Caldero Trading Ltd v Beppler & Jacobson Ltd & Ors (2012)
Showing or supplying the witness statements and attached documents to a third party funder so that the funder could determine whether to continue to fund the proceedings and whether to give and whether to continue to give the cross-undertaking in damages was use "for the purpose of the proceedings" within CPR r.31.22.
The court was required to determine three applications in a petition brought by the petitioner seeking the winding up on the just and equitable ground of the first respondent company (B) alternatively seeking relief for alleged unfair prejudice.
The petitioner was a company owned and controlled by an individual (Z) and it was a 25 per cent shareholder in B, which had been set up by Z and the fifth respondent (R5) to take advantage of property related business opportunities in Montenegro. According to Z, R5 had told him that he represented a well known Russian businessman (K) who owned a large Russian oil company (T). Z alleged that it had been agreed that R5's principal would provide the finance for the venture and would have the majority shareholding through a company (R3), and Z would provide local knowledge and management as his capital contribution. B had acquired and refurbished two hotels in Montenegro. The relationship between Z and R5 turned sour. Z suspected that the financier behind the venture was not K. Z was excluded from management of the hotel projects. It was said that B had held the hotels as an agent on the basis of an agency agreement and had transferred them to its principal. Z applied to join the principal as the seventh respondent (R7) and to join as eighth respondent (R8) the individual who owned and controlled R7 and R3. They resisted joinder on the ground that R3 had already offered the petitioner all that it could reasonably expect to gain from the petition. The second application was by the sixth respondent (R6), a Liechtenstein lawyer, who had been appointed director of B in place of the previous directors and sought the striking out of the petition as against him. The third application was an application by R3 and R6 to restrain the use of documents which had been disclosed in connection with the proceedings. In particular, they complained that the documents had been shown to T and related companies which were funding the petitioner in the litigation and had given a cross-undertaking in damages.
(1) Although R3's offer treated the agency agreements as of no effect, the offer was made on the basis that the injection of funds was by way of loan as R7 and R8 contended, rather than as capital, as the petitioner contended. It was realistically arguable that the agreement alleged by Z was a shareholders' agreement binding B, and that the finance provided was, in fact, capital and not by way of loan. By pursuing the petition the petitioner could obtain a finding from the court as to the basis of funding. Moreover, that decision affected the valuation of the shares. Once it was clear that that issue might have to be decided in the petition, it followed that R7 and R8 should be joined as parties under CPR r.19.2(2)(b). They had every interest in resisting the finding which was being sought, which would affect them. Moreover, it was plainly important that they were bound by the outcome of that issue. For similar reasons there was a good arguable case for service out of the jurisdiction on the ground that R7 and R8 were necessary or proper parties (see paras 38-43 of judgment). (2) The petition should not be struck out against R6. There was no claim for any monetary relief against him, but there was a claim to restrain him from dissipating B's assets and interim relief had been granted. The freezing order jurisdiction was wide enough to grant relief against third parties, such as directors, Revenue and Customs Commissioners v Egleton  EWHC 2313 (Ch),  1 All E.R. 606 considered. Although it appeared that he was acting on instructions, he was a central actor in the wrongdoing of which the petitioner complained and was within the Norwich Pharmacal jurisdiction to make disclosure orders against those involved in the wrongdoing of others. He was therefore properly joined and properly served outside the jurisdiction (paras 44-50). (3) Showing or supplying the witness statements and attached documents to a third party funder so that the funder could determine whether to continue to fund the proceedings and whether to give and whether to continue to give the cross-undertaking in damages was use "for the purpose of the proceedings" within CPR r.31.22. The position was different in respect of an affirmation made by R6 in response to the interim freezing injunction. That was outside r.31.22 and was subject to an implied undertaking that it would only be used for purposes ancillary to that interim relief. Accordingly, the affirmation and its exhibits should not have been shown or supplied to T. However, no purpose would be served by granting relief in that respect since all the material in the affirmation and exhibits was replicated in other material which was within r.31.22 (paras 65-76).