Vitaly Orlov v. Magnus Leonard Roth and Another

HCMP 1331/2017
HCMP 2753/2017
[2019] HKCFI 2120

HCMP 1331/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1331 OF 2017

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and

HCMP 2753/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2753 OF 2017

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(HEARD TOGETHER)

Before: Hon Coleman J in Court

Dates of Hearing: 3-5, 8-12, 15-16 July and 19 August 2019

Date of Judgment: 28 August 2019

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J U D G M E N T

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A. Introduction

1.Mr Vitaly Orlov (“Orlov”) and Mr Magnus Roth (“Roth”) are the petitioner and 1^st respondent, and vice versa respectively, in these two sets of proceedings, ordered to be heard together. The proceedings relate to the 2^nd respondent company (“TTC”), of which Orlov and Roth are and always have been equal 50% shareholders, and where each accuses the other of unfairly prejudicial conduct.

2.What was once a successful and harmonious business relationship has fractured to such an extent that it has given rise to a raft of allegations and counter allegations, where each of the protagonists sees the history and continuing circumstances through his own particular and very different lens. There is even a significant dispute as to the extent to which I must determine the matters in dispute.

3.But, notwithstanding the apparent extent of the disputes between the parties, there is in fact some common ground.

4.It is common ground that by the time TTC was incorporated in 2006, Orlov and Roth had been in business together for several years. That was a fisheries business, and TTC was incorporated as a holding company under which to bring certain aspects of that business.

5.It is common ground that Orlov and Roth would operate TTC in accordance with a mutual understanding and/or common assumption between them (“MU”). There is a slight difference between them as to the precise terms of the MU, but that probably need not matter when both accept the MU created a situation in which, if it were to be breached by the conduct of one party unfairly prejudicial to the other, that other party might apply for relief.

6.It is common ground that Orlov and Roth have fallen out, that there has been a fundamental breakdown in the trust which each previously reposed in the other, that the circumstances prevent the continuation of TTC under the MU, and that the appropriate remedy to be sought is a buyout order. In their respective petitions brought under section 724 of the Companies Ordinance Cap 602 (“Ordinance”), Orlov and Roth each ask for that buyout order.

7.They even agree that it is Roth who should buy out Orlov.

8.Hence, where there is a 50:50 company set up under the MU, where the breakdown of the relationship is acknowledged by both parties, where both seek a corporate divorce in the form of a buyout order, and where both agree that Roth should buy out Orlov, it might be wondered why this matter was set down for a 10-day trial with 28 lever arch files comprising 220 pages of pleadings, 495 pages of witness statements and affidavits, 4,800 pages of exhibits and other documents, as well as hundreds of pages of written submissions reinforced with six lever arch files of copies of legal authorities.

9.As an aside, and where it appeared that all representatives and the Luddite Judge were using hard copy paper hearing bundles, it may also be wondered whether the consequential environmental damage was in any way necessary or appropriate.

10.Though in addressing those queries it might be said that there is something of a long story, Mr William Wong SC, appearing for Orlov and leading Mr Justin Lam, says that it might also be that there is a short answer. Mr Victor Joffe QC (E&W), appearing for Roth and leading Mr Robin McLeish, says otherwise.

11.But before dealing with whether or not there is a short answer, it is helpful to deal with some further factual matters. I shall do so largely in chronological order. Though I shall occasionally do otherwise for convenience or clarity, I shall not lose sight of the chronological connections. Some of the facts are not in dispute, or are evident from the documents, and some are the result of inferences or findings that I have made (in addition to those findings I deal with elsewhere in this judgment).

B. Factual context

12.Orlov is a Russian national. Roth is a Swedish national. They began their jointly owned fisheries business in 1997, but had previously had the opportunity to work together under other separate employment. The original business was known as the Ocean Trawlers SA business. Over time, the enterprise developed into a significant fishing group with operations across Russia and Europe.

13.From the beginning it seems to have been at least implicit in their dealings, and clearly understood between them, that each would always inform the other of anything that would affect the value of a company they own together, and that decisions would always be agreed at board level prior to implementation. All important decisions were made together.

14.That is not to say that Orlov and Roth always immediately agreed. As is to be expected in business, they sometimes did not share the same views on some issues. But in those situations, they discussed the differences until ultimately reaching a joint decision with which they were both content. If something important was not jointly decided, it simply did not happen.

15.On 12 December 2006, TTC was incorporated in Hong Kong as the holding company for the UK, US and Russian operations. Eventually, TTC came to own the Ocean Trawlers Group and all fishing companies in Russia ultimately owned by Orlov and Roth.

16.TTC has a share capital of US$240,000 divided into 240,000 shares with a par value of one US dollar each. Each of Orlov and Roth is the registered owner of 120,000 shares of TTC. Both were and are directors.

17.As already indicated, it is common ground that TTC was set up and operated in accordance with the MU between Orlov and Roth. Though slightly differently worded in the pleadings, it appears to be common ground that the terms of the MU at least included that: (a) both would contribute to the capital requirements, share expenses and share profits of TTC on an equal 50:50 basis; (b) both would act in accordance with the relevant requirements of the Companies Ordinance, the Articles of Association of TTC, and their legal and equitable duties owed as directors; (c) both would be kept informed, and keep each other informed, of matters required for participation in the management of TTC; and (d) all decisions on matters affecting or potentially affecting the value of TTC and other companies in the business in which they were jointly engaged would be taken by mutual agreement.

18.The slight differences (alleged by Roth) as to the precise terms of the MU are as follows: (1) Orlov’s formulation includes an express provision that both he and Roth would have access to information and documents belonging to TTC required for the proper management of TTC; (2) Orlov’s formulation does not extend so as to encompass the management and affairs of TTC’s subsidiaries. However, I do not see any real difference between the terms of the MU alleged by the parties respectively. First, as a matter of law both Orlov and Roth would have access to information and documents belonging to TTC, and it might be said would have been obliged to access that information and those documents for the proper compliance with the duties owed as directors, which duties are common ground. Secondly, TTC is a holding company, and the real operational business is conducted by its subsidiaries, and I do not read Orlov’s formulation as somehow excluding the management and affairs of the subsidiaries (which would make no practical or commercial sense).

19.TTC had been set up with the assistance of, and on the advice of, Mr Gunnar Mansfeld (“Mansfeld”), a Swedish national resident in Hong Kong, who was also a director and TTC’s CEO from 2006 to 2010 (or perhaps April 2011).

20.Mansfeld was effectively replaced as director by Mr Nicolas Brun-Lie (“Brun-Lie”), a Norwegian and partner of a Norwegian law firm which had previously provided advice to the business and to Roth’s wider family. Brun-Lie is not a businessman, and he was appointed for his legal, regulatory and document skills. Brun-Lie resigned as director with effect from 15 June 2017.

21.There is an issue as to whether Mansfeld was replaced as CEO by Roth in early March 2011, as Roth asserts. There is no board minute reflecting any such formal appointment, though there is a record of his appointment as CEO of one of the operational companies at that time.

22.In any event, within a month Roth was diagnosed with a serious medical difficulty and on 1 April 2011 underwent emergency heart surgery. He was also subsequently diagnosed with myasthenia gravis, and commenced a period of convalescence. The extent of that period and the degree of Roth’s involvement with the business from mid-2011 and for several years are in issue.

23.In 2010, Mr Helge Klock (“Klock”) was appointed as TTC’s CFO, but did not then become a director. He did become a director much later in May 2017, effectively replacing Brun-Lie. Whilst the appointments of Mansfeld and Brun-Lie as director had been agreed between Orlov and Roth, the appointment of Klock as director was not agreed by Orlov (or his alternate, Mansfeld). Shortly after his appointment as a director, Klock’s consultancy agreement was amended by Roth to increase his monthly income from NOK160,000 to NOK200,000, though Orlov and Mansfeld were unaware of this until November 2017.

24.It is common ground that, for present purposes at least, the main operating entities of TTC are: (1) Katla Seafood Canaria SLU (“Katla”), a marine services agency incorporated in and based in Las Palmas; (2) the Rainbow Reefers Group of companies (“Rainbow Reefers”), including Rainbow Reefers Ltd (a wholly-owned subsidiary incorporated in Hong Kong) and two other subsidiaries incorporated in the Bahamas in Las Palmas, which own a number of reefer vessels via Hong Kong incorporated SPVs; and (3) Lispa Holdings SL (“Lispa”), incorporated in Las Palmas and which in turn wholly owns the Joint Stock Company Baltlanta UAB (“Baltlanta”), a fishing and trading company incorporated in Lithuania.

25.The group of companies operating in Russia ultimately came to be owned by a Russian company, Norebo Holdings JSC (“Norebo”), while the companies operating outside Russia remained ultimately owned by TTC.

26.The restructuring occurred in part in 2008, as a result of a change of rules in Russia relating to foreign investments in strategic industries in Russia, including the fishing industry. The restructuring in 2008 led to the Russian assets being sold and transferred from TTC to Norebo, then a newly established holding company, by way of seller’s credit. At first, all the shares in Norebo were registered the name of Orlov, who initially held one third of them on trust for Roth, and one third on trust for a Mr Alexander Tugushev (“Tugushev”). After approval from the Russian authorities in 2011, Roth became the legal holder of his one third of the shares which were transferred into his own name.

27.As an aside, it might be mentioned that there is a dispute between Tugushev and Orlov and Roth about the one third share originally held on trust for Tugushev, which has led to proceedings brought by Tugushev against Orlov and Roth in England, and ancillary injunctive proceedings in Hong Kong (though the original injunctions have been discharged). Orlov now holds the shares, but Tugushev alleges they were misappropriated as a result of joint activity by Orlov and Roth. But that dispute and those proceedings have not really figured in these proceedings, and this case has proceeded on the basis that the only relevant shareholders are Orlov and Roth. Therefore, other than possibly in the context of the precise terms of relief which might be granted in these proceedings, I do not think the Tugushev dispute and proceedings require further consideration for present purposes.

28.A wider restructuring took place in 2013. Its effect was to create a corporate structure in Russia, holding the Russian assets including the vertically integrated Russian companies ultimately owned by Norebo and its shareholders, Orlov and Roth. Roth became a director in the Norebo management company.

29.Hence, by 2013, the wide fishing business which Orlov and Roth established and developed together consisted of two groups of companies: (1) Norebo and its subsidiaries (“Norebo Group”) focusing on the holding structures for the operational side of the business based in Russia; and (2) TTC and its subsidiaries (“TTC Group”) focusing on the holding structures for the operational side of the business based outside Russia.

30.One of the Russian companies owned by Norebo was Murmansk Trawl Fleet (“MTF”), which it purchased in 2011.

31.On 5 June 2013, MTF entered into an agency agreement with Katla (“Agency Agreement”), under which Katla was appointed as the agent for the day-to-day management of the operation of the vessels owned by MTF. The services provided included (amongst other things) corporate governance services, maintenance of company records, budgeting/accounting/reporting and audit, financing, treasury functions, employment of vessels, technical operation of the vessels, crew management and crew insurance.

32.Even before the Agency Agreement, it seems that there was some consideration of the possibility of purchasing Katla. It is common ground that Roth was not originally in favour of this purchase, but was persuaded to agree after discussions with Orlov.  There is an email with the subject matter of “Katla” from Roth to Brun-Lie dated 2 February 2013, copied to Orlov, in which Roth stated that he and Orlov “went through the project, and we are tuned so I am not participating in the tel conf”. The minutes of the TTC directors meeting in Belgium on 23 April 2013, at which Brun-Lie, Orlov and Roth were apparently present, records an update of the “Katla project”, referring to due diligence having been finished subject to addressing some issues such as tax and transfer pricing, and to financing being “in place both for MTF and TTC”. The minutes appear to identify that at least some of the companies or assets bearing the name Katla were to be purchased by TTC.

33.On 18 June 2013, MTF purchased Katla from its previous owner, an Icelandic group of companies. The purchase was part of a wider purchase of businesses and assets from that previous owner.

34.The whole wider transaction was considered and approved at a board meeting of TTC conducted by telephone conference on 27 May 2013. All three directors, Brun-Lie, Orlov and Roth participated and the minutes included that the directors acknowledged by their signature that they had been informed in due time of the proposals made. The total transaction payment price was US$128 million. The minutes record that the total transaction comprised separate contractual relationships involving separate parties, but that it was understood by all involved parties that the transaction is regarded as a single transaction where completion of each of the documents is conditional on completion of each of the other documents. The directors concluded that it was in the best interest of TTC’s business, and to the commercial benefit and advantage of TTC to enter into, and as applicable ratify, the various transaction documents and the transactions contemplated by them. All necessary resolutions to complete the transactions were passed.

35.By reference to a valuation report dated 31 August 2013, with a valuation date of 11 June 2013, Katla was valued at US$9.9 million. The valuation was on a market valuation basis according to certain requirements of the Russian tax code, and specifically identified its anticipated use was as proof for fiscal authorities. The valuation was in part based upon a forecast of income and expenses for 2013.

36.Also, on 18 June 2013, MTF entered into a storage contract with Katla.  MTF’s spare parts and other equipment were stored in Katla’s warehouse. The terms of that contract included that where goods are ordered out by MTF, a reasonable time shall be given to Katla to carry out instructions.

37.On 26 June 2013, Roth became a director of MTF.

38.KPMG was responsible for reporting on transfer pricing, with the intention of compliance with appropriate range of transfer pricing to satisfy the various tax authorities. On 16 November 2013, a draft KPMG Report was sent Guadalupe Bengochea (“Bengochea”), in-house lawyer at Katla, to Klock and Soling Yip (“Yip”, the finance manager) by. Yip offered some comments on the report, to which Bengochea responded on 3 December 2013, copying in Klock. After further email discussion, the draft report and that discussion was forwarded by Yip to Olga Savina (“Savina”) at Norebo on 17 December 2013. Later that same day Orlov was also copied into two further emails between Bengochea and Savina, which emails discussed the possibility of retrospectively reducing the agency fees for Katla in 2013.

39.By a sales and purchase agreement dated 19 December 2013 (“SPA”), Katla was purchased from MTF by TTC. The purchase was expressly approved by the directors of TTC, comprising Orlov, Roth and Brun-Lie, at a board meeting on 19 December 2013.

40.There is also a board minute of MTF of the same date recording the unanimous approval of its directors to the same transaction. Whilst Roth is noted as having attended that meeting and having voted in favour, he said in evidence that he did not. But that may not matter, as he clearly had agreed to the transaction.

41.Under the terms of the SPA, the full purchase price was to be settled by seller’s credit, to be repaid over 2 years by flexible repayment programme. Also under the terms of the SPA, the purchase price was calculated based on the market price valuation of Katla as at 11 June 2013, namely US$9.9 million, plus a profit element. The SPA required a new valuation to be obtained at the parties’ joint cost and expense, from the same valuer applying the same principles, so that the purchase price should be adjusted up or down to reflect that new valuation.

42.There are various amendments to the SPA. The First Amendment to the SPA was actually signed on 6 March 2014 but backdated to 19 December 2013 (i.e. the date of the SPA).  Brun-Lie signed on behalf of TTC. The amendment effected was to require or permit MTF to arrange for the new valuation at (only) its own cost and expense.

43.The Second Amendment to the SPA was also in fact signed on or after 6 March 2014, by Brun-Lie on behalf of TTC, and backdated to 20 December 2013. The amendment was to revise the price to US$10.5 million.

44.That price was the price identified in the new or second valuation report dated 16 February 2014, by reference to the valuation date of 19 December 2013. The report was by the same valuer and it adopted the same broad valuation principles, again in accordance with certain Russian authorities’ standards. Whilst the forecasting revenues of expenses were stated to be for 2014, they simply duplicated the previous figures used for 2013. However, the values given by reference to the cost approach and the income approach were different, and the weighting coefficients applied to them also slightly varied from the previous valuation.

45.There were other subsequent amendments to the SPA. They were essentially to deal with the payment terms and extension of the period for the seller’s credit. The Third and Fourth Amendments to the SPA, dated 12 February 2015 and 24 December 2015, were signed by Roth on behalf of TTC. The Fifth Amendment to the SPA, dated 14 June 2016, was signed by Klock. Roth must have known of the earlier amendments, and must be taken to have known their terms, when he signed the Third Amendment to the SPA.

46.Under the SPA as amended TTC made payments to MTF of US$5.5 million on 22 December 2014, US$11,917.81 on 31 December 2014 and US$433,124.55 on 13 March 2015.

47.Meanwhile, on 9 January 2014, Roth ceased to be a director in the management company Norebo. On 15 June 2014, Roth ceased to be a director of MTF. On 9 December 2014 Roth executed a power of attorney authorising Klock and Yip to exercise his rights as 33% shareholder of Norebo. Subsequently, on 30 April 2015 Roth again became a director in the management company Norebo.

48.There were also various amendments made to the Agency Agreement. The first was dated 20 March 2014 and provided for a backdated reduction in the agency fee payable by MTF to Katla. The second was dated 17 April 2015, and provided for further reductions in the agency fee payable. The third, dated 1 June 2015, provided for the payment of interest by Katla to MTF on the retrospective ‘overpayments’ of agency fees arising from the backdated reductions. At least the last two amendments were signed on behalf of Katla by Michail Larionov (“Larionov”) its managing director. Larionov was also a director of Lispa and Baltlanta.

49.On 31 December 2015 Roth signed a TTC confirmation of unpaid balance owed to MTF recording the sum of US$4,566,874.45 with unpaid accrued interest of US$232,615.68. It seems to be common ground that those were the figures standing in the books of TTC as the unpaid balance as at that date.

50.Just before that, on 27 November 2015, a loan agreement was made between TTC and Brackway Services Inc (“Brackway”) for US$1 million. Brackway is a company apparently owned by a business counterparty of the TTC Group and the Norebo Group. The agreement was signed for TTC by Klock. This loan agreement arose in the context of a relationship going back to a cooperation agreement made between Brackway and Dragon Seafoods Limited (“DSL”), a subsidiary of TTC, dated 1 February 2012. The Brackway/DSL arrangements had given rise to a request for legal advice and various correspondence between the lawyers, Klock and Yip in April and May 2012. Following that, at a TTC board meeting on 3 July 2012, Brun-Lie, Orlov and Roth had resolved that DSL be authorised to enter a cooperation agreement with Brackway.

51.Towards the end of 2014 there was an exchange of email correspondence between Roth and Orlov which identified some strain in their relationship. The trigger appears to be the suggestion from Roth that to balance Orlov’s drawing a salary from Norebo, he might start a salary from TTC which logically should be 50% of Orlov’s. There is a mutual outpouring of frustration and dissatisfaction, with the commencement of statements identifying the different view of recent history. No absolute breakdown is apparent even though the chain of correspondence appears to end with floating the possibility that one or other would sell their shares, and not necessarily to the other. But it seems the possible unravelling of the relationship came into view.

52.Following negotiations which began in late 2015, in April 2016 Roth sold his one third interest in Norebo to Orlov, and Roth ceased to be a director of Norebo on 28 April 2016.

