Shahar v Tsitsekkos & Ors

In these two cases there is an aggregate of nine applications before me by various of the parties, taking a variety of jurisdictional and procedural points. They are grouped under the headings appearing below. It is impossible to understand them without some of the factual background.

Mr Michael Shahar is an Israeli citizen who conducts business in the Ukraine. In that context he incorporated or acquired an English company known as Teamtrend Limited (“Teamtrend”). That company was in substance the sole shareholder of two Ukrainian companies called Ged Plaza and Ged Invest. Mr Igor Kolomoisky is a Ukranian and Mr Cheklanov is a Russian. They both have business interests in, inter alia, the Ukraine. At the heart of these two actions is a claim by Mr Shahar that they have conspired together, with others, to deprive him of the value of assets which he held through Teamtrend. He claims that in 2003 they sought to get control of Teamtrend so that they could get hold of the assets which Teamtrend held through the companies of which it was a shareholder. They did that by procuring that Teamtrend issue additional shares and by appointing additional people to be directors and the company secretary of that company. The first of the two actions before me is one which claims that the relevant corporate steps were invalid. The Defendants are the purported new shareholders, directors, company secretary, and attorneys purportedly appointed by the new directors, and Teamtrend itself. The Claimant is Mr Shahar. In addition to seeking declaratory relief as to the validity of those claims, and certain related injunctive relief, it also contains claims for damages based on a conspiracy to injure Mr Shahar’s interest in Teamtrend and damages for unlawfully interfering with his economic interests.

In the second action Mr Cheklanov and Mr Kolomoisky are the claimants. They seek to justify the steps which were taken in relation to the corporate governance of Teamtrend – the steps referred to above. Relying on an agreement reached in June 2002, they seek an order against Mr Shahar to the effect that Mr Cheklanov is the beneficial owner of the one issued share in Teamtrend which Mr Shahar otherwise owns, and an order that Mr Shahar perfect Mr Cheklanov’s title to that share, which title is said to arise out of the terms of the June 2002 agreement to which I have just referred. It is apparent from that action that the corporate steps which are the subject of the first action were done at the behest of Mr Cheklanov and Mr Kolomoisky. In that second action Mr Shahar counterclaims against Mr Kolomoisky and Mr Cheklanov, and also joins a Ukrainian bank called Commercial Bank Privatbank (“Privatbank”) as Defendant to that counterclaim. His counterclaim is very similar to his claim against the Defendants in the first action - he seeks damages for conspiracy and other torts on the part of Mr Kolomoisky and Mr Cheklanov to deprive him of his Teamtrend assets, and he also claims further damage. In this second action it is his case that Mr Kolomoisky and Mr Cheklanov were the principle individuals behind the conspiracy alleged in the first action, and he now asserts that the individual and corporate defendants in the first action (other than Teamtrend) were acting at the behest of Mr Kolomoisky and Mr Cheklanov. Privatbank is said to be a party to the conspiracy (and a couple of other torts also alleged against Mr Cheklanov and Mr Kolomoisky), and there is a claim for a declaration that Mr Shahar is subrogated to certain rights of Privatbank against another company.

That is the background in very general terms. Various applications arise out of what has happened. In the first proceedings, the defendants (other than Teamtrend) attack the claim made against them, other than the claim relating to the validity of the corporate steps, on the footing that the conditions required for serving them out the jurisdiction were not fulfilled. Alternatively, and insofar as may be necessary, they apply for a stay of the proceedings, other than those relating to the validity of the corporate steps, on forum non conveniens grounds. Similarly, in the second proceedings Mr Cheklanov and Mr Kolomoisky seek a stay of the counterclaim on the footing that it would be more appropriately tried in the Ukraine. For its part Privatbank also attacks the service on it out of the jurisdiction – it says permission should not have been granted on technical grounds; and it also takes a point on the sufficiency of the pleaded case against it and non-disclosure. Mr Shahar has made his own applications. He seeks summary judgment on that part of his claim in the first action in which he attacks the validity of the corporate steps, and he also sought permission to amend in order to meet part of the attack that is now made on his claim. This last claim was not pursued at the hearing before me because, having reconsidered the amendments Mr Tager QC (who appeared for Mr Shahar) did not wish to pursue the amendments in the form in which they appeared in the application and wished to reconsider how he approached the points after judgment in the other applications.

These are interlocking applications. The sensible way of breaking into them is to deal first with the applications of the Defendants other than Privatbank because that provides the most useful context for going on to set out and then to consider the detail of the applications of Mr Shahar and Privatbank. In this judgment when I refer hereafter to the defendants in the first action that should be taken as a reference to the defendants other than Teamtrend unless the contrary appears.

In his Particulars of Claim in the first action, Mr Shahar says he is an Israeli citizen who operates various businesses in various countries including the Ukraine. One of the vehicles in which he held certain of his business assets was Teamtrend. That company was incorporated on 20^th March 2000 and one share was issued. It was registered in the name of Allbest Nominees Limited, and that nominee company executed a declaration of trust, leaving the name blank. It also executed a blank stock transfer form, leaving the name of the transferee blank. Those documents, together with other formal company documents (including the original certificate of incorporation and signed copies of the Memorandum and Articles of Association) were sent to Mr Shahar by the company formation agents on 28^th April 2000. Mr Shahar claims to have been the beneficial owner of the share in Teamtrend; that is not disputed by any of the parties to the litigation. He was not a director; the sole director was a Mr Dwen, who is resident in Cyprus. On 5^th January 2001 Mr Shahar and his cousin, a Mr Branovsky Anatoly, were given Powers of Attorney by Teamtrend. That enabled Mr Shahar to manage its affairs.

Teamtrend acquired various Ukrainian interests. In particular it was the owner of two Ukranian companies. One is known as Ged Plaza and the other known as Ged Invest. Ged Invest acquired an interest in a shopping centre in Dnipropetrovsk. It also apparently had an interest in another store known as ZUM. In the first action it is also pleaded that Ged Invest owned an office building in the Dnipropetrovsk, part of which was occupied by a firm of attorneys who acted for Mr Shahar in the Ukraine. Ged Plaza in due course acquired some of Ged Invest’s shopping interests. The precise picture is not clear because the evidence that has been filed in the course of these applications is confusing and, to some extent, contradictory. For example, there was some evidence that another company, namely Ged Lombard, owned the office building, and the evidence in relation to the shopping centre is not always consistent. However, I do not have to resolve these contradictions. It is sufficient to note that Teamtrend had assets in the form of subsidiaries, and that it is damage to those subsidiaries that lies at the heart of the tort claims in the both actions. It also had a bank account through which moneys passed for the purposes of the business of a mill in which Mr Shahar was interested.

In about 2000 Ged Invest acquired the benefit of a contract to run and manage the airport in Dnipropetrovsk. According to Mr Shahar, in 2002 it was agreed between Mr Shahar, Mr Kolomoisky, Mr Cheklanov and Privatbank that the benefit of that contract should be acquired by Privatbank. Privatbank is a substantial Ukrainian bank, 31% of whose share capital (on the evidence that I have seen) is said to be owned by Mr Kolomoisky; but Mr Kolomoisky denies that he controls it. It is said that it was not possible simply to transfer or assign the contract. Accordingly what was agreed was that that bank would acquire Ged Invest, but that all the assets of Ged Invest other than the airport contract would be removed from that company first. In that way the airport contract would be the only asset left and the bank would thus acquire the benefit of that contract. In that context the documents which gave effect to the transfer of Ged Invest were deposited under some sort of escrow arrangement with a Mr Chvets, who was the governor for the region. What is pleaded in the first action is that the documents in question were intended to be delivered to Privatbank once all the Ged Invest assets had been transferred out. Mr Shahar then pleads that in breach of his obligations Mr Chvets handed the transfer documents over to Privatbank prematurely, before the assets had all been transferred out. As a result “Privatbank and its representatives” were able (he says) to claim that they owned the office building.

The Particulars of Claim in the first action go on to allege that on 15^th April 2003 a number of people entered the offices to which I have referred, claiming they acted for Ged Invest and people they described as its new owners. They took control of the building and excluded everyone, including Mr Shahar’s lawyers. Then on 28^th June 2003 a number of people went to the shopping centre in Dnipropetrovsk brandishing inter alia two powers of attorney purportedly granted by Teamtrend to Mr Podgornov (7^th Defendant) and Mr Leonov (6^th Defendant). Although it is not pleaded, Mr Shahar’s evidence alleges that this was effectively a takeover of the shopping centre which deprived him, at least for the time being, of the interest that he had or thought he had, in those premises. The same applies to the office premises.

The particulars of claim in this case go on to say that following the shopping centre incident, Mr Shahar caused a search to be made at Companies House and he discovered that on 11^th June 2003 various steps had been taken in relation to the company:

The pleading then goes on to aver that since the changes had been made without the consent of Mr Shahar or Allbest Nominees or Mr Dwen, those changes are void and of no effect. As a matter of fact, though not of pleading, Mr Shahar now claims to be registered as the owner of the Allbest Nominee share.

Thus far the pleading makes claims about the internal affairs and governance of Teamtrend. The Defendants do not object to that claim continuing. However, added to those claims are claims for damages. Putting the matter shortly, Mr Shahar claims that the Defendants (other than Teamtrend) conspired to “hijack” or take over Teamtrend wrongfully and using unlawful means (namely falsely claiming that the steps set out above had properly taken place), filing false documents with the registrar of companies and causing powers of attorney to be issued to Mr Podgornov and Mr Leonov. This was done with the intent of injuring Mr Shahar by “stealing Teamtrend from him by wrongfully taking control of Teamtrend and its assets, in particular, its shareholding in Ged [Plaza], and thereby rendering his shareholding worthless”. Paragraph 20 of the statement of case goes on to allege a conspiracy with the predominant purpose of injuring Mr Shahar by stealing Teamtrend from him by wrongfully taking control of Teamtrend and its assets, and paragraph 22 makes a similar claim of unlawful interference with Mr Shahar’s business economic interests in that the Defendants have stolen Teamtrend from him thereby rendering his shareholding worthless by doing the acts that I have referred to above and by deceiving the registrar of companies.

The prayer in the particulars of claim seeks declaratory and injunctive relief based on the premise that the corporate steps were invalid. Again, no point is taken by the Defendant about that head of relief. However, paragraph 4 of the prayer claims damages in respect of the alleged torts.

