North Shore Ventures Ltd v Anstead Holdings Inc & Ors [2011] EWHC 910 (Ch)

[2011] EWHC 910 (Ch)Case No HC08CO2375
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 13/04/2011
Before
THE HON MR JUSTICE FLOYD
Between
NORTH SHORE VENTURES LIMITEDClaimant(1) ANSTEAD HOLDINGS, INCDefendants(2) RUSLAN FOMICHEVDefendant(3) VASILY PEGANOVDefendant
John Machell (instructed by Cooke, Young & Keidan LLP) for Second and Third DefendantsFrancis Tregear QC (instructed by Enyo Law) for ClaimantHearing Hearing date: 6 th April 2011
Judgment
[1]I have before me an application notice dated 15th March 2011 issued on behalf of the second and third defendants, Mr Fomichev and Mr Peganov. As ultimately put forward in the skeleton argument served in support, Messrs Fomichev and Peganov seek the following relief: i) a declaration that the cross-examination hearings on 20 July 2010, 16 December 2010 and 22 February 2011 were in private and that therefore no person has a right to a transcript under CPR 39A PD 6.3 without the permission of the Court. ii) An order that the Claimant shall not use or disclose to any third party the transcripts or the information contained therein until further order of the Court.[2]Following a trial before Newey J in March and April 2010, the claimant obtained judgment against the second and third defendants for a sum of approximately US$50 million. In an attempt to put itself in a position to enforce that order, the claimant has obtained orders for the cross-examination of the second and third defendants on their assets. There have been three hearings at which there has been cross examination. The transcripts of these hearings are those referred to in the application notice.[3]Newey J’s judgment was appealed to the Court of Appeal. By an order dated 2nd August 2010, the Court of Appeal granted a stay of execution pending appeal. However, in consequence of an order which I made on 7 October 2010, the cross-examination of Mr Fomichev and Mr Peganov was allowed to proceed. That was because the stay of execution did not by its terms prevent steps preparatory to execution, such as the cross-examination ordered by Newey J.[4]The appeal was heard between 8 and 10 February 2011. In consequence of the Court of Appeal's order, the judgment in favour of the claimant was reduced by about $20 million. Over $30 million remains due. The Court of Appeal ordered a stay of execution of the judgement until the dismissal of an application by the second and third defendants to the Supreme Court for permission to appeal, or the determination of the appeal by the Supreme Court.[5]At the third of the cross-examination hearings on 22 February 2011, the second and third defendants applied for an adjournment. The grounds of the application were that, on 21 February 2011, Mr Peganov was interrogated by the Investigations Committee of the Russian Federation in connection with criminal investigations into Mr Berezovsky, who is the principal behind the claimant company. According to second hand evidence put in by Mr Cooke, his solicitor, Mr Peganov was informed during his interrogation that he could be the subject of an investigation into alleged criminal conspiracy and racketeering by Mr Berezovsky. He was reportedly told that both he and Mr Fomichev may be complicit with Mr Berezovsky by reference to the monies loaned by the claimant to the first defendant and to the origins of the money used to make that loan. He could be subject to prosecution if he was found to have assisted Mr Berezovsky to profit from criminal activity. Mr Fomichev and Mr Peganov have obtained a legal opinion from a firm of Russian lawyers. The opinion states: "We think that disclosure by Mr Fomichev and Peganov in a civil proceedings in the British Court of information which may be interpreted by the investigative authorities as one facilitating an opportunity for Mr Berezovsky to receive funds obtained in a criminal way, as well as transfer of assets to the claimant may be qualified as aiding of Mr Fomichev and Peganov in the crime of Mr Berezovsky entailing the criminal proceedings against Mr Fomichev and Mr Peganov and possible sentence under articles of the Criminal Code of the Russian Federation providing for serious periods of imprisonment.”[6]A subsequent opinion responding to a series of questions asked by Mr Cooke explained that the investigator has the right to seek certain restraint measures in the course of his investigation including measures which would be recognised by an English lawyers as a remand in custody or conditional bail.[7]The application made to Kitchin J was to the effect that the cross-examination on that day be adjourned sine die in view of the risks to the second and third defendants revealed by these allegations. Kitchin J decided to proceed with the cross-examination on 22 February and refused the adjournment. However, in order to enable the second and third defendants to formulate a proper application supported by evidence, he granted an order restraining the parties from making use of the transcript of the cross-examination on that date for 21 days. If the application was made during that period the restraint would continue until further order of the court.[8]The hearing before Kitchin J was not listed as “in private”. The solicitor appearing for Messrs Peganov and Fomichev did indicate that she was going to ask the judge to sit in private, but Kitchin J did not make any order to that effect. He simply made the order in relation to the use of the transcript to which I have already referred. The other cross-examination hearings were not listed as “in private” either. At the hearing on 16th December 2010 the second and third defendants applied for an order pursuant to CPR 31.22(2) in relation to disclosure documents which were to be read to or by the court at that hearing, which was to be in public. The premise of that application was that the hearing was to be in public.[9]There is no suggestion that the events in Russia give rise to any privilege against self-incrimination. These matters are relied on only as background to explain the second and third defendant’s concern to impose the maximum permissible level of restriction on the use of the transcripts.

