Eurochem Volga-Kaliy Llc v IMR Management Services Ltd

Tuesday, 10 November 2015

(10.45 am)

Approved Judgment

This has been an application by the Applicant, Eurochem Volga-Kaliy LLC (“ECVK”), under CPR Part 31.16, for pre-action disclosure of documents against three Respondents: IMR Management Services Limited (“IMSL”), the First Respondent; Mr Saraf, the Second Respondent and Mr Youness, the Third Respondent.

The rule applies where it is proposed to be bringing proceedings against another party, who is proposed to be joined to the intended proceedings. 31.16 reads as follows:

“ (1) This rule applies where an application is made to the court under any Act for disclosure before proceedings have started.

…

(3) The court may make an order under this rule only where —

(a) the respondent is likely to be a party to subsequent proceedings;

(b) the Applicant is also likely to be a party to those proceedings;

(c) if proceedings had started, the respondent's duty by way of standard disclosure, set out in rule 31.6, would extend to the documents or classes of documents of which the Applicant seeks disclosure; and

(d) disclosure before proceedings is desirable in order to -

(i) dispose fairly of the anticipated proceedings;

(ii) assist the dispute to be resolved without proceedings; or

(iii) save costs.”

The history of this matter, in which the Applicant asserts its intention to sue the three Respondents in this country, is that there was a project undertaken by a South African company, Shaft Sinkers (Pty) Limited (“ShS”) on behalf of the Applicant at the Kotelnikovo Potash deposit site in Southern Russia, pursuant to two agreements entered into in 2008 (the “Agreements”). Work was suspended in December 2011, and the relevant Agreements were terminated in April 2012.

Three serious allegations of fraud and conspiracy were made against ShS. The first was that the whole of the contractual arrangements had been procured by fraud, because it was never going to be possible safely to grout the mine shaft, and indeed ShS had received, even prior to the entry into of the relevant Agreements, a report to that effect, which they concealed from the Applicant. Secondly, there had been bribery of a senior employee of the Applicant and, thirdly, there had been a system of overcharging on procurement of materials.

The Applicant brought Swiss arbitration proceedings against ShS under one of the Agreements, the arbitration proceedings pursuant to the other Agreement being adjourned until its outcome, and in those proceedings, finally in August 2015, an award was made in the sum of $112 million, in favour of the Applicants in relation to the major claim. As far as the bribery and the overcharging were concerned, although the Arbitrators made findings that those had occurred, they did not award any sums in favour of the Applicant, because in each case the Applicant had elected for damages, and the Arbitrators were not satisfied that they had adequately particularised those damages, although plainly they were of substantial amounts.

In the meanwhile, and before the outcome of that arbitration by way of its Award, the Applicant brought a substantive claim against ShS's indirect shareholder, International Mineral Resources BV (“IMR”), in the Netherlands. That action was dismissed in June 2014 and the Applicant appealed the decision of the Amsterdam District Court to a higher court on 18 September 2014. The rules in the Netherlands are that an appeal is a complete rehearing, entitling the adducing of new evidence and on 16 October 2014 the Applicant commenced in Holland disclosure proceedings against non-parties in relation to that action. There was disclosure sought against IMR, which was a party, but there were also other parties, including the First, Second and Third Respondents, against whom disclosure was sought for use in the main Dutch proceedings, under Article 843a of the Dutch Code of Civil Procedure.

The Swiss arbitration to which I have referred involved a lengthy evidential hearing between 16 June 2014 and 11 July 2014, at which the Arbitrators heard from 21 witnesses of fact and five expert witnesses, and reviewed what Mr Salisbury has described, in his witness statement on behalf of the Applicant in these proceedings, as “ hundreds of exhibits”, in addition to which the Applicant itself had a very substantial volume of documentation, including that given by way of disclosure. The Award is 369 pages long and I have only been shown a small part of it.