53.There were two back-to-back loan agreements dated 13 May 2016 (1) between Ohodsk Fishing Company Ltd, a Norebo Group company and DSL, and (2) between DSL and Brackway, for US$2.5 million. Those agreements were signed by Yip (for Ohodsk) and Klock (for DSL) respectively. On 29 June 2016 there was a further loan agreement between DSL and Brackway for US$1 million.

54.In around mid-June 2016, Roth says he resumed day-to-day management of TTC.

55.At a TTC board meeting on 29 June 2016, Roth sought to have his role as CEO confirmed. The accuracy of the minutes of that meeting is an issue, and no version of those minutes has been signed by Orlov as a result. The minutes note that Orlov brought up the fact that Roth had never formally been appointed to the position of CEO, but that it was resolved that the chairman and secretary shall bring to order the appointment and ensure that resolutions to ratify Roth’s position as the CEO together with writing up the tasks and responsibilities for the CEO will be passed. The resolution continued that it was also expected that the CEO together with the board will work on a strategy document for the group.

56.Elsewhere in the same minutes is recorded the agreement that the remuneration and salary of the CEO will be postponed until the tasks and responsibilities of the CEO are presented. In the same context, the minutes record that it was discussed and concluded that Orlov shall take the role as a non-executive director and be ready to act when asked and on demand.

57.On 19 July 2016, MTF wrote a letter of demand to TTC for outstanding payments under the SPA. Roth says it was this letter which prompted him to investigate TTC’s purchase of Katla.

58.On 3 August 2016, Savina on behalf of MTF emailed Klock and Yip, offering to reverse the sale and purchase of Katla between MTF and TTC. The offer was not taken up; indeed, there was no response at all, and no counter-proposal was made.

59.On 15 November 2016, Roth appointed Victor Engellau (“Engellau”) as his alternate director of TTC.

60.On 20 or 21 November 2016, Orlov gave written notice to TTC appointing Mansfeld as his alternate director of TTC. The appointment was registered on 5 December 2016. However, Orlov’s appointment of Mansfeld as his alternate director prompted an immediate response from Roth. On 21 November 2016, he emailed TTC staff instructing them that any request from Mansfeld had to go through the board and that in his position as alternate director Mansfeld had no access to the office, or what was in the office (which must be a reference to documents and information).

61.Indeed, there followed months of correspondence between various parties and their various solicitors as to whether or not Mansfeld had been properly appointed as alternate director, and the extent of his powers and responsibilities in that role. It may be necessary to review some of this material in more detail. Ultimately, it was only by letter from Roth’s solicitors dated 18 July 2017, that Roth stated he accepted Mansfeld’s appointment as Orlov’s alternate. But, by that date, various litigation between the parties and related entities was already well afoot, including Orlov’s petition in these proceedings which was issued on 8 June 2017.

62.The commencement of the various proceedings, and their various updating amendments, evidence the fact that from around mid- to late-2016 Orlov and Roth were increasingly ‘at war’.

63.The differing stance between the parties is perhaps well illustrated by an exchange of emails on 16 December 2016. Though the debate continued through more emails, I shall mention two at this point. In his email, Roth notified the management level staff of various TTC Group companies that: “For the sake of good order I would like to inform that the current structure in TTC is as follows: Shareholders: Vitaly Orlov and Magnus Roth. Board: Chairman Nicolas Brun-Lie, Gunnar Mansfeld (alternate for VO in 6 month), Magnus Roth. Management: Magnus Roth CEO, and Helge Klock CFO, Soling Yip Financial Manager. Normal corporate governance is that the management is following up with their daughter companies, which we currently are doing”.

64.In his response, Orlov told his colleagues: “Please be advised that there is no CEO in TTC, since resignation of Mr Gunnar Mansfeld in 2011. … Since we do not have any CEO in TTC and all three directors of the board are non-executive directors, as the owner of TTC I maintain the position that it is appropriate that the Board takes up on the issues and monitor the businesses within the group. The duly appointed management of the daughter companies shall look after the interests of the companies and report to the board of TTC. This is in line with good corporate standards and should be followed by us.”

65.On 23 December 2016 Roth emailed Larionov to tell him that as he was managing a TTC company, he should report to the “management of TTC”, said then to comprise Yip, Klock and Roth as CEO.

66.The next board meeting of TTC following the disputed board meeting of 29 June 2016 took place on 6 March 2017. The board members present included Brun-Lie, Roth and Mansfeld (as alternate for Orlov, notwithstanding that his appointment and/or the extent of his powers remained in issue). Klock was also present as CFO. For parts of the meeting Larionov attended as an officer of Lispa and Baltlanta and MD for Katla. Yuri Skrebnev, MD for Rainbow Reefers attendered for that part of the meeting relevant to him.

67.The minutes of the 6 March 2017 meeting record that Orlov was not prepared to sign the minutes of the 29 June 2016 meeting, as it was his opinion that those minutes did not reflect what was decided in that meeting. The minutes also dealt with a new contract and job description for the CEO. Though Roth declared a material interest in the new contract, he nevertheless took part in the relevant discussions and voting on the topic. Ultimately, the contract was approved by majority vote of Brun-Lie and Roth against the opposition of Mansfeld.

68.The CEO employment agreement was indeed made dated 6 March 2017 and signed by Brun-Lie for TTC as employer and by Roth as employee. Under the contract, Roth was employed as CEO of TTC, but was also to serve in such additional or different positional positions as TTC’s Board of Directors consider necessary. He shall report to the board, or any committee of the board duly appointed by it, and he “shall be responsible for supervising all of the operations of [TTC] and of its various subsidiaries from time to time”. The non-exhaustive list of the CEO’s duties and responsibilities included providing strategic leadership for TTC, and directing and evaluating the organisation’s function and performance.

69.Amongst the other topics covered at the 6 March 2017 board meeting were a resolution, passed by the same majority, to increase the Katla board from just Larionov by the addition of two board members, intended to be Bengochea and Klock.

70.On 28 March 2017, Mansfeld called a TTC board meeting, but Roth and Klock did not attend. The board meeting was adjourned.

71.On 4 May 2017, an EGM of TTC was held. Though it does not matter for present purposes, there was a dispute as to whether the meeting was properly called. It was attended by two solicitors, each acting as a proxy for Orlov and Roth respectively. The EGM was to consider a number of resolutions proposed by Orlov, most if not all of which were plainly contentious. Unsurprisingly, all resolutions were voted on by the proxy for Orlov voting in favour and the proxy for Roth voting against. The EGM is noteworthy really only to identify the disagreements and antagonism between the parties and that the battle lines had already been firmly drawn.

72.Ocean Trawlers Management Limited (“OTM”) is a wholly owned subsidiary of TTC. It provided back-office services to Ocean Trawlers Hong Kong Limited (“OTHK”) and TTC. OTHK is a company in the Norebo Group. As part of the CEO and CFO update noted in the minutes of the TTC board meeting for 6 March 2017, reference was made to Klock and Stephen Collyer (“Collyer”) “to find the best solution on how to transfer the [OTM] company or the staff to OT group”. On 21 April 2017, OTHK gave two months’ notice to OTM of termination of their management services agreement. On 25 May 2017, the employment of the employees of OTM was terminated. All but perhaps one of those employees has subsequently taken up employment with OTHK.

73.On 29 May 2017, Orlov and Mansfeld wrote to Roth and Brun-Lie asking them to join in demanding an explanation from Klock on the unauthorised actions which clearly impacted TTC’s position in Hong Kong, and asking whether anyone took legal and tax advice beforehand. I note that Brun-Lie immediately asked Roth whether this was moving too fast, to which Roth responded that he thought not, also forwarding his own support to Klock.

74.On 3 June 2017, Klock circulated to Roth, Orlov and Brun-Lie a memo giving explanation of the situation for OTM and TTC. He stated he had been cooperating with Collyer, and steps were taken to ensure that neither TTC nor OTHK would be affected in the short run by people leaving OTM, so that termination of the staff in OTM was done purely out of damage control. Klock also identified that he had not yet sought any tax advice, but would do so upon instruction. The attached memo is headed “Restructure of TTC Back-office and accounting function”, and appears to set out background matters and options as well as Klock’s suggestions. The suggestions were apparently made to the “TTC management”. It is notable that the memo is dated 12 May 2017, but was provided to Orlov only under cover of the email of 3 June 2017, after all relevant staff had been sacked on 25 May 2017.

75.Meanwhile, on 9 May 2017, Engellau was appointed as a consultant for TTC, by an agreement signed for TTC by Roth. The terms of appointment had not been considered by the board of directors of TTC. Engellau’s assignment was described as being to further develop the supporting organisation for TTC by the supply of knowledge and assistance within the areas of administration and general management services outlined in schedule 1 to the agreement. That schedule described the requirement for Engellau to act “in coordination with CFO [Klock]” so as to “coordinate, manage and monitor the migration and closing down of Hong Kong office; assist in communication and plan downsizing of staff; work with management team to secure contingency for TTC operation; communicate and coordinate outsourcing of existing activity; secure contingency for TTC’s IT environment; assist in all other aspect of the TTC operation where it is applicable and needed”.

76.Whilst the original consultancy period was to be from 21 May 2017 to 21 August 2017, it was subsequently extended to 30 April 2018. Subsequently there was a further consultancy agreement dated 24 November 2017, this one signed by Klock on behalf of TTC. Under the two agreements. Engellau was to be paid CHF10,000 then CHF17,500 per month respectively, and the second agreement included a discretionary bonus based on performance.

77.As already indicated, on 15 May 2017 Klock was appointed as an additional director of TTC. The minutes approving his appointment also specifically authorised him to give instructions to TTC’s lawyers on issues arising from the ongoing litigation and any dispute between Orlov and Roth. As had started to happen with Brun-Lie, in essence whenever there was a dispute between Roth and Orlov (or his alternate) at TTC board level, Klock voted with Roth. What is properly to be made of this fact is, of course, something for further consideration in the context of the various complaints.

78.In June 2017, TTC closed its Hong Kong office and appointed NH Shipmanagement Ltd (“NH”) to carry out corporate management and administrative work for it. This triggered correspondence from Orlov and Mansfeld making clear objection to the closure of the Hong Kong office.

79.Mansfeld had also asked for access to TTC’s books and records, for example by email of 29 June 2017 sent to Klock, referring specifically to the relevant sections of the Companies Ordinance and the Articles of the company. Just two minutes later, Klock forwarded that email to Roth (not at his TTC email address but one @me.com) saying simply “This need urgent attention …..”.

80.By email of 23 June 2017, Roth provided an updated organisation chart identifying that the “management” now comprised Roth as CEO, Klock as CFO and Engellau as Vice President. In his oral evidence, Engellau identified that he had been given that title as he needed some job title to explain his management presence to members of staff of TTC’s subsidiaries.

81.As a response to Roth’s email, on 10 July 2017, Orlov emailed management staff of TTC’s subsidiaries, including Larionov, Yip, Bengochea, and Engellau, copied also to Roth, Mansfeld and Klock. Orloff’s email referred to the breakdown in relations between himself and Roth, the dispute as to whether Mansfeld was entitled to fulfil the role intended of acting as alternate director so that he might apply himself independently and objectively in Orlov’s stead, and the dispute as to whether Roth had been appointed as CEO of TTC and what powers or responsibilities would attach to that role. In that context, the email was stated to provide guidance as to how the recipients should seek and receive approval from TTC on the occasions needed. Hence, Orlov suggested that in order to avoid the situation that different directors might give different answers if approached independently, any email to any director of TTC or responding to one should be copied to all other directors of TTC. He stated that if there is doubt as to whether everyone should be copied in, then everyone should be copied in.

82.On 26 July 2017 TTC received draft tax advice from PwC relating to various tax issues for TTC. The draft records that it is based upon the TTC Group’s restructuring exercise, under which it is proposed that TTC would appoint a service provider in Hong Kong and Katla in Las Palmas to handle its accounting and finance activities effective during the year ending 31 December 2017. Of course, by the date of the report those proposals had already been effected.

83.The report also dealt with requirements for the purposes of comprehensive double tax arrangements (“CDTAs”) and a Hong Kong tax resident certificate (“HKTRC)”. The draft emphasised that a Hong Kong incorporated company does not necessarily or automatically qualify as a Hong Kong tax resident, and that where there would be a change in TTC’s business substance in Hong Kong, resulting in a decrease in substance level in Hong Kong, it would be highly recommended that to the extent possible TTC should continue to perform in Hong Kong on a high-level basis, in various ways then set out.

84.On 1 August 2017, TTC’s then solicitors disclosed that the registered office of TTC would be moved to the office of NH. This move had not been previously approved at board level. The registered office was formally moved on 2 January 2018, or (by reference to the minutes of TTC board meeting on 1 March 2018) some time in or after March 2018.

85.Throughout August and September 2017, correspondence went back-and-forth between Roth, Mansfeld, TTC, and their various solicitors about Mansfeld’s requests seeking documents and information. Some limited information was provided, but Orlov and Mansfeld commenced court proceedings by originating summons dated 30 August 2017 to obtain an inspection order, which was granted by DHCJ Seagroatt at an opposed hearing on 27 October 2017 (“Seagroatt Order”).

86.It is fair to say that the deputy judge had no difficulty in rejecting TTC’s opposition to inspection, and the hearing even began by his asking counsel then appearing for TTC for her to “give [him] one good reason why the plaintiffs can’t have these accounting documents”. During the hearing, the deputy judge expressed that he was getting “the impression that the defendants are being peculiarly obstructive in this”, that some of the objection simply “doesn’t matter” or was “a red herring” or had “nothing to do with this”, and even that some of the argument astonished him. There was no appeal from the Seagroatt Order.

87.Some inspection was given in late November 2017, but correspondence between solicitors continued for some considerable period thereafter. Any fair reading of the correspondence as a whole identifies that obtaining access to information and documents was not made easy. For example, as late as June 2019 TTC’s solicitors asked Orlov and Mansfeld to give an undertaking that any documents provided to them for inspection would be used solely for the purposes of discharging their duties as directors of TTC and specifically would not be used in the shareholder dispute between Orlov and Roth. There was no reply to Orlov’s solicitors’ response that TTC had presumably required a similar undertaking from Roth before he reviewed the records of TTC given that he had also issued a petition, and seeking a copy of that undertaking. Orlov and Mansfeld remain dissatisfied with the access to information and documents provided to them.

88.On 22 August 2017, a directors meeting of TTC took place. One of the matters traversed was the making of a loan to Lispa, so that Lispa is able to take all necessary steps to apply the loan for the subscription of shares in Baltlanta, apparently necessary to comply with legal or regulatory requirements. The minutes record a unanimous vote in favour of the relevant resolution, and the board’s noting that the deficit had been indicated to be much higher in March 2017, but the new figure represented the accurate situation as the accounts had been audited by KPMG since then.

89.In around September 2017, a channel of communications was opened between Larionov and Mansfeld and/or Orlov, and in which Bengochea also became involved. By email of 11 September 2017, Mansfeld told Larionov that he (and Orlov, it is to be assumed) were ready to proceed with the “plan” discussed between Mansfeld and Larionov in Stockholm earlier in the month. He stated that “the best is to provoke a reaction from their side” (meaning Roth’s side), and made various suggestions in response to questions posed by Larionov. By email of 14 September 2017, Mansfeld told Larionov that he should ask for a written resolution signed by all directors of TTC relating to proposed changes in the Katla by-laws and ZEC registration. He said that would “obviously cause grave concerns in [Roth]’s camp”, and that Larionov could share and discuss this with Bengochea if he felt it appropriate.

90.In his email of 17 September 2017, Larionov demonstrated some frustration and concern about his position, but there is also reference to “new operations” and “new entity”, and he is seeking input on what he should do. One of the questions is whether or not to dismiss Bengochea “so that she could be focused on other matters”, but he foresaw possible questions if they later joined forces.

91.This channel of correspondence was largely moved to a Protonmail account from around mid-September.

92.In early September 2017, in an exchange of correspondence between Mansfeld and Roth, the former raised complaints and questions about company reorganisation which he said was not authorised. Roth’s response was in part to draw the line between TTC management issues and TTC board issues.

93.On 22 September 2017, Klock signed a declaration in Las Palmas stating that TTC (as sole shareholder of Lispa) had passed a resolution to amend Lispa’s bylaws and to appoint Klock as Lispa’s sole director. Subsequently in the TTC directors meeting of 1 March 2018, Roth and Klock voted to ratify the resolutions adopted on 22 September 2017 by Roth representing and on behalf of TTT as sole member of Lispa (Mansfeld voted against the resolution).

94.Also on 22 September 2017, Bengochea’s employment by Katla was terminated by Larionov. Larionov subsequently stated he had done so on the instructions or advice of Engellau, but Engellau says that whilst he had generally discussed reducing staff to save costs the decision to dismiss Bengochea was made by Larionov.

95.By email on 11 October 2017 written in Russian, Larionov asked Orlov “how to proceed in the current situation”. Whilst written in Russian and with the opening salutation “Vitaly, good evening”, the email was actually sent – apparently by mistake – to Roth, copied to Klock, Mansfeld, Engellau and Orlov (Orlov being the only one who reads Russian). The “current situation” Larionov set out identified that Roth had lost confidence in him as director of Katla, that Roth had continued to push his TTC management policy, and that questions might come without end until they find something that does not suit them. Larionov expressed the feeling that at any time he might be accused of excessive protection of the interests of MTF, while this was still going around.

96.Larionov had originally been employed by Katla under a contract dated 1 April 2015, under which he was required to report to the board of directors of TTC. His notice period for termination of employment was three months. On 13 October 2017, Larionov tendered his resignation as MD of both Katla and Lispa. In his covering email, Larionov referred to previous correspondence exchanged between him and Roth and Engellau. He stated his opinion was that the TTC board was divided, and that as MD he could not serve one side, and if he did not have the support from both owners, he saw no sense to continue.

97.At a TTC board meeting on 27 October 2017, attended by Klock, Roth and Mansfeld, various matters were discussed including DSL, Brackway, the closure of the Hong Kong office, and Katla. As to Katla, it was minuted that Engellau would be visiting the following week, and would revert with alternatives, namely whether the operations at Katla should be continued without Larionov or whether a replacement should be hired. It was also noted that the main concern would be Batlanta, not Katla, as “Katla is not a profit generating centre and the costs associated with Katla are high”. Mansfeld queried the dismissal of Bengochea, and Roth explained that she was not generating much profit and was a cost of the company and in any event had been dismissed by Larionov not the board of TTC, as both companies are run by their own boards and the TTC board could not instruct the Katla board. In their oral evidence, Mansfeld accepted the accuracy of that note, but Roth identified that what he meant was that a board member of the mother company could not instruct the board of the daughter company.

98.On 31 October 2017, Kekur Overseas Solutions SL (“KOS”) was incorporated by Bengochea. The company was subsequently brought into the Norebo fold by acquisition on 7 August 2018 and renamed as Norebo Africa SL. Mansfeld and Larionov were appointed as its administrators/officers. Mansfeld has also been a director of other Norebo companies since late March 2018.