The defendants do not dispute that they took the corporate steps referred to but say that they were entitled to do so. They plead a different arrangement in June 2002. They plead the background of the airport contract, and then say that in November 2001 the airport company was indebted to Privatbank in the sum of US$4m and another bank, Prominvestbank, in the sum of US$4.5m. It was agreed that Privatbank would lend the airport company the US$4.5 to take out Prominvest and additional funds to finance the development of the airport. Mr Kolomoisky would guarantee repayment of the loans, and Mr Cheklanov would indemnify Mr Kolomoisky as to half of that liability; Mr Shahar would ensure that the loans were repaid. In June 2002 it was agreed by Mr Kolomoisky, Mr Cheklanov and Mr Shahar that the first two would procure that Privatbank would not call in the loans until 30^th September 2002 and that Mr Shahar would cause Teamtrend to transfer Ged Invest to Mr Kolomoisky on 30^th September 2002, and if the loans were not discharged by that date Mr Shahar would transfer Teamtrend as directed by Mr Cheklanov. To give effect to that agreement documents, including transfers of Ged Invest, the share certificate in Teamtrend, the blank declaration of trust of that share and the share transfer executed in blank, were deposited with Mr Chvets so that the Ged Invest documents could be handed over on 30^th September, along with the other documents if the indebtedness was not discharged by that date. The indebtedness of the airport company was not repaid on that date, so the documents were properly released to Mr Kolomoisky and Mr Cheklanov. Mr Cheklanov became the beneficial owner of the one issued share in Teamtrend and the corporate steps complained of by Mr Shahar were carried out on his instructions. The 6^th and 7^th defendants have acted on the instructions of Mr Cheklanov. The torts are denied. It is admitted that control has been taken of Teamtrend, but it is alleged that this was done lawfully.

To complete the picture, the Reply joins issue with much of the Defence, pleads a certain amount of detail which I need not go into at this stage and avers that the share certificate, the blank declaration of trust and the stock transfer form were in the possession of Mr Shahar’s lawyers at the office building until that office building was “raided” by the agents of Privatbank, Mr Kolomoisky and Mr Cheklanov. Before me Mr Shahar advanced the more positive case that it was that raid that put those two gentlemen in possession of the documents, and they have used them to effect the corporate steps of which he complains. He also avers a wrongful sale of the office building, effected by them in November 2002, at an undervalue of US$60,000 compared with its true value of US$4m.

The second action has clear links with the first. It was started by Mr Cheklanov and Mr Kolomoisky, and Mr Shahar and Teamtrend are the defendants. In it the claimants repeat their version of the June 2002 arrangement and seek a declaration that Mr Cheklanov is the beneficial owner of the one issued share in Teamtrend which is, or had been, owned by Mr Shahar, an order that Mr Shahar perfect that title and and an order for rectification of Teamtrend’s share register. It is not wholly clear why Mr Kolomoisky is a party to this action since he does not seem to claim any relief; but he clearly is a party. Mr Shahar defends this action by asserting his version of the June 2002 agreement, and denying the claim. He goes on to counterclaim against Mr Kolomoisky and Mr Cheklanov in conspiracy in very similar terms to the claim made against the defendants in the first action, making a similar unlawful interference claim. However, the counterclaim is wider, or differs, in the following respects. First, Privatbank is made an additional defendant to it. Second, in addition to claiming damages in the sum of the difference between the value of Teamtrend immediately before the wrongful activities and its value when Mr Shahar gets it back, it also claims damages for the diminution in value of other business assets of Mr Shahar in the Ukraine (valued at in excess of $15m and including a hotel and a cotton mill) and lost profits from Teamtrend and its assets. Third, the value of the Teamtrend assets is put at in excess of $35m (this value is not referred to in the first action). Fourth, it adds a claim for wrongfully procuring Mr Chvets to hand over the documents that he handed over and, in the event that Mr Cheklanov and Mr Kolomoisky are found to have acted lawfully, a claim to be subrogated to the bank’s rights against the airport company (via Mr Cheklanov’s rights against against Mr Kolomoisky, and Mr Kolomoisky’s rights against Privatbank). The prayer claims injunctive and declaratory relief similar to the claims in the first action, and damages claims for the alleged torts.

The first action - the defendants’ applications - jurisdictional disputes

The 2^nd Defendant is domiciled in Greece. The question of service against her is governed by the Judgments Regulation (Council Regulation EC No 44/2001). The other Defendants (other than Teamtrend, which is not an active Defendant for these purposes) are domiciled in non-Regulation territories. Service out of the jurisdiction in relation to them is governed by CPR 6.20. The 2^nd Defendant says that, on the facts, the Claimant was not entitled to serve her with the proceedings so far as they made tort claims because they cannot be brought within the Judgment Regulation, and the remaining Defendants say that the tort claims do not fall within CPR 6.20 so that service out should not have been allowed in respect of these claims. None of these defendants seek to have the whole of the service set aside – they accept that since service out of the jurisdiction would have been permissible for the corporate steps claims then those claims can be allowed to go ahead.

I will deal first with the Defendants other than the 2^nd Defendant. None of them are domiciled in a Regulation State, so the service out rules apply. In those circumstances Mr Shahar has to show that the claims in question fall within the grounds set out in CPR 6.20 and if they do he then has to show that England and Wales is the proper place in which to bring the claim - CPR 6.21(2A). Permission to serve those Defendants outside the jurisdiction was given by Lindsay J in an order dated 4^th July 2003 (on which occasion he also granted without notice injunctive relief, to which I refer below). In his affidavit in support of his claim to relief at that stage, Mr Shahar averred that permission was not necessary by virtue of the terms of Article 22 (2) of the Judgments regulation, with article 22(3) being relied on in the alternative. His main point was that the claim concerned the validity of the decisions of the organs of Teamtrend, which had its seat in England and Wales. He went on to suggest that the damages claim based on the various torts could be said to be a corollary to his claims in relation to the validity of the decisions of the organs of Teamtrend. In the further alternative, so far as he had to bring himself within the provisions of Order 6.20, he relied on ground (2) (injunction ordering the Defendants to do or refrain from doing an act within the jurisdiction); ground (3) (claim made against someone else on whom the claim form would be served); ground (8) (tort where damage is sustained within the jurisdiction or damage is sustained resulting from an act committed within the jurisdiction); and ground (10) ( the whole subject matter of the claim relates to property located within the jurisdiction, namely his shareholding in Teamtrend). The order of Lindsay J giving permission to serve out gave “such permission as is necessary”. However, Mr Shahar does not now seek to justify service out against these defendants on any grounds other than those in CPR 6.20. Mr Tager put his submissions on those grounds alone (and rightly so, in my view).

The question for me is therefore whether, on the information now available, and on the basis of full submissions from both sides (which of course were not available to Lindsay J) permission to serve the Defendants out of the jurisdiction was rightly given. Again, it is necessary to bear in mind that the Defendants do not challenge the appropriateness of trying the validity of the corporate steps in this jurisdiction.

It is common ground that, under the familiar principles to be applied to the exercise of the jurisdiction under CPR 6.20, it is for the Claimant to show that he has a good arguable case that the claim falls within a relevant paragraph of that rule, and that if he can do that then he has to establish a serious issue to be tried on the merits. Underlying a consideration of the latter point, (and to some extent the former), is the question of whether Mr Shahar can have any claim at all even if he establishes the conspiracy relied on because of the nature of the loss. Although the “serious issue to be tried” case is not logically the first point, I shall nonetheless take it first because in my view it provides a clear answer to the point and it raises a matter which occurs at various points in the applications before me. At the heart of this point lies the nomineeship agreement which means that the pleaded damages claim cannot be sustained.

Mr Shahar claims that as a result of the torts in question and by the acts in question the Defendants have committed wrongs “by wrongfully taking control of Teamtrend and its assets, in particular its shareholding and its assets, and thereby rendering his shareholding worthless”; or, in the case of the unlawful interference tort, “they have stolen Teamtrend from him thereby rendering his shareholding worthless”. It is plain from an overall view of the claim that the shareholding has been rendered worthless by some form of wrongful misappropriation of the assets of the subsidiaries. There are two problems with this formulation of claim. The first is whether such a claim can be made by a shareholder when the loss is really a loss suffered by the company (the now familiar “reflective loss” point). The second is a point that arises out of the status of Teamtrend and its assets as it has emerged during the course of these proceedings. I will take the second of those points first.

There is no doubt that, as this case was first advanced, it was advanced on the footing that Teamtrend was a holding company which owned valuable assets, namely the Ukrainian assets of Mr Shahar “or at least some of his Ukrainian assets”. It is expressly pleaded that it “invested in various real properties in the Ukraine” and that those properties were held through, inter alia, Ged Invest. It is implicit in the claim that the Defendants took control of “Teamtrend and its assets” that those assets were owned by it beneficially. It is also quite clear from the evidence (and it was not disputed by Mr Tager) that it was on that basis that Mr Shahar applied for interim injunctive relief. However, it has transpired that that basis is false. In June of this year (that is to say after this litigation had been proceeding for almost one year) Mr Shahar disclosed a nominee agreement dated 23^rd March 2000 under which Allbest Nominees acknowledged that it held Ged Invest (identifying its assets as being the shopping centre and the ZUM store) on trust for Mr Shahar, and containing various provisions such as an agreement to vote shares according to his direction. Although that agreement related only to the Ged Invest shares, Mr Shahar’s position, as set out both in evidence and as clearly put forward by Mr Tager in the hearing before me, is that the nomineeship extends to all the assets of Teamtrend. It is said by Mr Shahar, in evidence, to be for that reason that the accounts of Teamtrend indicate that it has no assets beneficially owned by it. (The only accounts that I have seen are the accounts for the year ended 31^st March 2001. They are in abbreviated form, and show net assets of £1,882. It was not suggested that these assets were any part of the Ukrainian assets which are said to be the subject of the conspiracy.) Although that has not been pleaded (at least not yet, but subject to possible amendments in the future if the opportunity is available) Mr Tager invited me to approach the various applications before me on the footing that that was the true state of affairs. I am prepared to do so for the purposes of the present applications (other than the application for permission to amend, to which I will come in due course), not least because Mr Bompas Q.C (counsel for the Defendants other than Teamtrend) and Mr Clutterbuck (who appeared for Privatbank) accepted I should do so.

The difficulty for Mr Shahar to which that gives rise is that it immediately undercuts, or even destroys, the basis of his claim that any of the acts of the Defendants in this case have damaged the value of his shares in Teamtrend. Although the Particulars of Claim in the first action do not particularise the damage caused, it is quite plain on a fair reading of that document that the allegation is that because Teamtrend’s assets have been “stolen” (to use a word frequently used in this case by Mr Tager), or otherwise wrongfully interfered with, the value of Teamtrend’s shares, which reflects the value of its assets, has been diminished. The assets of Teamtrend can only be reflected in its share value if the assets are owned beneficially by Teamtrend. Since that is no longer Mr Shahar’s case, this damages claim becomes impossible for him. Mr Tager sought to suggest that the shares in Teamtrend might have some other sort of value. He said that Teamtrend had some value to Mr Shahar, who chose to hold his assets through his own corporate trust vehicle, and that that value has been diminished by the “theft” of Teamtrend by the acts alleged. That claim is not pleaded and is not in any sensible terms sustainable. Mr Tager also suggested that the shares in Teamtrend must have some value because the alleged conspirators went out of their way to take control of Teamtrend (at least ostensibly) in order to pursue the conspiracy in the Ukraine. He says that Mr Shahar has been deprived of that value. Again, it seems to me that that argument, as well as not being pleaded, is not really sustainable. One has to distinguish between practical value and the value of the shares for the purposes of the damages claim. This case is not all about the practical benefits to Mr Shahar and the conspirators of having shares in the trust company; it is quite clearly (as pleaded) all about an alleged diminution in the value of the shareholding resulting from loss of assets. Even if assets have now left Teamtrend, the value of Teamtrend as a company has not thereby been diminished because, as it now transpires, it did not own those assets beneficially.

