IEHC 611
THE HIGH COURT
[2016 No. 9981 P.]
TRAFALGAR DEVELOPMENTS LIMITED, INSTANTANIA HOLDINGS LIMITED, KAMARA LIMITED and BAIRIKI INCORPORATED
DMITRY MAZEPIN, OJSC UNITED CHEMICAL COMPANY URALCHEM, URALCHEM HOLDING PLC, EUROTOAZ LIMITED, ANDREY GENNADYEVICH BABICHEV, YULIA BOLOTNIKOVA, BELPORT INVESTMENTS LIMITED, MILKO EMILOV MINKOVSKI, ANDROULA CHARILAOU, DMITRY KONYAEV and YEVGENIY YAKOVLEVICH SEDYKIN
(DISCOVERY SOUGHT BY PLAINTIFFS AGAINST NINTH DEFENDANT)
JUDGMENT of Mr. Justice David Barniville delivered on the 31st day of July, 2019
1. This is my judgment on an application for discovery made by the plaintiffs as against the ninth defendant, Androula Charilaou (“Ms. Charilaou”).
2. The background to, and a description of, the proceedings has been set out by me in a separate judgment which I am also delivering today on applications for discovery as between the plaintiffs and the fourth and fifth defendants, Eurotoaz Limited (“Eurotoaz”) and Andrey Gennadyevich Babichev (“Mr. Babichev”)(the “Eurotoaz judgment”). A more detailed description of the proceedings and of the alleged scheme which forms the basis of the plaintiffs’ claims against all of the defendants can be found in that judgment. I do not propose to rehearse that detail in this judgment. I will, however, refer to the claims made in the proceedings by the plaintiffs against Ms. Charilaou and the pleadings exchanged between them. I do not propose to rehearse the legal principles on discovery which I discussed in greater detail in the Eurotoaz judgment. I have adopted and applied the legal principles discussed in that judgment in considering and determining the plaintiffs’ application for discovery against the ninth defendants. Having discussed briefly the claims made by the plaintiffs against Ms. Charilaou, I consider the categories of discovery which remain in dispute between the parties, substantial agreement having been reached between them prior to the hearing.
3. For reasons which I set out in this judgment, I am refusing the plaintiffs’ application for discovery of the two categories in dispute.
Proceedings against Ms. Charilaou
4. In the amended statement of claim, the plaintiffs claim that the defendants, including Ms. Charilaou, are parties to a conspiracy which has taken the form of an alleged scheme intended wrongfully to divest the plaintiffs of their shares, or the benefit of their shares, in ToAZ for the benefit of the first defendant, Mr. Mazepin. The plaintiffs claim that the alleged scheme displays features of a “raider attack”, the purpose of which is to defraud the plaintiffs of their shares in ToAZ.
5. The plaintiffs have included Ms. Charilaou as one of the defendants and have alleged that she is an active participant in the alleged scheme. She is specifically referred to at para. 31 of the amended statement of claim where she is described as being a director of Belport Investments Limited (“Belport”), a company registered in the British Virgin Islands (“BVI”), which was the counterparty to an alleged false or sham share purchase agreement (“SPA”) purported to have been entered into with UCCU. The plaintiffs have obtained judgment in default of appearance against Belport. It is also alleged (at para. 32 of the amended statement of claim) that Ms. Charilaou is a director of another company, Sanders Enterprises Limited (“Sanders”), which is also incorporated in the BVI. Sanders is stated to be a wholly owned subsidiary of the second named defendant, UCCU, through a Cypriot company, Havenport Investments Limited (“Havenport”). UCCU is also said to own 100% of the shares of Havenport. It is pleaded that Ms. Charilaou, as a director of Belport, signed the alleged false SPA between Belport and UCCU.
6. At para. 35 of the amended statement of claim, it is alleged that the fourth to eleventh defendants (including Ms. Charilaou) are linked through a common relationship with the first, second and third defendants (Mr. Mazepin, UCCU and Uralchem Holding plc (“Holding”)). Mr. Mazepin is alleged to be the controlling mind and will of UCCU and Holding and the instigator and orchestrator of the alleged scheme. As one of the relevant defendants, Ms. Charilaou is alleged to have acted on the basis of a shared combination or understanding with Mr. Mazepin and has been an active participant in the alleged scheme in pursuit of the alleged common understanding reached with Mr. Mazepin.