The relevant Rules and Practice Direction

[10]CPR Part 39.2 provides, so far as relevant, as follows(1) The general rule is that a hearing is to be in public.(2) The requirement for a hearing to be in public does not require the court to make special arrangements for accommodating members of the public.(3) A hearing, or any part of it, may be in private if – (c) it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality;(4) The court may order that the identity of any party or witness must not be disclosed if it considers non-disclosure necessary in order to protect the interests of that party or witness. (c) it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality;[11]Practice Direction 39A to CPR Part 39 provides: 1.2 The general rule is that a hearing is to be in public. 1.3 Rule 39.2(3) sets out the type of proceedings which may be dealt with in private. 1.4 The decision as to whether to hold a hearing in public or in private must be made by the judge conducting the hearing having regard to any representations which may have been made to him. 1.5 The hearings set out below shall in the first instance be listed by the court as hearings in private under rule 39.2(3)(c), namely:(1) a claim by a mortgagee against one or more individuals for an order for possession of land,(2) a claim by a landlord against one or more tenants or former tenants for the repossession of a dwelling house based on the non-payment of rent,(3) an application to suspend a warrant of execution or a warrant of possession or to stay execution where the court is being invited to consider the ability of a party to make payments to another party,(4) a redetermination under rule 14.13 or an application to vary or suspend the payment of a judgment debt by instalments,(5) an application for a charging order (including an application to enforce a charging order), third party debt order, attachment of earnings order, administration order, or the appointment of a receiver,(6) an order to attend court for questioning,(7) the determination of the liability of an LSC funded client under regulations 9 and 10 of the Community Legal Service (Costs) Regulations 2000, or of an assisted person’s liability for costs under regulation 127 of the Civil Legal Aid (General) Regulations 1989,(8) an application for security for costs to be provided by a claimant who is a company or a limited liability partnership in the circumstances set out in rule 25.13(2)(c),(9) proceedings brought under the Consumer Credit Act 1974, the Inheritance (Provision for Family and Dependants) Act 1975 or the Protection from Harassment Act 1997,(10) an application by a trustee or personal representative for directions as to bringing or defending legal proceedings. 1.7A Attention is drawn to paragraph 24.5(8) of Practice Direction 52, which provides that an appeal to a county court against certain decisions under the Representation of the People Act 1983 is to be heard in private unless the court orders otherwise. Attention is also drawn to paragraph 24.5(9) of that practice direction, which provides that an appeal to the Court of Appeal against such a decision of a county court may be heard in private if the Court of Appeal so orders. 1.8 Nothing in this practice direction prevents a judge ordering that a hearing taking place in public shall continue in private, or vice-versa. 1.9 If the court or judge’s room in which the proceedings are taking place has a sign on the door indicating that the proceedings are private, members of the public who are not parties to the proceedings will not be admitted unless the court permits. 1.10 Where there is no such sign on the door of the court or judge’s room, members of the public will be admitted where practicable. The judge may, if he thinks it appropriate, adjourn the proceedings to a larger room or court. 1.11 When a hearing takes place in public, members of the public may obtain a transcript of any judgment given or a copy of any order made, subject to payment of the appropriate fee. 1.12 When a judgment is given or an order is made in private, if any member of the public who is not a party to the proceedings seeks a transcript of the judgment or a copy of the order, he must seek the leave of the judge who gave the judgment or made the order. 1.13 A judgment or order given or made in private, when drawn up, must have clearly marked in the title: ‘Before [title and name of judge] sitting in Private’ [bold emphasis above supplied] (1) a claim by a mortgagee against one or more individuals for an order for possession of land, (2) a claim by a landlord against one or more tenants or former tenants for the repossession of a dwelling house based on the non-payment of rent, (3) an application to suspend a warrant of execution or a warrant of possession or to stay execution where the court is being invited to consider the ability of a party to make payments to another party, (4) a redetermination under rule 14.13 or an application to vary or suspend the payment of a judgment debt by instalments, (5) an application for a charging order (including an application to enforce a charging order), third party debt order, attachment of earnings order, administration order, or the appointment of a receiver, (6) an order to attend court for questioning, (7) the determination of the liability of an LSC funded client under regulations 9 and 10 of the Community Legal Service (Costs) Regulations 2000, or of an assisted person’s liability for costs under regulation 127 of the Civil Legal Aid (General) Regulations 1989, (8) an application for security for costs to be provided by a claimant who is a company or a limited liability partnership in the circumstances set out in rule 25.13(2)(c), (9) proceedings brought under the Consumer Credit Act 1974, the Inheritance (Provision for Family and Dependants) Act 1975 or the Protection from Harassment Act 1997, (10) an application by a trustee or personal representative for directions as to bringing or defending legal proceedings.