I turn next to the reflective loss point. Before the nomineeship took such a principal position in Mr Shahar’s claim, the defendants to the conspiracy claim were going to take the point that any losses had been suffered by Teamtrend and that Mr Shahar could not mount a separate claim as shareholder in respect of diminution in the value of his shares. Since it is Mr Shahar’s decision to stand by the nomineeship arrangements this point does not arise in practice, since there is no relevant loss for either the company or Mr Shahar to sue for in the action as presently formulated. Mr Tager did not quite abandon this reflective loss point, and made some submissions on it, but I do not see how it can still be relevant. I therefore do not deal with it extensively, though I make the following determinations.

There have been a number of recent authorities in this reflective loss area, and I can confine myself to adopting the summary in Giles v Rhind [2003] Ch 618 as set out in Gardner v Parker [2004] EWCA Civ at para 33:

“(1)

A loss claimed by a shareholder which is merely reflective of a loss suffered by the company – i.e. a loss which would be made good if the company had enforced its rights against the defendant wrongdoer – is not recoverable by the shareholder save in a case where, by reason of the wrong done to it, the company is unable to pursue its claim against the wrongdoer; (2) where there is no reasonable doubt that that is the case, the court can properly act, in advance of trial, to strike out the offending heads of claim; … (5) Provided the loss claimed by the shareholder is merely reflective of the company’s loss and provided the defendant wrongdoer owed duties both to the company and to the shareholder, it is irrelevant that the duties so owed may be different in content.”

Mr Tager addressed some submissions to me in this area, but he was unable to satisfy me that there was a serious question to be tried in relation to the question as to whether, had Teamtrend and its shareholding had some value, this was a case in which the normal bar on a shareholder suing for reflective loss did not apply. The factual position is complex and uncertain – the evidential position and the argument left it very unclear as to what assets were said to have been taken out of which company (including the Ukrainian companies), when and how, and then how that is to be related to the claim made by Mr Shahar as shareholder. If a claimant wishes to show a serious question to be tried in relation to a personal claim as shareholder, on an application to justify service out of the jurisdiction, he has to provide more material by way of fact and analysis than has been available to me. In the circumstances, had this point been relevant I would have determined it against Mr Shahar.

In the circumstances, as against these tort defendants, I find that there is no serious issue to be tried in relation to the pleaded damages claim, and therefore in relation to the tort claims as pleaded. That means that on that footing the claim to serve out of the jurisdiction fails.

That is enough to deal with the service out point, but submissions were addressed to me on the application of the various grounds in CPR 6.20, so I will deal with them as shortly as I sensibly can, on the “good arguable case” basis required by Seaconsar Ltd v Bank Markazi [1994] AC 438.

Ground (3).

CPR 6.20 (3) reads:

“[a claim form may be served out of the jurisdiction with permission of the court if] a claim is made against someone on whom the claim form has been or will be served and –

(a)

there is between the claimant and that person a real issue which is reasonable for the court to try; and

(b)

the Claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim”.

Mr Tager Q.C has argued that Teamtrend is the relevant party on whom this claim is served, there is an issue between Mr Shahar and Teamtrend which it is reasonable for the court to try (the corporate issues), and the non-Regulation defendants are necessary or proper parties to that claim. In my view it is clear that Mr Shahar is not entitled to rely on this ground. The important thing under this head is to focus on the “claim”.

The person outside the jurisdiction whom it is wished to serve has to be a necessary or proper party to “that claim”. That is clearly a reference back to the opening words of ground (3) – “a claim is made”. One therefore has to look and see what the claim is that is made against the person within the jurisdiction and see whether the person outside the jurisdiction is a necessary or proper party to that claim. So far as a claim is made against Teamtrend, it is only a claim made in relation to the validity of the corporate steps. It is already conceded that the non-Regulation defendants are appropriate parties to to that claim. However, the service out point relates to other claims, namely the tort claims. Teamtrend is not a party to those claims.

Accordingly this ground, on this basis, is not available to Mr Shahar.

The alternative way in which Mr Shahar puts his case under this head is that the second defendant has already been properly joined and sued, and that since she is alleged to be a co-conspirator, it is appropriate to join the non-Convention defendants to the claims in conspiracy as against her. This argument depends on the correct joinder of the Second Defendant. Since she is domiciled in Greece service out as against her is determined on a different basis. As will appear later on in this judgment, I have concluded that she cannot be appropriately sued in tort here. Accordingly the premise which is necessary to enable Mr Shahar to serve the non-Regulation defendants under this head is missing. Ground (3) therefore does not assist him.

Ground (8) entitles a claimant to seek permission to serve out of the jurisdiction if:

“A claim is made in tort where –

a)

damage was sustained within the jurisdiction; or

b)

the damage sustained resulted from an act committed within the jurisdiction.”

There is no doubt that the conspiracy and other claims are claims in tort. However, the question is whether the other conditions can be fulfilled. Mr Tager submitted that they can. He submitted that damage was sustained within the jurisdiction because Mr Shahar suffered a loss here in the form of damage to his shares in a English company. Furthermore, the damage was sustained as a result of an act committed here, namely the filing at Companies House of certain documents. In order to understand this submission it is necessary to go into the nature of the pleaded case a little more deeply.

The pleading starts by setting out some background – it identifies Mr Shahar and Teamtrend; it identifies in general terms Teamtrend’s holding of shares in Ukrainian companies; it identifies Mr Shahar and Teamtrend: it identifies in general terms Teamtrend’s holding of shares in Ukrainian companies; it identifies the director; and it gives some more business background. As I have already said, it then pleads the airport contract and the intention to divest Ged Invest of that contract, the entry into the offices and the entry into the shopping centre. Then it avers that the various corporate steps were not validly taken and they, and the granting of powers of attorney, were all “void and of no effect”. The tort claims then follow. The first is a conspiracy to “hijack” or to take over Teamtrend wrongfully and using unlawful means namely by falsely claiming that the corporate steps and their registration had properly taken place, filing false documents relating thereto with the Registrar of Companies so that such steps appear to have official recognition, and issuing the powers of attorney. Paragraph 20 alleges a conspiracy with the predominant purpose of injuring Mr Shahar by “stealing Teamtrend from him by wrongfully taking control of Teamtrend and its assets, in particular its shareholding in Ged [Plaza], and thereby rendering his shareholding worthless”. Paragraph 21 pleads that the 1^st to 4^th Defendants have deceived the Registrar of Companies by lodging false documents for registration, and paragraph 22 alleges the tort of unlawfully interfering with Mr Shahar’s business and economic interests “in that they have stolen Teamtrend from him thereby rendering his shareholding worthless by doing the acts set out in paragraphs 19(a) to (c) and by deceiving the Registrar of Companies.” The reference to paragraphs 19(a) to (c) is a reference back to the first conspiracy allegation and to three steps allegedly taken in order to “hijack” Teamtrend. There is no pleading as to where the overt acts of the conspiracy took place apart from the pleading of filing documents with the Registrar of Companies (if that is indeed such an overt act), and there is nothing in the evidence which expressly goes to the point. Bearing in mind the history of the matter as set out in the evidence, and the nationalities, domicile and centres of business interests involved, it is a sensible inference that if there was a conspiracy then the conspiring was done abroad, and probably in the Ukraine (with some of the corporate steps having perhaps been taken in Cyprus which is where the 1^st, 3^rd and 4^th Defendants are domiciled).

The only acts which can be said to have taken place in this jurisdiction are therefore the filing of the corporate documents. It was a necessary act so far as the conspirators were concerned because it enabled them to present to the outside world that the relevant people were appointed directors and attorneys, and that they were entitled to control Teamtrend. It is said that when the shopping centre was taken over the 6^th and 7^th Defendants brandished their powers of attorney. If anyone had sought to check on the validity of those powers of attorney and had gone back to Companies House, they would have found that they were apparently properly granted by ostensibly proper officers of the company. The English act was therefore, according to Mr Tager, an act committed within the jurisdiction as a result of which damage was sustained, within the meaning of ground (8)(b).

I do not think that that particular argument can be sustained. Assuming for these purposes that Mr Shahar suffered the damage that his form of pleading relies on, that damage was not suffered as a result of that registration. If those acts were impeachable, then they are reversible and they have not caused the loss alleged. If they are not impeachable then no wrong has been committed and the whole claim fails. If his shares have been reduced in value it is because of acts done to the assets of Teamtrend. Those acts are most likely to have been committed in Ukraine (or the predominant acts will have been); or at any rate they were not apparently committed in this jurisdiction. That limb of Ground (8) is not therefore not available to Mr Shahar.

As to the first limb, Mr Bompas accepted that if Mr Shahar could have suffered damage in the form of recoverable loss in the value of his shareholding then that would have been sustained within the jurisdiction. However, in the light of my findings this point does not arise. At one stage Mr Shahar proposed to apply to amend to turn this action into a derivative action. Had that been done then it would have become apparent that the alleged damage was done to Teamtrend outside the jurisdiction. Mr Shahar has decided not to apply for this amendment so that point does not arise either.

Under this Ground service out of the jurisdiction can be permitted if:

“The whole subject matter of a claim relates to property located within the jurisdiction”.

Mr Tager submitted that this ground applied because the whole subject matter of the tort claim related to Mr Shahar’s shares, and they were property within the jurisdiction. He relied on In re Banco Nacional de Cuba [2001] 1 WLR 2039 in which Lightman J had to consider whether a claim to set aside a transfer of shares under section 423 of the Insolvency Act 1986 fell within this ground. He held that it did. At page 2055E he held that the Ground:

“extends to any claim for relief, whether for damages or otherwise, so long as it is related to property located within the jurisdiction”.

The shares in that case were properly situated in England and Wales, and the Ground was fulfilled because:

“the claim under section 423 relates to the shares and particularly the disposition of the shares.”