99.Budget documents prepared for KOS identify that it was set up with the idea and on the financially planned basis that it could provide most if not all the services of the type provided by Katla.

100.On 1 December 2017, MTF gave notice of its intention to remove goods from the Katla warehouse, and the removal of those goods commenced the very next day, 2 December 2017. The removal process was not completed for approximately one week. At one point, on 8 December 2017, Larionov procured the replacement of locks at the warehouse to enable MTF to continue removing the goods.

101.At a TTC board meeting on 4 December 2017 (which had originally been called for 1 December 2017) only Klock and Roth attended. Mansfeld had informed that he would not be able to attend because of travel until 11 December 2017 and had proposed a new date of 13 December 2017 for the meeting, but the minutes record that “due to the urgency of the matters on the initial agenda the board decided to proceed with the meeting”. The meeting took place at Katla’s office in Las Palmas (albeit Roth attended by telephone).

102.The matters dealt with at the 4 December 2017 meeting related first to Larionov’s resignation. Klock and Roth resolved to release Larionov from all his duties and remove him from office as director of Lispa, Katla and Baltlanta with immediate effect, and to appoint Raul Farias and Klock as new directors of Katla.

103.The other topic was Engellau’s appointment as a manager and agent of TTC pursuant to clause 17 of TTC’s articles of association. Klock and Roth resolved that “with immediate effect” Engellau should be appointed as a manager and an agent for TTC and “be delegated with the powers, authorities and discretions vested in the board to manage the operational affairs of TTC in Hong Kong or elsewhere for a term of one year or until the termination of his consultancy contract with TTC or until the termination of his appointment by the board of TTC, whichever is earlier” (emphasis in original). It was also minuted that Engellau would work alongside Klock and report to Roth.

104.On 11 December 2017, Larionov wrote to the TTC directors to “report and clarify the situation at Katla”. Amongst other points made, he rejected the idea that he had been immediately dismissed earlier in the month, objected to Engellau’s “confrontational” attitude, referred to being in an “uncomfortable limbo situation”, and asserted he remained the MD and sole director of Katla and that he would remain so until his notice period expired on 12 January 2018 or the board of TTC properly removed him by a jointly signed resolution of his dismissal.

105.On 19 December 2017, Engellau was re-appointed as alternate director of TTC for Roth.

106.For a period of several years to the end of the calendar year 2017, the Rainbow Reefers Group chartered three fishing vessels (“Karelian Vessels”) on annual renewal charges from third-party owners. It is said that the business using the Karelian Vessels was profitable. In around November 2017, Roth learned that the third-party owners would not renew the time charters upon expiry, because the vessels had been sold. It was subsequently confirmed that the Karelian Vessels were purchased by Arctic Shipping, a company in the Norebo Group.

107.In early 2018, disagreements arose in relation to the potential sale of three vessels (“the 3 Frios”) owned by Rainbow Reefers, one of which was the “Frio P”. On 25 January 2018, Mansfeld wrote to Klock, with copies to Roth, Orlov and Engellau, expressing astonishment at learning that the 3 Frios were being advertised in the market as the sale, when these were significant assets and neither Orlov nor himself knew anything about it. In his response of 28 January 2018, Klock stated in terms that the subsidiaries did not intend to sell the vessels, and that the listing of the vessels on the market was for the sole purpose of gathering useful and important information, which was not an unusual business tactic. He asked Mansfeld to rest assured that “should the subsidiaries intend to sell their vessels, proper procedures will be followed”.

108.On 1 March 2018, Klock emailed Orlov, Roth, Mansfeld and Engellau enclosing certain documents one of which was a “Note from CEO/CFO re: sale of 3 Frio vessels”. The note referred to the impact on Rainbow Reefers of the sale of the Karelian vessels to Norebo, and in essence put forward a business case for the sale as a result of operational losses and the age of the vessels. The agenda also referred to the possibility of selling Katla.

109.On 8 March 2018, Klock circulated an agenda and notice of meeting of the TTC board for 12 March 2018, together with another note on the proposed sale of the 3 Frios. The note and agenda identified that TTC had received three offers, one of which had been accepted subject to board approval. The note recommended the sale of the 3 Frios for the total consideration of US$14 million en bloc.

110.On 9 March 2018, solicitors for Orlov wrote to the solicitors for Roth complaining about the apparently proposed liquidation of significant assets by possible sale of the 3 Frios and Katla, and without provision of documents in relation to either proposal. The point was made that if TTC is to be liquidated, that is a role for a professional liquidator. The matter was asked to be referred to the shareholders of the company as the appropriate forum for such a fundamental issue. That request was refused by Roth’s solicitors on the same day.

111.On 10 March 2018, Mansfeld asked Klock for full disclosure of the offers made for the 3 Frios to be provided in advance of the proposed board meeting. He also asked for a written explanation as to why the proposed sales were in the interests of Rainbow Reefers, not simply by reference to the question of price but the short, medium and long-term strategy of Rainbow Reefers. He also reiterated that the board could only make a recommendation, whereas a decision for sale needed to be referred to the shareholders. Roth and Klock both responded, essentially asking Mansfeld to identify why the sale was not appropriate and what alternative he would suggest, and to affirm that the meeting would go ahead at which the matters could be discussed.

112.At the directors meeting on 12 March 2018 Klock and Roth voted in favour of the resolution to accept the third offer to sell the 3 Frios.

113.On 16 March 2018, Mansfeld made an affidavit in HCMP 1331/2017 in support of a summons seeking an injunction to prevent the sale of the 3 Frios, at least pending the provision of proper information for him and Orlov to be able to consider and make an informed decision whether or not to agree to the sale. He explained that neither he nor Orlov would object if the sale was considered to be in the best interests of the company, and if there was certainty as to what the plans were in respect of the company going forward including what would be done with the proceeds of sale. The application was opposed by the affidavit of Klock dated 22 March 2018. At a CMC on 23 March 2018, Harris J granted the injunction.

114.The injunction was subsequently discharged by consent on 3 May 2018, after the provision of certain documentation. Despite that, by 31 May 2018 the intended sale had failed, but a new buyer had been approached. On 5 June 2018, the TTC board of directors comprising Klock, Roth and Mansfeld passed a written resolution to approve the sale of the 3 Frios to the new purchaser for a total of US$14.75 million. However, that sale also subsequently fell through.

115.Meanwhile, on 21 March 2018, Klock signed on behalf of Lispa to dismiss the Baltlanta board and to elect himself, Engellau and a Mr Klakauskas as directors of Baltlanta.  Mr Klakauskas’ appointment was later revoked, and Mr Jonas Jonikas was appointed in his stead on 24 April 2018. Mansfeld and Orlov complained about this in an email dated 2 May 2018, but Klock responded on 22 May 2018 that because Batlanta was experiencing losses steps were taken to change the management, and outsource operations had been taken by Baltlanta management to improve its performance going forward.

116.On 25 October 2018, a new company Ulysses Reefers LLC (“Ulysses”) was incorporated in Russia. Its shareholders were Katla and Rainbow Reefers in the proportion 25%/75% respectively. The incorporation of Ulysses was only subsequently retrospectively approved by the directors of TTC at a meeting on 19 November 2018. On 16 January 2019, ownership of the Frio V was transferred to Ulysses.

117.On 31 October 2018, Klock wrote to Roth and Orlov in relation to an update as to the Frio P, stating that “Management have now received and accepted a firm and final offer” for the sale of the Frio P, that “Management would be happy to answer any questions the Board may have about the sale and the purchaser”, and that “management will keep the Board informed of the progress of the sale”. On 3 November 2018, Klock called a board meeting to discuss the proposed sale. Though solicitors for Mansfeld sought to delay that meeting to 5 November 2018, the meeting went ahead on 4 November 2018. Roth and Klock were present (by telephone) and resolved to sell the Frio P.

118.There are also minutes of another meeting on 5 November 2018. Engellau (as alternate for Roth), Klock and Mansfeld were present (by telephone). The minutes record the objection to the meeting going ahead on the previous day, and suggested it was postponed to 5 November 2018. However, all that then is recorded as having happened was a discussion about the sale, ending with a note that subject to Mansfeld getting information directly from the broker he would recommend to Orlov to sign the members’ resolution provided. However, by email of 7 November 2018, Orlov subsequently disagreed to the sale of the Frio P, for the reasons explained by his solicitors in their letter of 9 November 2018.

119.At a further TTC board meeting on 19 November 2018, at which only Klock and Engellau were present, it was resolved to proceed with the sale of the Frio P. The minutes note the opposition to the sale from Orlov and Mansfeld, but specifically record that “Unanimous shareholder approval is not required for the sale or disposal of [the Frio P] or any other ‘one-off’ asset” (emphasis in original).

120.On 20 December 2018, a meeting took place of the TTC board of directors at which it was agreed to appoint a liquidation committee with sale of assets subject to approval by the shareholders. This was not implemented as it was said to duplicate the work of the board of directors, and it was not approved by shareholders.

121.On 16 January 2019, Klock circulated a notice of board meeting and agenda relating to the sole item for the sale and scrapping of the MV Reina, a vessel owned by an SPV subsidiary of TTC. Mansfeld objected the following day, and at the board meeting on 18 January 2019, but was outvoted by Klock and Engellau. The vessel was apparently sold for scrap by agreement dated 31 January 2019, though that was only provided by TTC’s solicitors to Orlov’s solicitors on 8 March 2019.

122.On 29 March 2019 the Hong Kong Inland Revenue Department rejected TTC’s application for HKTRC. Whilst this decision is being challenged, no successful challenge has yet been achieved.

123.On 28 May 2019, at a board meeting of TTC, Klock and Engellau outvoted Mansfeld to approve a resolution to sell the Frio V for US$5.6 million.

124.The various proceedings between the parties and related entities commenced towards the end of 2016. On 25 November 2016, MTF issued a claim against TTC in the English High Court to recover outstanding sums not paid by its extended deadline of 31 July 2016. In those proceedings, on 3 March 2017, TTC filed a defence and counterclaim, making an additional claim against Orlov for alleged breach of fiduciary duty. Those proceedings have now been stayed pending the current proceedings in Hong Kong.

125.However, TTC had previously on 16 May 2017 also issued a writ against Orlov in HCA 1134/2017. That writ expired, and was never served. Roth had also issued a writ against Orlov in HCA 1093 of 2017 on 9 May 2017, seeking US$2 million or damages in relation to Orlov’s purchase of Roth’s shares in Norebo. I do not think that action has progressed either.

126.On 22 December 2017, Roth filed his petition (or cross-petition) in these proceedings. Both petitions, and those pleadings consequential to the petitions, were subject to various amendments including green amendments in mid-May 2019.

127.In addition, I have already mentioned the proceedings leading to the Seagroatt Order in October 2017, and the order in March 2018 (later discharged) made to prevent the sale of the 3 Frios.

C. The Possible Short Answer

128.Mr Wong says that Orlov has sensibly accepted that a buyout order should be made, and that the parties should proceed to the issue of valuation with appropriate directions from the Court including experts’ full access to corporate documents. But Roth has insisted on having a trial on liability, when it would have been sensible to agree that the mutual trust and confidence have broken down as was evidenced at least by the Seagroatt Order. Given that both sides ask for the order that Roth should buy out Orlov, Mr Wong submits that it is difficult to imagine the circumstances in which a court would refuse such an order, and unthinkable that the court might force the continuation of the corporate marriage when both prefer a divorce.

129.Roth’s insistence that there should be a trial first arose as a result of the submission that the court could not make a buyout order under section 724 of the Ordinance unless the necessary finding has been made that the affairs of the company have been conducted in a manner unfairly prejudicial to the petitioner. That section provides that the court may exercise the powers under section 725(1)(a) and (2) if, on a petition by a member of a company, it considers that (a) the company’s affairs are being or have been conducted in a manner unfairly prejudicial to the interests of the members generally or of one or more members (including the member); or (b) an actual or proposed act or omission of the company (including one done or made on behalf of the company) is or would be so prejudicial. Hence, it was said that is necessary for the court to deal with the substance of the parties’ allegations of unfair prejudice.

130.Mr Wong points out that the corollary is that the court can make a buyout order as long as it is satisfied that there is at least one ground for finding unfair prejudice, and a commercially sensible and robust approach would be to say that by reason of the agreed breakdown of mutual trust and confidence and the Seagroatt Order, plainly a buyout order can and should be made. The valuation can be as at the date of the petition or some other date, and the parties can sort out the remaining valuation issues at the quantum stage.

131.Mr Wong goes so far as to say that in effect from around June 2016 the balance of power totally shifted, Roth is now in control of TTC, and the MU has effectively been ignored or put aside by him. But Orlov is content that Roth take over the company, particularly if he thinks he can run it in a better way. Roth can buy him out, Roth can get the company, and if Roth thinks he has a claim against Orlov he can procure TTC to sue him, as has been already done (albeit not yet followed through). But it would be inappropriate for the matter to be dragged out, so that Orlov is kept out of both the management and the value of the shares.

132.I accept that a finding of at least some unfairly prejudicial conduct is a statutory jurisdictional requirement to be able to order a buyout. I also accept that in most cases, making such a finding will unlikely be possible or appropriate at the interlocutory stage, at least the early interlocutory stage. However, by the time a case approaches the trial, with closed pleadings, full discovery, and witness affidavits/affirmations or witness statements, there may well be reached a position where the court – having read into the case for the PTR and/or trial – would have no difficulty in identifying at least some unfairly prejudicial conduct which it could find and which could be the proper basis for a buyout order. In such a case, it can well be asked why a full trial of all issues would be necessary, particularly if one has an eye on the fundamental underlying principles in RHC Order 1A.

133.This might be such a case. Indeed, at the commencement of the trial I indicated to Mr Wong and Mr Joffe that the materials seemed to me to demonstrate that I could find, and to make it even likely that I would find, at least some unfairly prejudicial conduct, possibly if not probably such conduct on both sides. But the invitation to proceed on this basis was not taken up.

134.Mr Joffe explained that the allegations which are pleaded both in the cross-petition and in the defence to the petition are important for at least three reasons. First, they go to whether unfair prejudice can be established, and if so what remedy should be given by the court. He referred me to Re London School of Electronics Ltd [1986] Ch 211, [1985] BCLC 273, where Nourse J held that the conduct of the petitioner could be relevant in a number of ways of which the two most obvious were first, that it might render the conduct of which the petitioner complained, even if prejudicial, not unfair, and second, even if the treatment of the petitioner was unfair and prejudicial, it might affect the relief granted by the court.

135.Secondly, Mr Joffe said that the allegations are important because they go to the basis of valuation. Thirdly, the allegations go to the date of valuation. For example, where the starting position is that the valuation date will be the date of the order for valuation, if the petitioner wants to show good reason for another date, he has to explain to the court why, and his conduct may be relevant if there has been activity which damages or destroys the business of the company between the petition and the date of the order.

136.Mr Joffe also added that the conduct of both Orlov and Roth might be relevant if, for example, it can be shown that they (comprising 100% of the shareholders) have agreed to something in a way sufficient even to override the articles, so that one of them could not come to court complaining about unfair prejudice.

137.Mr Wong also submitted that in any event there are also legal points which identify that Roth’s cross-petition is entirely unnecessary and inappropriate. He submits that the allegations made by Roth against Orlov are allegations not of mismanagement but of misconduct, and such allegations should be left for a derivative action. He referred me principally to the two cases of Re Chime Corp Ltd [2004] 3 HKLRD 922 (“Chime”) and Re Shun Tak Holdings Ltd [2009] 5 HKLRD 743 (“Shun Tak”).

138.There may be some force in those submissions, but there was considerable argument in the written and oral opening and closing submissions relating to this point. It may be necessary to canvass the arguments in more detail for other reasons below. But I did not, and I do not, think that this point is capable of reaching a ‘short answer’ to the case as a whole.

139.Ultimately, the parties were not prepared to proceed consensually on a shortened approach, and there has been no application actually to strike out the cross-petition of Roth. In any event, the issues which are pleaded in that cross-petition are also pleaded (often verbatim) in Roth’s defence to Orlov’s petition. Everyone has proceeded through the interlocutory steps towards a trial, and has prepared for that trial. The trial has taken place, canvassing the evidence relating to what has been referred to as the whole “laundry list of complaints” (though I prefer the phrase “litany of complaints”).

140.It might be dangerous just to pick one issue out of a vast number of issues, having presumably already decided that it would be determinative when, in the proper context of the other issues and the evidence of those other issues, it might not be determinative. This may be particularly so, where those other issues may not go away and may require resolution at some point.

141.Though no Judge likely has any great desire to decide and resolve more issues in dispute than is reasonably required for the proper resolution of the overall case, there is also a natural reluctance to hear full evidence and argument on matters and then not decide most of them, but leave them to someone else on another day and who would have to hear all the evidence and argument traversed again.

142.It seems to me that it is, therefore, necessary to consider the totality of the cross complaints of both Orlov and Roth, and see whether each might and should lead to a finding of unfairly prejudicial conduct in proper context, and potentially the impact that might have on any valuation process should a buyout order be made.

D. Summary of the Cross Complaints

143.Orlov’s pleaded case is that Roth conducted the affairs of TTC unfairly prejudicial to himself in breach of the MU. Whilst the core of the complaint is in an alleged exclusion from management, individual complaints against Roth are put forward, being:

(a)  misusing TTC’s resources regarding the claim by MTF for sums due under the SPA;

(b)  denying Orlov’s right to appoint an alternate director;

(c)  denying Orlov’s right to information and documents of TTC;

(d)  wrongfully holding himself out as CEO to take over TTC;

(e)  dismissing TTC’s staff in Hong Kong without Orlov’s consent;

(f)  excluding Orlov from the management and affairs of Lispa and Baltlanta;

(g)  excluding Orlov from the management and affairs of Rainbow Reefers;

(h)  paying additional salary and bonuses to clock without reference to Orlov or Mansfeld and in breach of the articles of TTC;

(i)  unilaterally procuring TTC to grant the power of attorney to Engellau without reference to Orlov or Mansfeld.

144.Roth’s pleaded case is that Orlov has breached the MU and/or his director’s fiduciary duties by:

(a)  causing or procuring TTC to purchase Katla from MTF on seller’s credit at a substantial overvalue;

(b)  improperly dealing with the affairs of Katla after its acquisition by TTC by:

(i) orchestrating a concerted effort to disrupt Katla’s operations in or around the last quarter of 2017, in connivance with Larionov and Bengochea;

(ii) causing or procuring MTF to terminate the Agency Agreement and transfer its custom to KOS; and

(iii) causing or procuring the Norebo Group to “acquire” KOS;

(c)  improperly dealing with the affairs of Rainbow Reefers Group by:

(i)  wrongfully diverting to a company in the Norebo Group the business opportunity of purchasing the Karelian vessels; and

(ii)  blocking the sale of the Frio P without any or any proper commercial justification;

(d)  causing or procuring TTC and/or its subsidiary DSL to be used to funnel money from companies in the Norebo Group to Brackway, for an undisclosed purpose and not for any purpose in the interests of TTC or DSL.