[bold emphasis above supplied]

[12]Paragraphs 6.3 and 6.4 of the same Practice Direction deal with transcripts of hearings: 6.3 Any party or person may require a transcript or transcripts of the recording of any hearing to be supplied to him, upon payment of the charges authorised by any scheme in force for the making of the recording or the transcript. 6.4 Where the person requiring the transcript or transcripts is not a party to the proceedings and the hearing or any part of it was held in private under CPR rule 39.2, paragraph 6.3 does not apply unless the court so orders.[13]Finally CPR Part 34.12 provides:
“(1) Where the court orders a party to be examined about his or any other assets for the purpose of any hearing except the trial, the deposition may be used only for the purpose of the proceedings in which the order was made. (2) However, it may be used for some other purpose – (a) by the party who was examined; (b) if the party who was examined agrees; or (c) if the court gives permission.” (a) by the party who was examined; (b) if the party who was examined agrees; or (c) if the court gives permission.”

The declaration

[14]The first part of the application, which seeks a declaration about the proceedings being in private, does not directly affect the claimant. The only relevant incident of a finding of privacy would be that third parties would not be entitled to obtain copies of the transcript see paragraph 6.4 of the Practice Direction. The claimants are plainly entitled to copies of the transcript: see paragraph 6.3 of the Practice Direction. Nevertheless, Mr Tregear QC made submissions to assist me on the question.[15]Mr Machell, who appeared on behalf of Messrs Peganov and Fomichev, submits that the hearings were plainly ones within CPR 39.2(3)(c), involving confidential financial matters. They were hearings, therefore, which “may be in private” despite the general rule that hearings be in public contained in CPR 39.2(1). Furthermore the hearings fell within paragraph 1.5(5) of Practice Direction 39A because, they were held pursuant to orders to attend court for questioning. I accept those submissions.[16]Mr Machell went on to submit that the rules had therefore required the hearings to be “listed by the court in the first instance as hearings in private”. That gave the hearings a private character. He went on to submit that the fact that the hearings were not in fact listed in private, or that members of the public might have been admitted, or that the parties may have treated the hearing as being in public, did not deprive the hearings of that private character. Accordingly the incidents of that private character remained, and transcripts of the hearing could only be obtained by a non-party with the permission of the court.[17]Mr Tregear submits that paragraph 1.5 of the Practice Direction is administrative in nature. Even where a case falls within paragraph 1.5 and is listed as “in private”, the judge was required by paragraph 1.4 to decide whether the hearing should continue in private or become public. If the judge did not do this the hearing became public, pursuant to the general rule in CPR 39.1 repeated in paragraph 1.2 of the Practice Direction. He contrasted the language of paragraph 1.5 with that of 1.7A and CPR 52PD 24.5(8) which expressly require the Court to hold the hearing in public unless it orders otherwise. Language of the present kind did not, he submitted, have the effect of making the hearing private once it commenced.[18]In Department of Economics, Policy and Development of the City of Moscow and another v Bankers Trust Co and another [2004] EWCA Civ 314; [2005] QB 207 (“Moscow”), an arbitration award had been challenged in the High Court under section 68 of the Arbitration Act 1996. The arbitration proceedings and award having been private, the judge determined that his judgment should be private as well. The case fell within CPR 62.10. That rule disapplies CPR 39.2, the rule with which I am concerned, and provides that, subject to exceptions, all arbitration claims are to be heard in private. The court nevertheless has a discretion, by CPR 62.10(1), to allow an arbitration claim to be heard in public. The case was concerned with the principles on which the court should decide whether, notwithstanding that the hearing was in private, to make public its judgment or a summary of it. The judgment nevertheless contains some discussion as to the general rules which apply in cases other than arbitration, in particular CPR 39.2. At [22], after referring to the Practice Direction to CPR Part 39, and in particular to paragraph 1.5, Mance LJ says this: "The common theme is that such claims may involve confidential financial information. The reference to listing shows that, in these cases, the onus remains on a party seeking to maintain privacy to justify it in the light of the general rule set out in rule 39.2(1).”[19]Later, at [42] he says this:
"In his carefully formulated judgment in this case, Cooke J ... acknowledged the distinction which exists between the hearing of an arbitration claim and the order and judgment following it. I differ from him perhaps only in emphasis on two aspects. First, the tenor of his judgment might, I think, be read as giving greater and more generalised weight to the starting point established by rule 62.10 than I would. It is, I think, better to describe rule 62.10 and indeed rule 39.2 as establishing starting points, rather than as presumptions. If neither the parties nor the judge of his or her own motion raises any question about the appropriateness of a private hearing, where that is the starting position, then the hearing will remain private. But, once a question of publication is raised the judge’s task is to weigh all relevant circumstances; and, even where it is not raised by the parties, he or she may if appropriate raise it of his own motion."