In the light of the way in which the case is now put, and in the light of the fact that the claim as it ought to be pleaded (assuming that it can be pleaded at all) no longer involves in substance damage to the value of the shares, I do not consider that this ground can be made out. As it was a nominee company, Teamtrend’s shares have no value, and certainly the damage pleaded cannot be damage to the value of those shares. The whole subject matter of the claim is more appropriately described as the stripping of assets which were held by Teamtrend as nominee. It is not apparent that any of that stripping took place here; none of the assets are identified as being in this jurisdiction.

Accordingly this ground is not available to Mr Shahar.

It follows from the above that the basis for permitting service out of the jurisdiction, so far as the tort claims are concerned, is not made out.

CPR 6.21(2) provides:

“The court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim.”

It is well established, and accepted, that the burden is on the claimant to establish this point. However, since I have already ruled against service out on at least two other bases, once again this question does not arise. However, should it be necessary to reach a decision on this point I observe briefly that I would have found that in the circumstances this jurisdiction would be a proper place to bring the tort claims. My reasoning would be parallel to that which I have applied below to the claim to stay the counterclaim against Mr Kolomoisky and Mr Cheklanov – a trial of the claim relating to the validity of the corporate steps would have involved going into the dispute as to whose version of the June 2002 agreement is correct, since Mr Kolomoisky and Mr Cheklanov rely on their version to justify the corporate steps. That would not necessarily involve litigating all the issues that would arise on the conspiracy claim, but in reality there would be a very large amount of common ground. I deal with this in more detail below.

The 2^nd defendant is domiciled in Greece. Under Article 2 of the Judgments Regulation she is entitled to be sued in her country of domicile unless one of the exceptions in the Regulation apply. Article 22(1) applies to give the court jurisdiction in relation to the corporate steps claims as against her, and since jurisdiction is conceded I do not need to consider this area further. I do, however, need to consider the tort claims.

CPR 6.19 governs service out of the jurisdiction in relation to those domiciled in Regulation states. If the claim falls within the Judgments Regulation then the defendant can be served without permission. Under CPR 6.19(3) the claim form has to contain a statement of grounds on which the claimant is said to be entitled to serve that particular defendant. In the present case the claim form refers to article 22 and the proceedings having as their object the constitution of an English company No dispute arises as to that ground so far as the first part of the claim is concerned (the validity of the corporate steps). It also refers to Article 22 so far as it refers to the validity of entries in a public register, but Mr Tager wisely does not rely on that – insofar as it is applicable it adds nothing to Article 22(1). The claim form does not refer to any other Article as establishing jurisdiction.

While it is clear and accepted that Article 22 of the Judgments Regulation covers the corporate steps point so far as the 2^nd defendant is concerned, Mr Tager also relied on it in relation to the tort claim. Article 22(2) reads:

“22.

The following courts shall have exclusive jurisdiction , regardless of domicile …:

(2)

In proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations or natural or legal persons, or of the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat.”

Mr Tager submitted that from a common sense point of view the tort claims had the validity of the corporate processes at their heart. I do not consider that to be true – the corporate steps are one aspect of the conspiracy, albeit an important one, but even if I am wrong and Mr Tager is right it does not mean that they have them as their object, which is the word used in the Regulation. What I have called the corporate steps claims fall into that category, but the conspiracy claims do not. In Kleinwort Benson v Glasgow City Council [1999] AC 153 concerned Article 5 of the Brussels convention. In that context, and in considering its width of application, Lord Goff said (at page 164):

“But it is clearly recognised that article 5 is in derogation from the basic principle of domicile in article 2 … and that as a result the provisions of article 5 are to be construed restrictively (see Kalfelis v Bankhause Schröder, Münchmeyer, Hengst and Co (Case 189/87) [1988 ECT 6656, 5585, para 19).”

The same construction principles should apply to the Judgments Convention, and to Article 22. When so applied it becomes apparent that the tort claims do not have the validity of corporate decisions or steps as their “object”. They have as their object a claim to damages arising out of alleged misappropriation of corporate assets (not necessarily Teamtrend’s) and conspiracy in relation thereto. That is different. Article 22(2) therefore does not assist Mr Tager in relation to the tort claims.

So far, therefore, the claim form does not clearly justify service on the 2^nd defendant in relation to the tort claims. However, argument took place on the footing of other possible candidates and I will deal with them. Mr Tager relied mainly on Article 6. This reads:

“A person domiciled in a Member State may also be sued:

1.

where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.”

Mr Tager relied on the fact that Teamtrend was domiciled in this jurisdiction (which it is), it is one of a number of defendants (which is true) and the claims are so closely related that it is expedient to try them together (which is where Mr Tager has difficulties). He said that if a claimant can issue against a number of defendants (irrespective of whether he can serve them all) then an Regulation state domiciled defendant can be joined provided that (a) the claim against that defendant is related to the claims against the others, and (b) there is one other defendant domiciled in this jurisdiction whether or not the claim relates to that defendant. On this footing the conspiracy claim can be deployed against the 2^nd defendant notwithstanding the fact that the other defendants may not have been properly served (and on my findings have not been properly served) because of the presence of Teamtrend even though Teamtrend is not a defendant to the tort claims .

The circularity of this argument is noteworthy. If it is correct then the presence of the non-Convention defendants is used as a basis for serving the 2nd defendant without leave, and then the joinder of the 2^nd defendant is then used as the basis for serving the non-Convention defendants outside the jurisdiction. That cannot be right. The answer lies in identifying which claims are brought against which defendants. In Réunion Européenne SA v Spiethoff’s Bevracthtingskantoor (27th October 1998)the European Court had to consider Article 6(1) of the Brussels and Lugano Conventions in the context of a shipping dispute and at paragraph 47 it adverted to the need to guard against abuse of the Article by allowing joinder of multiple defendants with the sole purpose of ousting the jurisdiction that another national court would have under Article 2. At paragraph 48 it said:

“… for Article 6(1) of the Convention to apply there must exist between the various actions brought by the same plaintiff against different defendants a connection of such a kind that it is expedient to determine the actions together in order to avoid the risk of irreconcilable judgments resulting from separate proceedings”

It is therefore necessary to consider the claims that are properly brought against the English domiciled defendant, and to consider whether there is a sufficiently close connection between the claims against that defendant and the EU domiciled defendant. Otherwise the presence of the English domiciled defendant is merely a convenient peg to hang jurisdiction on (which is of the essence of Mr Tager’s submissions in this case). One does not look at the claims against the other defendants, especially when it cannot be said that they have been properly joined. The claims to which Teamtrend is an appropriate party are the corporate steps claims. It is a largely technical defendant – the real dispute is between Mr Shahar and the other defendants. Comparing those claims with the tort claims, I do not consider that the latter are sufficiently closely connected for the purposes of Article 6(1). There is a connection, but the test in the Article is strict, and in my view, evaluating the position, I do not consider that the connection exists.

Last, Mr Tager relied on Article 5(3). This provides:

“5.

A person domiciled in a Member State may, in another Member State, be sued…:

(3)

in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur.”

The jurisprudence establishes that the harmful event occurs either where the damage occurred or where the event giving rise to the damage occurred – Handelswerkerij GJ Bier BV v Mines de Potasse d’Alsace SA [1978] QB 708. Since no claim to a diminution in the value of Mr Shahar’s shares can be prayed in aid, the facts do not demonstrate any basis for saying that either the wrongful acts took place in this jurisdiction, or that the damage occurred in this jurisdiction. Mr Tager relied on the wrongful act of filing documents at Companies House. He said that this was the “main event” of conspiracy, and it occurred here. I do not think that this description characterises the alleged conspiracy (and other torts) correctly. It may have been perceived by the alleged conspirators as a necessary step if they wished to cloak their subsequent activities with an apparent authority, but it is the subsequent events that were the substance of the conspiracy. The filing of documents by itself caused no loss at all. All other acts apparently took place elsewhere – in the Ukraine and perhaps Cyprus. There is certainly no indication whatsoever that they took place in England and Wales.

Accordingly Article 5(3) does not found jurisdiction against the 2^nd defendant.

In the circumstances there is no basis on which the tort claims can be brought against the 2^nd defendant and they should be struck out as against her.

Mr Shahar claims summary judgment in the first action in relation to that part of the claim which deals with the validity of the corporate steps. The legal basis of this is said to be simple. At all material times before the steps (or alleged steps) were taken Allbest Nominees was the registered owner of the one share in the company and Mr Dwen was its one director. Mr Dwen is still a director. Allbest Nominees was given no notice of any company meeting and did not participate in one. Mr Dwen was given no notice of any of the meetings or other steps which were necessary to the validity of the steps taken by the defendants; he was not invited to register a transfer of the Allbest Nominees share; and he knew nothing of the whole process. Without a properly registered transfer of the Allbest Nominees share, and without Allbest Nominees’ participation in the process, the process must be invalid. In the circumstances, and for that reason alone, the corporate steps were invalid and ought to be declared invalid now, and appropriate injunctive relief ought to be granted.

The exact mechanism by which the defendants claim to have done what they did has not appeared from the evidence. The steps are not fully documented in the evidence, nor have Mr Kolomoisky and Mr Cheklanov stated precisely how they brought about the steps which were reflected at Companies House (which is perhaps a little surprising). In the absence of such evidence Mr Tager may well be technically right about what he says. However, that is not an end of the matter. It is quite clear that Mr Cheklanov claims to be the beneficial owner of the Allbest Nominees share as a result of his version of the June 2002 agreement. That claim cannot be dismissed out of hand. Mr Tager has sought to characterise it as shadowy, and there are undoubtedly features of this case which call into question Mr Cheklanov’s version of events, not least the sense of the bargain. However, that claim still exists, and it gives rise to two reasons why it is inappropriate to grant summary judgment.

The first relates to the power of a beneficial owner of shares to invoke the Duomatic principle to cure informalities in corporate procedures. It is Mr Cheklanov’s case that he is the beneficial owner of Allbest Nominees’ share as a result of the June 2002 agreement. That is disputed, of course, but it cannot be ignored. If he is the beneficial owner, then the beneficial owner has at least consented informally to all the corporate steps even if some necessary formal steps have not been taken. That, says Mr Bompas, brings in the possibility of invoking the Duomatic principle under which informal consents of all the shareholders can validate steps that otherwise require formality (I express the principle in such short terms because it is not necessary to consider its precise formulation – those terms will do for the present).