E. Applicable Legal Principles

E.1. Unfair Prejudice Claims

145.As already indicated, each of Orlov and Roth alleges that the relationship of mutual trust and confidence between them has ceased to exist and the other has conducted the affairs of TTC in a manner that is unfairly prejudicial to him. I have referred above to the provisions of section 724 of the Ordinance.

146.The correct legal approach to that section is largely undisputed between the parties, and for many of the principles no authority need be cited. They can be summarized as follows.

147.Unfairness may be established where there has been a breach of the terms on which it has been agreed that the affairs of the company should be conducted. That agreement might be evidenced by the articles of association of the company, or perhaps a collateral agreement between the shareholders.

148.Unfairness may also be established where equitable considerations arising from the parties’ relationship make it unfair for those conducting the affairs of the company to rely on their strict legal powers under the company’s constitution.

149.The latter such relationship is generally labelled a “quasi-partnership”, the existence or non-existence of which is largely a question of fact.

150.In the case of a quasi-partnership company, exclusion of the minority (or an equal shareholder) from participation in the management of the company contrary to the agreement or understanding on the basis of which the company was formed, may provide a clear example of conduct by the majority (or other equal shareholder) which equity regards as contrary to good faith. It is not necessary that the agreement or understanding between shareholders is independently enforceable as a matter of contract.

151.Prejudice includes damage to the financial interests of the member such as where the value of the shareholding is diminished or jeopardized. But although the prejudice must be to the petitioner in his capacity as a member, it need not be financial in character. Hence, a disregard of the rights of a member as such, even without any financial consequences, may amount to prejudice falling within the section.

152.A breach of fiduciary duty can amount to unfairly prejudicial conduct of the company’s affairs. Breaches of duty may include causing a company to purchase property at an overvalue, and the diversion of the business opportunity available to a company.

153.But it is important to remember that it is necessary that the conduct complained of must be both unfair and prejudicial. Whilst conduct may be prejudicial without being unfair, or unfair without being prejudicial, one without the other will not suffice to trigger the statutory jurisdiction under section 724.

154.Whilst there is no principle that a petitioner may be disentitled to relief if he does come to court with “clean hands”, it is necessary to consider the conduct of a petitioner, as his own actions may render the actions of a respondent not unfairly prejudicial, or might affect the relief that may be granted to the petitioner.

155.In terms of the petitioner’s conduct rendering otherwise unfairly prejudicial conduct merely prejudicial, and not unfair, the mere fact that the petitioner is a wrongdoer is not enough to deny him or her a remedy. What is required is some conduct which is sufficiently serious or conduct which is sufficiently closely related or connected to the alleged unfair prejudice to make it appropriate for the Court to exercise its discretion so as to refuse to grant the remedy under the section which it would otherwise grant.

156.The unfairly prejudicial conduct complained of must be conduct in the subject company’s own affairs. But it may sufficient that the affairs of the company have in the past been conducted in a way which was unfairly prejudicial to the petitioner even though at the date of the petition the unfairness has been remedied.

157.If unfairly prejudicial conduct is established, one potential remedy is the making of a buyout order.

158.But relief would not properly be given by the court in respect of conduct which the majority shareholders have remedied and where there is no continuing unfairly prejudicial conduct of the affairs of the company when that conduct is in their hands alone. Indeed, it maybe that it is simply not apt to deal with a case where the petitioner can himself readily put an end to the unfair prejudice alleged.

159.In assessing the date of valuation, the court engages in a discretionary exercise, and the essence is for the court to choose a date which is fair on the facts of the particular case. The starting point for a going concern is generally that the shares should be valued as nearly as possible to the actual date of sale, usually the date of the order for valuation. Taking the date of the petition as the valuation date may be justified in circumstances where in issuing the petition the petitioner has elected to treat as at an end the basis on which he agreed to be a shareholder.

E.2. Claims for Mismanagement and Misconduct

160.There is a distinction between claims for mismanagement and claims for misconduct. This distinction may be of importance in the consideration of an unfair prejudice petition.

161.In Chime, the issue for consideration was described by Bokhary PJ (at §8) as the question of law whether, on an unfair prejudice petition presented by a shareholder, there is jurisdiction to make an order for the payment of damages or compensation, or for the grant of restitution, to the company itself. Lord Scott NPJ described (at §35) the question as being whether, on an unfair prejudice petition, the court can deal with and dispose of a cause of action for damages or restitution that is vested in the company and, if it can do so, in what circumstances it should do so.

162.In that context, Lord Scott stated (at §62) that as a general rule, the court should not in an unfair prejudice petition make an order for payment to be made by a respondent director to the company unless the order corresponds with the order to which the company would have been entitled had the allegations in question been successfully prosecuted in an action by the company (or in a derivative action in the name of the company). If the order does not so correspond then, either the company will have received less that it is entitled to, in which case it will be entitled to re-litigate the issue in an action against the director for the balance, or the company will have received more than it was entitled to, in which case a clear injustice to the director will have been perpetrated.

163.Lord Scott also stated (at §63) that the use of an unfair prejudice petition in order to circumvent the rule in Foss v Harbottle in a case where the nature of the complaint is misconduct rather than mismanagement is an abuse of process.

164.Subsequently, in Shun Tak, Kwan J (as she then was) agreed that the Court of Final Appeal in Chime was not dealing with the wider proposition that where the nature of the complaint is of misconduct as opposed to mismanagement, it is not appropriate to proceed by an unfair prejudice petition, and the proper vehicle for obtaining relief would be a derivative action.

165.Having referred in particular to the decision in Re Charnley Davies Ltd (No 2) [1990] BCLC 760 (“Charnley”), where Millet J (as he then was) was concerned to distinguish between proceedings where the complaint was of unfairly prejudicial conduct of the company’s affairs and proceedings where the complaint was of breaches of duty to, or other misconduct actionable by, the company, Kwan J identified the need to look at the nature of the complaint together with the relief sought. She agreed with the analysis that if the whole gist of the complaint is misconduct and the objective of the litigation is to seek redress for the company for the misconduct, then it is squarely a case within derivative action territory and the matter would not be within the practical jurisdiction of the unfair prejudice provisions, although there may be theoretical jurisdiction.

166.In further holding (at §36) that the distinction between granting direct monetary relief and an order directing proceedings to be brought to recover monetary loss is a distinction without a difference, and the objective is the same, it seems to me that Kwan J was focusing on the fact that the relevant monetary claim was being brought or was to be brought on behalf of the company itself.

167.In the particular case, she went on to hold (at §66) that the whole gist of the complaints was plainly misconduct, and that the objective of the petition was to seek redress for the company for the misconduct, where the remedy provided by law for the wrong would adequately redress the misconduct. She identified that the petitioners were not seeking relief for mismanagement, and held that in the particular case if the complaints about misconduct and the redress sought for the Company were removed, there would be nothing left in the petition. Hence, the proper vehicle for seeking and obtaining relief would be in a derivative action, not an unfair prejudice petition.

168.In Charnley, Millet J (at p625B-D) identified that the distinction between misconduct and unfairly prejudicial management does not lie in the particular acts or omissions of which complaint is made, but in the nature of the complaint and the remedy necessary to meet it. He said it was a matter of perspective, where the metaphor is not a supermarket trolley, but a hologram. If the complaint is one of misconduct simpliciter there is no need to assume the burden of alleging and proving that the acts or omissions complained of evidence or constitute unfairly prejudicial management of the company’s affairs. It is otherwise if the unlawfulness of the acts or omissions complained of is not the whole gist of the complaint, so that it would not be adequately redressed by the remedy provided by law for the wrong. In such a case it is necessary to assume the burden

169.But Millet J also (at p625E-G) agreed that the fact that a petitioner could have brought a derivative action does not prevent him seeking relief under the unfair prejudice provisions. The very same facts may well found either a derivative action or an unfair prejudice petition. But that should not disguise the fact that the nature of the complaint and the appropriate relief is different in the two cases. He specifically identified that the petitioners in the case before him would not have been content with an order that the respondent make restitution to the company, and that they relied on the respondent’s unlawful conduct as evidence of the manner in which he had conducted the company’s affairs for his own benefit and in disregard of their interests as minority shareholders, and they wanted to be bought out. As he put it, they wanted relief from mismanagement, not a remedy for misconduct.

170.In Waddington Ltd v. Chan Chun Hoo (2008) 11 HKCFAR 370 at §77, Lord Millet NPJ (as he had by then become) again noted that while there is some overlap between unfair prejudice proceedings and a derivative action, they serve essentially different functions. Unfair prejudice proceedings are concerned to bring mismanagement to an end; derivative actions are concerned to provide a remedy for misconduct.

171.In this case, Roth would not be satisfied with restitution to the company, as he is pursuing the unfair prejudice petition for his own benefit and he wants a buyout order (albeit that he wants to be the buyer, so as to remove Orlov from TTC and thereby be relieved of his alleged mismanagement contrary to the terms of the MU). He has made no claim to any monetary award for the company.

172.Kwan J further referred in Shun Tak (at §71) to the risk of double jeopardy, which had also been recognised by Bokhary PJ in Chime (at §28). The concern in the case before her was that, if the petition were dismissed, the individual respondents might be vexed again on a derivative action brought in the name of the company. The court might have dismissed the petition and so refused to direct the company to bring proceedings against wrongdoers, but might not make binding determinations or findings as might create an estoppel which could be invoked by the respondent directors. In addition, she referred to the difficulty that there is no lis between the respondent directors and the company in the petition.

173.Mr Wong submitted that a similar difficulty arises in the present case. He says that, properly characterised, the complaints made by Roth in the cross-petition are all complaints of breaches of duty or other misconduct, which are actionable by the company. Hence, those fall to be pursued by way of derivative action, that if you strip out all those complaints from the cross-petition, there is nothing left.

174.In response, Mr Joffe accepts, and it is probably common ground, that a breach of directors’ fiduciary duties can give rise both to unfair prejudice and to derivative claims. Here, Roth has pleaded both breaches of director’s fiduciary duties and breach of the MU, so there is no basis for suggesting that the claim must be run in derivative proceedings.

175.The important point, says Mr Joffe, is that in both Chime and Shun Tak the claim for monetary relief was the claim made on behalf of the company, or by reference to a cause of action vested in the company. But, in this case, Roth seeks no monetary relief for TTC. Hence, the ratio in Chime and Shun Tak are essentially irrelevant to current circumstances. I agree.

176.Mr Joffe also submits that the claims for an adjustment to the share valuation to reflect the financial losses suffered as a result of unfair prejudice are not equivalent to claiming financial relief for the company. Whereas an order made under section 725(2)(a)(ii) of the Ordnance would be an order that proceedings be brought in the Company’s name against the wrongdoer, so that any monetary relief would be the company’s property, a share is the interest of a shareholder in the company measured by a sum of money. The share is the property of the shareholder, not the company. Again, I agree.

177.A share sale, effected by a buyout order under the statutory unfair prejudice provisions is to enable the shareholder who has been unfairly prejudiced to extract his share of the value of the company’s business in return for forgoing any future right to dividends. In the converse suituation, the vendor who has committed the unfair prejudice is required to realise his share of the value of the company’s business. Viewed either way round, what is being dealt with is a remedy personal to the shareholder, and the transfer of property of the shareholder.

178.Hence, an adjustment to the share price to reflect the loss suffered by the company as a result of the unfair prejudice remains a personal claim in which the shareholder seeks an enhanced price for his asset.

179.There remains, however, the concern about double jeopardy. Mr Joffe submits, on the authority of Chime and Shun Tak, that the possibility of double jeopardy could only arise if the unfair prejudice petition did not succeed. It is in those circumstances that the respondent directors would be at risk of a subsequent action by the company (or a derivative action) on the same facts. Also, in those cases, the court was considering the possibility of double jeopardy before the trial took place. But, if a trial has taken place, and the court has decided to order a buyout, the question of double jeopardy does not arise.

180.Mr Joffe further submits that if the court orders a buyout, and the value of the claim arising from the unfair prejudice comprising losses to the company is taken into account in the valuation, it would be a plain abuse for the new owner to cause the company to bring proceedings against the person whose shares were ordered to be purchased. On the other hand, if the unfair petition in this case is dismissed, then the court will have found that the allegations on which Roth might seek to bring subsequent derivative proceedings are not well founded, so bringing those proceedings would be an abuse of process.

181.In any event, says Mr Joffe, Roth would be bound by factual findings made in these proceedings on the basis of issue estoppel, and a privity of interest is recognised as between a company and its controlling directors and shareholders so that TTC would also be bound by issue estoppels arising in this case. Further, TTC was only excused from further participation on the basis that it would be bound by the judgment.

182.Mr Wong does not accept that this is necessarily a complete answer to the double jeopardy concern. He relies on the fact that there is no strict lis between TTC and Orlov in these proceedings. He also refers to the possibility that the company might go into liquidation, or that Roth might sell his shares to a third party. In those circumstances, Mr Wong submits that there would be at least a real concern that a liquidator or purchaser would not be bound by findings of fact made against Roth.

183.Mr Wong referred me to the case of Chan Woon Fui v. Chan Wing Suen and others (unreported, HCCW 350/2004, 7 December 2005) in which Barma J (as he then was) accepted that the propositions deriving from Chime included that whether or not a court dealt with claims to grant relief in favour of a company in an unfair prejudice petition was a matter for discretion which might include the consideration of that there could be unfairness in allowing such a course to be taken and that a director who successfully resisted such a claim in an unfair prejudice petition might later find himself faced with an action by the company, or a derivative action, founded on substantially the same facts. But again, that was a case in which there was an express claim to relief for the company, and the consideration appears to reflect a concern when that claim has been dismissed within the petition proceedings.

184.I think the answer to the double jeopardy concern, if it is to arise in this case, is as follows. First, it has expressly been accepted on behalf of Roth that my findings in this case will prevent him starting or pursuing proceedings in his own name, or in the name of the company, making allegations which have already been dealt with (and, I would have thought, could have been dealt with in the Henderson sense) in these proceedings. Secondly, I can direct that the company is bound by the result, and that the company under whatever potential future management or ownership cannot seek to re-raise claims based materially on the same facts. In so far as that means that extent proceedings, for example in England, cannot be pursued further, that is what I would intend.

185.In this context, I have considered the position relating to the outstanding claim from Tugushev. But, it seems to me where he is unlikely unaware of these proceedings but has taken no step to become involved in them or to protect his position in any way, if he were ever ultimately to take any element of interest in TTC, he would take it subject to my above decision and direction.

F. Other Factual Matters

F.1. Roth’s business involvement from April 2011 to June 2016

186.A significant part of each party’s argument turns on that party’s assertion as to the extent of Roth’s involvement in the Norebo and TTC businesses in the period following Roth’s diagnosis and emergency heart surgery in late March and early April 2011.

187.Roth says he was not heavily involved in the business for a ‘convalescent period’ which lasted until he returned properly to work in June 2016 (notably, a period of over 5 years). This is important to his case, as he says that it was only in June 2016 and afterwards that he began to find out what had happened in the businesses during that 5-year period.

188.On the other hand, Orlov says that Roth was fully involved and so fully cognisant, and in accord, with what was going on in the businesses over that period of time. Orlov says the claim that Roth was effectively out of action for those 5 years is unsustainable, hence Roth’s argument that it was only in and after June 2016 that he learned of what had been going on is equally unsustainable.

189.Though an enormous number of words on paper and much time in court have been spent on exploration of Roth’s involvement, or lack of involvement, in TTC’s business in the period April 2011 to June 2016, I am not sure ultimately there is very much difference between the parties on the evidence as to the extent of his involvement following his health scare and in the period thereafter. Clearly he was less involved in the day-to-day management of TTC and its subsidiaries, and this slack was taken up by Orlov (and to some extent by Klock, who seems to have acted as Roth’s ‘eyes and ears’ to some degree). But equally clearly Roth was at least involved at board level, and fully involved in those matters essentially covered by the MU.

190.As Roth himself said in evidence, he was “not dead”. Whilst the emergency operation and the discovery of a further medical problem no doubt precipitated a significant change in lifestyle, he did not lose all interest in TTC (or indeed in Norebo). TTC was obviously of some importance and interest to Roth, even when he was unwell and not able to take as active a role as he had previously, and as he might otherwise have preferred.

191.Roth appears to have attended every board meeting of TTC, either in person or by telephone, throughout the period from mid-2011 to June 2016. That is the forum in which decisions were ultimately taken, or if previously taken were to be endorsed, in accordance with the MU. The minutes of those meetings identify precisely that happening.

192.But on occasions the minutes also record the discussion of considerable operational detail in relation to some of the operating subsidiaries. The board of TTC frequently had reports from managers of the operating subsidiaries, who themselves sometimes physically came to the meeting to present those reports (and, no doubt, take questions form the directors). The minutes of the meetings also identify that they often lasted many hours (though, naturally, with some breaks), and even on occasion continued on a subsequent day. The minutes also identify that certain business aspects and projects were revisited in numerous and often consecutive meetings.

193.In fact, even outside of the board meetings, it seems that Roth was keeping tabs on TTC and its operating subsidiaries to quite a fine level of detail. Firstly, he was kept broadly up to date by monthly contact with Klock, and Klock’s forwarding to him some email information (and I do not see anything nefarious in that contact). Secondly, Roth was receiving the various cash flow reports (usually directly from Yip, the finance manager). Roth would likely have been interested in those because, as Klock put it, this aspect had always been Roth’s main concern or main focus. Thirdly, it also seems that Roth was copied into the rolling agenda of the weekly meetings of the operational management, and from time to time attended those meetings, or was provided with a summary of them after they had taken place. I accept Orlov’s evidence that Roth had timely information about material things happening with the companies within the group.

194.Nevertheless, it is also clear that Roth stepped back from some of the day-to-day operational activities, and that Orlov took up a greater degree of responsibility as his cover. Leaving aside any argument as to who was CEO, and whether the circumstances created an alternate CEO, the fact that Orlov took up a greater degree of responsibility is evidence of the then harmonious relationship between them, and the sharing of business responsibilities in accordance with their abilities (technical and practical).

195.So, overall, the evidence identifies that Roth was clearly generally kept in the loop, and that he was also sometimes specifically brought into the loop for particular topics of discussion and decision. I accept that that may have been on occasions where he had prior experience or specialist knowledge, and to have engaged him on those topics was consistent with the previous sharing of work between partners of differing but complementary skills.

196.I accept that Roth for a period he was not so very closely involved in the day-to-day management of the operating subsidiaries. In particular, he probably did not normally attend the weekly management meetings, and it seems that he would not have done so as a result of his, as he put it, “very strict” approach to his change in lifestyle. Roth did attend some meetings, but not what he described as the normal management meetings. Nevertheless, he was sent materials, and he sent a not insignificant number of emails, some of which would have allowed Roth to follow in some detail certain operational questions and the funding or cash flow matters (although I accept that the email traffic to and from him was rather lower than it might otherwise have been, and the number included some personal emails).

