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||Neutral Citation Number:  EWHC 2527 (Ch)
||Case No: HC09C02105
IN THE HIGH COURT OF JUSTICE
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
MR JUSTICE PETER SMITH
|| (1) Cadogan Petroleum Plc
(2) Cadogan Petroleum Holdings Ltd
(3) LLC Astroinvest-Ukraine
(4) US Enco Ukraine
||- and -
||(1) Mark Tolley
(2) Marksman International Ltd
(3) Natural Resource Ltd
(4) Vasyl Vivcharyk
(5) VPV Oil Investments LLC
(6) Smith Eurasia Ltd
(7) Vladimir Shlimak
(8) SonicGauge Inc
(9) Global Process Systems LLC
(10) Global Process Systems Inc
(11) Clint Elgar
(12) Anthony Wright
(13) Wayne Goranson
(14) AOE Energy Inc
(15) Philip March
Anthony Trace QC, Richard Morgan & Thomas Munby (instructed by Dewey & LeBoeuf) for the Claimants
Andrew Thomas (instructed by Needleman Treon) for the First, Second and Third Defendants
Hearing dates: 9th October 2009
HTML VERSION OF JUDGMENT
Crown Copyright ©
Peter Smith J :
- This judgment arises out of a decision I made on a Case Management issue on Friday 9th October 2009 when I heard a number of applications by the parties to this action. The action is complicated and involves allegations of breach of contract, breach of trust and conspiracy against various of the Defendants. There have been a large number of hearings already in this action.
- The present application arises out of the Claimants' application to use the transcript of a cross examination of the First Defendant Mr Tolley on 20th July 2009 for the purpose of the trial.
- On 31st July 2009 I gave permission to use a 10 page extract from the transcript of Mr Tolley's cross examination which it was necessary for the Claimants' to refer to in the Amended Particulars of Claim in order to join the Fifteenth Defendant Mr March. Mr Tolley did not oppose the application for his cross examination.
- The present application is to use the remainder of the transcript for all purposes at trial but to retain the current prohibition on use of the transcript for any criminal or contempt proceedings except by order of the Court.
- Mr Tolley opposed that application.
- At the end of the submissions I ruled in favour of the Claimants and this judgment sets out the reasons for that decision.
EVIDENCE IN SUPPORT
- The evidence in support of the Claimants' application was the seventh witness statement of David Waldron dated 6th October 2009. He is a partner in the Claimants' firm of solicitors and has conduct of the matter on behalf of the Claimants together with his colleague Peter Sharp.
- As I said above Mr Tolley was cross examined for a day on 20th July 2009. The purpose of that cross examination was to enable the Claimants to cross examine Mr Tolley as to assets and various statements he made as to the whereabouts and existence of assets, in order to evaluate whether there were any other assets that they could freeze in the proceedings whether against Mr Tolley or any other persons. The original order dated 13th July 2009 ordering cross examination was subject to an undertaking given by the Claimants that they would not without permission of the Court use the answers given in cross examination for the purpose of any criminal proceedings, committal proceedings or for the trial of the action.
- The Claimants' justification was set out in paragraphs 10-12 of Mr Waldron's witness statement. He observed that Mr Tolley gave evidence to the effect that he had fabricated numerous documents or created documents which did not reflect the reality of the transactions to which they related. Mr Waldron set out examples in paragraph 10 of his witness statement. This was not disputed by Mr Tolley.
- The Claimants wish to use this evidence at trial because it relates they say to the complex history of business dealings and movements of money between Mr Tolley and his companies on the one part and in particular the Thirteenth Defendant (Mr Goranson) and his companies on the other part. This also extends to proprietary claims as set out in the Amended Particulars of Claim in respect of funds received from Mr Tolley's company Marksman International Ltd (the Second Defendant) by Mr Goranson's company AOE Energy Inc (the Fourteenth Defendant) in their accounts held in the Cayman Islands. Second the Claimants' contend that the evidence is significant to credit as against Mr Tolley.
- The Claimants have provided transcripts of the evidence to the other parties in the action at their request. The cross examination did not take place in private and there is nothing wrong in what they did. The other parties are not bound by the restriction in the undertaking but I will propose imposing that restriction on them as a result of this judgment. The hearing took place in their absence and they will have the usual liberty to apply to seek to vary or discharge that restriction. It would however be pointless restricting the use as against the Claimants if any other party is not so bound. Mr Thomas who appeared before me for Mr Tolley relied principally on two authorities. The first of those was the decision of the Court of Appeal in Yukong Line Ltd Korea v Rendsburg Investments Corporation Liberia (17th October 1996). The second was the Dadourian case (see below).
- In the course of that judgment Phillips LJ (as he then was) after rejecting the first submission that cross examination of a Mareva Defendant on a discovery affidavit was necessarily an abuse of the process of the Court then went on to consider the exercise of the discretion. On that point he said the following :-
"Mr Allen's most forceful submission was that it was wrong in principle to order cross examination on a Mareva discovery affidavit in respect of matters which had relevance to the substantive issue in the action.
He pointed out that the Defendant has an option whether or not to give evidence and submit to cross examination at the trial. Before the Defendant takes that decision the plaintiff has to undertake the burden of adducing evidence to make out his case. It was, submitted Mr Allen, manifestly unjust that a plaintiff should be able to compel a Defendant to submit to cross examination which might provide the plaintiff with the material in which to advance his case on merits. It was doubly unjust that this should occur before the close of pleadings and discovery. Here, with more justification, Mr Allen relied against that upon Scott J's reference to the Star Chamber inquisition.
