Trafalgar Development Ltd v Mazepin

JurisdictionIreland
CourtCourt of Appeal (Ireland)
JudgeMs. Justice Costello
Judgment Date18 July 2019
Neutral Citation[2019] IECA 218
Date18 July 2019
Docket NumberNeutral Citation Number: [2019] IECA 218

[2019] IECA 218

THE COURT OF APPEAL

Costello J.

Whelan J.

McGovern J.

Costello J.

Neutral Citation Number: [2019] IECA 218

Record No. 2018/23

IN THE MATTER OF ARTICLE 26(1) OF COUNCIL REGULATION (EU) NO.1 2015/2012

BETWEEN
TRAFALGAR DEVELOPMENTS LIMITED, INSTANTANIA HOLDINGS LIMITED, KAMARA LIMITED

AND

BAIRIKI INCORPORATED
PLAINTIFFS/RESPONDENTS
- AND -
DMITRY MAZEPIN, OJSC UNITED CHEMICAL COMPANY URALCHEM, URALCHEM HOLDING PLC, EUROTOAZ LIMITED, ANDREY GENNADYEVICH BABICHEV, YULIA BOLOTNIKOVA, BELPORT INVESTMENTS LIMITED, MILKO EMILOV MINKOVSKI, ANDROULA CHARILAOU, DIMTRY KONYAEV

AND

YEVGENIY YAKOVLEVICH SEDYKIN
DEFENDANTS/THE FOURTH AND FIFTH NAMED DEFENDANTS ARE THE APPELLANTS

Conspiracy – Damages – Bound to fail – Appellants seeking to dismiss the plaintiffs’ action against them – Whether the plaintiffs’ action was frivolous and vexatious, factually unsustainable and bound to fail

Facts: The plaintiffs, Trafalgar Developments Limited, Instantania Holdings Limited, Kamara Limited and Bairiki Incorporated, were companies incorporated in various Caribbean islands that together owned approximately 70% of the shares in OJSC Togliattiazot (ToAZ), a Russian company, which was a fertilizer producer and the largest producer of trade ammonia in Russia. The plaintiffs claimed that the defendants actively participated in an unlawful, corrupt and oppressive scheme, orchestrated by the first defendant, Mr Mazepin, to wrest control of ToAZ from the plaintiffs. They claimed damages for conspiracy and for declaratory and injunctive relief in respect of the pleaded conspiracy. They pleaded both lawful means and unlawful means conspiracy against the defendants. The fourth and fifth defendants, Eurotoaz Ltd and Mr Babichev (the appellants), appealed to the Court of Appeal against the judgment and order of the High Court (Haughton J) delivered on the 23rd November, 2017 refusing to dismiss the plaintiffs’ action against them pursuant to the inherent jurisdiction of the Court on the basis that the action was frivolous and vexatious, factually unsustainable and bound to fail.

Held by Costello J that this application was misconceived and never had any prospect of success. She held that the appellants adduced no admissible evidence to substantiate the arguments advanced in support of the application. She held that the substance of the arguments of the appellants did not meet the threshold required in an application to strike out proceedings on the basis that they were bound to fail. She held that the appellants had failed to identify any errors in the judgment of the High Court which would entitle them to succeed on this appeal.

Costello J held that the appeal would be dismissed.

Appeal dismissed.

JUDGMENT of Ms. Justice Costello delivered on the 18th day of July, 2019.
1

This is an appeal against the judgment and order of the High Court (Haughton J.) delivered on the 23rd November, 2017 refusing to dismiss the plaintiffs” action against the fourth and fifth named defendants (the appellants, Eurotoaz or Mr. Babichev as appropriate) pursuant to the inherent jurisdiction of the Court on the basis that the action is frivolous and vexatious, factually unsustainable and bound to fail.

The Statement of Claim
2

It is appropriate first to consider the case as pleaded by the plaintiffs and then to examine the decision of the High Court.

3

Proceedings issued and a statement of claim was delivered on the 9th November 2016. It states that the plaintiffs are companies incorporated in various Caribbean islands and that together they own approximately 70% of the shares in OJSC Togliattiazot (ToAZ), a Russian company, which is a fertilizer producer and the largest producer of trade ammonia in Russia. The plaintiffs claim that the defendants actively participated in an unlawful, corrupt and oppressive scheme, orchestrated by the first named defendant, Mr. Mazepin, to wrest control of ToAZ from the plaintiffs (the ‘Scheme’). Their claim is for damages for conspiracy and for declaratory and injunctive relief in respect of the pleaded conspiracy. They have pleaded both lawful means and unlawful means conspiracy against the defendants. The conspiracy is referred to as a Scheme to damage and injure the plaintiffs and the Scheme is summarised in paras. 5-12 of the statement of claim. It is said that the Scheme is led by Mr. Mazepin and that he controls the second named defendant (UCCU) which owns a minority interest in ToAZ. The methods employed in giving effect to the Scheme over a number of years are set out in para. 6 as follows:-

‘(a) Making direct and indirect unlawful threats against shareholders and officers of ToAZ and persons perceived to be connected with ToAZ, to the effect that improper legal proceedings would be brought against them if the Plaintiffs' ToAZ Shares were not sold to the Defendants at an undervalue;