7. The particular allegations made against Ms. Charilaou are contained in paras. 98 to 108 of the amended statement of claim. In particular, it is alleged that Ms. Charilaou (with others) produced or knowingly acquiesced in the production and/or execution of the allegedly false or sham SPA and knowingly acquiesced or permitted UCCU to rely on that document in support of its proceedings against ToAZ. At para. 108, it is alleged that Ms. Charilaou, the director of Belport who signed the alleged false or sham SPA, was at the time a director of Sanders, an indirect subsidiary of UCCU. The plaintiffs plead that Belport and UCCU were affiliated companies and that the purported transaction between them was not a genuine one. The plaintiffs contend that it is to be inferred that Ms. Charilaou knew that she was signing a sham or false document to be relied on as false evidence in one of the criminal complaints initiated by UCCU against the management of ToAZ.
8. The features and methods employed in the alleged scheme are set out at para. 6 of the amended statement of claim. However, the only feature or method which appears to be directly referable to Ms. Charilaou is that contained in subparagraph (e) concerning the production of allegedly forged or sham documents against ToAZ and others in the legal proceedings forming part of the alleged scheme. The plaintiffs confirmed by way of replies to particulars, dated 21st September, 2018 that while they could not know the full extent of the involvement of Ms. Charilaou and were reserving the right to adduce further evidence of her alleged participation in the scheme relied upon, Ms. Charilaou’s participation in the alleged scheme is as pleaded in the amended statement of claim (para. 1 of those replies to particulars). Further particulars of Ms. Charilaou’s alleged active participation in the alleged scheme were provided by the plaintiffs at para. 2 of those replies. There, it was alleged that Ms. Charilaou has “clear links” to UCCU, which is owned and controlled by Mr. Mazepin. Reference was made to the execution by Ms. Charilaou as a director of Belport of the alleged false SPA dated 8th August, 2011 and to the fact that Ms. Charilaou signed a letter dated 3rd October, 2011 purporting to demand the payment of $1 million as a result of an alleged breach by UCCU of the alleged false SPA. In that regard, it was alleged that in signing the false SPA and the letter in October 2011, Ms. Charilaou knowingly and consciously participated in the manufacture and deployment of false evidence which it is alleged overwhelmingly points to the conclusion that Ms. Charilaou was an active participant in the alleged scheme.
9. An extensive defence was delivered on behalf of Ms. Charilaou on 22nd October, 2018. In it, she denies any part in the alleged conspiracy. She specifically denies each of the allegations made against her. She denies any links to Mr. Mazepin and pleads (at para. 11) that she has never met, spoken to or corresponded with Mr. Mazepin or any of the other defendants.
10. At para. 18 of her defence, Ms. Charilaou admits that she is a director of Belport and a director of Sanders and that Sanders is a wholly owned subsidiary of UCCU through Havenport. It is pleaded that she is an employee of a law firm in Cyprus called CGV but is not a lawyer, and that she is employed by CGV as a corporate administrator. It is further pleaded that CGV provides corporate administration services to at least 3,742 companies which are registered at the address of CGV in Cyprus and that, in her capacity as an employee of that firm, Ms. Charilaou is currently a nominee director of at least 226 companies registered in Cyprus. She admits that the eighth defendant (Mr. Minkovski) is the owner of Belport but states that she has never met, spoken to or corresponded with him. It is pleaded that she receives all instructions as nominee director of Belport from solicitors within CGV who she understands are in turn instructed by Belport. Further, at para. 19 of her defence, it is stated that Ms. Charilaou understands that Mr. Minkovski engaged CGV on foot of a letter of engagement dated in or around May 2009 to provide legal advice and to provide the services of nominee directors and/or secretaries and/or shareholders for Belport but that Ms. Charilaou had no involvement in the terms of such engagement. At para. 20, it is denied that Ms. Charilaou is linked with the other defendants or through a common relationship with Mr. Mazepin, UCCU or Holding and it is said that she is a stranger to the allegation that Mr. Mazepin is the controlling mind and will of Holding and UCCU or that he is the instigator and orchestrator of the alleged scheme.