Mr Tager naturally accepted the existence of the Duomatic principle, but said that it did not extend to the consent of a beneficial but non-registered owner of a share. In support of this submission he cited the Australian case of Jalmoon Pty Limited (In liquidation) –v- Bow (1997) 15 ACLC 230. That was a case in which all the shares in the company were beneficially owned by one man (the sole director), although he had not registered some of them in his name. A debtor of the company paid the company solicitor a sum of money so that it could be paid to the company. The director said that he was entitled to the money and asked the solicitor to pay the money directly to him. The solicitor acceded to the request. A winding up order was made and a claim was made against the solicitor for breach of trust. In his Defence the solicitor pleaded the consent of the sole shareholder. The court rejected that submission for the following reasons (at page 237 – 8):

“It was not established that at any relevant time Ivory [ie the director/shareholder] was registered as holder of all the shares. It therefore appears to be necessary, in order to apply the [informal consent] doctrine in the present case, to hold that the principle of unanimous assent covers instances in which some or all of the persons who assent are not registered shareholders. To accept that proposition would as it seems to us introduce an additional element of uncertainty into the operation of a principle the present basis of which itself is unclear…

Secondly, it is our opinion that the doctrine of unanimous assent does not apply to Ivory’s authority given to the Defendant, purporting to be on behalf of the Plaintiff company, because the Defendant had absolutely no reason to think that the payment of the money to Ivory could have been for the benefit of the company… The Plaintiff was, as we have observed, insolvent to the knowledge of the Defendant, so that the effect of payment to Ivory rather than to the Plaintiff was to take the money out of the reach of creditors, other than Ivory who perhaps claimed to be a creditor of the Plaintiff….

Looking at the matter more broadly, if the Defendant’s contention were correct, then the consent of all the shareholders, informally expressed, would be sufficient to authorise anyone holding funds belonging to a company to pay them to the shareholders (or to anyone nominated by them) rather than to the company, even if the company were known to be insolvent. That would, in our view, need a strong authority to establish such an improbable rule.”

Mr Bompas pointed out that there is English authority to the contrary. In Deakin –v- Faulding (unreported), 31^st July 2001) Hart J had to consider the position of a nominee shareholder and her beneficiary in relation to a claim that certain bonuses were claimed unlawfully. The recipient of the bonuses relied, amongst other things, on the Duomatic principal. For that purpose they had to rely on the consent of the beneficiary and not the registered shareholder in respect of the relevant shares. It is clear from paragraph 106 of the judgment that the relevant party alleged that the beneficiary of the share was acting as the agent of the shareholder in assenting. At paragraph 115 Hart J held in terms that the beneficiary did assent to the relevant bonuses and at paragraph 117 he dealt with the submission that the Duomatic principle could not apply. He said this:

“117.

Mr Kosmin submitted that, as a matter of law, the assent of the shareholder himself must be proved, and that it was not sufficient simply to show that that assent had been given by the beneficial owner of a share held by a nominee. He cited In re New Cedos Engineering Co Limite” [1994] 1BCLC 797 as authority for that proposition. I am unable, however, to derive any such proposition from my reading of that case. Nor do I see why as a matter of principle it should be regarded as correct. We are concerned here with the application of the equitable rule that a fiduciary must not profit from his office without consent of the corporators. Where a person (Peter Faulding) had an equity to compel a consent, I see no reason why equity should not have regard to the position of the beneficial as opposed to the legal owner in its application of the rule”.

It seems that Hart J was plainly prepared to accept that the consent of a beneficial owner of a share was sufficient for Duomatic purposes. In the passage I have cited he seems to treat the matter as a question of principle – the beneficial owner (at least on the facts of his case) could have compelled the consent anyway so it was right to take that consent into account. However, it is also right to point out that part of his reasons seems to have been on an agency basis. The beneficial owner was argued to be acting as agent of the nominee – that is apparent from paragraph 121 of his judgment.

In Domoney –v- Godinho [2004] 2 BCLC 15 the question again arose. At paragraph 44 of his judgment Lindsay J referred to a submission that the Duomatic principle looked only to registered as opposed to beneficial, owners, and at paragraph 45 he said:

“There is no doubt that argument to the contrary in some respects and some contexts is possible (see Deakin –v- Faulding….). But there is also strong authority to the contrary, namely that one looks solely to the register of members. In that respect I have in mind Jalmoon Pty Ltd –v- Bow… a decision of the Supreme Court of Queensland, handed down on 13 December 1996. To like effect, it could be argued, is Euro Brokers Holdings Limited –v- Monecor (London) Ltd. which, in the decision of Mummery LJ, emphasises the word “membership”.

“46 – There are, indeed, further cases on the point and there may be some contest on the law, but if there is to be here [sic] a contest on the law, it is one best dealt with on the basis of found fact rather than on the basis of assumptions and possibilities and uncertainties.”

Mr Bompas says that this case holds, or at least leaves open the possibility, that the application of the Duomatic principle depends on the facts of each case, and that will require a trial in this case.

It seems to me that the point of principle relied on by Mr Tager (namely that the Duomatic principle can never apply to the consent of a beneficial but non-registered owner) is not clearly right, and it should not be determined on a summary judgment application such as this. In fact my view is that as a statement of principle it is wrong. I do not see why in an appropriate case the principle should not operate in relation to the consent or infomed participation of a beneficial owner of shares if the facts justify it. It may well be that the appropriate analysis is the agency argument – in many cases it will doubtless be possible to argue that a nominee shareholder has left all the real decisions to his beneficiary so that technically the consent of the beneficiary is the consent of the registered shareholder. If the facts are as Mr Cheklanov says they are in this case then I can certainly see the basis in fact for running such an argument. In the circumstances I am not prepared to accede to the summary judgment application on the footing that the consent of Mr Cheklanov cannot conceivably be good to validate such of the corporate steps as would require the consent of the shareholder.

However, there is another reason why it seems to me to be clearly inappropriate to grant summary judgment. Let it be supposed for the moment that Mr Cheklanov has become the beneficial owner and is entitled to compel the transfer of the share to him and his registration as shareholder. At the end of this litigation that is what would happen. What useful or sensible purpose would be achieved by granting summary judgment in favour of Mr Shahar now, declaring that corporate steps are technically invalid and granting injunctions to which Mr Cheklanov does not consent? On the present hypotheses the declarations, at least, would be technically correct. However, they would be pointless unless something was to be achieved by them. I do not think that anything useful or proper would be achieved by them. If their only effect is technical and temporary, then they are useless. If their effect is more than technical, then one has to look carefully at that effect and decide whether it should be created pending a trial of the issues between the parties.

When asked what the point of the summary judgment was Mr Tager said that the declaratory and injunctive relief should be granted because, on his client’s case, he has been deprived of his company by stealth. If this was a clear case of beneficial ownership then he accepted that there would be no point in granting the relief. However it was not, and it was right in the circumstances to restore the status quo and to remove the effects of the corporate steps, and the powers of attorney granted pursuant to them, from the picture. He asserted that the interim injunctions had not been sufficient to prevent the attorneys continuing what he described as “their mischief”, and he referred to their intervention at certain meetings of a company known as Ged Investments (not the same as Ged Invest). The powers of attorney should be delivered up for cancellation. He accepted that his client should give an undertaking not to dissipate assets pending a trial if he was put back in control of the company, but the price of that should be a cross-undertaking in damages from the Defendants or from Mr Cheklanov and Mr Kolomoisky. That would restore the appropriate balance.

I do not consider that that would be an appropriate way of going about things. Achieving the status quo pending a trial is generally achieved, where appropriate, by granting interim relief and not summary judgment (which is final). Such interim relief can be carefully targeted in order to deal with the acts in question. Granting summary judgment, although in this case containing some refined injunctive relief, would be a somewhat blunter weapon. It would also be inappropriate. I see no legitimate point in granting it. If it is true that the interim relief is not working properly then the proper remedy is further and better interim relief or, if necessary, enforcement proceedings. The extent to which that is appropriate, sensible and possible has not really been canvassed in the present proceedings. Mr Shahar has preferred to make the technical application for summary judgment.

I therefore reject this application on the basis that the Defendants have an arguable defence to it, and in any event it is inappropriate in the circumstances.

On 4^th July 2003 Lindsay J granted relief on a without notice application. The relief he granted was permission to serve out of the jurisdiction on the Defendants other than the 2^nd Defendant, and he granted some wide ranging injunctions restraining the Defendants from variously acting as directors, company secretary and attorneys. He also granted specific injunctions restraining voting in respect of Ged Plaza and doing various acts in respect of that company’s affairs, including disposing of its assets. On 11^th July, which was the return date for the relevant application, the defendants attended by counsel and the injunctive relief was continued, with the addition of an additional injunction restraining the dismissal of Mr Dwen as director of Teamtrend. The possibility of discharging the order was to be dealt with on a future date. On 25^th July 2003 the matter came back before Hart J, on which occasion the injunctive relief was ordered to continue until trial or further order in the meantime. Directions for the further conduct of the action (including provisions for disclosure and witness statements) were given. The Defendants now apply to set aside those orders for non-disclosure. Although the non-disclosure point goes to the service out application, I do not think I need to consider that further because I have already dealt with that point. In essence, the application is therefore an application to set aside the injunctive relief for non-disclosure.

The non-disclosure is said to be two-fold. First, as I have already indicated in this judgment, the claims were presented to Lindsay J and Hart J on the footing that Mr Shahar had a valuable shareholding (or a right to a valuable shareholding) in Teamtrend and that that shareholding had been devalued by the conspiracy and other torts relied on. His Particulars of Claim are dated 4^th July 2003, the same date as the hearing before Lindsay J, and it is a sensible inference that they were before the Judge, or at least available to the Judge. That document again makes the nature of the claim clear. What Mr Shahar did not tell the Judge, although he (Mr Shahar) must have known about it (and indeed he concedes that he knew about it) was that in fact (according to him) the assets of Teamtrend were all held in trust for him and Teamtrend was no more than a nominee. That would mean that the shareholding had no value. This fact did not emerge until June of this year, almost one year thereafter the grant of the without notice relief. The second alleged non-disclosure arises in this way. On 5^th August 2004 Mr Shahar provided a further affirmation in support of a claim for a further injunction against the defendants. The details of that injunction do not matter. In that affirmation he refers to what he calls “defensive actions” to try to protect his position. The first such action was the application for an injunction which he made to Lindsay J. The second took place in the Ukraine. At paragraph 29.2 he describes his attempts to “rescue what assets I could on 14^th May 2003”. Since his companies owed money to another Ukrainian Bank called UkrSiBank and that bank had already invested in the shopping centre, “I transferred all my companies and assets to this bank. This was after the initial intimidation of me, but before the actual theft of Teamtrend”. The new bank is said to have assumed responsibility for protection against “Privatbank’s unlawful aggression” and various shares were transferred to affiliated companies of the bank. The bank also made a decision to transfer certain rights of ownership to various companies. Thereafter the factual position in relation to these “defensive actions” gets a little murky. At a later stage Mr Shahar referred to the transfer to the new bank as being by way of security, and in a further witness statement again signed on 5^th August 2004 (i.e. the same date as the witness statement in which he disclosed the defensive actions, and which he describes as his “earlier” witness statement) he clarifies what he did by saying :

“ What I had in fact done was to ensure that powers to (sic) attorney were granted to UkrSibBank so that they could look after my interest and protect me. When I said “all” my assets I should have made clear in any event that this in fact only related to the assets I had left at that time. It did not include the assets of Ged Invest…”.