197.The important point seems to me to be that Roth kept abreast of, and was made specifically aware of, the important decisions of the sort which fell under the MU. Those decisions were mainly made at or endorsed at Board level. I do not accept that Roth would have simply gone along with decisions, or signed significant documents, without satisfying himself that he had sufficient information to make a decision whether or not to agree or to sign.

198.He may have gone along with, that is agreed to, decisions which he might at first have opposed. But that he did agree is evidence of his participation, and indeed the way the MU operated, and it is not open to him years after the event to claim he agreed on the basis of insufficient materials.

F.2. Klock’s Independence

199.Klock was appointed as director of TTC on 15 May 2017, by board resolution of that date. Mr Wong challenged Klock’s claimed independence as director. This was really an attack on his bona fides.

200.One of the points of challenge related to the fact that TTC issued a writ in Hong Kong in HCA 1134/2017 against Orlov, on the very day following the appointment of Klock as director. It was suggested that Klock could not possibly have been an independent director, if he authorised and gave instructions to commence the writ action within a day of his appointment.

201.Nevertheless, Klock accepted that he had to some extent been involved in discussions with Roth about potential claims which TTC might bring against Orlov arising from the Katla purchase. It is obvious as a matter of chronology, and the time needed to prepare a writ for issue, that TTC’s then lawyers must have received earlier instructions in relation to the claim. But that is also obvious from the terms of the board minute appointing Klock as director. Another paragraph of the minute specifically authorises Klock to seek independent advice from independent lawyers, and to instruct them in relation to two matters defined as “the Issues” being (1) the ongoing litigation between Orlov, MTF and TTC and (2) any dispute between Roth and Orlov. The last part of that paragraph authorises Klock to ratify any actions and steps previously taken by or on behalf of TTC in relation to the Issues, clearly identifying that someone had taken such actions and steps before 15 May 2017.

202.I do not think these facts identify the basis on which I would infer a lack of independence on the part of Klock.

203.Nor do I think the matters relating to his remuneration, raised by Mr Wong, realistically suggest a lack of independence. It is correct that a new consultancy agreement was put in place in December 2016, under which Klock (or his service company) was to receive NOK160,000 per month for his services to TTC. But Klock explained that as being necessary because his previous consultancy agreement related to his work both for TTC and Ocean Trawlers, from which latter post he had since been dismissed. He is also correct that his pay was increased to NOK200,000 by a supplemental agreement in June 2017, and that he was thereafter awarded a 3 months’ discretionary bonus by Roth. But Klock explained that the increase was to reflect the extra work necessary arising from the transfer of the back-office staff, and bringing a new team up to speed, and the bonus was a typical bonus awarded on a discretionary basis by whoever was either the MD or the CEO at the time. I accept that evidence.

204.Ultimately, having seen and heard Klock give evidence, I think he has throughout mainly tried faithfully to conduct himself in accordance with what he sees as his duties as CFO and as director. I accept that Klock is sympathetic to Roth’s position, and has in practical terms become aligned with Roth. This has from time to time lead to mistakes which open him up to some justifiable criticism. But I do not think that he has aligned himself with Roth in the sense of voting with Roth simply because Roth has instructed him to do so, or paid him to do so. Rather, I think his alignment with Roth was essentially the consequence of taking the view – perhaps sharing Roth’s view – that their intended actions were in the best interests of TTC, not least in the circumstances of what he (and Roth) perceived to be the conflict, actual or potential, arising with the positions of Orlov and Mansfeld.

205.But, the relevant conduct to consider when assessing whether it has been unfair and prejudicial is not the conduct of Klock in any event. It is the conduct of Roth. Questioning the independence of Klock may be focusing on the wrong question. In practical terms, Roth has facilitated Klock acting as he did because it was not made clear by Roth to Klock that the terms of the MU actually prevented it being properly open for Roth to invite him to cast a deciding vote in circumstances where Roth could not agree with Orlov (or his alternate).

206.In his witness statement, Roth said in terms that the appointment of Klock was done to prevent the disagreements between himself and Orlov from disrupting TTC’s conduct of the MTF claim and TTC’s proper management generally.

G. Orlov’s Complaints

G.1. Roth as CEO

207.There is plenty of evidence that Roth was holding himself out, at least internally, as the CEO of TTC without objection from Orlov. Numerous board minutes designate Roth as CEO, and some contain discussion of the duties and details relating to that role. There is also correspondence in which Orlov appears to acknowledge that Roth has been acting as CEO, though that correspondence relates to salary. There is an overall sense that Orlov was appropriately happy to step in to assist with whatever would otherwise have been done by Roth in the operational management of TTC, following Roth’s illness in around March 2011. But there came a point (in 2014) when Orlov felt that Roth could not justify an increase in salary, and certainly not one tied as a percentage to his own salary from the Norebo group for which he had moved back to Murmansk and was working genuinely full-time.

208.The evidence shows that there was no formal appointment of Roth as CEO in March 2011. In his evidence at trial, Roth suggested that there had been an oral agreement made between him and Orlov during a meeting. But his witness statement does not say that, and rather it gives the impression that there was no actual agreement; it was just that Orlov raised no objection when Roth held himself out as CEO.

209.Roth says he did so specifically at an industry fair in Boston in early March 2011. In that regard, there is evidence that Roth was appointed and publicly held out as CEO of Ocean Trawlers in March 2011. Ocean Trawlers was the operating company at the time, and a later email from Brun-Lie shows Thomas Lagerqvist (who was chairman of that company) seems to have thought that Roth was CEO of the company of which he was chairman. In oral evidence, Roth essentially said that if he was CEO of the operating company, that made him CEO of TTC. I do not think that necessarily follows.

210.But in any event, it seems to me that whether or not Roth was de facto or properly de jure appointed as CEO of TTC is something of a red herring. It cannot be sensibly understood that the appointment of either Roth or Orlov as CEO would have somehow fundamentally altered the MU. Whilst a CEO might be more heavily involved in the day-to-day operational management of a company than other executive or non-executive directors, that would not mean the CEO has rights which conflict with the very basis of the cooperation between the two equal shareholders of the company.

211.It is unthinkable that, when Mansfeld was CEO, he might have exercised operational management conflicting with the agreed views of Orlov and Roth. Indeed, Mansfeld said in evidence that it had not occurred to him that he might act in such a way. (In passing, I note the suggestion in evidence that Roth became unhappy with Mansfeld as CEO exactly because he started to want to become involved in business decisions.) I do not think the position (that the CEO should not act in conflict with the agreed views of Orloff and Roth) would be different simply because one of the shareholders and parties to the MU was given the title of, or acted as, CEO.

212.Similarly, even if Klock is to be regarded as independent (as to which see elsewhere in this judgment), it was simply contrary to the MU for there to be any director, independent or not, who might be used by either one of Roth or Orlov to outvote the other on issues where they could not reach agreement.

213.There is another aspect to the CEO question. Since his return to more full-time work in June 2016, and especially since his assignment and contract as CEO since 6 March 2017, Roth has asserted that he is able to conduct the duties of the CEO essentially without interference from the board of TTC unless matters are brought up to the board by the “TTC management”. I deal further with the aspect of “TTC management” elsewhere in this judgement, but if Roth had that ability as CEO, so must Orlov when he was in effect acting as CEO, having stepped into the role (albeit perhaps shared to some extent with other members of staff) when Roth was taken suddenly ill in March 2011.

214.In other words, I do not think Roth can demonstrate double standards and insist that he can and could do as he wishes as CEO, but Orlov could not when acting in that role. Of course, the real distinction is that Roth asserts that he only ever acted in the best interests of TTC, whereas Orlov did not. That seems to me to be an entirely different point, which I can address elsewhere.

215.As to the degree of control taken by Roth, he said in terms in evidence that he took over the entire control of TTC, in the best interests of the company, otherwise it would be dead. Whilst he acknowledged that that excluded Orlov, Roth insisted that Orlov had actually excluded himself, for example by not participating in board meetings and by not doing any other management jobs. Roth said that he and the management had turned the company round and TTC is now making money.

216.There is significant dispute as to the accuracy of the board minutes for 29 June 2016. It is important to remember that by that date Roth had transferred his own shareholding in Norebo to Orlov. The minutes record the taking up of the duties of CEO by Roth, and record the discussion and conclusion that Orlov would take a non-executive role, albeit becoming involved as and when requested or necessary. Orlov denies that he ever agreed to take a non-executive role.

217.In my view, it is likely that once Roth was either able or wanted to take up the prior heavier responsibility of operational day-to-day management, which role had been assumed by Orlov in the light of Roth’s illness, Orlov would have been more than content to go back to the previous arrangement and to step aside. Orlov was, of course, by then heavily involved in managing the Norebo Group.

218.I therefore accept that there was discussion and conclusion reached that Orlov would become ‘non-executive’, but only in the sense that he would give back to Roth more of the day-to-day operational management. But I wholly reject any idea that Orlov would have become ‘non-executive’ in the sense of giving up the overall joint management control and joint decision-making which was the essence of the MU.

219.Orlov’s real complaint seems to me to be that the insistence by Roth that he was the CEO was being used to justify the creation of a different tier of management, so as to explain and justify why Orlov might be excluded from information and decision-making which he would otherwise have expected to be involved in under the MU. That is why Orlov was so adamant, perhaps without the degree of justification that he asserted, that Roth had not been appointed CEO.

220.In any event, I am satisfied that the real concern was well-founded. It seems to me from the contemporaneous materials that Roth was asserting his role as CEO as part of the “TTC management” as a basis for doing more on his own decisions than would have been appropriate, and so as to exclude Orlov and his camp from decision-making and access to materials relevant to such decisions. This was essentially because of what Roth perceived to be the inevitable conflict of interest that had arisen between himself and Orlov (see elsewhere in this judgment).

221.As to the tier of “TTC management”, it is to be noted that TTC is a holding company. It is TTC’s subsidiaries which are the operational businesses. The management of TTC’s business is really conducted by the management of the operational businesses at the operational level. Of course, TTC directed and managed those subsidiary businesses. But that was what the board of TTC did, more particularly Roth and Orlov in accordance with the terms of the MU.

222.Insofar as it has been suggested that the MU did not extend to the subsidiaries of TTC, I reject that suggestion. It makes no sense where TTC is a holding company and the real matters which might affect its value arise as a result of the operation at the subsidiary company level. Indeed, in parts of his own evidence Roth specifically talks about decisions impacting the “TTC Group”, as to which he was entitled to be informed and jointly to make decisions with his equal partner Orlov.

223.There was, therefore, in my view, no room for the interposition of some tier described as “TTC management” if it was used to get around the requirements of the MU. The creation of such a term and the way in which it was deployed seems to me precisely for the reasons of which Orlov makes complaint, namely to take away from him – that is, to exclude him from – a significant part of the oversight and operation of the business of the subsidiaries of the holding company TTC.

224.That this is so was also revealed by Roth in the evidence he gave on the second day of his oral testimony about the equal partnership and the common understanding. Roth appeared to identify late 2014 as a watershed moment. He said that up to that date there was the common understanding in the form of the MU which reflected the equal partnership of himself and Orlov. But that common understanding about the operation of all the companies was broken about 90%, so that the only thing left was TTC. Roth also identified that when he sold his shareholding in Norebo to Orlov, they became competitors, and he asked the rhetorical question, “When a competitor is conflicted, how can you have a common understanding that you share everything?”.

225.That seemed at first to be a suggestion that the MU ceased to exist at all as from 2014. But Roth then clarified his position that the MU might continue to exist for some decisions, but that there were exceptions from the MU when Orlov was conflicted because of his other interests. That conflict was with the activity of the operational companies of TTC, whereas (as Roth put it) “TTC and myself have common interest, but not Mr Orlov”.

226.As I have noted. at one point in his oral evidence, Roth went so far as to say that after the Norebo separation there was no common understanding left. (On this point, I note the later suggestion of setting up a liquidation committee was turned down by Roth as he considered that it was not best for the company. But that is a little odd, as liquidation is the recognition that the partnership has come to an end and is one way to realise what each shareholder owns in the company.)

227.Anyway, the idea that the MU either ceased to exist at all as from 2014, or was fundamentally modified in some way from around that date or even in 2016, is nowhere to be found in Roth’s pleaded case or in either of his lengthy witness statements.

228.This is surprising, to put it mildly – not least against the history of the various amendments made to the two petitions, defences and replies, in recognition of the importance that the precise nature of the complaints and answers are fully pleaded. Of course, it also explains why this was not mentioned in Mr Joffre’s written or oral opening submissions, and why it was not put to Orlov in cross-examination.

229.But the thrust of that evidence seems to explain what actually happened. As Roth said, “When there is a conflict of interest then it is prudent to run the company in accordance with the Articles”. In his view the whole of TTC was “infested by people who have a conflict” and – at least with the benefit of looking at the history of what happened, as Roth frequently mentioned – he saw them as looking after their own interests instead of those of TTC. In other words, where Roth considered there to be a conflict of interest he thought it prudent to exclude, and so he excluded, Orlov from the involvement which otherwise he would have had under the MU.

230.If the MU continued to exist, which is actually both sides’ pleaded case, that exclusion was a breach of it. Perhaps the attitude of Roth is summed up by some words in his witness statement to the effect that where a decision was in the best interests of TTC, Orlov had no reason to complain about it. But that misses the point of Orlov’s complaint, which was that he was excluded from the decision-making process as to what was or was not in the best interests of TTC, and he was kept from information or documents relevant to or necessary for that decision-making process.

231.I might add that, to be fair, the idea that voting might be restricted in some way because of a conflict of interest is to be found in the minutes of TTC’s board relating to a meeting of 1 March 2018. But that meeting took place long after most of the matters giving rise to the issues in dispute in these proceedings had occurred, and indeed well into the interlocutory process of these proceedings. The reference to conflict is also in some of the email traffic from around August or September 2017, but that was also after the disputes had really arisen and the parties had started digging trenches.

232.To say, as Roth did, that history shows he “did the right thing” does not seem to me to meet the criticism.

233.There was also some confusion in Roth’s evidence about the third director on the board of TTC. Roth seemed to accept the proposition put to him that (in the first period of directorship 2006 to 2010) Mansfeld never voted with either Roth or Orlov to outvote the other. Roth explained that the reason for that is that Mansfeld was never given the opportunity to vote because decisions were always taken jointly between himself and Orlov in advance of being brought to the board. But surely that is the description of the MU in operation; matters would indeed be discussed and decided between Roth and Orlov alone, and if agreed would be brought to the board for the formality of approval. But there is no suggestion that something would be brought to the board which had not already been agreed so that it could be decided by the board through the casting vote of the third director siding with either Roth or Orlov.

234.I reject Roth’s evidence that, for example, Brun-Lie was there to break the deadlock. That is wholly contrary to the materials in the witness statements of Orlov and Roth, which in common identify that whilst they had sometimes expressed differing views, matters were resolved between them by continuing to discuss them until the point of agreement could be reached.

235.At one point in his oral evidence, Mansfeld made the point (I did not think limited to one particular set of circumstances) that Brun-Lie was not capable of producing a business plan. In this respect, I think he was acknowledging – or was in accord with – Orlov’s point that Brun-Lie was not a businessman, and had not been appointed as a director for his business acumen but rather his legal and corporate governance input.

236.That makes sense anyway in the context of the MU. Both Roth and Orlov agree they were the only and equal partners in the business. They made the business decisions, and they made them together. As stated, if at first they did not agree, they tended simply to discuss matters until they reached an agreement. If they could not ultimately agree on a business proposal, that would mean an absence of mutuality and so that proposal would not go ahead. It seems to me to fly in the face of the MU then to suggest that deadlock between Roth and Orlov could somehow be broken by the vote of another member of their board.

237.I acknowledge that the articles of the company (as amended in 2010) appeared to draw a distinction between board decisions which require unanimous approval, and those that which can be made by majority decision of the directors. But the point of the MU was to govern the relationship between Roth and Orlov as regards TTC, and it seems to me that if there is a conflict between the terms of the MU and the terms of the articles, it is the MU which should prevail.

238.I have, of course, taken into account the possibility that the articles are proper evidence of what the MU really was. I do not accept that possibility as being the correct interpretation of the factual circumstances and the real common or mutual agreement or understanding.

239.In his closing submissions, Mr Joffe submitted that Orlov was not excluded from management because it was still open to him or his alternate, Mansfeld, to attend board meetings. He says that though Orlov excluded himself, Mansfeld took a full and vigourous part in the meetings, as some of the transcripts of the meetings evidence.

240.This submission seems to me to be one that amounts to saying that there is no exclusion if there is no total exclusion. I do not think that can be right. Being excluded from a significant part of what one would otherwise do by way of management in accordance with the MU is still exclusion from management. Also, it is precisely part of the complaint that numerous matters were not dealt with at board level because Roth (with Klock, and later Engellau) had decided that numerous matters did not require board consideration or approval, and could be dealt with at “TTC management” level.

241.Orlov’s complaint is made out.

G.2.  Access to documents

242.Mansfeld was nominated by Orlov to be his alternate as director of TTC by notice dated 20 November 2016. It is fair to say that there was immediate pushback from Roth, whose instant reaction was to tell staff that Mansfeld should have no access to the offices or anything in the offices. I have dealt with this in more detail elsewhere in this judgment. But the immediate pushback could not have been on the basis of legal advice, as was suggested by Roth, as that advice was yet to have been sought and had not yet been obtained.

243.Nevertheless, soon after his appointment as alternate director, Mansfeld continued to pursue access to documents, specifically finance and accounting documents, which he wished to see so as to exercise his powers and duties in his role. He wrote to Klock asking for access to various documents. It is of note that within 2 minutes of receipt of that email, Klock passed it to Roth in effect seeking Roth’s instructions or at least input as to how to respond to it.

244.Indeed, the whole story in relation to access to documents smacks of deliberate obfuscation and delay on the part of Roth, Klock, and hence TTC. I do not think I need to rehearse the volume of exchanges of correspondence between the parties and solicitors, but I note the changes in TTC’s solicitors, and the shifting sands of the advice as previous advice has been shown to be bad, so a new point of opposition to access is taken in its place.

245.I accept the thrust of Mansfeld’s evidence that whilst he was being told that he could have access to documents, and that there was simply some administrative delay, and that nothing was being hidden, and that there was merely inconvenience in the physical location for inspection, the opposite is true. Whilst there may have been some validity in a concern as to the later practicalities of inspecting documents at the outsourced back-office in Hong Kong in February or March 2018, that was many months after access to the documents was first sought.

246.The extent to which the documents were refused is clear from TTC’s opposition to the application which was necessitated to court, and which led to the Seagroatt Order. Whilst Roth has attempted to distance himself from TTC in this respect, I am unimpressed by that attempt. First, I do not accept that Klock was acting wholly independently or alone in whatever instructions he gave to TTC’s lawyers, and the evidence identifies that he was in contact with Roth on this topic. Further, TTC’s own lawyers revealed in correspondence that they took instructions not just from Klock, but from the board via Klock and others. Whilst those others are not identified by name, it seems to me to be the overwhelming inference that they at least included Roth.