11. Ms. Charilaou expressly addresses the particular allegations made against her in the amended statement of claim. At para. 33 of her defence, she admits that she executed the SPA on behalf of Belport in her capacity as a nominee director of that company. She pleads that she executed the agreement on the instructions of her employer, CGV, and that her sole function in that regard, as an employee of CGV and a nominee director of Belport, was to execute the agreement on the instructions of CGV. It is pleaded that she understands that the agreement was reviewed by a solicitor in CGV on the instructions of Belport before she was directed to sign it and that the SPA was returned to Belport by a solicitor in CGV but that she had no communications with Belport concerning the agreement and had no role in reviewing its contents. At para. 34 of the defence, it is pleaded that she is a stranger to the allegation that the SPA was a false or sham document and it is denied that she knowingly acquiesced or permitted UCCU to rely on the agreement in support of unjustified proceedings against ToAZ. It is also pleaded that she is a stranger to the allegation that the agreement was a sham or was forged in order to support a criminal complaint initiated by UCCU and to the allegation that the agreement was not at arm’s length. She denies that she knew that she was signing a sham or false document to be relied on as false evidence in the criminal complaint. At para. 43, she pleads that she is a stranger to the criminal complaint in question (the shareholder list criminal complaint) but that she is now aware of a resolution for the termination of that criminal case in November 2013 by the Russian authorities and of the findings contained in that resolution concerning the SPA. She pleads that she did not communicate directly with Mr. Minkovski in relation to the agreement or at all.
12. In their reply to Ms. Charilaou’s defence, the plaintiffs reiterate their contention that Ms. Charilaou is linked to each of the other defendants by her active participation in the alleged scheme through her activities as a director of Belport, a wholly owned subsidiary of UCCU, which is in turn controlled by Mr. Mazepin (para. 2). They further plead that Ms. Charilaou is objectively linked to other defendants. The plaintiffs also joined issue with Ms. Charilaou’s denials of participation in the alleged scheme.
Discovery sought by plaintiffs from Ms. Charilaou
13. The plaintiffs initially sought discovery of nine categories of documents from Ms. Charilaou in their request for voluntary discovery dated 11th January, 2019. A number of those categories were agreed in the response to the request sent on behalf of Ms. Charilaou on 22nd February, 2019. In correspondence on behalf of Ms. Charilaou, the point consistently made on her behalf was that the plaintiffs’ case against Ms. Charilaou on the pleadings concerned her alleged involvement in the signing of the SPA between UCCU and Belport dated 8th August, 2011 (which the plaintiffs claim is a sham or false document) and in the signing of the letter of 3rd October, 2011 which purported to demand the payment of $1 million as a result of an alleged breach by UCCU of the SPA. Ms. Charilaou agreed to make discovery of documents relating to those allegations against her but was not agreeable to making discovery in more general terms and on the basis of the more general allegations made against her on the basis that it was contended that such discovery amounted to a fishing expedition.
14. The plaintiffs issued a motion seeking an order for discovery against Ms. Charilaou on 27th March, 2019. At that stage, five categories of discovery were fully in dispute and there was dispute in respect of certain parts of two other categories. In dispute were the documents sought in Categories 1, 2, 3, 4, 5(b), 7 and 8(e). The basis on which the plaintiffs sought to be entitled to discovery in respect of these disputed categories was set out in an affidavit sworn by Karyn Harty on 27th March, 2019. An affidavit was sworn in response on behalf of Ms. Charilaou by Jerry Burke on 12th April, 2019 and a further affidavit was sworn on behalf of the plaintiffs by Ms. Harty on 7th May, 2019.
15. Following further engagement between the parties on the day of the hearing, the plaintiffs refined their request for discovery further. In lieu of the documents sought at Categories 1 to 4, the plaintiffs sought a revised version of Category 2. Ms. Charilaou agreed to make discovery of those documents, namely “all documents or communications passing between the ninth defendant and one or more of the other defendants of and concerning the scheme as described in the amended statement of claim”. Ms. Charilaou also agreed to make discovery of the documents sought in Category 8(e) (which concerned “the Article 159(4) criminal case and any related proceedings by UCCU as described from paragraph 110 of the amended statement of claim onwards” in respect of the period from 1st January, 2011 to 25th July, 2018 (being the date on which an unconditional appearance was entered in the proceedings on behalf of Ms. Charilaou)). Category 9 was previously agreed and it was agreed that those documents would be included in Category 8.