In my judgment it is undesirable that a plaintiff should be able in Mareva proceedings to extract, by cross examination under order of the Court, material upon which to build his case for the substantive hearing. I envisage circumstances where if this were the price that had to be paid for an effective Mareva injunction it would nonetheless be a price worth paying in the interests of justice. But the Court must be astute to guard against abuse of the Mareva process by plaintiffs who are using it in an attempt to discover facts that will assist them in the action. The fact that cross examination on Mareva discovery affidavit will relate to matters which are relevant to the substantive issues is a matter to which the Judge should have regard when considering whether to permit this process."
- He then referred to the provisions of RSC Order 29 rule 1A and after confessing that he was unaware of the rule and that the note in the Supreme Court Practice gave no clue as to its practice, indicated (quite clearly) that it was designed to protect the party cross examined. In fact the rule imposed restrictions on the use of the material in virtually the same form as that imposed by the Claimants' undertakings in this action.
- He then went on to consider general discretion and said this:-
"In my judgment, in this case there has not been any error of principle demonstrated in the orders made. I do not believe that the cross examination that will take place is likely to bear critically on the substantive issues, and Mr Allen has not suggested, nor could he properly have done, that Yukon's application to cross examine was motivated by a desire to advance their substantive case rather than to render the Mareva relief effective. Having regard to the history which I have summarised at some length at the outset of this judgment it cannot be suggested that there was not material upon which Clarke J could properly form the view in his discretion that it was just and convenient to order cross examination. "
- It will be seen that that judgment relates to the decision to order cross examination. That order for cross examination has already taken place in this case and Mr Tolley not only did not challenge the jurisdiction to order cross examination and the order for cross examination but also submitted to cross examination for one day. I did not find this decision particularly helpful in respect of the use of transcripts of a cross examination that had already taken place. In any event it is based partly on the old RSC and is therefore of little assistance when considering the issue under the CPR.
- The form of the order in this case followed an order I made in the Dadourian case see Dadourian Group International Inc & Ors v Simms& Ors (No 2)  1 WLR 2967 at paragraphs 6-7.
- In fact when the action in the Dadourian case came on for trial before Warren J he released the Claimants from the undertakings they gave and the evidence given by the Defendants in the cross examination was used at trial and for subsequent committal proceedings. The Defendants did not ultimately challenge the decision for the material to be used at trial but they did challenge the use of the material for committal purposes.
- In dismissing their appeal Arden LJ said there was no principle that an undertaking restricting the use of the cross examination material could only be changed on exceptional circumstances. The true test was whether it was just and convenient for the information to be so used either for the purpose of enforcing or policing the freezing order or if it was convenient for the information to be used for the purpose of establishing contempt or as Sir Andrew Morritt C observed where it was just in all circumstances of the case.
- It must be appreciated that orders for cross examination on affidavits will be rarely made. However those were circumstances where, as the Chancellor pointed out in his judgment there was nothing exceptional in the undertakings that were given to me which would inhibit the Court releasing the Claimants from the undertakings. The position is entirely the same here.
- Such a procedure is more likely to occur before the Courts now under the Civil Procedure Rules than occurred prior to the implementation of those rules. One must be aware of the overriding objective in particular and ensure that all proceedings are disposed of in a just and expeditious manner for the benefit of all litigants. As the Dadourian case shows (in the Chancellor's judgment) the discretionary powers of the Court of a general nature are exercisable so as to ensure that when it is appropriate in any given case for cross examination material to be used at trial it should be done. This reflects an earlier decision of the Court of Appeal in Phillips v Symes  EWCA Civ 1769 against a judgment I made. It affirmed the judgment but reorganised the hearing process so as to enable cross examination of Mr Symes to take place in relation to assets and issues separate from proceedings for committal. Nevertheless it showed that the Court of Appeal approved in that case the cross examination of a person before trial.
FACTORS IN THE PRESENT CASE
- First in my view the cross examination is relevant partially to establishing any potential claim to trace assets. The Claimants seek tracing orders in the present case and that material is plainly relevant. Second the Claimants will in effect be able to cross examine Mr Tolley in this case and ask the same questions. Although it is theoretically possible Mr Tolley will not give evidence the possibility of that is remote in my view. I do not see how he can expect to defend the case without giving evidence given the nature of the allegations that are made against him and the material which has already been deployed by the Claimants.
- Further, assuming that the Claimants can put the same questions in cross examination, it would be quite wrong for any inconsistency in the answers to be withheld from the trial Judge. An essential tool in determining the truth of matters at trial is cross examination of witnesses with all available material. Inconsistent answers given on oath are clearly relevant material which a Judge would need in order to establish the credibility of a witness at trial.
- The other side of the coin of course is that Mr Tolley will be able to give precisely the same answers in his evidence in chief so that the cross examination material will have no relevance.
- I accept that the Claimants should not be able to deploy this material in the unlikely event that Mr Tolley chooses not to serve any evidence. In that regard only it seems to me it would not be appropriate to allow this material to be used at trial. I will therefore make an order that the Claimants be entitled to deploy the evidence given in cross examination if Mr Tolley elects to serve a witness statement in this action. If he does not serve any evidence then, as I have said above I do not see how realistically he can defend the case. If he elects to take a risk like that however I agree it would not be appropriate for the Claimants to be able to put in his answers as part of their primary case.
- For all of those reasons I accept the Claimants' application in substance but restrict the use being dependent on whether or not Mr Tolley serves evidence.
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