247.Also, no answer has been suggested to the simple question why, if there was some objection to Mansfeld (as alternate director) being provided with the documents he sought, those documents were not simply provided to Orlov. Instead, Orlov had to join Mansfeld to commence court proceedings to get an order forcing TTC (and in practice Klock and Roth) to give him and his alternate director access to the documents to which they were clearly entitled as a matter of straightforward statutory provision.

248.It seems to me that it is not open now to Roth to seek to rely on the arguments which were rejected by DHCJ Seagroatt as to vague assertions of privilege, improper purpose and so on.

249.I also accept that even following the Seagroatt Order for production of or access to documentation, the obstruction apparently continued; for the avoidance of doubt, I do not accept that the further delay was limited to practical questions of where to obtain access. Indeed, this also seems to me to be relevant to the questions which arose as to the proper place for maintaining the documents, tied to the question of movement of registered office and place of business.

250.It may be that some of the obstruction was with the benefit of legal advice. I find that, in his contacts with lawyers, Brun-Lie was at the same time in contact with and discussing matters with Roth. It may not be correct to say that Brun-Lie and Roth were specifically trying to get legal advice which suited them and match their own views, so as to enable them to exclude Mansfeld. For example, I can understand that the northern European experience might lead them to the instinctive view (a) it could not be the correct answer to the question they faced to think that Mansfeld could in effect double up with Orlov on the director’s role, and (b) that the correct answer was that Mansfeld could only act as alternate to Orlov on specific occasions, and perhaps only when Orlov was otherwise unable to act himself on those occasions.

251.As an aside, there was some evidence that one reason why Roth should have trusted Mansfeld was because he himself had approached Mansfeld to be his alternate director. Though it fits the chronology of Roth appointing an alternate, Roth denies he approached Mansfeld for this purpose, saying it was to assist on a project. It does not seem to me to matter whether Mansfeld was approached by Roth to be his alternate director, or whether (as Roth says) Mansfeld was to assist with some work relating to Brackway. The fact of the approach at all evidences that Mansfeld was apparently someone with whom Roth felt in late 2017 he might be able to work (even if on a specific project) and in whom he presumably reposed the necessary trust as to integrity. Indeed, Roth suggested in evidence that he was prepared to employ Mansfeld even over the objections of Klock. Obviously, that trust since has completely evaporated (though it seems to me that the minutes of the meetings in which Mansfeld participated contain clear examples of an independence of mind, and not immediately or automatically siding with Orlov).

252.But returning to the point of legal advice, there was really no need to have sought legal advice in circumstances where directors were seeking information to which they were plainly entitled. To put it another way, the advice apparently given, if not actively sought as support for a chosen course, clearly matched the chosen course. Also, the solicitors acting for the company did not appear to be acting even-handedly, for example when asking Orlov and Mansfeld for undertakings not to use documents for an improper purpose of the purposes of this litigation, when there is no suggestion that they had asked Roth for a similar undertaking. In his oral evidence, Klock was forced to concede that he should have asked Roth for a similar undertaking too.

253.In oral evidence, Klock also accepted as a fact that, by the third quarter of 2017 and throughout 2018 and early 2019, he and Roth were withholding information from Orlov and Mansfeld, essentially because they feared that to provide them with information would enable them to frustrate their own intended actions.

254.In circumstances where Roth pleaded that part of the MU was that both sides would act in accordance with the relevant requirements of the Ordinance, which would include the right of a director for access to books and documents of the company, the deliberate denial of those statutory rights, and/or placing obstacles in the path of exercising those rights which at least delayed that exercise, seem to me to be clear breaches of the MU, and amount to unfairly prejudicial conduct.

255.A telling statement was made by Roth in his oral evidence (albeit by reference to a later time) when he said, “If Norebo wanted to hold a board meeting of TTC in Hong Kong to support the tax position, they should have considered it”. This identifies how Roth sees, and saw, it; the other side of the equation is not just Orlov but Norebo. This was part of the driver to exclude those on the Norebo side from access to information and documents. Once Mansfeld was appointed as alternate to Orlov, and even though up to that point he had apparently been trusted by Roth, Roth then saw Mansfeld as an extension of Orlov, and tried to shut them both out.

256.In his closing submissions in this context, Mr Joffre also submitted that there was not really total exclusion. He said the complaints about access to information and documents were really complaints of delay, not exclusion. I am afraid I think that is playing with semantics. In my view, if someone is obstructed and delayed in obtaining access something to which they have a plain entitlement, until that access is provided, there is exclusion. It is no answer to the real complaint to say access was provided later, not least when it was provided only under compulsion of an order of the court, and even then with purported strings attached.

G.3.  Dismissal of TTC’s staff in Hong Kong

257.It appears to be common ground that whilst, before the Norebo buyout, OTML had provided back-office services to both the Norebo Group and the TTC Group in Hong Kong, it was later decided that their back offices should be run separately.

258.It also appears to be common ground that it was intended that some employees would be transferred to the Norebo Group. Collyer (for Norebo) and Klock (for TTC) were asked to consider and propose a solution for presentation to the TTC board for approval. There is evidence of that joint consideration taking place.

259.Orlov’s complaint is that on 25 May 2017 Klock suddenly gave notice to terminate all OTML employees, of which Klock confirmed in evidence he had not previously informed Orlov or Mansfeld, and had not obtained the consent of Collyer. Further, the matter was not brought to the TTC board for discussion or approval.

260.Klock’s explanation was that this was a matter for the “TTC management”, and so he had discussed it with Roth and Engellau only. Hence, though I accept that Orlov may have had some knowledge from Collyer as to the discussions he held with Klock, in effect the Hong Kong operation of TTC was closed down without Orlov’s direct knowledge and without his (or his alternate’s) participation in the decision-making process at board level.

261.This point is connected to the change of TTC’s registered office, and also to the loss of TTC’s HKTRC. It seems to me that cessation of employment of the entirety of TTC’s back-office in Hong Kong, and the connected move of the registered office, with potential taxation implications, was something in which Orlov was entitled to participate under the terms of the MU. It is at least arguable that he was also entitled or obliged to participate in the decision-making process for proper compliance with his duties owed to TTC as director.

262.Even with the degree of mistrust by then in existence, I do not see why these decisions could not have been brought to and dealt with by the directors of TTC, and more particularly by decision-makers which included Orlov or his alternate. This seems to me to be an example of the interposing of the “TTC management” tier which had the effect of excluding, and seemed precisely to be intended to exclude, Orlov from significant management decisions. Even Brun-Lie expressed the concern that TTC was doing this too fast.

263.As to the tax residency question, I accept that the draft tax advice identifies that one of the fundamental problems for maintaining tax residency in Hong Kong is the absence of any director resident in Hong Kong. But, first, such problems could only have been exacerbated by closing the Hong Kong operation, and, secondly, might have been addressed in other ways. For example, Mansfeld was and is resident in Hong Kong.

264.I also think that there is proper criticism to be made of Klock’s approach to this question, and the way in which he presented what TTC was supposed to have been doing in relation to obtaining the HKTRC. His statements in an email of 28 November 2018 that TTC had “started the process” of getting a tax certificate and would do its utmost “to get this done as quickly as possible”, and in the email of 13 December 2018 that TTC “was chasing the certificate” were disingenuous. The application was not made at all until 12 February 2019. Even when it was relatively quickly refused in March 2019, Orlov was not informed.

G.4.  Lispa and Batlanta

265.Orlov’s complaints as pleaded are: first, that the initial valuation of capital needed to be injected into Baltlanta by Lispa (so as to comply with Lithuanian capital requirements) was revised downwards by more than half between 6 March 2017 and 22 August 2017; and second, as regards the decision to remove and appoint various directors to the boards of Lispa and Baltlanta.

266.The downward revision of the capital requirement resulted from an audit which identified the inaccuracy. The revised figure was unanimously approved by the directors of TTC at the board meeting on 22 August 2017 (including by Mansfeld). It is difficult to see what the concern is in this regard, unless the real complaint is as regards exclusion from the management and decision-making and information necessary for that purpose, which is the way the point was (gently) pursued in Mr Wong’s closing submissions.

267.I see nothing in the point, and I reject the complaint.

268.Mr Wong characterises the second point as being seizure of control in Lipa and Baltlanta. He refers to the resolution of TTC signed by Roth, and what is described as a false declaration signed by Klock in Las Palmas, both dated 22 September 2017.

269.As to the Lispa declaration, the fundamental concern is as to the absence of a shareholders or proper board resolution authorising TTC to make the decision as sole shareholder of Lispa. The suggestion made by Mansfeld that Klock might have committed a criminal offence may not be a good suggestion, and puts the point too strongly. There is no basis to challenge Klock when he says he was advised by a lawyer in Las Palmas that Roth as CEO of TTC could sign a shareholder’s minute of Lispa on behalf of the sole shareholder TTC. But, I think that slightly misses the point.

270.It may well be that as a matter of Spanish law the signature of Roth was sufficient to evidence the will of TTC as the sole shareholder of Lispa. But the real point is the absence of a proper board resolution when, as a matter of Hong Kong law, TTC acts by its board and decisions are made by board resolutions.

271.Again, the real complaint on Lispa and the removal of Bengochea as director, Roth says on the basis that she had ceased to be in-house counsel for Katla on 22 September 2017, is in relation to exclusion. The exclusion is from management by exclusion from the decision-making process. It does not matter that the same decision might have been taken with inclusion. But against the circumstances of what was happening in the background with Bengochea I am not satisfied that this exclusion was both unfair and prejudicial conduct.

G.5.  Defending the MTF claim for sums due under the SPA

272.This point was not really pursued at trial. It might be regarded as something of a makeweight in any event. It is unlikely to be in any way determinative of any matter, and even were I to find that any part of the complaint amounts to unfairly prejudicial conduct, I reject the suggestion that the expenditure on legal costs should in some way affect the valuation exercise if a buyout order is made.

273.I do not propose to consider this point further.

G.6.  Additional salary and bonus for Klock

274.I do not think this is really a stand-alone point. It might be relevant to, and I have already considered it in the context of, questions relating to Klock’s independence.

275.I do not propose to consider this point any further.

G.7.  Grant of power of attorney to Engellau

276.Whilst the minutes relating to the power of attorney granted to Engellau appear to have been clumsily drafted (Klock accepted they were perhaps overstated), I do not think properly read that they were intended in effect to delegate the entirety of TTC’s Board of Directors’ powers to Engellau. The minutes in terms stated that he would work with Klock and report to Roth, and that probably means reporting to him as director rather than merely as one of the shareholders.

277.Instead, I accept that the giving of power to Engellau was triggered by the actions of Larionov, and in particular his desire to see a power of attorney which identified that Engellau really did represent the board’s views and intentions. It is, however, perhaps ironic that the power of attorney (if that is the correct description of what was effected by the minutes) was conferred in the same meeting where Larionov’s services were terminated with immediate effect.

278.I am not satisfied that this amounts to unfairly prejudicial conduct. In any event, whatever powers of the board might have been delegated to Engellau, those powers were already being exercised to an extent excluding all of, so this allegation cannot substantially add to the points already made.

G.8.  Exclusion of Orlov from management and affairs of Rainbow Reefers

279.I deal below with the other side of the complaint in relation to these matters.

280.Suffice it to say at this stage, I do not think that Orlov’s complaints as regards Rainbow Reefers and its affairs, and in particular the proposed sale of vessels, adds anything significant to the overall consideration as to whether or not he has been subject to unfairly prejudicial conduct by Roth in the context of the management of the affairs generally of TTC and its subsidiaries.

281.In those circumstances, I do not propose to address the point further from this side of the equation.

G.9.  MV Reina

282.The MV Reina was sold for scrap, on the basis that it was an aged vessel and that in the context of its likely value it was not commercially viable to make the further significant investment that will be necessary to bring it up to class.

283.In his evidence, Mansfeld said he understood it would be more commercially sensible for the vessel to be sold after repair, than for selling it for scrap. It is correct that Roth’s camp went ahead with the sale over Orlov’s and Mansfeld’s objections, and only disclosed the memorandum of agreement for sale dated 31 January 2019 by a solicitors’ letter of 8 March 2019.

284.Nevertheless, I am not satisfied that this amounts to unfairly prejudicial conduct.

G.10.  Ulysses

285.Roth says he was not involved in this, although he knew about it and had nothing against it. But, he said, Orlov was “very conflicted” on this.

286.In any event, I do not think this is a matter which warrants lengthy consideration. It is unlikely to assist in the overall determination, and in any event I am not persuaded that this could amount to unfairly prejudicial conduct

H.  Roth’s Complaints

H.1.  Acquisition of Katla by MTF then TTC

287.Part of Roth’s complaint is that TTC purchased Katla from MTF at a considerable overvalue, arising as a result of the known or anticipated significant reductions in service income for Katla which affected its value. The reductions arose from transfer pricing rules.

288.There are numerous emails as to transfer pricing. For those in late 2013, it looks to me as though Orlov was not really involved in this transfer pricing and re-fixing or reducing the service charges (although Klock was more involved and kept abreast, which might be expected as he was the CFO).

289.The correspondence also identifies that the transfer pricing was not an issue in setting the price for the transfer of Katla from MTF to TTC. I accept Orlov’s evidence that Katla was always intended to be held by TTC, and that the original transfer to MTF was on a temporary basis. I have noted that the TTC board approved the original wider purchase from the Icelandic seller, and the minutes speak of funding including by TTC. That the transfer of Katla from MTF to TTC was a left-hand to right-hand transfer is why there was no need fundamentally to change the price between that paid by MTF and that to be received by MTF in its role as a conduit (and also why there could be transfer on seller’s credit with flexible payment schedule). I accept that is why the price was essentially set at the same level of US$9.9 million, subject to some adjustment which led to the agreed revised price of US$10.5 million.

290.As to the valuation obtained for the purposes of the transfer of Katla to TTC, it seems to me that the valuation was largely obtained so as to justify the price which had already been agreed, for example to present if necessary to tax authorities, in the circumstances that it was a left-hand to right-hand transfer. But I have already accepted that basically the transfer was to put into effect the original intention that Katla should end up in TTC, hence the logic of adopting effectively the same price. Again, it is important to remember that this occurred during the period of joint ownership and management of both the Norebo Group and the TTC Group.

291.I accept that Orlov did not give instructions to hide the reduction in service income fees which might have been planned so as to mislead either the valuers or to create an unfair price or to hide it from Roth. I do not think it makes sense to suggest that Orlov gave instructions to hide the potential change in income fees, when at the same time Klock says Orlov told him as CFO that he had that change in mind.

292.In any event, the logic of reducing the fees was because of an increase in the number of vessels. Whilst the unit price might go down, the number of units was intended to go up. So I accept Orlov’s evidence that, whilst he was informed about the reduction in price, he did not instruct it. Instead, in evidence which he gave and which I accept, Orlov provided a perfectly good explanation of the commercial reasons for doing this, including making reductions on a backdated basis. The commercial rationale of the concept was for management fees to be charged by Katla in order to provide it sufficient funds to pay its own costs, but also making a small profit which would be acceptable within the transfer pricing policies and rules, both in Spain and in Russia. Sometimes this would require looking back, such as in 2013 when four more ships were added to Katla after the acquisition via Baltlanta. The management of the operating subsidiaries would look at cash flows and incomes from the various sources, and make logical adjustments of the management fee to maintain sufficient funds for meeting costs without making so much for profit as would fall foul of the transfer pricing requirements.

293.Of course the change in fees would affect the income and profit of Katla, but that has to be seen in the context of the transfer pricing scenario, and that Katla was not an entity designed to create maximum profit for itself. It was to be used as maximising the profit of the group as a whole, and it operated on a “costs plus” basis.

294.I accept that Katla was never intended when it was purchased to become a profit generating centre. Indeed, that appears to have been expressly recognised by Roth’s own description attributed to him in the minutes of the TTC board meeting dated 27 October 2017 that “Katla is not a profit generating centre” (though in oral evidence Roth says he meant that it was not in fact making profit, not that it was not supposed to). Rather, I think Katla was used to provide services from within the group which would otherwise have been an expense paid to a service provider outside the group. In other words, it was to have been an internal service provider and a cost centre, albeit one contributing overall to the profit of the group or groups of companies. Money not paid to Katla by other group companies, if these were reduced, would simply be kept somewhere else in the group.

295.Roth said that Katla transfer was the first really moving of assets of TTC to Norebo group at a reduced price or in a preferred way. Roth went so far in his oral evidence as to say it was “robbing Katla from TTC”. Roth’s point was that you cannot change the rules and fail to disclose matters when selling a company. But all of this tends to highlight how Roth now sees things.  The fact is that MTF did pay US$9.9 million (attributed as part of the overall price) to the third party for Katla.  It is also clear that Roth was fully involved in the various decisions in 2013 and joined in them.  Had he not done so, Katla either would not have been purchased by MTF and/or would not have been transferred to TTC.

296.Again, I note that the transfer of Katla to TTC from MTF was in essence part of a series of transactions that had happened during 2013, and at the time of common ownership of both groups, long before any sign of breakdown in the relationship between Orlov and Roth and Roth’s selling his interest in Norebo.

297.I reject the assertion that Orlov acted in breach of fiduciary duty or engaged in unfairly prejudicial conduct in relation to the acquisition of Katla.

H.2.  KOS / Norebo Africa

298.Mr Joffe described the essence of the case as being that Orlov had removed much of Katla’s remaining value by transferring the entirety of MTF’s custom to a new competitor, which had been staffed by former key staff of Katla and another company in the TTC Group. The gravamen of the legal case is that Orlov secretly procured the establishment of a competitor, to be run by those staff, and which competitor would be owned in due course by the Norebo Group.

299.In this context, is important not to lose sight of the fact that Orlov and Roth agreed to purchase Katla in the first place because they wish to have the experience and expertise of Katla’s staff within their own organisation, rather than in a third-party service provider.

300.Engellau made an interesting comment in his oral evidence that, when he was appointed alternate director to Roth in late 2016, and when he began his consultancy arrangement in May 2017, it was not apparent to him and he was not informed that there was an ongoing dispute between Roth and Orlov. Obviously, that subsequently changed, as he described the later period of 2017 as being “very turbulent”, requiring him to do a lot of work for the company.

301.Larionov was clearly caught in the middle of the spat between Orlov and Roth, and it is clear that he was uncomfortable about his position. Part of the discomfort came from being required to report to the “TTC management”, rather than the board of TTC which was what his contract actually required. I accept that he would have seen this as Roth trying to take full control, without the involvement of Orlov. As Orlov put it, Larionov was to some extent trying to be careful and sitting on two chairs.

302.Therefore, the criticism of Larionov for his private contact with Orlov – at least at first – is weakened in the rather more nuanced circumstances that seem to me to have existed. As Mr Wong submitted, some of that contact was an understandable reaction to the circumstances presented.

303.But the position was reached over time that Larionov, Bengochea, Mansfeld and Orlov were acting in concert – specifically keeping their activities secret from TTC, Roth and Klock – where at least some element of conflict of interest was bound to come into play, and during the time they owed duties to Katla and TTC.

