Aliaksandr Hniazdzilau v Zolt Adam Vajgel and Others
| Jurisdiction | England & Wales |
| Judge | Mr Richard Millett |
| Judgment Date | 11 May 2015 |
| Neutral Citation | [2015] EWHC 1582 (Ch) |
| Court | Chancery Division |
| Date | 11 May 2015 |
[2015] EWHC 1582 (CH)
Mr Richard Millett Q.C. (SITTING AS A DEPUTY JUDGE OF THE HIGH COURT)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Thomas Roe Q.C. and Alexander Halban for the Appellant/Third Defendant
Clifford Darton for the Respondent/Claimant
Hearing dates: 6, 7 May 2015
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Richard Millett Q.C. (SITTING AS A DEPUTY JUDGE OF THE HIGH COURT)
Mr Richard Millett Q.C. (sitting as a Deputy Judge of the High Court):
Introduction
This is an appeal by the Third Defendant ("D3") by his application notice dated 3 March 2015 from the order of Master Clark dated 10 February 2015. It comes before me on an expedited basis with the permission of Warren J granted on 25 March 2015. By her order the Master dismissed D3's application for security for costs in the sum of £285,000 and gave judgment in default against the First Defendant ("D1") for costs only. She also ordered a detailed assessment of certain costs orders made by Chief Master Winegarten on 11 January 2013 and 4 March 2013 relating to D1's unsuccessful challenge to the jurisdiction and forum non conveniens challenge ("the Winegarten costs"), and ordered a payment on account of £40,000.
D3 also applied for a stay of paras 3, 4 and 5 of the Master's order pending this appeal, which was originally refused on paper by Morgan J but it has not been revived at this hearing because its timing has made it unnecessary.
There are two basic issues on this appeal. First, the question of whether D3 should have security for costs. Secondly, whether the Master was right to have granted default judgment against D1 and ordered a detailed assessment of the Winegarten costs (and the payment on account).
Chronology
This case comes before me in circumstances where a seven day trial is due to take place in a window starting on 29 June 2015. As yet, strikingly, witness statements have not been exchanged and the case is not ready for trial. I am told that the Claimant will be in a position to serve his w/s in a matter of days from today, but D3 needs another month. It has not spent the money on producing statements unless and until it has security for costs. In order to understand that unsatisfactory state of affairs, and indeed the appeals before me, it is necessary to set out in detail the unusual and somewhat tortuous procedural history of this case.
12 Claim commenced against only D1
12 D1 applied to set aside service and a declaration of forum non conveniens
13 D1 served a witness statement from Mr Bronovets (who later became D3) in support of his application in which Mr Bronovets says that he is the beneficial owner of all the shares the subject of the dispute and that D1 holds them on trust for him
13 Chief Master Winegarten dismissed the application and orders D1 to pay the Claimant's costs and adjourns the forum non conveniens application for further hearing
13 Chief Master Winegarten dismissed the forum non conveniens application and ordered D1 to pay the Claimant's costs. D1 appealed with the permission of Chief Master Winegarten and the Claimant sought security for costs of appeal
13 D1 transferred the shares to the Second Defendant ("D2")
13 Mr Robin Hollington QC ordered D1 to put up security for costs of the appeal by 8.11.13 or else it be struck out, with no order as to costs. No security provided and it was indeed struck out.
13 Master Bragge joined D2 to the action on application of the Claimant and ordered both Defendants to serve defences by 17.1.14 (which neither did). He ordered that costs be in the case.
14 D3 issued application to be joined as a Defendant
14 The Claimant applied for default judgment against D1 and D2
14 Master Bragge ordered D3 to be joined on terms as to D3 indemnifying the Claimant for the Winegarten costs as per para 2 of that order following a detailed assessment of default costs certificate or agreement as between the Claimant and D1 as to the amount. He adjourned the Claimant's default judgment applications against D1 and D2 generally with liberty to restore. At that hearing the Claimant had actively opposed the joinder of D3. Master Bragge gave directions for the service of amended pleadings, with the Amended Reply to be served by 13 May 2015 (although in the end it was served on 19 May).
