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Case and Comment
THIS subject has been considered in Novoship (UK) Ltd. v Mikhayluk [2015] 2 W.L.R. 526; [2014] Q.B. 499. The first plaintiff ("Novoship") and the 14 other plaintiff companies ("the Novoship Group") were indirect subsidiaries of the JSC Novorossiyak Shipping Co., incorporated in Russia. The first defendant, Mr. Mikhayluk, was an officer of Novoship and in charge of negotiating the charter of vessels owned by members of the Novoship Group. In litigation in the Commercial Court, he was held to have been in breach of his fiduciary duty to members of the Novoship Group by his corrupt conduct between 2002 and 2004 in dealings with various charterers. These included the sixth defendant, Mr. Nikitin, and the eighth defendant, Henriot Finance Ltd. ("Henriot"), a Virgin Islands company owned and controlled by him. There were connections with a number of jurisdictions but the litigation was conducted on the footing that the governing law was that of the English forum.
The trial judge (Christopher Clarke J.) held that Mr. Nikitin and Henriot were liable to account for profits made from charters to Henriot ("the Henriot charters") of vessels of the Novoship Group, which had been arranged between Mr. Mikhayluk and Mr. Nikitin. His Lordship concluded ([2012] EWHC 3586 (Comm), at [519]-[520]) that: (1) in negotiating the Henriot charters, Mr. Mikhayluk had been in breach of his fiduciary duty and that Mr. Nikitin and Henriot had dishonestly assisted that breach; (2) the profit by Henriot and Mr. Nikitin from deployment of vessels under the Henriot charters to carry freight "resulted from" Henriot entering into those charters, the very activity which constituted their dishonest assistance, so that there was "a sufficiently direct causal connection between the assistance and the profit"; and (3) it was no answer that the charters were at commercial rates and would have been made anyway in an arm's-length transaction, or that Henriot would have made the same profits from charters of vessels from other than the Novoship Group.
The Court of Appeal (Longmore, Moore-Bick, Lewison L.JJ.) set aside the order against Mr. Nikitin and Henriot for an account of profits. It did so on the footing that (1) the "real and effective cause" of their profits had been a supervening and favourable shift in...