304.I accept that the need for secrecy was in part perhaps triggered by the actions of Roth, or those acting for him, in “raiding” the email records of the employees of TTC. I do not accept that the email records were obtained simply to further the best interests of TTC itself; this occurred in the context of the dispute which had already erupted between Roth and Orlov about TTC. I confess I also find it quite extraordinary that it was a firm of English solicitors that came to Hong Kong in order to obtain the email records.

305.But the primary desire for secrecy seems to have been allied to a general desire to cover tracks. Whilst early private communications were conducted in large part through iCloud email accounts, in September 2017 accounts were set up with Protonmail under which the operators were able to set the relatively short time of 14 days after which email traffic would be automatically deleted. Some Protonmail exchanges amongst Orlov, Mansfeld, Larionov and Bengochea were disclosed, but that appears to be only because those particular exchanges were forwarded to Mansfeld’s lawyers and so were naturally caught in the discovery net cast in these proceedings. Otherwise they would have been deleted, and any tracks covered.  Many others must have been deleted, and I think it likely that their content would have been adverse to Orlov’s case.

306.The email exchanges conducted privately and secretly evidence that Larionov and Bengochea were seeking and obtaining at least guidance, and subsequently instructions, from Mansfeld and/or Orlov as to how to act. It was acknowledged by Mansfeld in his oral evidence that they did so at least in part to further or protect the interests of MTF (although he suggested that would simultaneously protect the interests of Katla). As Mansfeld was Orlov’s alternate and they were working closely together, I think it is fair to infer (which I do) that what came from Mansfeld was to the knowledge of, and with the express or implied agreement of, Orlov.

307.The reference, for example, to “the next step, updated costs estimate, timeline etc”, on which Mansfeld asked Larionov for his thoughts, clearly demonstrates the conscious participation in a plan, one evolving and being put into effect. All this, specifically kept secret and confidential from Roth and his “side”.

308.One of the directions given to Larionov was to look for alternative warehouse accommodation for MTF’s stock then held at Katla’s warehouse. It may well be that part of the “plan” was to search for “solutions” or “options” for MTF. But, I do not see how it can be right or acceptable to ask Larionov, who at the time was the sole and managing director of Katla, to look for alternative accommodation for a company which would be set up to take over from Katla.

309.Criticism was also made of Mansfeld for seeking Katla documents from Larionov, and on the basis that Larionov would give whatever he was asked for if he had it.  I am not sure this criticism is so well-founded, in circumstances where Mansfeld was in effect seeking access to materials which could have been provided to him as an alternate director of TTC in any event, and where Larionov had contractual duties to report to the board of TTC, which comprised Mansfeld as Orlov’s alternate.

310.I think there was some obstruction relating to what was stated to be ‘regularisation’ of Katla’s position with the ZEC, with which it was registered for beneficial tax purposes. The need for that regularisation was because Katla staff took over back-office work for TTC, which had not been approved by ZEC. I suppose one way to have stopped the breach was not to have extended the ZEC approval, but instead to have stopped the breach by bringing the TTC back-office work away from, Katla. I take note of the fact that this uncertainty was concurrent with the problems Mansfeld was having in gaining access to TTC’s books and records, and that this was said by him to underpin his stance. However, what was happening was itself part of the two track approach, one open and one secret.

311.As to Larionov’s dismissal of Bengochea, I accept Roth’s evidence in this respect that there was some “well-planned theatre” going on, with the distinction between open and secret levels of communication. I agree that there was the pretence of dismissals – and hence the reference to the three “pretenders” for dismissal in Larionov’s emails – in the sense that whilst they would formally be dismissed, the intention was for them to leave in any event to join the new and competing venture.

312.In his evidence, Engellau described his feeling that he was being lined up to be blamed for the sacking of staff whereas Larionov had already decided (as the disclosure has revealed, in concert with Orlov and Mansfeld and Bengochea herself) to use this as an excuse to sack the staff who were intended to set up the new and competing venture.

313.Engellau accepted that he had had discussions with Larionov about cutting costs, which would have included reducing staff costs, but he was adamant that he did not direct any member of staff to be fired by Larionov. Engellau said that he would not have given those instructions, first because he had not yet discovered enough about the Katla and its operations to make firm recommendations, and secondly because he was “humble” enough not to give such instructions anyway. He denied that there was particular tension between himself and Larionov, to whom he felt he had made it clear he was there to assist.

314.However, nothing in the course of Engellau’s oral evidence up to the point that he used the word “humble” (to be fair, he only said that he was “humble, in some respects”) or at any point thereafter caused any idea of his “humility” to jump into my mind. Rather – and I am sure he will not mind my saying so – he came across as supremely self-assured, very confident in his own abilities which he extolled, and I am sure that he was not backwards in coming forwards with his expression of views to Larionov. I am sure Roth had employed and re-employed Engellau because he was also confident in his robust abilities, and had shown them to good effect. Roth described Engellau as being “like a potato”, namely useful for a lot of things. I am sure that there was at least some possibility of tension between Engellau and Larionov. That may have helped to push Larionov more to the Orlov camp, if he was not already a paid-up member of it.

315.I have also taken into account that by September 2017, Roth and Klock would have had some doubts at least about the loyalty of Larionov, and might have expected some pushback from him if they sent someone like Engellau to Las Palmas. I think that explains the power of attorney dated 1 September 2017 given to Engellau, even before Larionov himself had questioned the authority of Engellau to act on behalf of TTC.

316.It also seems to me that there was deliberate “provocation” of the TTC side, for example in the hope that “obnoxious” behaviour might lead to the Katla staff being terminated by the TTC management, so that those staff could more easily (and apparently lawfully) be employed by the new venture, KOS. Whilst on one hand Larionov was pretending some reluctance in dismissing staff, in reality on the other hand that was precisely what the concert party secretly wanted.

317.I accept that Bengochea was in effect the “front” for the new company being set up by her, Larionov, Mansfeld and Orlov to take over MTF’s business from Katla. Numerous email exchanges identify this, but perhaps in particular one dated 10 November 2017. That email seems to me to evidence that it had by then been firmly decided that the new company would be set up; that Larionov would be its managing director; that at some point in time after “going live”, the company would subsequently be sold to Norebo; that a budget was being prepared (and indeed it was continually revised and updated); and that the MTF stock would be shifted from the Katla warehouse to new premises.

318.As to the kerfuffle about Larionov claiming to remain a director after 4 December 2017, and the activities in relation to the removal of MTF’s stock from Katla’s warehouse, I do not think anyone comes out of this looking particularly good. I entirely accept Mansfeld’s description of what was going on at the time as “war on the ground”.

319.Clearly, by early December, there was a fight going on in relation to the movement of MTF’s stock to new warehouse premises. That fight was the clash between the factions. Each appears to have involved security guards and/or the police, lawyers, freezing or trying to take control of bank accounts. There is some evidence that Orlov and Mansfeld were involved in seeking to hide the source of funding of Larionov and Bengochea’s activities, whilst on the other side Klock seems to have been not entirely straightforward as to who held the ultimate beneficial ownership in Katla (in that he mentioned only Roth, and not Orlov). There is also a sound basis for inferring that Mansfeld’s attempt to delay the TTC board meeting from early December to on or after 11 December 2017 – at which board meeting Larionov was liable to be immediately dismissed and relieved of his duties – was to permit Larionov to remain in control of Katla at least long enough to complete the movement of MTF’s goods from Katla’s warehouse.

320.I agree with Engellau that Larionov’s 6 December 2017 email to all staff of Katla at Las Palmas is unattractive in its threatening or bullying tone, and is not a sign of an appropriate or proper style of management. Of course, the reality is that Larionov was hoping to keep the Katla staff in line for long enough to achieve his and Orlov’s own aims, in the face of competing pressures from Roth’s camp.

321.I agree in broad terms with Mansfeld’s suggestion that removing the MTF stock was perhaps overall not just in the best interests of MTF, it was also in the best interests of Katla as it had no legitimate reason to prevent removal of that stock. Some partial confusion as to whether Katla owned the stock or spare parts, dispelled by the separate stock purchase agreement, does not change the position.

322.It may be that MTF did not give what might in ordinary circumstances have been regarded as “reasonable” notice of its intention to withdraw its property from the warehouse. It may also be that some springboard effect was achieved by the subterfuge in setting up KOS so as to be ready to take over the business transferred, after termination of the Agency Agreement between MTF and Katla. But there can be no doubt that MTF was lawfully entitled to take back its property, and that the Agency Agreement was able to be lawfully terminated on the appropriate giving of notice.

323.Indeed, it was accepted by Mr Joffe that the movement of MTF’s business to a competitor service provider is not itself what founds Roth’s case as to Orlov’s unfairly prejudicial conduct in relation to the affairs of Katla post-acquisition. In his own evidence, Roth accepted this raises only a “moral issue”.

324.I consider that this means that though there were actions which are sufficient to lead to findings of breach of duty and of unfair and prejudicial conduct on the part of Orlov in this respect, the prejudice is not such as can properly be regarded as having any significant financial impact. It founds a buyout order, but can be ignored for valuation purposes.

325.For the avoidance of doubt, I have not found it necessary to consider whether or not to draw any adverse inferences from the failure to have called Larionov or Bengochea or other ex-Katla staff members. There is wholly sufficient actual evidence to avoid the need to draw any such inferences.

H.3.  Karelian Vessels

326.As indicated above, the Karelian Vessels had been under regularly renewed annual time charters to the Rainbow Reefers Group. They made substantial contributions to turnover and profit.

327.When the owners of the Karelian Vessels considered selling them, it seems to me that the long-term charterer would have been the obvious person to contact about a potential sale. Orlov accepted this point in his oral evidence. But, it happened that the owners did not approach the Rainbow Reefers Group.

328.Instead, the Karelian Vessels were sold to Arctic Shipping, with possession apparently as from 1 February 2018. In consequence of the intended sale, the owners gave notice that they would not conclude new time charters with Rainbow Reefers following their expiry on 31 January 2018 (that is, the day before delivery up to the new owner Arctic Shipping).

329.In oral evidence, Orlov accepted that the agreement for purchase by Arctic Shipping was made in late 2017, and was the result of negotiations of which he had been contemporaneously aware. It is fair to point out that Orlov stressed that he was not himself approached by and did not speak to the owners of the Karelian Vessels. But, Orlov also accepted that he had been aware for some time that the owners of the Karelian Vessels, whom he knew personally, were considering selling the vessels so as to exit that business. As would be expected of the owner of the Norebo Group, when considering the potential purchase of significant business assets, Orlov approved their purchase by Arctic Shipping.

330.Orlov should have known, or could have understood, that TTC might want to buy the Karelian Vessels. Whilst Orlov gave evidence that he did not think Rainbow Refers would want to extend the charter, let alone buy the vessels, still he did not tell TTC or Roth that he had discovered that the Karelian Vessels were for sale.

331.It is not a necessary part of the criticism of Orlov that TTC could and would have purchased the Karelian Vessels had it known they were for sale; rather, the criticism is made good if the purchase was something which TTC would have wanted to consider. I think the possibility of purchasing vessels which had previously been on long-term charter, and which had contributed substantially to turnover and profit, is clearly something which TTC would have wanted at least properly to consider. Obviously, there would be no criticism if TTC had been made aware that the vessels were for sale, but decided not to buy them, if Arctic Shipping then bought them. But that is not what happened.

332.Nor do I think it a necessary part of the criticism that Orlov can only have had knowledge of the possibility of purchase of the Karelian Vessels because of his position as owner and director of TTC. I accept the likelihood that Orlov, or one of his businesses, would have been approached by the owners because they would know that, as a high-profile and major participant in this field the business, he or his businesses might well be interested in purchasing the vessels. I also accept that they may have approached Orlov, or one of his businesses, because of some personal connection or previous dealings with him.

333.The no conflict rule applies, however, in circumstances even where the defendant is in a fiduciary relationship with multiple principles. I take the point made by Mr Wong in submission, to the effect that where an individual is a director of, and so owes fiduciary duties to, a large number of companies (perhaps in different groups even), that is unlikely to mean that he must offer every opportunity of which becomes aware to every company of which he is a director, or to turn down the opportunity for every company so as not to favour one over another. Indeed, it may seem harsh to penalize a director for being in breach of fiduciary duties owed to a particular company, when the relevant business opportunity was not brought to that director in person, but to another of his companies which was itself an obvious potential purchaser.

334.But the facts in this case are not of some opportunity arising afresh, but rather relating to the potential for purchase of vessels with which TTC already had a long-term and satisfactory relationship. Even if not directly approached, once Orlov became aware of the real opportunity to purchase those vessels by which TTC might have continued that satisfactory arrangement in the longer term, I think he ought to have made TTC specifically aware of it. He did not.

335.To put it another way, stepping back from the detail it would seem to be at first blush obvious that the relevant company that might continue the long-term use of the vessels for commercial value would logically be the company already using those vessels over the long term. That is the corollary of the accepted point that the long-term charterer was the obvious person to contact about a potential sale. There would be no obvious reason to move the use of those vessels to another commercial entity, and hence to move the commercial value, at least not before the current user had had a proper opportunity to consider whether or not to purchase the vessels.

336.Therefore I find this aspect of the complaint be made out.

337.Nevertheless, I do not think this breach of duty or unfairly prejudicial conduct likely has any consequence on valuation, as (despite Roth’s attempt to say otherwise in evidence) it seems clear that TTC would not have, and probably could not have, actually made the purchase of the Karelian Vessels. Whilst I accept that, as Roth put it, “a vessel is not a vessel”, meaning that not all vessels are the same, so that simply because Rainbow Refers was selling vessels that did not mean it might not buy other vessels, the chronology does not seem to work.

H.4.  Frio P

338.The Frio P was one of the three vessels which comprised the 3 Frios.

339.In late January 2018, Mansfeld learned that the 3 Frios had been put on the market for sale. When he confronted Klock, the latter told him that there was no actual intention to sell the vessels, and that they had simply been marketed as a way of testing or scanning the market generally. I do not think that statement is entirely consistent with Mr Joffe’s submission that Klock had at the beginning of 2018 taken the commercially prudent precautionary step of engaging a reputable shipping broker to sound out market interest.

340.The statement in January is also difficult to reconcile with what had happened within a few weeks, when by early March 2018 Klock and Roth were pushing through the sale of the vessels.

341.Klock’s explanation was that they were taken by surprise at the level of interest in the vessels when they were floated as being for sale. Nevertheless, against that stated surprise, it is not entirely clear why Klock and Roth should not have agreed to the proposal to postpone for 72 hours the board meeting called for 12 March 2018, to allow Mansfeld a proper opportunity to review a significant volume of documents (which Klock and Roth had had for some time, as the documents built up). The offer to buy had already been accepted, subject to board approval, by 8 March 2018 and there is no contemporaneous suggestion that there was such an immediate requirement for the board approval to be obtained that could not wait two or three days. I acknowledge that Klock said in cross-examination that TTC needed to get back to the potential buyer on a “very urgent basis”, which is why he and Roth wished to proceed with the board meeting on 12 March 2017, but that is not found in the witness statement or contemporaneous documents.

342.More relevantly to my mind, Klock said that the company was in a desperate situation where the shareholders were “arguing about all and everything”, the company was bleeding money and Roth and Klock were trying to save it. It is clear – and was acknowledged at least by Roth and Klock – that there was by this time deep suspicion about the motives on the other side of the broad dispute.

343.Even so, it is clear that during the 1 March 2018 TTC directors meeting, Mansfeld acknowledged that a sale of the 3 Frios, which were loss-making, might make commercial sense if the price were sufficiently attractive. This might be said to be one of the occasions where Mansfeld demonstrated a reasonable and relatively independent line, and was not simply being obstructive for the sake of obstruction (which is the thrust of the allegations made against him).

344.In any event, it seems to have been Roth’s own concern and suspicion that Orlov might himself purchase the 3 Frios, so might wish somehow to force down the price by interfering in a potential sale to other Russian buyers, that caused some of the subsequent problems. It was that concern that led to curtailing information relating, for example, to the identity of potential buyers.

345.Forced into a corner, when there did not appear to be such urgency, and without the further materials requested, Mansfeld voted against the resolution to sell the 3 Frios. But the resolution was passed by the majority vote of Roth and Klock.

346.As I have indicated, Orlov’s response was to apply at the next CMC on 23 March 2018 for an injunction to prevent the sale. But Mansfeld’s evidence filed in support of that application made it clear that no absolute opposition was intended; rather, what was in reality being sought was the opportunity to consider all necessary materials to decide whether or not to agree.

347.Following the grant of the injunction, which was pursued only against TTC and on which it is said TTC took a neutral stance, further materials were provided. Orlov then dropped his objection and agreed to the sale of the 3 Frios and the injunction was discharged by consent.

348.I am not prepared to draw the inference, invited by Roth in his evidence and by Mr Joffe in submission, that the purpose of the injunction was to seek identification of the potential buyers, which when obtained permitted Orlov to interfere such that the firm offers failed to complete. Even Klock said in evidence that the sale fell through for reasons internal to the potential buyers.

349.As to the later possibility of selling the Frio P separately, I can see the argument that if there is consent to sell all three vessels, it is implicit that there is consent to sell just one of them. But I do not think that necessarily follows. First, while selling more than one vessel may be more difficult than selling just one vessel, doing one as opposed to the other may have an effect on the price collected. Secondly, it would be expected the sale of any significant asset or assets is the result of the formulation of a commercial strategy. That strategy may not be the same, and the decision-making factors may not be the same, depending on the number of assets to be sold, and whether if more than one as a package.

350.Thirdly, I would have thought it also likely that part of the consideration may depend upon the potential purchaser. There may be a difference and strategic approach if the likely purchaser of the assets is a competitor. The seller might be content to allow the competitor to purchase one asset, but not more for broader strategic commercial reasons. Indeed, Roth himself seems to have had in mind the possibility that the 3 Frios might be purchased by Norebo, which by then he clearly regarded as a competitor, causing Orlov to be in conflict with himself and TTC.

351.Fourthly, selling to stem losses is one thing. Selling for reinvestment in a different asset may be something else. Selling as part of a general liquidation may be something else again.

352.The document headed “Executive summary Rainbow Reefers situation” dated 14 November 2018 was provided with the agenda and notice for the TTC board meeting called for 19 November 2018. It looks like an attempt to obtain after the event justification for steps already taken on a relatively one-sided basis. As the introductory paragraph identifies the document is to summarise the various stages and situations that Rainbow Reefers has been through for the previous year, and to explain to the board of TTC the main reasons why decisions were taken end of last year and during the course of year 2018 in order to save the situation for the company.

353.The conclusion of the document is the proposal of strategic options said to be in the best interests of TTC

354.The document was provided with other documents relating to the financial update of the Rainbow Reefers Group, budget 2018 and strategy. Indeed, it seems to me that those documents might be thought to be precisely the type of document which Orlov and Mansfeld had previously been seeking namely a strategic view with strategic proposals which might include how to deal with the 3 Frios and Reina. However, it is also fair to note that whilst the documents were recognised to be of some assistance, Orlov and Mansfeld continued to request financial information and strategy proposals for the TTC Group as a whole, rather than just one part of it.