16. Two categories remained in dispute, namely, Category 5(b) and Category 7. It is necessary for me to resolve the dispute in relation to those categories.
17. As indicated earlier, I adopt and apply the legal principles on discovery outlined and discussed by me at paras. 17 to 27 of my Eurotoaz judgment. The same principles apply to the plaintiffs’ application for discovery against Ms. Charilaou. It is not necessary, however, for me to repeat or rehearse those legal principles in this judgment. However, I confirm that I have applied those principles in my determination of the two outstanding categories of documents. It is to those two outstanding categories that I now turn.
Date Range: 1st January, 2011 to 25th July, 2018.
18. Category 5(b):- “Documents relating to the incorporation, assets, ownership, management and trading activity of:
(b) Sanders Enterprises Limited
including (but not limited to) communications with registered agents, documents relating to the appointment of the 9th Defendant as a director of and/or the engagement of CGV as agents of or advisors to, either of these companies and documents relating to any indemnity arising from such engagement.”
19. Briefly summarised, the reasons advanced, and the case made, by the plaintiffs for discovery of the documents under this category are directed to the alleged inextricable link between Ms. Charilaou and the other defendants and, in particular, Mr. Mazepin and UCCU. The plaintiffs contend that the documents in this category are relevant to the objective links between Ms. Charilaou and those other defendants in circumstances where Ms. Charilaou has denied knowledge of the other defendants. Therefore, the plaintiffs contend that the documents sought in this category go towards Ms. Charilaou’s knowledge of, and her purpose in allegedly carrying out, acts in pursuit of the alleged scheme. While noting that Ms. Charilaou has admitted being a director of Sanders, the plaintiffs maintain that that does not deprive them of their entitlement to discovery of documents under this category. They maintain their entitlement by reference to what they regard are the objective links between Ms. Charilaou and the other defendants and, in particular, Mr. Mazepin and UCCU, pointing out that Sanders is a wholly owned subsidiary of UCCU, through the Cypriot company, Havenport, of which UCCU owns 100% of the shares. The plaintiffs assert that the documents are relevant in that, despite the alleged objective links between Ms. Charilaou and these other defendants, Ms. Charilaou denies knowledge of those other defendants. The plaintiffs further assert that as Ms. Charilaou is a director of Belport and also a director of Sanders (an indirect wholly owned subsidiary of UCCU), effectively, Ms. Charilaou was a director of the two companies that were party to the alleged false or sham SPA. I do observe, however, that the parties to the alleged SPA were in fact Belport and UCCU (and not Sanders). The plaintiffs appeared, therefore, to be relying on this connection and what they called Ms. Charilaou’s “affiliation” in the execution of the agreement as being the main basis for the discovery of the documents in this category.
20. In response, Ms. Charilaou objects to the extent of the discovery sought in Category 5(b). Issue is taken in relation to the very broad wording of the category. Ms. Charilaou highlights the particular case made by the plaintiffs against her which concerns her signing the SPA and subsequent correspondence on behalf of Belport. Ms. Charilaou admits signing the agreement as a director of Belport (and stresses her capacity as an alleged nominee director) and does not it seems dispute signing the correspondence on behalf of Belport in October 2011. She contends that there is no issue on the pleadings concerning Sanders. No case is made against Sanders and the only thing said about Sanders is that it is an indirect wholly owned subsidiary of UCCU, through Havenport. Ms. Charilaou relies on the fact that she has admitted being a director of Sanders (as well as several other companies through her employment by CGV).
