Vtb Dc Llc and Another v. Top Fuel Corporation Ltd and Another

HCMP 1543/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1543 OF 2013

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D E C I S I O N

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Introduction

1.By judgment dated 16 April 2014, I made an order in favour of the plaintiff for pre-action disclosure against the 2^nd defendant pursuant to s 41 of the High Court Ordnance, Cap 4.

2.Whilst I was satisfied that the plaintiff had a reasonable basis for a potential claim against the 2^nd defendant and that it was likely the 2^nd defendant had documents in its possession directly relevant to issues in the potential claim, I was of the view that the documents sought to be disclosed were too general and broad given the nature of the potential claim by the plaintiff.  I granted the plaintiff’s application against the 2^nd defendant but subject to being addressed as to the terms and scope of the order for disclosure.

3.On 19 May 2014, I directed that the parties address the issue by way of written submissions to be filed and served by the plaintiff on or before 26 May 2014 and the 2^nd defendant on or before 3 June 2014.  I received written submissions from the plaintiff but not from the 2^nd defendant.

4.The grounds on which I granted the order are set out in my judgment and can be briefly summarised as follows. 

(1) The 2^nd defendant owns Faeton Set Nomer 1, which was operated by Featon Aero until Faeton Set Nomer 1 was transferred to the 2^nd defendant in about May or June 2009.

(2) The fact that the 2^nd defendant owns Faeton Set Nomer 1 which was one of the entities that defaulted in its loans with the VTB Bank and that the 2^nd defendant was incurring expenses and conducting business in Hong Kong, a claim may well be made by the VTB Bank against the 2^nd defendant on the grounds of fraud and conspiracy in relation to the loans to Faeton Set Nomer 1 and the non-payment of them to the VTB Bank and the receipt of monies or property from Faeton Set Nomer 1 to it in order to defeat any claim by creditors of Faeton Set Nomer 1.

(3) There was clearly a close connection between Faeton Set Nomer 1 and the 2^nd defendant.  The 2^nd defendant owned Faeton Set Nomer 1 during the time it maintained loans with VTB Bank and defaulted under them.

(4) There was a high likelihood there would have been transactions between the 2^nd defendant and Faeton Set Nomer 1 during this relevant time. The 2^nd defendant was a company of reasonable financial standing and it may have derived funds or profit from its ownership of Faeton Set Nomer 1.

5.The plaintiff has sought to clarify that the initial loans between VTB Bank and Faeton Set Nomer 1 were entered into prior to when the company was transferred to the 2^nd defendant in 2009.  However, all the defaults occurred after the transfer and as correctly pointed out by the plaintiff that is the crucial period in relation to the loans and the basis for the potential claim against the 2^nd defendant. The plaintiff submitted that the documents sought may be amended by reference to the following matters:

(1) The transfer of Faeton Set Nomer 1 to the 2^nd defendant occurred in around May or June 2009 but the loans were granted in 2007.

(2) Faeton Aero and Faeton Invest (Faeton Invest had a 0.32% shareholding) were the former owners of Faeton Set Nomer 1 which transferred Faeton Set Nomer 1 to the 2^nd defendant.

(3) The connection of the 2^nd defendant to the plaintiff’s claims against the Faeton Group is by virtue of the 2^nd defendant’s ownership of Faeton Set Nomer 1 and the 2^nd defendant’s receipt of monies from Faeton Set Nomer 1 in order to defeat any claim by creditors of Faeton Set Nomer 1.

(4) There is also a connection between the 1^st and 2^nd defendants.  The 1^st defendant indirectly holds LLC Piligrim‑II, which was formerly indirectly held by the 2^nd defendant, through Faeton Set Nomer 1.

(a) The 1^st defendant is the 99% shareholder of Faeton-Toplivnaya Set Nomer 1(“FTS No 1”).  According to the state register for FTS No 1, its business is in petroleum chemicals.  FTS No 1 is the sole shareholder of a company called LLC Piligrim‑II.

(b) Sergei Snopok, one of the persons behind the defaulting companies, was formerly a 49.58% shareholder in LLC Piligrim‑II until Faeton Aero became the 100% shareholder on 22 July 2003.  On 26 March 2009, Faeton Invest became the 100% shareholder of LLC Piligrim‑II.  The shareholding of LLC Piligrim‑II was then transferred to Faeton Set Nomer 1 on 24 December 2010.

(c) LLC Piligrim‑II was then transferred to FTS No 1.

6.As I mentioned in my judgment, it is a requirement under the relevant provisions for a pre‑action disclosure order that the documents in question are appropriately specified and described and shown to be directly relevant to an issue in the claim. An order for pre-action disclosure should specify the document or class of documents sought with sufficient particularity to ensure that it is within the terms and scope of the contemplated proceedings. This serves two important functions. First, it ensures that the order goes no further than is reasonably necessary and it avoids any unwarranted or inappropriate disclosure which is outside the ambit of the claim. Secondly, it provides the person on whom the order is served a clear understanding of the documents to be produced.

7.The plaintiff has accordingly redrafted the order and has to my satisfaction particularised and described the documents to be disclosed within the terms and scope of the contemplated proceedings.  The plaintiff seeks a disclosure order for the following documents for the period from 2007 to 2013:

(1) (i) the management accounts of the 2^nd defendant;

(ii) the audited accounts and the auditors’ reports to management; and

(iii) all bank statements of the 2^nd defendant recording amounts transferred to or from the 1^st defendant, LLC Faeton Set Nomer 1, LLC Faeton Aero or LLC Faeton Invest, and any supporting documentation for transfers to or from the 1^st defendant, LLC Faeton Set Nomer 1, LLC Faeton Aero or LLC Faeton Invest (including invoices, debit and credit advices, transfer advices); and

(2) any contractual documents and/or correspondence in relation to any transactions between the 2^nd defendant and the following companies, namely LLC Faeton Set Nomer 1, LLC Faeton Aero or LLC Faeton Invest.

8.In light of the foregoing, the amended draft order is accordingly granted.

Mr Julian Lam, instructed by Stephenson Harwood, for the plaintiff

The 2^nd defendant was not represented and did not file a written submission