355.In those circumstances, I am not sure there is any real criticism to be levelled at Orlov for his stance not to sell assets without proper information as to the proposed sale, and not to sell assets piecemeal without a proper strategy for an orderly and sensible disposal of assets.

356.I acknowledge again that when it came to the possibility of selling the Frio P alone, Mansfeld indicated that he would recommend (and subsequently he did recommend” to Orlov and Roth that they should confirm their joint agreement to the sale, and to sign a shareholder’s resolution to that effect. But I do not see that it necessarily follows that Orlov’s subsequent refusal to confirm such agreement was necessarily a breach of any duty or was unfairly prejudicial.

357.Overall, I do not accept that Orlov’s conduct in relation to the potential sale of the 3 Frios or the Frio P amount to unfairly prejudicial conduct.

H.5.  Brackway

358.The criticism or complaint is that it is to be inferred from the factual matters upon which Roth relies that Orlov has caused or procured TTC or its subsidiary DSL to be used for the funnelling of money from the Norebo Group and/or other sources to Brackway for his own undisclosed purpose and not for any purpose that is in the interests of TTC or DSL.

359.Orlov’s answer is that DSL was used by Orlov and Roth to pay long-standing third-party suppliers outside of Russia. He says he was happy for there to be an independent investigation in about 2016, and he understood that Brun-Lie had conducted one, though he was never shown the results.

360.I have already referred to the taking of legal advice and the TTC board’s consideration in 2012, and the fact that the material loan agreements were signed by Klock and Yip in 2015. Klock signed the various loan agreements as CFO, and appeared to be fully aware of the loans and the history of the intercompany relationships.

361.Brun-Lie also looked into the Brackway matter again later. On 26 October 2016, he wrote to Roth identifying that the investigations and due diligence reports made against Brackway and its directors and officers did not indicate any risks related to corruption, bribery, fraud, money laundering or other similar risk factors. It may be no surprise that Roth did not share these results with Orlov. Whilst there might have been some possible concerns as to transparency, that is not really the complaint now made.

362.The alleged risk of loss now said to arise is from a concern that DSL might not be able to recover the money it loaned to Brackway, whilst at the same time being required to pay the money it had borrowed from the company in the Norebo group.

363.That concern does not seem to me to be a real one as to the US$1 million loan, where that was already underwritten by the dividend not taken by Orlov. Whilst it may be more of a legitimate concern in relation to the US$2.5 million loan, it is to be remembered that that sum came from Norebo in the first place.

364.I do not think the rather vague allegations in this respect lead to any conclusion of breach of duty or unfairly prejudicial conduct. I reject the complaint.

I.  Conclusions on Cross Complaints

365.I have already made some specific findings as to whether or not there was unfairly prejudicial conduct in my analysis of the evidence, under the various headings above. But it is helpful, and in any event probably necessary, to make a summary of findings with specific reference to the particular complaints of alleged unfairly prejudicial conduct.

366.By reference to the complaints in Orlov’s pleaded case, I find as follows:

(a)  There was no unfairly prejudicial conduct by using TTC’s resources regarding the claim by MTF for sums due under the SPA.

(b)  There was unfair and prejudicial conduct in denying, or at least significantly delaying, Orlov’s right to appoint an alternate director, and to afford that alternate the appropriate recognition.

(c)  There was unfair and prejudicial conduct in denying, or at least significantly delaying, Orlov’s right to information and documents of TTC.

(d)  There was unfair and prejudicial conduct on the part of Roth, not so much in holding himself out as CEO, but rather in using that appointment and the interposed “TTC management” tier entirely to take over the management of TTC.

(e)  There was unfair and prejudicial conduct in dismissing TTC’s staff in Hong Kong without Orlov’s consent.

(f)  There was no unfairly prejudicial conduct from any exclusion of Orlov from the management and affairs of Lispa and Baltlanta.

(g)  There was no unfairly prejudicial conduct from any exclusion of Orlov from the management and affairs of Rainbow Reefers.

(h)  There was no unfairly prejudicial conduct in paying additional salary and bonuses to Klock without reference to Orlov or Mansfeld and no breach of the articles of TTC.

(i)  There was no unfairly prejudicial conduct in unilaterally procuring TTC to grant the power of attorney to Engellau without reference to Orlov or Mansfeld.

367.As to the complaints in Roth’s pleaded case, I find as follows:

(a)  There was no unfairly prejudicial conduct in the circumstances relating to TTC’s purchase of Katla from MTF on seller’s credit.

(b)  There was unfair and prejudicial conduct in improperly dealing with the affairs of Katla after its acquisition by TTC, but on a more limited basis than was the subject of the complaint. I am satisfied that there was an inappropriate, orchestrated, unfair and prejudicial disruption of Katla’s operations in or around the last quarter of 2017, to the extent that Orlov acted in connivance with Larionov and Bengochea in setting up KOS and preparing to use KOS in place of Katla, at a time when they continued to owe fiduciary or employment duties to TTC and Katla. But, as it could have been lawfully and properly carried out in any event, I am not satisfied that causing or procuring MTF to terminate the Agency Agreement and transfer its custom to KOS amounts to unfair and prejudicial conduct. Similarly, save to the extent that it is covered by my criticism of the secret dealings in late 2017, I am not satisfied that causing or procuring the Norebo Group to “acquire” KOS amounts to unfair and prejudicial conduct.

(c)  There was unfair and prejudicial conduct in improperly dealing with the affairs of Rainbow Reefers Group by wrongfully diverting to a company in the Norebo Group the business opportunity of purchasing the Karelian vessels; but there was no unfairly prejudicial conduct in the circumstances regarding the potential sale of the Frio P.

(d)  There was no unfairly prejudicial conduct in causing or procuring TTC and/or its subsidiary DSL to be used to funnel money from companies in the Norebo Group to Brackway, for an undisclosed purpose and not for any purpose in the interests of TTC or DSL.

368.For the avoidance of any doubt, my findings as to unfair and prejudicial conduct have been made taking into account the context and the conduct of the opposing party in each instant, in assessing whether prejudicial conduct is nevertheless in the circumstances not unfair. I also take into account the full circumstances in deciding the appropriate remedy.

J.  Appropriate Remedy

369.There can be no doubt, and in any event it is common ground, that the appropriate remedy upon the finding of findings of unfairly prejudicial conduct is to order a buyout.

370.As it is common ground that in the event of such an order the appropriate order is for Roth to buy out Orlov, that is the order I make. In any event, exercising my discretion outside the agreement of the parties I would reach the same conclusion that that is the fair and appropriate order to make another circumstances of this case.

371.As I have not been persuaded that the matters in Roth’s cross-petition should not be entertained at all, and I have made some findings of unfair and prejudicial conduct on that petition, in so far as it is technically necessary I confirm that I would order the same buyout, on the same terms, on each of the petitions.

372.For the avoidance of doubt, I would also add that even had I found unfairly prejudicial conduct in any other respect as was the subject of the complaints which I have rejected, I do not think any of those would have given rise to something with an impact on valuation. I would therefore have directed a valuer to ignore those matters.

K.  Date of Valuation

373.The four apparent candidates for the appropriate date to be ordered as the date of valuation are: (1) 29 June 2016, being the date from which Orlov says he was excluded from management (the primary case for Orlov); (2) 8 June 2017, the date of Orlov’s petition; (3) 22 December 2017, the date of Roth’s cross-petition; and (4) today, the date of the order for buyout (the case for Roth).

374.Mr Joffe submits that Orlov has not pleaded any facts which demonstrate that date other than the date of the order is appropriate. He points to the fact that Orlov’s written opening submissions made no attempt to justify any earlier valuation date, albeit examples were cited of cases where an earlier valuation date had been ordered. Insofar as Mr Joffe suggests that it is not open to Mr Wong on the half of Orlov to advance a case for data valuation earlier than the date of the order, I reject that suggestion. It seems to me that in the exercise of my discretion as to the appropriate date I am not bound by the way in which the parties may have chosen to formulate their claims, and that I should not blinker myself when considering all circumstances as might be appropriate in finding the date which appears to be fair.

375.In any event, Mr Joffe also submits that the date earlier than the date of the petition could not be appropriate where many of the allegations made by Orlov relating to breach of the MU are alleged to have occurred after presentation of his petition. I agree.

376.Mr Joffe also submits there are at least two cogent reasons why it would not be fair to take the petition date as the valuation date. First, the only adverse financial effect pleaded by Orlov as flowing from any unfair prejudice is insignificant in the context of valuation, and could not justify a later valuation date. Secondly, the commercial fortunes of TTC have markedly declined since 8 June 2017, and to use that date as the date of valuation would ignore the events orchestrated by Orlov which have substantially depressed TTC’s value.

377.Hence, Mr Joffe submits that, where no earlier date is justified, the valuation date should be the date of the buyout order.

378.For his part, Mr Wong submits that following the Norebo buyout, Roth took steps to exclude Orlov from the management and operations of TTC, precisely because he considered Orlov to be a competitor as the owner of Norebo with a conflict of interest. That exclusion commenced around 29 June 2016, as the draft board minutes from that date identify. Since then, says Mr Wong, Roth has continued to manage and operate TTC and its subsidiaries to the exclusion of Orlov, and in a way which has fundamentally changed the business and operations.

379.On the basis that it was Roth’s own evidence that he had turned the business of TTC around, and that at least one business unit was now making profit, but where Orlov doesn’t seek to reap the benefits of any improvement in the fortunes of TTC Group since he was ousted, Mr Wong says that the appropriate date, if not 29 June 2016, is the date of Orlov’s petition approximately one year later.

380.It seems to me that choosing the fair and appropriate date of valuation is linked to the consideration of what unfairly prejudicial conduct might have occurred, whose conduct it was, and when it occurred. In those circumstances, and where I have found unfairly prejudicial conduct on both sides and continuing throughout 2017 at least, I do not think either 29 June 2016 all the date of Orlov’s petition is a fair or appropriate date for valuation.

381.Nevertheless, nor do I agree that what is in essence an arbitrary date of the order for a buyout is in the circumstances of this case fair or appropriate either. As I have found, though the breakdown of the relationship was clearly under way from mid-2016, and though they started to behave badly towards each other, it was only when Roth issued the cross-petition that it became open common ground that the appropriate way to resolve the disputes was for him to buy out Orlov.

382.To put it another way, at least by the time of the cross-petition, Roth had elected to treat as at an end the basis upon which he and Orlov had become shareholders. Essentially from that date, and despite the various shenanigans during 2018 and early 2019 giving rise to the cross complaints as to activities in that period, Roth had determined to operate the TTC Group businesses in his way.

383.In the context of this case, that seems to me to be the fact of magnetic importance in identifying the fair date for valuation. Though I have ultimately determined that there was no short answer to this case, and it was necessary to consider the evidence and arguments of both parties in full, but for the need to have collated the evidence and to have set out those arguments, and the inevitable delay in obtaining sufficient court time for the resolution of them, it might be thought that a buyout could and should have been affected rather soon after 22 December 2017.

384.In those circumstances, and in the exercise of my discretion, I direct that the valuation be by reference to the date of 1 January 2018.

385.I also order an early date to be fixed for the valuation.

L.  Basis of Valuation

386.The aspects of the valuation which are not controversial include that TTC’s issued share capital is US$240,000, comprising 240,000 shares with a par value of one US dollar each, of which 120,000 are each held by Orlov and Roth; that TTC should be valued as a going concern; and that there should be no discount for the fact that each of Orlov’s and Roth’s shareholding represents a 50% interest in the company.

387.More controversy arises in relation to whether or not there should be any adjustments.

388.I accept that cases may require, in order to reach a fair result, the valuation of shares under a buyout order be adjusted to reflect the effect on the company of all or any wrongs which the wrongdoers have committed against it. This may mean assessment of the value of shares at the valuation date, adopting a value had it not been for the effect of the unfairly prejudicial conduct. But I do not accept that adjustments need to be made automatically, as it were, to the extent that underlying allegations are established. Each case needs to be considered on its own circumstances.

389.As to the impact of my finding on questions of valuation in the particular circumstances of this case, it seems to me that none of them impact valuation such that it would be appropriate for them to be taken into account in the valuation process.

390.The only matter pleaded by Orlov which is said to have had an adverse financial effect on TTC since the date of the petition is as regards the wasted costs, such as the costs incurred in the English proceedings and the costs of the Seagroatt Order. But it seems to me that, as an individual, Orlov has already been or will be compensated in costs by any costs orders made. This does not need to be, and it should not be, taken into consideration in the valuation process.

391.As to Roth’s claimed adjustments, I have rejected the allegation of the transfer of Katla at an undervalue, and (for reasons given) I do not accept that valuation is or needs to be impacted by my findings in relation to the conduct vis-a-vis Katla in the last quarter or so of 2017. I reject the general suggestion that the valuation should be conducted on the notional basis that all losses caused to TTC’s subsidiaries by Orlov after his account.

392.I have already identified that there is, as I see it, some overlap in the considerations as to the date for valuation and the basis of valuation. In the exercise of my wide discretion, I have chosen the valuation date of 1 January 2018 as being the date which seems to me to be fair. I see no reason why various activities of the parties after that date, at times unattractive on both sides, require taking those activities into account. The parties should be left with the result that flows from taking the valuation date I have chosen.

393.Mr Joffe invites me to note that I can have regard to the effect of my order on third parties and their interests, though he accepts that the weight to be given to their interests will depend on the circumstances. The particular third-party he has in mind is Tugushev, whose claim might proceed in England. If so, Mr Joffe invites me to take into account the possibility that Tugushev might obtain an order that he is entitled to ownership of one third of the shares in TTC. On that basis, he says that any buyout order made might unfairly prejudice Roth. However, he offers no specific suggestions for any mechanism to deal with the situation.

394.In any event, I am not persuaded that any such mechanism is necessary or appropriate. Orlov and Roth have chosen to fight these proceedings on the basis that they, and they alone, are the equal shareholders of TTC. That they so assert is a necessary corollary of the whole basis of their cross claims upon the alleged MU. It seems to me to be a bit late in the day to suggest at the end of the trial that the fundamental basis asserted by both parties as underpinning these proceedings might not actually be correct, and that my order ought somehow to take that into account.

395.In any event, from my reading of Tugushev’s claim, if it is made good he can be suitably compensated by a financial award, and any financial award against Orlov and Roth as co-conspirators or co-tortfeasors is likely to give rise to duties and obligations between them as a result. I do not think my order for buyout in these proceedings need be unnecessarily complicated by anticipation of matters which appear, at this point, to be entirely speculative and somewhat remote.

396.However, I give liberty to apply as to the precise terms of the buyout order, albeit only on the approach I have directed above (not just as to the date and basis of valuation, but also as to the intended effect by way of estoppel and bar of any future proceedings based on the same material underlying facts).

M.  Quasi-Interest

397.Mr Wong submits that it is clear from a number of Hong Kong cases that the court has the power to make an order for “quasi interest”.

398.The interest factor is not ordered qua interest, but serves as a proxy to measure the increment in value of the petitioner’s investment in the company, and in an appropriate case can reflect the fact that the respondent has had the use of the petitioner’s investment since the valuation date. In essence, as with other forms of interest awarded in legal proceedings, this “quasi interest” is awarded by way of compensation to a petitioner for being kept out of the money in addition to the purchase price of the shares, and would logically run from the date of valuation.

399.I have already referred to the fact that the period of time after my chosen valuation date of 1 January 2018 is the latter period during which the parties were ‘at war’, and that one of the reasons why in fairness I have chosen that valuation date is that it seems to me to be impossible and simply unnecessary in all the circumstances to try to unravel what each side did and the monetary consequences of that. Fairness is not an absolute concept with only one answer, and it can often suitably be achieved by simplicity.

400.In the circumstances I have identified, I do not think an award of “quasi interest” is apt or would be fair, and I decline to make any such order.

N.  Costs

401.I shall reserve the question of costs to further argument after the parties have had an opportunity to consider this Judgment.

402.However, it may assist the parties to know that my current inclination – though not one strong enough to make a costs order nisi – would be to make no order as to costs on both petitions.

O.  Postscript

403.This case demonstrates that a corporate divorce between long-term business partners can be as difficult and emotional as a divorce between matrimonial partners. In such circumstances, it is unfortunate but not surprising that either or both partners might review history and reinterpret events very differently from their own contemporaneous interpretation, and choose to act or feel driven to act in ways which they may not see, but outsiders can readily appreciate, as being inappropriate and unfair.

404.My findings are that both parties have at times acted inappropriately and unfairly. My findings are also that both parties have made criticisms of the other which criticisms are unfair. Unfashionable as it appears to have become to think it or to say so, many (if not most) disputes are not completely ‘black or white’.

405.The practical reality is that the previously harmonious relationship began to unravel in late 2014. Part of the problem appears to have been that Orlov perceived Roth as having fully taken part in and having benefited from the strategic business decisions jointly taken, but as not having fully pulled his weight for some time. When Orlov pushed back against Roth drawing a salary which might reflect an extent of day-to-day management which he was not actually doing, Roth began to see Orlov as exhibiting more selfish behaviour, which he expressed in terms.

406.With the benefit of hindsight, perhaps the ultimate breakdown of their relationship was from then on inevitable. But it has been painfully slow. The separation of Roth from Orlov by selling out of Norebo was only part of the solution, but itself created other perhaps deeper problems. Essentially from that point, Roth considered Orlov to be in conflict with himself, and in effect thought the answer was to shut him out. Orlov did not understand Roth’s change in stance at the time, and the reaction was strong, some of it too strong. As I have said above, soon they were ‘at war’.

407.Again with the benefit of hindsight, if in 2016 more clear business or commercial boundaries had been set, the path to this degree of conflict might not have been laid. In reality, the only ways to avoid the conflict or its continuation were either for one party to buy out the other, for both parties to sell to a third party, or for the business to be wound up. The last option was floated but rejected.

408.However, where it was as early as December 2017 that Orlov and Roth effectively agreed the exit route was for Roth to buy out Orlov, it is perhaps startling that otherwise sensible commercial men have expended such enormous time and emotion and so many dollars and pounds without achieving the exit even more than 18 months later.

409.It is to be hoped that, to avoid the continued haemorrhage of such enormous financial and non-financial resources, the parties might now be able to refocus and deploy their resources for a more positive resolution, one which pays proper tribute to their previous joint endeavours and success.

Mr William Wong, SC and Mr Justin Lam, instructed by Boase, Cohen & Collins, for the Petitioner in HCMP 1331/2017 and the 1^st Respondent in HCMP 2753/2017

Mr Victor Joffe and Mr Robin McLeish, instructed by Howse Williams, for the 1^st Respondent in HCMP 2753/2017 and the 1^st Respondent in HCMP 1331/2017

Hogan Lovells, for the 2^nd Respondent in both actions (Appearance Excused)