21. I have carefully considered the submissions advanced by the parties in respect of this category and have borne in mind the legal principles which I must apply in resolving the dispute between the parties. As observed earlier, the specific case made by the plaintiffs against Ms. Charilaou concerns her signature on behalf of Belport on the SPA which the plaintiffs maintain was a false or sham document and her subsequent signature on behalf of Belport on the correspondence in October 2011. Ms. Charilaou admits signing the agreement and the related correspondence (see para. 5 of Mr. Burke’s affidavit). I note that Ms. Charilaou has agreed to make discovery of documents relating to the SPA and the correspondence of 3rd October, 2011 (under Category 8). There is no case made by the plaintiffs in the amended statement of claim against Sanders or in respect of any action or conduct by Sanders. The only way in which it is said that Sanders is relevant is that Ms. Charilaou is a director of Sanders and that Sanders is indirectly owned by UCCU, through Havenport. The main basis, therefore, for seeking discovery from Ms. Charilaou in respect of the Sanders’ documents in Category 5(b) appears to be the fact that she is a director of both Belport and Sanders. An attempt was made in submissions to suggest that when Ms. Charilaou signed the SPA on behalf of Belport, she was connected or affiliated to both sides of the transaction (since Sanders was an indirect wholly owned subsidiary of UCCU). However, whether that is so or not does not, it seems to me, support the very broad discovery sought in this category. The SPA, whether it be a genuine document or a false or sham document as alleged by the plaintiffs is stated to be between Belport and UCCU and not between Belport and Sanders.
22. While it is true that the plaintiffs seek to rely on links between Ms. Charilaou and Mr. Mazepin and UCCU, partly through Sanders, I do not think that those alleged links could justify the extensive discovery sought in Category 5(b). What is sought in this category is not any documents which Ms. Charilaou may have concerning any role or involvement which Sanders may have had in relation to the SPA or subsequent correspondence (and, of course, no such claim is made in the amended statement of claim). On the contrary, what are sought are documents relating to a whole range of areas such as (a) the incorporation of Sanders, (b) the assets of Sanders, (c) the ownership of Sanders, (d) the management of Sanders, and (e) the trading activity of Sanders. I am not satisfied that the plaintiffs have properly linked the documents sought in this category with the reasons which they have advanced for seeking such discovery. No explanation has been offered as to how, for example, documents relating to the incorporation of Sanders is relevant. The same can be said in relation to documents concerning its assets and its ownership and its management and its trading activity.
23. The position becomes even more clear as to the irrelevance of the documents sought when it is suggested that the documents sought include a whole range of other documents such as communications with registered agents, although it is not stated what those communications are supposed to relate to. Assuming they are intended to relate to the incorporation, assets, ownership, management and trading activity of Sanders, I find it very difficult to see how they can be relevant. I have similar problems with the request for documents relating to the appointment of Ms. Charilaou as a director of Sanders and indeed the engagement of CGV. There is also no valid basis, to my mind, advanced for seeking documents relating to any alleged indemnity arising out of the engagement of CGV. It simply does not arise from the pleaded case.
24. In conclusion, I do not believe that the plaintiffs have made out a good case for obtaining discovery of the documents sought in Category 5(b). I am not satisfied that the documents sought in the category are relevant. Nor am I satisfied that a persuasive explanation has been offered for seeking discovery of this category of documents. I do not believe that the request satisfies the threshold set by Clarke J. in National Education Welfare Board and Hartside for seeking such documents. It could not, I believe, be said that the plaintiffs have passed the limited threshold of having to establish a prima facie case or a legitimate basis for their case against Ms. Charilaou based on her directorship of Sanders such that the plaintiffs should be entitled to discovery of these documents. In those circumstances, I refuse the plaintiffs’ request for discovery of the documents sought in Category 5(b). It seems to me that the documents which Ms. Charilaou has agreed to discover (including those in reused Category 2) are and should be sufficient.
Date Range: 1st January, 2011 to 25th July, 2018.
26. In their request for voluntary discovery and in subsequent correspondence and submissions, the plaintiffs contend that the documents sought in this category are relevant and that Ms. Charilaou should be directed to make discovery of them. The plaintiffs rely on the fact that Benstock Finance Limited (“Benstock”), a company registered in the BVI, is the owner of the fourth defendant, Eurotoaz, which the plaintiffs allege has conducted a campaign of vexatious and fraudulent litigation in furtherance of Mr. Mazepin’s alleged ultimate goal of obtaining a majority share in ToAZ. They also rely on the admitted fact that UCCU is the ultimate beneficial owner of the shares in Eurotoaz (para. 24.5 of the defence of Eurotoaz and Mr. Babichev). They rely on the fact that Benstock has the same registered office and agent as Belport, of which Ms. Charilaou is a director. As regards Havenport, the plaintiffs rely on the fact that it is the company through which UCCU owns Sanders, another company of which Ms. Charilaou is a director. The plaintiffs note that apart from admitting that she is a nominee director of Belport and Sanders, Ms. Charilaou denies links to the other defendants including Mr. Mazepin and UCCU and that the documents sought in this category are relevant to establishing the extent of those links.