[20]These observations, insofar as they relate to CPR 39.2 and its Practice Direction, are not necessary for the decision with which the Court of Appeal was concerned. They are made in the context of the balancing exercise with which the Court of Appeal was concerned. When referring to CPR 39.2 as a starting point, Mance LJ was referring to its use as a starting point in such a balancing exercise. He was not considering a case where the proceedings were not in fact listed as in private under paragraph 1.5 of the Practice Direction.[21]The decision to list cases in private is made by a court listing officer subject to the supervision of the judge. I am unable to regard listing, therefore, as a wholly administrative function. When a case is listed in private, and the judge begins to hear the case in private, he thereby endorses the decision of the listing officer to hear the case in private. Because the judge may raise the question of privacy himself, he should keep under review whether the proceedings should be in private. However, I cannot accept that if the proceedings are listed in private in the first instance pursuant to PD 1.5, it is necessary for the court formally to adjudicate in each individual case, pursuant to PD 1.4, that the hearing should continue in private. The Practice Direction dispenses with the need for this to occur.[22]I think the following principles can be derived from the Rule and Practice Direction and from the dicta in Moscow: i) Once a case involving confidential information falls within the list of matters in paragraph 1.5 of the Practice Direction, the court is required to list it in private: PD 1.5; ii) The effect of so listing the case is in practice that the public will not be admitted in the first instance: PD 1.9. A sign will be placed on the door of the court to indicate that the public are not to be admitted. iii) If proceedings are so listed, and no steps are taken by any party or the judge to alter the position, the proceedings will continue in private: Moscow [22]. The judge thereby adopts the decision of the listing officer to list the proceedings in private. iv) If at any stage the question of whether the proceedings should be in private is raised, it will be for the party who seeks privacy to justify it: Moscow [22]. v) It follows that, where the point arises, there is no presumption that the hearing should continue in private simply because the case falls within 39(2) and has been listed in private. The judge must consider all the circumstances: Moscow [42].[23]Those principles are, however, not sufficient to deal with the present application for a declaration that the hearings were in private. Whether a hearing is in private is a question of fact. Moreover, particularly since the advent of the CPR, the question is a binary question. Either the proceedings were in private or they were in public. I therefore reject Mr Machell’s submission that the effect of paragraph 1.5 of the Practice Direction is to give all the listed proceedings a “private character”. What gives proceedings a private character is the fact that they are listed as occurring in private.[24]The hearings in question were not listed as in private, the public were not prevented from having access, and the parties themselves seem to have treated the hearings as being public.[25]If the case advanced on this application by the second and third defendants is correct, when any case falling within paragraph 1.5 of the Practice Direction is heard, the proceedings are deemed to be in private even where the public would not be on notice of that fact. That submission has quite far reaching implications. For example one of the categories of case which should be listed as “in private” is an application for security for costs against a claimant company on the ground that the company may prove unable to pay the defendants’ costs if ordered to pay them. Such applications are frequently heard in the applications list in the Chancery Division, but it is not my experience that they are ever listed as “in private”. If paragraph 1.5 is to be construed as making such proceedings private even where they are not listed as such, members of the public should be excluded and transcripts of the hearing and judgment should not be made available to non-parties. Moreover, if the second and third defendants are right, members of the public would have no means of knowing, unless they were both aware of the subject matter of the proceedings and dedicated readers of the Practice Directions, that the proceedings they are observing are private. These are undesirable consequences.[26]In my judgment, paragraph 1.5 of the Practice Direction does not deem a hearing to be in private even when it is not so listed. The correct view is that where proceedings are not listed as being in private, contrary to the terms of the Practice Direction, the general rule applies and the proceedings are in public. The public are entitled to assume, when proceedings are not listed as private, and when no sign appears on the court door to the effect that they are not to be admitted, that the proceedings are open to the public. It is the duty of parties and their advisors, if there are no such indications and they wish proceedings to be private, to make an application for the proceedings to be conducted in private.[27]Mr Machell submitted that this approach meant that an error in listing could result in proceedings being public when the rule required them to be in private in the first instance. That is correct. However the difficulties inherent in proceedings being in private when there is no indication to that effect in the list or on the court door, and the parties and the judge are working on the basis that the proceedings are in public are in my view much greater.[28]It follows that I am not prepared to grant the declaration sought by the first part of the application.