There is some further evidence about various transfers effected by that bank and steps taken to challenge them, the details of which are somewhat obscure but which do not matter for these purposes. What is relevant is that Mr Shahar did not disclose these defensive actions at any stage before the beginning of August this year. Precisely what they were, how they were intended to work and what has in fact happened in relation to them is a matter of some obscurity and confusion in the evidence that I have seen. I am therefore uncertain as to the full extent of those measures and their success. I think that this obscurity is unnecessary; it would and should have been possible to make matters somewhat clearer. However, what matters most for present purposes is that none of this was disclosed to Lindsay J, or indeed to Mr Garnett Q.C. who, sitting as a deputy Judge of this division, gave permission to join Privatbank (an aspect of the case to which I will come later).

It is, of course, very well established that an applicant for without notice relief must make proper disclosure. If he or she does not do so then he or she runs a serious risk that the order will be discharged. The principles to be applied can be taken from “Brink’s Mat Limited –v- Elcombe [1988] 1WLR 1350 where Ralph Gibson LJ set them out thus at page 1356:

“In considering whether there has been relevant non-disclosure and what consequence the court should attach to any failure to comply with the duty to make full and frank disclosure, the principles relevant to the issues in these appeals appear to me to include the following.

(1)

The duty of the applicant is to make “a full and fair disclosure of all the material facts:” see Rex –v- Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac [1917] 1 K.B. 486, 515 per Scrutton L.J.

(2)

The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers: see Rex –v- Kensington Income Tax Commissioners, per Lord Cozens-Hardy M.R., at p. 504, citing Dalglish –v- Jarvie (1859) 2 Mac. & G. 231, 238 and Browne-Wilkinson J. in Thermax –v- Schott Industrial Glass Ltd. [1981] F.S.R. 289, 295.

(3)

The applicant must make proper inquiries before making the application: see Bank Mellat –v- Nikpaur [1985] F.S.R. 87. the duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.

(4)

The extent of the inquiries which will be held to be proper, and therefore necessary, must depend on all the circumstances of the case including (a) the nature of the case which the applicant is making when he makes the application; and (b) the order for which application is made and the probable effect of the order on the defendant: see, for example, the examination by Scott J. of the possible effect of an Anton Piller order in Columbia Picture Industries Inc. –v- Robinson [1987] Ch. 38; and (c) the degree of legitimate urgency and the time available for the making of inquiries: see per Slade L.J. in Bank Mellat –v- Nikpour [1985] F.S.R. 87, 92-93.

(5)

If material non-disclosure is established the court will be “astute to ensure that a plaintiff who obtains [an ex parte injunction] without full disclosure … is deprived of any advantage he may have derived by that breach of duty:” see per Donaldson L.J. in Bank Mellat –v-Nikpour, at p.91 citing Warrington L.J. in the Kensington Income Tax Commissioners’ case [1917] 1 K.B. 486, 509.

(6)

Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application. The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.

(7)

Finally, it “is not for every omission that the injunction will be automatically discharged. A locus poenitentiae may sometimes be afforded:” per Lord Denning M.R. in Bank Mellat –v- Nikpour [1985] F.S.R. 87, 90. The court has a discretion, notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order, or to make a new order on terms. “When the whole of the facts, including that of the original non-disclosure, are before [the court, it] may well grant … a second injunction if the original non-disclosure was innocent and if an injunction could properly be granted even had the facts been disclosed:” per Glidewell L.J. in Lloyds Bowmaker Ltd–v- Britannia Arrow Holdings Plc. Ante, pp. 1343H-1344A.

There is no doubt in my mind that the non-disclosure in this case was material. As well as making his technical claim based on the invalidity of the alleged corporate steps, Mr Shahar was also seeking to restrain the Defendants in the first action from acting so as to dissipate assets held by Teamtrend’s subsidiaries. He clearly put forward his claim to do that on the footing that he was the shareholder in Teamtrend and that those shares had real value because Teamtrend was the beneficial owner of its assets. It now turns out that that is not the proper position. That does not mean that Mr Shahar necessarily has no claim – that will depend on whether as beneficiary of the assets (which he claims to be) he can make the claims that he seeks to make. However, it is an important part of the picture. As Mr Bompas put it, it makes the corporate side of things more of a “sideshow”. I have no doubt that a Judge being asked to consider an application for the without notice relief that was obtained in this case would wish to be properly informed as to the nature of Mr Shahar’s rights in this company and its assets so that he had a proper picture. So far as the defensive actions are concerned, again they are a material piece of the background. They are not merely a piece of irrelevant narrative. On Mr Shahar’s evidence he took his defensive action before 14^th May 2003. One of the things that seems to have happened is that the shopping centre was sold by Ged Plaza to another Ukrainian entity known as Eliritsa. The documents show that this was carried out via Mr Demchenko who was Mr Shahar’s own lawyer, whereas Mr Shahar had suggested that this transfer was carried out by the UkrSibBank. This is part of the confusion as to precisely what has happened in relation to some of the Ukrainian assets, and it is confusion for which Mr Shahar is responsible. The picture presented by Mr Shahar in the evidence is that the assets of Teamtrend were in jeopardy and the implication is that he could not do anything about that. It now appears that some time before what he says was the triggering event (the shopping centre takeover) he realised there was some jeopardy and took his own steps to alleviate the problem. His case may be that those steps were not successful, but the attempt to take those steps, and what those steps were, are matters which it seems to me to be obviously material. Mr Tager accepted the materiality of the non-disclosure in relation to the nomineeship arrangement, but he did not accept that the defensive measures were material. He said that the relief sought was to stop the Defendants holding themselves out as having authority pending the trial. It would not have been material to the decision of Lindsay J to have been told that protective measures had been taken because the strength of each side’s case is not affected by the absence of that reference. For the reasons I have just given, I reject those submissions.

It is therefore clear that there has been material non-disclosure. Mr Shahar says that insofar as there was material non-disclosure it was innocent in that he did not realise that the material ought to have been disclosed. I confess to being somewhat sceptical about that position. He says that the nomineeship arrangement was brought about for tax reasons, and since he seems to be a man of some sophistication I assume that he would be aware of how it operated. I do not find it altogether easy to believe that he did not think that the whole basis on which he held assets through Teamtrend was something that he need not bother to disclose to the court and to his lawyers (I certainly infer that he did not tell his lawyers – he was represented by extremely reputable and responsible solicitors and counsel before Lindsay J, and I am confident that those lawyers would have been aware of the need to describe his interest in the company correctly had they had the information). I suppose that the failure to disclose the existence of the defensive measures might be a little more understandable. I suppose that Mr Shahar might be able to say that his problem was that the measures that he had taken had not worked and the position was worse than he thought. I suppose that he might be able to say that he focused on the position as it was suddenly presented to him when the situation got much worse, and that he needed to deal with a situation in which the measures were apparently insufficient. Be all that as it may, there was no cross-examination of him on his protestations of innocence and in the circumstances, and despite my misgivings, I am prepared to treat these non-disclosures as being innocent in the sense that Mr Shahar did not realise that he had to disclose the relevant material.

There has nonetheless been a culpable failure to disclose material facts. Is this sufficient to require a discharge of the injunctions? I have not found this an easy question, but in the end I have decided that it is not; or if it were it would be appropriate to order injunctions with the same content. I bear in mind all the factors outlined in the Brink’s Mat case. In particular I bear in mind the principle that it does not matter that a disclosure of the material events would have made no difference to the result. Mr Tager submitted that it would not - had the full disclosure been made then the judge would have made precisely the same order. That may be right, but it is not the point. It is not for an applicant for without notice relief to decide on the scope of disclosure on the footing of what would and what would not be determinative. He has to disclose what is material; in the absence of any submissions from the other side the judge has to be as fully informed as possible so that the judge can make up his own mind. The judge may have a different view as to what is and is not determinative, and it is not for the applicant to pre-judge that. The jurisdiction to set aside orders for breach of the duty of full disclosure is to some extent disciplinary. However, in line with point 6 of the summary in Brink’s Mat, I am entitled to take into account the extent to which the fact not disclosed is sufficiently serious to justify immediate discharge of the order without examination of the merits. The facts were serious, but it might be said that they were facts which could actually have gone to strengthen Mr Shahar’s case. He could have made the submission that despite his defensive measures he was still at risk, and by relying on his beneficial ownership in the shares he might have avoided some arguments which would otherwise arise in relation to the principles governing reflective loss (although conversely it might have given rise to other difficulties). That factor goes a little way towards ameliorating the seriousness of the breach of duty. However, what weighs most with me, and which just (but frankly only just) tilts the balance against the discharge of the orders is the question of proportionality and overall fairness. Injunctions have now been in force for over one year. Subject to their jurisdictional and other challenges, the defendants have been content to take the matter to trial. There is going to have to be a trial. If there is no injunctive relief, and if Mr Shahar is right in what in he says about what has been happening, then Mr Shahar is at serious risk of simply having nothing left to fight about, or at least serious risk of the picture being made very much more complicated. I think that the circumstances are such that the status quo should be preserved. The defendants say that because of the injunctive relief they have not been able to take steps to restore some assets to the Ged Companies, by which I understand them to mean they have not been able to take steps to challenge some of the actions of UkrSibBank. So far as that is true the situation can no doubt be dealt with by adjusting the relief or giving the necessary permission, but before that can happen it must be made clear to the court what is proposed and what has been happening on the ground. There is still a ring to be held in these proceedings, and it would be unduly penal to Mr Shahar were it to turn out that he has grounds for complaint and were it to transpire that in the period between now and his winning the asset position had become even more murky and assets less easily recoverable.

Mr Shahar should take no great comfort from this. I think his lapses were serious, and I think he has created quite unnecessary uncertainty and confusion as to what steps have been taken in the Ukraine. He has come very close to losing his injunctive relief. However, in the circumstances I will not discharge the injunctions.

These two gentleman seek to stay the counterclaim on forum non conveniens grounds. Mr Bompas submits that what has to be tried (now that I have decided against Mr Shahar on his summary judgement application) is the question of the validity of the claim of Mr Cheklanov and Mr Kolomoisky on the June 2002 agreement. That, he says, is a limited question, and it is certainly more limited than the sort of issues that will arise on the counterclaim. All that has to be decided is which party is telling the truth in relation to what was agreed in June 2002. If Mr Kolomoisky and Mr Cheklanov are telling the truth, then Mr Cheklanov would presumably be entitled to his relief. Mr Bompas submits that the determination of all this will, in effect, be a much narrower enquiry than the issues that would have to be gone into in the counterclaim.