27. In response, it is contended by Ms. Charilaou that her only connection with either of Havenport is that Havenport is the owner of the shares in Sanders and that she is a nominee director of Sanders. As regards Benstock, she notes that it is referred to in the amended statement of claim as owning Eurotoaz and having the same registered office and agent as Belport. Ms. Charilaou is a director of Belport but is not a director of either Benstock or Havenport. The only reference to Havenport in the amended statement of claim is the reference at para. 32 to the fact that it owns the shares in Sanders and is in turn owned by UCCU. Ms. Charilaou contends that these are tenuous connections with her. She further notes that there is no allegation in the amended statement of claim that either Benstock or Havenport had any knowledge of or involvement in the alleged scheme the subject of the proceedings and that the request for discovery of these documents is an impermissible attempt to fish for documents. It should be said that Ms. Charilaou is also critical of the extent and breadth of the wording of the category.
28. I have again carefully considered the submissions of the parties as well as the pleadings and the reasons advanced by them for seeking and for resisting discovery of the documents sought in this category. I have also borne in mind the legal principles summarised earlier. In my view, the plaintiffs have not established an entitlement to discovery of the documents sought in this category. Apart altogether from the fact that the category description is extremely broad and general and seeks documents relating to Benstock and Havenport without specifying with any precision the actual documents being sought or why they are being sought, the category also looks for communications with or relating to Benstock and Havenport without specifying the parties to those communications who are intended to be covered by the request. If I were satisfied that documents involving Benstock and Havenport were relevant to matters in issue in the proceedings, I would have attempted to reword the category in order to catch the relevant documents. However, I am not satisfied that they are.
29. I agree with the submissions made by Ms. Charilaou in resisting discovery of documents in this category. It is not alleged by the plaintiffs in the amended statement of claim that either Benstock or Havenport are involved in the alleged scheme or conspiracy the subject of the proceedings. It is not alleged that Ms. Charilaou is a director of or involved in either Benstock or Havenport. What is said in relation to Benstock is that it is the company through which UCCU ultimately owns Eurotoaz and that it has the same registered office and agent as Belport (of which Ms. Charilaou is a director). It is not, however, alleged that Benstock is in any way involved in the alleged scheme, the subject of the proceedings. What is said in relation to Havenport is that it is the company through which UCCU owns Sanders and that Ms. Charilaou is also a director of Sanders. However, it is not alleged that Sanders or Havenport are involved in the alleged scheme or conspiracy the subject of the proceedings. Nor is it alleged that Ms. Charilaou has done anything in her capacity as a director of Sanders in pursuance of the alleged scheme. Consequently, I agree with the objection made on behalf of Ms. Charilaou to the discovery sought under this category. I do not believe that the plaintiffs have advanced a persuasive case on relevance. Nor do I believe that the plaintiffs have met the threshold set by Clarke J. in National Education Welfare Board and in Hartside, for the reasons outlined by me earlier in respect of Category 5(b). It seems to me that the extensive discovery which Ms. Charilaou has agreed to make in respect of the claims made against her, and indeed the very extensive discovery which she has agreed to make in respect of new Category 2 in relation to the alleged scheme the subject of the proceedings, as well as the other discovery which she has agreed to make, is sufficient for the plaintiffs’ purposes and they are not entitled to any further or additional discovery.
30. Accordingly, I refuse the plaintiffs’ application for discovery in respect of the documents sought in Category 7.
Summary of conclusions
31. In summary, I have noted the terms of the discovery which Ms. Charilaou has agreed to make to the plaintiffs. A dispute remains between the plaintiffs and Ms. Charilaou in respect of the documents sought in Category 5(b) and in Category 7. Having considered the case made and the arguments advanced in respect of each of these categories, I have not been persuaded that the plaintiffs are entitled to discovery of the documents sought. Therefore, I refuse the plaintiffs’ application for discovery in respect of both categories.
32. I will discuss with counsel whether there are any outstanding issues in relation to discovery including the timing on which the agreed discovery is to be made. I will also give liberty to apply to both parties in the event that any further dispute arises from the terms of the discovery agreed.