Restraint on the claimant’s use of the transcripts

[29]The second part of the application is founded on CPR Part 34.12. This rule provides that the product of an examination as to assets cannot be used for any purpose other than the purpose of the proceedings in which the order was made. There is no dispute between the parties as to this. Moreover Mr Machell recognises that collateral use by the claimant of the transcript could amount to a contempt of court.[30]The injunction sought by the second part of the application seeks to impose a greater restraint on the claimant as to its use of the transcripts than that imposed by CPR 34.12. It prevents any use or disclosure of the transcripts, even for the purposes of the proceedings. Mr Machell accepted in his skeleton argument that the claimant could not be prevented from using the transcript at a re-listed cross examination. He also conceded that there would have to be other exceptions, as the second and third defendants have themselves relied on the transcripts for the purposes on an ongoing permission hearing in the Court of Appeal in relation to disclosure of assets, and the claimant must be able to respond. Equally, he recognised that the claimants are entitled to rely on the transcripts for the purposes of a charging order application which they are making in respect of a property in the UK.[31]I think what all this shows is that the right restriction on the use to which the transcripts can be put is that contained in CPR 34.12: use for the purposes of the action. There is no reason why the claimant should be required to seek a series of exceptions to a blanket prohibition on use. No purpose would in my view be served by granting the relief sought.[32]There remains however an anomaly which needs to be addressed. If the cross-examination hearings were in public, a copy of the transcript is available as of right to any member of the public. Yet CPR 34.12 provides quite generally that the use to which such transcripts may be put is the purposes of the action only. There is no provision corresponding to CPR 31.22 which discharges the corresponding obligation in relation to disclosure documents when a document is read to or by the court, or referred to, at a hearing in public. The net effect is that although a non-party may obtain a copy of the transcript of an examination as to assets conducted in public, it may only be used by the third party for the purposes of proceedings to which, by definition, he is not a party.[33]The anomaly is not a consequence of my construction of the Practice Direction. Proceedings within paragraph 1.5(5) of the Practice Direction may be conducted in public as a result of a request by a party or on the initiative of the judge. The transcript is then only protected by the restriction on its use provided for by CPR 34.12.[34]It is, however, difficult to see what a non-party could do with a transcript within the use permitted by CPR 34.12. One possibility is an application to be joined as a party, but I think it unlikely that there would be any such application by a non-party in this case. In the present case I think it would be right, as Mr Machell suggested, for me to direct that the file be marked with an indication that copies of the transcript can only be obtained for use for the purposes of the present proceedings. Notice of that direction can be given to the court transcription service. That will enable the matter to be referred to a judge in the event of a request which is not clearly for a permitted purpose.[35]However, with that exception, I am not prepared to make either of the orders sought on the application.