has entered into harassing actions in various foreign jurisdictions which the Court of Appeal in a decision in May 2014 said were in breach of the jurisdiction clause which required proceedings to be commenced in the UK. Thirdly, he says that it is now conceded in these proceedings that the Claimants have made material misrepresentations to the prosecuting authorities in Russia and have apparently admitted as much in the proceedings, but have not, according to Mr Stroilov, gone back to the prosecuting authorities to indicate that the evidence they formerly gave was mistaken.
34. It is true that the judge does not refer to these matters, but they were all drawn to his attention. I think it is fair to say that he considered this would be so unusual a claim that it would not be appropriate to award costs. It is plain to me that these factors could not have weighed heavily with him. It is right to say that they are the sort of factors that one will much more readily take into account following a trial when one can assess the veracity of what is alleged.
35. Let me give one or two examples. It is true that there have been multiple foreign procedures and the Court of Appeal held that pursuing them was in breach of the jurisdiction clause in relevant agreements, but I note that the judge at first instance, Hildyard J, had in fact taken the view that it was not in breach. I only make that point to say that it was not, therefore, a deliberate and obvious harassment in flagrant breach of an agreement that had been entered into, albeit that the Court of Appeal in the end considered that the proceedings taken in other jurisdictions ought not to have been commenced.
36. Similarly, it is impossible, it seems to me, for this court or indeed the judge below to have made any realistic assessment as to how serious any representation had been to the Russian criminal authorities which now, it is alleged, are false. Whether that is really material to the proceedings of the prosecutor or not is impossible to say. It may have been preferable for the judge to have mentioned these points simply to indicate that he was taking them into consideration, but the failure to do so does not invalidate his decision.
37. Mr Stroilov can say with some justification that the judge has dealt with this part of the case very summarily. He suggests that this shows that he did not give any serious consideration to the possibility that he should award costs under this jurisdiction, notwithstanding that he had recognised that strictly he had jurisdiction to do so. But it seems to me that the judge was saying in effect that this was such an unusual application, and so far from the normal type of case, that whilst there could be exceptional cases, this was not one of them.
38. I would accept entirely that had the judge come to a different conclusion in relation to Article 6 that would undoubtedly have changed the picture in relation to the costs issue and that would have had to be a factor that the judge would need to have weighed up. It might have been the only way of securing a fair trial, had he concluded otherwise that a fair trial was not possible. But given his conclusion on Article 6, he was justified in not having regard to that factor.
39. Whether at some later stage he may come to the view that without some assistance a fair trial is not possible, that is not for me to say. As I say, he is keeping that issue under review, it seems to me. Indeed, he would be obliged to do so under Convention jurisprudence.
40. So notwithstanding the very attractive and considered way in which these arguments have been advanced by Mr Stroilov, I would not grant permission to appeal.