(b) Repeatedly bringing multiple unfounded civil actions, inter alia, in the name of Eurotoaz Limited (“Eurotoaz”), a company registered in Ireland, against officers of and persons perceived to be connected with ToAZ in Russia, including fraudulent claims that Eurotoaz was entitled to shares in ToAZ;

(c) Repeatedly making multiple unfounded criminal complaints in Russia, inter alia, in the name of Eurotoaz, against ToAZ officers and persons perceived to be connected with ToAZ in Russia;

(d) Uttering false evidence and procuring and deploying false evidence against ToAZ, its officers and persons perceived to be connected with ToAZ, in criminal and civil legal proceedings referred to herein;

(e) Producing forged or sham documents against ToAZ, its officers and persons perceived to be connected with ToAZ in such legal proceedings;

(f) Procuring oppressive and unjust court orders against the Plaintiffs to include, inter alia, improper and unlawful freezing orders against the Plaintiffs' ToAZ Shares and dividends on false pretexts;

(g) Procuring improper arrest warrants and Interpol Red Notices against officers and individuals perceived to be connected to ToAZ;

(h) Illegally procuring the suspension of the Chairman of ToAZ from the board of ToAZ;

(i) Purporting to remove ToAZ's lawful directors and replace them with nominees of the Defendants through unlawful means, namely the use of false evidence and/or documents;

(j) Unlawfully purporting to pass Board Resolutions which would de facto empower the nominee Directors on the Board to dilute the ToAZ shares or misappropriate some or all of them; and

(k) Putting undue and unlawful pressure on judges, criminal investigators, court-appointed experts, and judicial officers in Russia to make improper and unfounded adverse orders against ToAZ, its officers and shareholders.’

4

It is pleaded that the purpose of the actions is to cause such catastrophic damage to ToAZ and its business that the plaintiffs would be forced to sell their shares in ToAZ to the defendants, or their nominees, at an undervalue because the shares would be worthless in the hands of the plaintiffs. In the alternative, the purpose is to ensure that a Russian court would make an enormous and unjustified damages award in favour of certain of the defendants and order that the plaintiffs” ToAZ shares be sold to satisfy that award. The defendants, it is alleged, would then ensure that a purchaser, owned or controlled by them, would purchase the plaintiffs” ToAZ shares at an undervalue. It is also pleaded that the purpose of the actions is to deprive the plaintiffs of the rights attached to their shares in ToAZ on a false pretext.

5

It is alleged that the defendants, in carrying out the Scheme, have succeeded in causing, and continue to cause, catastrophic loss to the plaintiffs, including the effective expropriation of the plaintiffs” ToAZ shares, the almost total loss in value attributable to the plaintiffs” ToAZ shares, the deprivation to the plaintiffs of dividend payments in connection with the plaintiffs” ToAZ shares and the inability, fully, to exercise the rights associated with, or to deal in, the shares.

6

It is pleaded that each of the acts were committed, not as an end in themselves, but to facilitate the Scheme. Further, if the acts were lawful they nonetheless were carried out with the:-

‘…wholly unlawful and singular aim of enabling the defendants or their nominees to acquire the plaintiffs” ToAZ shares at the greatest undervalue achievable…’

7

At para. 37 the statement of claim pleads that the Scheme is properly understood as part of an internationally well recognised phenomenon known as ‘raider attacks’. Paragraph 38 describes ‘raider attacks’ as follows:-

‘Raider attacks typically involve the so-called ‘raider’ acquiring a minority shareholding in the company that is the target of the attack. Thereafter, a series of improper civil and criminal lawsuits are repeatedly issued on behalf of, or at the behest of, the raider against the target in order to devalue the company's stock; unlawful pressure is placed on judicial authorities to bring regulatory and tax prosecutions against the principals of the target; and searches and seizures of confidential information are made at the target's offices. Ultimately, the raider procures the freezing of the shares, dividends and cash in the target with the result that the business collapses and effective control is wrested from the owners of the target company.’

8

The statement of claim sets out the alleged illegal acts the plaintiffs say the defendants, and each of them, committed, or permitted to be committed, in furtherance of the Scheme. These include threats issued by Mr. Mazepin and Mr. Konyaev to Mr. Zivy, a beneficial owner of minority shares in ToAZ, and Mr. Ruprecht, who is employed by and associated with ToAZ's trading partner, Ameropa. They made plain it was the intention that UCCU take control of ToAZ by any means.

9

It is said that from in or about...

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2 cases
  • Trafalgar Developments Ltd v Mazepin
    • Ireland
    • High Court
    • 17 January 2020
    ...An appeal by those defendants from the refusal to strike out the proceedings was dismissed by the Court of Appeal on 18th July, 2019 ( [2019] IECA 218). In the meantime, pleadings were exchanged as between the plaintiffs and the fourth and fifth defendants and discovery requests were exchan......
  • Highfield Distribution Ltd v Pat The Baker Unlimited Company
    • Ireland
    • High Court
    • 21 February 2020
    ...in the judgment of Costello J. of the Court of Appeal in Trafalgar Developments Limited & Ors. v. Dmitry Mazepin and Ors. [2019] IECA 218: - “The Legal Principles Applicable to Applications to Strike Out Proceedings Pursuant to the Inherent Jurisdiction of the Court 50. Since Barry v. B......

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