I will deal first with the tort claims. I think that Mr Bompas’s analysis presents an unrealistic picture of how the action would be run if the tort counterclaims were not there. Mr Shahar would defend the claim on the basis of his version of the June 2002 agreement. In attacking the case of Mr Cheklanov and Mr Kolomoisky he would inevitably be alleging fabrication, and putting his full case on fabrication would involve his putting the idea that their case is not genuine and they have simply made it up in order to give a spurious justification to what they did thereafter. He would in effect be raising the idea of a conspiracy as a defence to the claim on the facts. It may be that the facts would range wider, but the core facts and penumbra would be litigated in any event. One is therefore looking at a trial in respect of which a counterclaim does not add a whole new raft of fact that would not be there anyway. I acknowledge that expert evidence of Ukrainian law may be necessary on the counterclaim which would not be necessary on the claim, but that requirement is not sufficiently weighty material against litigating the counterclaim with the claim in this jurisdiction.

This conclusion undermines Mr Bompas’s submissions so far as they are based on the presence of documents and witnesses. He points out, no doubt entirely correctly, that all the witnesses would have to come from the Ukraine. Various witnesses are identified. Some of them do not speak English. Nearly all the documents will be in the Ukraine, and doubtless they will require translation. All that is true but a lot if not all of those witnesses and a lot if not all of those documents, would be coming to this jurisdiction in connection with the trial of the claim anyway. Accordingly, these are not weighty factors in support of Mr Bompas’s submissions.

Accordingly I do not think that the tort claims in the counterclaim involve enough new issues, or enough evidential material, over and above those which are involved in the trial of the claim to sustain a submission that more appropriate forum for trying the counterclaim would be the Ukraine. Mr Kolomoisky and Mr Cheklanov have chosen to come to this jurisdiction to litigate; they have therefore accepted the jurisdiction of this court, and in my view it is right and convenient that, since they have done so, those issues should be tried here. I would add that in this part of the judgment I am dealing purely with the application to stay on the grounds of forum non conveniens. The counterclaim in the second action is as flawed as the claim in the first action in that it pleads on the footing that Teamtrend is the beneficial owner of its assets and Mr Shahar’s shareholding in Teamtrend has been damaged. That, apparently, is no longer the way in which the matter is to be put. I deal below with the fate of Mr Shahar’s application to amend his statements of case. There is no application before me to strike out the counterclaim on the footing that it is plainly unsustainable on the facts, and my ruling is simply a ruling on the application to stay on forum non conveniens grounds.

There is, however, one area of the counterclaim where I think a stay is appropriate. At the end of the Counterclaim Mr Shahar makes two claims on the footing that Mr Kolomoisky and Mr Cheklanov are right, and he is wrong, about the nature and effect of the June 2002 agreement. He says that in that event he is entitled to be subrogated to the claims of the bank against the airport company, via the chain of guarantees which goes from him, through Mr Cheklanov and Mr Kolomoisky, to the bank. In addition, he says that if they are right, the rights that he gave were merely security rights and he is entitled to have any surplus returned to him after the bank has been repaid. These claims therefore presuppose that Mr Shahar’s conspiracy claims have failed. The issues involved were not really developed in the evidence, skeleton arguments and the debate before me, so I am somewhat handicapped in dealing with this issue as a result. However, I have concluded that this claim should be stayed on a forum non conveniens basis. While some of the facts relevant to these issues will emerge in the trial of the conspiracy claim, they take the facts off in a different direction, and they do not easily fall within the factual investigation that will take place then. The likely applicable law was not debated either, but it seems unlikely in the extreme that it will be English law. Ukrainian law is an obvious candidate. If the conspiracy claim fails because Mr Cheklanov and Mr Kolomoisky are correct in their version of the agreement, then it seems to me that the Ukraine would be the appropriate forum for working out the consequences of that. I therefore stay these aspects of the claim on forum non conveniens grounds. I have seen no material which could lead me to conclude that the Ukrainian legal system could not deal with these issues. Indeed, it is apparent from the material that I have seen that Mr Shahar has had resort to that system for sorting out certain aspects of this matter because there are several sets of proceedings in which ousted directors of Ukrainian companies (appointed by Mr Shahar) are seeking reinstatement. Mr Shahar has deposed to instances of threats to persons who would or might be witnesses, but the material does not enable me to conclude that the matter would not be dealt with properly in the Ukraine. Furthermore, in relation to the subrogation claim, Privatbank is a key party – it is ultimately Privatbank’s asset which is said to be subject to the subrogation rights. As will appear below, I consider that permission to serve out of the jurisdiction is not appropriate against Privatbank in respect of this claim. If that is right then it makes it even more inappropriate to litigate it here as against Mr Kolomoisky and Mr Cheklanov.

By an application dated 23^rd December 2003 Mr Shahar sought permission to serve the defence and counterclaim and other documents out of the jurisdiction on Privatbank in the Ukraine. The application was supported by a witness statement from Mr Shahar. On 19^th February 2004 the application was heard by Mr Kevin Garnet Q.C., sitting as a deputy judge of the High Court, and he gave permission to serve those documents out of the jurisdiction. He gave directions for the filing of a Defence and gave permission to Privatbank to apply to vary the directions in what the order describes as paragraph 3 but which is probably a mistaken reference – it should probably be to paragraph 4, but nothing turns on that. In paragraph 2 of the order it was provided as follows:

“It is ordered that… the requirement (if any) to file and serve a part 20 claim form on Privatbank is waived.”

It is clear that the document that was served on Privatbank and which indicated to them what the claim made against it was not something which in terms purported to be a part 20 claim form, but was the statement of case in its usual form. These facts give rise to the first of Privatbank’s challenges to the service on it, which is a very technical one.

Mr Andrew Clutterbuck, who appears for Privatbank, advanced this technical point. He points out that permission to serve proceedings outside the jurisdiction is governed by CPR 6.20 where non-Regulation State defendants such as his clients are concerned. The relevant words in the opening of that rule are: “A claim form may be served out of the jurisdiction with permission of the court…”. He points out that the provision is therefore confined to things called “claim forms”. The normal claim form is clearly covered. Under CPR 6.18(h) the expression “claim form” includes a petition and an application notice, but those words do not cover a part 20 claim made in a counterclaim against a non-claimant. Accordingly the jurisdiction of the courts to give permission to serve proceedings outside the jurisdiction is confined to a narrow range of documents. It does not include a document called a Defence and Counterclaim which includes a counterclaim (part 20 claim) against a non party. There is such a thing as a part 20 claim form – that is provided for by CPR 20.7 (2), and he accepts that such a document would be a claim form within CPR 6.20. However, the document that was served in this case, and which Mr Kevin Garnett gave permission to serve out of the jurisdiction, was not such a document. Accordingly, when Mr Garnett gave permission in relation to the document in question he was doing something that he had no jurisdiction to do.

Mr Clutterbuck’s submissions point out what seems to me to be an oddity in the CPR which does not seem to have been commented on in any notes in the White Book or in any authority – at least none were drawn to my attention and I have found none myself. The oddity is this. CPR 6.20 does indeed seem to confine itself to things called “claim forms”, and CPR 6.18 goes out of its way to extend the definition of the claim form for the purposes of the rule relating to service out of the jurisdiction in a way which does not include counterclaims against non-claimants. The relevant part of Part 6 does not even in terms include documents called “part 20 claim forms”, even though those documents are expressly provided for in CPR 20.7(2). However, I think there is little difficulty in construing the expression “claim form” in CPR 6.20 to include a “part 20 claim form”. CPR 6.20(3A) indicate at least some part 20 claims are within the rule because it reads:

“(3A) a claim is a part of a part 20 claim and the person to be served is a necessary or proper party to the claim against the part 20 claimant.”

Those words make it obvious that some form of Part 20 claim is understood as coming within CPR 6.20. That is not surprising; there will be many cases in which an appropriate Part 20 Defendant is out of the jurisdiction and needs to be served there.

The inclusion of a part 20 claim form (strictly so called) within the service out regime achieves the desired result where the nature of the Part 20 claim is a claim which is not in the nature of a counterclaim against a claimant plus one or more persons outside the jurisdiction – for example, if it is a claim for an indemnity or contribution from a non-party. Such a Part 20 Defendant would be joined by issuing a claim form under CPR 20.7(2) in form N211. However, the oddity arises from the fact that such a claim form cannot apparently be issued where there is counterclaim against a non-party. CPR 20.2 provides that the expression “part 20 claim” includes such a counterclaim (see paragraph 1(a)), including such a claim by a Defendant against a non-party (see paragraphs (1)(b) and (c)). CPR 20.5 (1) provides for the permission of the court to be obtained to the joinder of the non-party to the counterclaim – 20.5(1) requires that a defendant who wishes to counterclaim against a person other than the claimant must apply to the court for an order that “that person be added as defendant to the counterclaim”. However, CPR 20.7 seems to preclude the need for a Part 20 claim form in those circumstances –

“20.7

(1) This rule applies to any Part 20 claim except –

(a)

a counterclaim;

(b)

a claim for contribution or indemnity made in accordance with rule 20.6.” [Rule 20.6 is the rule which provides for contribution and indemnity claims against co-defendants, who by definition are already parties].

Thus the oddity is this. CPR 6.20 requires a claim form; Part 20 claim forms can be issued if a Defendant is joining a non party other than by way of counterclaim; and therefore such a defendant can invoke the jurisdiction under CPR 6.20 because his Part 20 claim form is a claim form for the purposes of Part 6.20. But a defendant who wishes to counterclaim against a non-party cannot bring himself within CPR 20.7, cannot issue a claim form and therefore cannot invoke the jurisdiction under CPR 6.20. On the face of it he does not have the means of applying for any permission to serve out, unless one takes the view that he can serve out free of any restrictions, which cannot be right. I have found it very strange that the rules do not explicitly provide for this situation, because it must frequently arise and it simply cannot be the case that such a Defendant cannot counterclaim against an extra-jurisdictional person.

Mr Clutterbuck’s answer to the point is on its face very simple. He says that a Defendant who wishes to counterclaim against a non-party who is outside the jurisdiction must be able to do so, but he must do so by issuing and serving a “claim form”. The only candidate for this is a Part 20 claim form and therefore that is what such a Defendant (and Mr Shahar in this case) must do. Absent such a form the courts jurisdiction under CPR 6.20 cannot be invoked. Mr Shahar did not issue such a claim form in this case; not only is that apparent from the face of the document which was served, it was explicit in the order made by Mr Garnett Q.C. that such a document would not be issued.