In the Dutch disclosure application, the Applicant argued that the documents which it was seeking were required for the appeal, and also so that it could bring a new substantive claim in the Netherlands against Mr Youness and other respondents to the Dutch disclosure application. The Dutch court dismissed the disclosure application in December 2014, as far as these Respondents are concerned, on the basis of lack of geographical jurisdiction over them, but as far as all the respondents were concerned on the basis that the Applicant was: “ a large number of documents often described in a very broad manner.” It is common ground that those documents overlap with the classes of documents which the Applicant seeks in this application, although there were other documents sought in both courts.

The authorities which I have been asked to consider have been put together in a veritable encyclopaedia of the first, middle and last words on the subject in the parties' bundles, in fact amounting to 38 authorities. I mention them now so that it should be, first of all, a source of endless enjoyment to those wanting to know the places to look for guidance on the topic of pre-action disclosure, though I do not propose to read them all out, nor read them into the judgment, and also so that it can be noted that I have in fact considered all of the relevant authorities. They start with the leading authority on the subject, Black v Sumitomo Corporation [2002] 1 WLR 1562 in which there is a learned and extremely authoritative and helpful description of the whole topic by Rix LJ. Then there are the following other cases: Snowstar Shipping Company Limited v Graig Shipping Plc [2003] EWHC 1367 (Comm); BSW Limited v Balltech Limited [2006] EWHC 822 (Ch); Trouw UK Limited v Mitsui & Company UK Plc [2007] EWHC 863 (Comm); SES Contracting Ltd v UK Coal Plc [2007] EWCA Civ 791, [2007] 5 Costs LR 758; Hutchinson 3G UK Limited v O2 (UK) Limited [2008] EWHC 55 (Comm); Gwelhayl Limited v Midas Construction Limited [2008] 123 Con L.R. 91; Pineway Limited v London Mining Company Limited [2010] EWHC 1143 (Comm); Beckett Bemrose & Hagan Solicitors v Future Mortgages Limited [2010] EWHC 1997 QB; Travelers Insurance Company limited v Countrywide Surveyors Limited [2010] EWHC 2455 (TCC); Alpstream AG v PK Airfinance Sarl [2011] EWHC 1002 (Comm); Smith v Secretary of State for Energy and Climate Change [2014] 1 WLR 2283; and Assetco Plc v Grant Thornton UK LLP [2013] EWHC 1215 (Comm).

I do not propose to repeat the principles, which are now well established, and which consequently assist a court considering the questions of pre-action disclosure, such as I have had to do.

In the Dutch case there were witness statements and pleadings and I have been shown the relevant pleading, in which statements were made as far as these three Respondents are concerned as to whether they had any documents to disclose. As far as the First Respondent is concerned, in paragraph 6.24 of the defence it is stated:

“IMSL … acted exclusively as external consultant of IMR and in that capacity was never involved in ShS' operational activities. To the best of its knowledge, IMSL does not possess documents which could serve as substantiation of the claim alleged by the ECVK.”

With regard to the Second Respondent, in paragraph 6.22 it was stated:

“ In the meantime, Saraf, for many years, is no longer employed by IMSL (or any other company from the group). To the best of his knowledge, he does not have any of the requested documents, except for his former employment contract with Alferon/IMSL, [which was exhibited], the relevance of which however cannot be understood.”

In paragraph 6.21 reference was made to the Third Respondent:

“ Youness, in his personal capacity, to the best of his knowledge, does not have any of the requested documents, except for his employment contract with IMSL [which was again exhibited] the relevance, of which however cannot be understood.”

The individual Respondents made short written statements in the Dutch proceedings. The relevant passage as far as the Second Respondent is concerned is in paragraph 5:

“ To the best of my knowledge, I have none of the materials sought at my disposal. I do possess an employment contract … I do not have at my disposal and nor am I aware of e-mails, correspondence or other written materials from the relevant period that pertain to the alleged conduct of [ShS] and IMR.”

As for the Third Respondent, he said this in paragraph 4 of his witness statement, which was even shorter:

“ To the best of my knowledge, I have (in my personal capacity) none of the material sought at my disposal. I do possess an employment contract … As far as I know, I do not have at my disposal (and nor am I aware of)...