14 Case management conference: Master Bragge ordered a trial with earliest date in window being 1 June 2015; the trial was eventually fixed at the end of August 2013
14 D3 formally sought security for costs from the Claimant
14 D3 issued application for security for costs, supported by a witness statement of Mr Kakkad. It was originally listed for 19.9.14.
14 The Claimant issues application notice for default judgment against D1 (notwithstanding that his earlier application for default judgment against D1 had been adjourned by Master Bragge). It was this application that was before the Master from whose order appeal is now made.
14 First hearing of security for costs application before Master Clark: adjourned to allow D3 to put in expert evidence of Belorussian law and response evidence
14 The Claimant serves Kakkad 2, relying for first time in the security for costs application on s 6 of the Resolution of the Plenum of the Supreme Economic Court of the Republic of Belarus dated 23 December 2005 N34, which had previously been in evidence on the jurisdiction challenge before Chief Master Winegarten on the forum non conveniens application as part of an expert's report of a Mr Verkhovodkho dated 25 January 2013.
14 The resumed hearing took place before Master Clark
14 Master Clark circulated her judgment in draft.
14 Master Clark formally handed down judgment and made her order. She refused permission to appeal.
15 D3 issued application notice for permission to appeal, supported by D3's skeleton. D3 also applied for a stay of part of the orders pending the hearing of the appeal.
15 Morgan J refused a stay on paper and directed that if a stay was sought D3 should apply at the hearing of the appeal by separate application notice giving 3 days' clear notice.
15 D3 applied for a stay of paras 3 to 5 of Master Clark's order
15 Warren J granted D3 permission to appeal on paper and expedited this hearing
15 Warren J extended time for the Claimant's Respondent's Notice to 20.4.15
15 The Claimant filed a Respondent's Notice relying on a statement contained within it by his solicitor, Ms Melinda Shashou of HCLS solicitors to the effect that there were further delay grounds on which the Master could have relied in coming to her conclusion and that there was now insufficient time for the order for security to be complied with given the proximity of the trial and the size of the sum, and that he would be deprived of his election between putting up security and abandoning the claim.
The issues on the pleadings
The Claimant and D3 are Belorussian nationals. I am told that D1 is resident in Alice Springs, and D2 in Manila. The case is about which of the Claimant and D3 is the beneficial owner of the shares in a company called Bennet Invest Ltd, an English company ("the Company") incorporated in 2005. The Company owns valuable land in Belarus. There is no dispute between the Claimant and D3 that D1 held the shares only as trustee from the outset, nor that when the shares were transferred to D2 in June 2013, D2 was merely a replacement trustee for D1 and had no beneficial interest himself. It is also common ground that D1 accepted that he was a trustee for D3, and indeed on 10 Jan 2013, in support of his jurisdiction challenge the next day before Chief Master Winegarten, he adduced a w/s from D3 (who at that stage was not a party to the action) to the effect that D1 was trustee of the shares for D3. It is the Claimant's own pleaded case (at para 29D of the Re-Amended P/Cl) that D2 was merely a replacement for D1 and was only a trustee, and that is admitted at para 48 of D3's Defence. It is also important to note two other matters from the pleadings: (i) that the Claimant positively alleges that D1 and D2 were always only ever controlled by D3 in relation to the shares and their response to this litigation; and (ii) that on 17 June 2013 D2, upon receiving transfer of the shares from D1, executed a declaration of trust of the shares in favour of D3. That declaration of trust is not admitted by the Claimant.
D3 counterclaims for a declaration that he is the beneficial owner of the shares and that they are held on trust for him by D2. The counterclaim relies solely on the facts and matters pleaded in the Defence, and the defence to counterclaim relies solely on the matters in the Reply.
Security for costs
The Master dismissed D3's application for security for costs. Her reasons are at para 64 of her reasoned judgment. She identified as specific factors (i) the fact that the Claimant had assets in Italy and Montenegro; (ii) D3's delay and, most importantly, as she said, (iii) the fact that the principle established by the CA in in B J Crabtree (Insulation) Ltd v GPT Communication Systems Ltd [1990] 59 BRL 43 ("the Crabtree principle") applied because both the Claimant and D3 were in the position of claimants, and the position could not be saved for D3 by his proffering a Dumrul undertaking, i.e. to give up his counterclaim if the Claimant was ordered to but...
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