I do not think that this argument can be correct. It would be absurd to suppose that the CPR does not provide for the service of counterclaims on extra jurisdictional non-parties, and I am sure that Mr Clutterbuck was right when he says that Part 20 claim forms (within CPR 20.7) are within CPR 6.20. However, I do not think that a counterclaiming defendant can issue a Part 20 claim form. He simply cannot bring himself within CPR 20.7 which does not apply to claims against existing parties. Furthermore, if one looks at the specified Part 20 claim form (form N211) it is manifestly inappropriate for use in relation to a counterclaim. It requires Particulars of Claim to be endorsed or served separately and clearly anticipates a different form of pleading from what one would expect to find in a Defence and Counterclaim. Accordingly, Mr Clutterbuck’s answer to the puzzle is not the correct one.

I think that the only sensible answer to the puzzle lies in a combination of CPR 6.20, CPR 20.3 and CPR 20.5. CPR 20.3 (1) provides:

“A Part 20 claim shall be treated as if it were a claim for the purposes of these Rules, except as provided by this Part.”

It then goes on to provide that certain rules do not apply to Part 20 claims, but those excluded rules do not include CPR 6.20 (or indeed any part of CPR Part 6). CPR 20.5 provides (as I have already indicated) that a Defendant who wishes to counterclaim against a non-party must apply to the court for an order adding that person as a defendant to the counterclaim. CPR 20.5 (3) provides:

“(3)

while the court makes an order under paragraph (1), it will give directions as to the management of the case.”

What I think the rules therefore envisage is that the court hearing the application for joinder should treat the counterclaim as if it were the claim form within CPR 6.20 and apply the relevant provisions of that rule (and CPR 6.21) as if the counterclaim were a claim form. I do not see that anything else works. That is entirely sensible. The court still retains its full control over the joinder of persons outside the jurisdiction and the regime is entirely workable. It is rather more sensible than requiring a defendant to do something which apparently the rules do not permit (the issuing and serving of a Part 20 claim form) and in a form which is required by the relevant practice directions but which will produce an inappropriate document. Furthermore, I can see no point in requiring a counterclaiming Defendant to issue this separate document – it would be a matter of form only and utterly pointless.

Mr Clutterbuck’s first and technical point therefore fails. I therefore move on to consider his application to set aside service on Privatbank out of the jurisdiction on the grounds that service out was inappropriate.

For the purposes of considering whether or not service out of the jurisdiction should be set aside for non compliance with the other requirements of CPR Part 6.20 it is helpful to treat the claims against Privatbank as falling into three categories.

First, the claims relating to the corporate steps. Mr Shahar seeks to justify service out of the jurisdiction under CPR 6.19 (1)A. This reads as follows:

“(1)A – A claim form may be served on a defendant out of the jurisdiction where each claim included in the claim form made against the defendant to be served is a claim which the court has power to determine under the Judgments Regulation and –

(a)

no proceedings between the parties concerning the same claim are pending in the court of any other of the part of the United Kingdom or any other Regulation State; and

(b)

…(ii) Article 22 of Judgments Regulation refers to the proceeding…”

I have already set out the text of article 22 (2) above.

It seems to me to be clear that there are at least 2 reasons why Mr Shahar cannot successfully rely on this provision to justify the corporate claims.

The next head is the tort claims. Mr Shahar seeks to justify service out of the jurisdiction in respect of these claims on a number of grounds CPR 6.20 – ground 3, 8 and 10. One of the alleged wrongs, namely intentionally procuring a breach of duty on the part of Mr Chvets (which duties are described as trust duties earlier in the counterclaim) was expressly abandoned by Mr Tager on the footing that the tort of intentionally procuring a breach of trust is not one known to the law – see Metall und Rohstoff AG –v- Donaldson Luftkin and Jenrette Inc. [1990] 1 Q.B. 391 at page 481H. That leaves the other tort claims requiring consideration.

So far as those other claims are concerned, I do not need to consider two of the three grounds for service out of the jurisdiction because Mr Clutterbuck expressly conceded that if those tort claims were being proceeded with against Mr Cheklanov and Mr Kolomoisky then, jurisdiction against his client could be founded on the basis of ground (3) (necessary and proper party). However, he said that even though that is the case, the court should not have given permission to serve out of the jurisdiction because Mr Shahar cannot make out that there is a serious issue to be tried in relation to these claims.

Next Mr Clutterbuck took a point on the poverty of the pleading (and the evidence in relation to the involvement of Privatbank. There is plenty of averment as to the participation of the individuals Mr Cheklanov and Mr Kolomoisky. So far as the participation of Privatbank is concerned, the foundation for this appears in paragraph 13 of the counterclaim:

“13 Mr C is an employee of or otherwise affiliated to Privatbank and/or Mr K and Mr Shahar will assert that the steps taken by Mr C in relation to Teamtrend were taken by him on behalf of Privatbank and/or on the instructions of Mr K. Mr K is the chairman of the supervisory board and the main shareholder of Privatbank and at all material times was acting for and on behalf of Privatbank. Alternatively, Mr K and Mr C were acting on their own behalf.”

What then follows in the counterclaim is the pleading of various acts said to have been done pursuant to the conspiracy, and each time someone is alleged to have done something it is in terms of Mr Cheklanov, Mr Kolomoisky and/or Privatbank, with no particulars given as to how it was that either of those two gentlemen (or anyone else) came to be acting for Privatbank rather than in their own personal capacities. One therefore assumes that Mr Shahar alleges that Privatbank was involved because of the matters that he has pleaded in paragraph 13. As to those matters, it is right to make the following observations. The assertion that Mr Cheklanov is an employee of Privatbank is a mere assertion. It has been denied by Mr Jacobson, a solicitor acting for Privatbank, and Mr Shahar has not produced any material which substantiates his mere assertion or which would gainsay what Mr Jacobson has said. The allegation that he is “otherwise affiliated” to Privatbank is a vague allegation which, standing by itself, would not justify attributing any other acts to the bank – I do not even know what it means. So far as Mr Kolomoisky is concerned, he may be the chairman of the supervisory board and the main shareholder, but that does not mean that everything that he does is done on behalf of the bank. Paragraph 13 therefore again contains no more than bare assertion that Mr Kolomoisky was acting on behalf of the bank in conspiring as he has said to have done. There is precious little material to suggest that he was involving the bank in conspiring in this way. Indeed, Mr Tager told me that what was relied on was not really the agency of Mr Kolomoisky; Mr Shahar relied on the bank acting dishonestly in depriving Mr Shahar of the Ged Invest documents and assets.

It is true that it is part of Mr Shahar’s case that the bank was a party to his version of the June 2002 agreement, and if he is right in his version of events then the bank has presumably somehow not sought to enforce his rights arising out of that agreement. He has also asserted in evidence, though not in his statement of case, that Mr Chvets handed the Ged Invest documents over to the bank. On his case, therefore it can be said that the bank had some involvement. There is some hearsay evidence from a Rabbi Kaminezki (who is said by Mr Kolomoisky and Mr Cheklanov to have witnessed their version of the June 2002 agreement) to the effect that executives of the bank flew to the Crimea in the bank’s executive jet and put pressure on him to support the Cheklanov/Kolomoisky version of events. That is about the only positive evidence of bank involvement. All this leaves the case for bank involvement in the conspiracy somewhat thin. It is not even clear why the bank would wish to participate in the conspiracy. The decision whether the material discloses a serious issue to be tried is pretty marginal, but had I been required to rule upon it I would have been minded to say that there is enough, but only just. However, since I have ruled against service on other bases, I do not have to decide the point.

That deals with the tort claims. Next is the subrogation claim. I have described it above. Mr Clutterbuck accepted that if this claim were proceeding as against Mr Cheklanov and Mr Kolomoisky then ground (3) of CPR 6.20 would technically found jurisdiction. However, I think this puts the cart before the horse. The main defendant to the subrogation claim is likely to be Privatbank, since the right to which subrogation is claimed is that bank’s claim against the airport company. As a matter of analysis, it seems to me that Mr Cheklanov and Mr Kolomoisky would be necessary or appropriate parties to the claim against the bank, not the other way round. However, that does not matter. Even if there were jurisdiction under CPR 6.20 I would have found that England and Wales is not an appropriate forum for trying this claim for the reasons given above in relation to Mr Kolomoisky and Mr Cheklanov.

The effect of that is that I set aside the permission to serve out of the jurisdiction against Privatbank, and its joinder as a defendant to the counterclaim.

In addition to its application to set aside the service on technical grounds, Privatbank also seeks to set it aside on the grounds of non-disclosure, relying on the principles set out in Konamaneni v Rolls Royce [2002] 1 WLR 1269 at paras 179ff. Since I am setting aside the joinder and service on other grounds it is not necessary for me to deal with this in detail, and it is undesirable to lengthen an already lengthy judgment further by extended reasoning. However, since I have reached a conclusion on the point I will set it out briefly.

The material before Mr Garnett QC was a witness statement from Mr Shahar and a skeleton argument from counsel. The note of the hearing indicated that the deputy judge was not familiar with the facts of the case and required assistance (not surprisingly – the matter by then was getting complex). There is no indication that he was given sufficient assistance on analysing the matter. Had he been given that assistance then, for example, the problems with the “trespass” claims would have become more apparent. Crucially, however, he was not told of the nomineeship agreement, which (as repeatedly pointed out above) changes the whole basis of the claim (if there still is one). I cannot envisage that permission to serve out, in respect of the claim as presently pleaded, would have been given if that had been pointed out. The claim would have had to have been recast, and then re-presented in such a way as to demonstrate a serious question to be tried as to its validity. There is no indication that the obvious difficulties with the trespass claim were pointed out to the judge, which indicates a lack of thoroughness in addressing the analysis which a judge is entitled to expect in an application of this sort. Other complaints were made by Mr Clutterbuck which are less justified or less significant. Looking at the matter overall, I would have concluded that the non-disclosure would have been sufficient to justify setting aside the permission to serve out of the jurisdiction.

The last of the sets of applications are applications by Mr Shahar to amend his Particulars of Claim in the first action and his Defence and Counterclaim in the second action. The essence of the amendments was to make the claims as shareholder of Teamtrend (via a derivative action), and/or by reason of Teamtrend’s position as shareholder of the Ged companies, and/or by reason of the fact that Teamtrend held the shares of the Ged companies as nominee for him. Two paragraphs were proposed to be introduced into each of the statements of case stating those positions. However, at the hearing before me Mr Tager did not advance his application. They were not the amendments that he wished to put forward to meet some of the problems that had arisen. Accordingly, I have not been invited to consider the various claims of Mr Shahar as amended, or to consider whether amendments would save those part of the claims that I have found cannot be sustained in this jurisdiction. Mr Tager reserved his position in relation to any amendments he might wish to propose in the light of my judgment, but that is as far as the amendment question went. Accordingly I do not have to rule on the amendments or consider them at all. There was some debate as to whether I should adjourn the application or dismiss it. Since it is not being advanced, and since it is not going to be advanced in its present form, and since no application to amend the application is before me, I shall dismiss the application itself.