New Media Distribution Company Sezc Ltd v Kagalovsky [2018] EWHC 2742 (Ch)

Case No HC-2015-004673[2018] EWHC 2742 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Venue Royal Courts of Justice, Rolls Building, Fetter LaneDate Tuesday, 16 October 2018
London
EC4A 1NL
Before
THE HONOURABLE MR JUSTICE MARCUS SMITH
Between
KONSTANTIN GRIGORYEVICH KAGALOVSKYDefendant
Ms Barbara Dohman, QC and Mr Ajay Ratan (instructed by GSC Solicitors LLP) for ClaimantMr James Ramsden, QC and Ms Rebecca Drake (instructed by Bird & Bird LLP) for Defendant
Transcript by John Larking Verbatim ReportersSuite 305, Temple Chambers, 3-7 Temple Avenue, London EC4Y 0HPTel: 020 7404 7464
Judgment
[1]I have before me an application by the Claimant in these proceedings (“New Media”) to exclude from the evidence certain paragraphs from the fourth witness statement of the Defendant, Mr Kagalovsky.[2]These paragraphs are paragraphs 48 to 50 of Mr Kagalovsky’s fourth witness statement (“Kagalovsky 4”). I will not read them out. They introduce by way of reference and short quotation two statements that are then exhibited to Kagalovsky 4. Those statements are the statements of:(1) Mr Rievman, who (so I am told) was the junior counsel in certain New York proceedings between Mr Kagalovsky, New Media and others, retained on behalf of Mr Kagalovsky’s side. Mr Rievman (together with a Ms Raquel Alvarenga) opines on certain aspects of New York law; and(2) Professor Butler, who has not been involved in these proceedings or their history at all, who gives a statement regarding Ukrainian law.[3]The points to which these paragraphs Kagalovsky 4 and these statements of Mr Rievman and Professor Butler are said to go are, so it is contended, pleaded in Mr Kagalovsky’s Amended Defence. More particularly: (1) Paragraph 15 states:
“The Defendant was advised that the mechanism by which the Dilution was carried out was lawful according to Ukrainian law, and reasonably believed that the Dilution was so lawful.”
Although Professor Butler was not involved in the history of these proceedings, it is said that Professor Butler’s evidence goes to support the lawfulness of the Dilution under Ukrainian law and inferentially the reasonableness of Mr Kagalovsky’s belief. (2) Paragraph 32 states:
“Further or alternatively, it is not just and proper for the Court to make an order against the Defendant because the relief in question should have been sought in New York.”
It is said that the evidence of Mr Rievman goes to this point.[4]The difficulty with the evidence that Mr Kagalovsky seeks to introduce is as follows. It is clear that a witness statement represents “a written statement signed by a person which contains the evidence which that person would be allowed to give orally”: CPR 32.4(1). One cannot use a witness statement to adduce evidence which that witness could not give orally: JD Wetherspoon plc v. Harris (Practice Note) [2013] EWHC 1088 (Ch) at [37] to [39] (per Etherton C). A witness can only properly address matters in a witness statement which he is competent to address.[5]In this case, Mr Kagalovsky is neither an expert in Ukrainian law, nor yet an expert in New York law. I fully accept that he can give evidence as to what he believed those laws to be. To be clear, I will be permitting and giving weight to the averments in the Amended Defence generally, including paragraphs 15 and 32, because that document has been signed with a statement of truth by Mr Kagalovsky.[6]But paragraphs 48 to 50 of Kagalovsky 4 go beyond such expressions of belief and seek to express views as to what Ukrainian and New York law actually is. Kagalovsky 4 seeks to act as the “gateway” for material (namely the statements of Mr Rievman and Professor Butler) that is, in my judgment, expert opinion.[7]There are two problems with this. First, this is not evidence that Mr Kagalovsky, as a non-expert in Ukrainian and New York law, can himself give as a witness of fact. Kagalovsky 4 is being used as the gateway, by way of which expert evidence can be introduced before this court without the sanction of the court.[8]Mr Ramsden, who appears for Mr Kagalovsky, says that this is not really expert evidence, it is evidence that goes to support statements of fact made by Mr Kagalovsky, namely those pleaded in paragraphs 15 and 32 of the Amended Defence. I do not accept that. I accept that Mr Kagalovsky has, in these paragraphs, made certain averments of fact, and I will treat them with appropriate weight, as I have said. But the evidence of Mr Rievman and Professor Butler is undoubtedly opinion evidence going not to Mr Kagalovsky’s state of mind, but to the state of Ukrainian and New York law. Plainly, this is a matter of expert opinion.[9]That conclusion is underlined by the fact that Professor Butler has nothing to do, so far as I can see, with this case. He is a third party, just as one would expect an expert to be. Mr Rievman’s statement looks on the face of it to be an objective opinion on the state of New York law. I am prepared to treat it as such. The problem, of course, is that Mr Rievman, having been junior counsel in the earlier New York proceedings that I have referred to, could be said to be disqualified as an expert for that reason.[10]But the short point is that these statements are, or purport to be, expert opinion. And this is the second problem with these paragraphs in Kagalovsky 4. It is not right for a factual statement (that is, Kagalovsky 4) to be used to adduce expert, when there are clear procedural rules of this court that no party may call an expert or put in evidence an expert’s report without the court’s permission. It is not right for these provisions in CPR 35 to be circumvented simply by attaching the expert statements to a statement of fact.[11]Indeed, there are a number of problems with this course. One loses, in their entirety, the safeguards that exist regarding the adduction of expert evidence. I have in mind, for example, an expert’s duty to the court, the expert declarations that one normally sees and the fact that experts will be cross-examined. Here, the statements of Professor Butler and Mr Rievman contain none of the requirements and provisions that expert evidence ought to have.[12]Furthermore, it has been impossible to test whether these two gentlemen are actually third party experts. That is something that would be dealt with on an application to adduce expert evidence.[13]Finally, there is no provision for the cross-examination of these experts. Now, that may or may not be necessary in this case - Mr Ramsden suggested not - but it seems to me that this court really cannot proceed on the basis that evidence being adduced in this way cannot be tested. The reason it cannot be tested is because these statements appear as annexes to a witness of fact who himself, even if he were medically competent to give evidence (which Mr Kagalovsky is not), could not sensibly be cross-examined on this material.[14]Accordingly, I accede to the application made by New Media and I exclude from the evidence these paragraphs in Kagalovsky 4. I should say that I do so fully conscious of the fact that I am keen to give Mr Kagalovsky's legal team every latitude in terms of the evidence from Mr Kagalovsky that they can adduce because, through no fault of his own, Mr Kagalovsky is unable to give evidence on his own behalf.[15]But it seems to me absolutely clear that the evidence I have just excluded is not in fact evidence that Mr Kagalovsky could properly give even if he were capable of giving evidence in this court.

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