Michael Wilson & Partners Ltd v Robert Colin Nicholls & Ors

Michael Wilson & Partners Ltd (Plaintiff) Robert Colin Nicholls (First Defendant) David Ross Slater (Second Defendant) PARTIES : Temujin Services Limited (Third Defendant) Temujin International Limited in its own capacity and in its capacity as trustee of the Temujin Trading Trust (Fourth Defendant) Temujin International FZE (Fifth Defendant) Shaikenov & Partners, LLP (Sixth Defendant)

COUNSEL : MA Jones (Plaintiff) ex parte

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

Monday 26 March 2007 ex tempore Revised 5 April 2007

50151/06 Michael Wilson & Partners Limited v Robert Colin Nicholls & Ors

1 There is before the Court a notice of motion being heard in closed court. The motion is sought in proceedings with some history, having commenced in 2006. The Court has granted leave to the plaintiff, [Michael Wilson and Partners] [or "MWP"], to file in court three affidavits, that of Mr Michael Earl Wilson of 26 March 2007, that of Ms Katherine Jane Dixon, described as 'confidential affidavit' made on 26 March 2007, and that of Ms Dixon of 26 March 2007, not expressly described as 'confidential'. The background 2 The circumstances are unusual in the extreme. The general background to the application concerns the matters generally set out in the Commercial List Statement, [it being unnecessary to repeat the content of that statement], and the fact that freezing orders have been made in a number of jurisdictions around the world as part and parcel of the plaintiff's continuing endeavours to trace assets of the material defendants. The defendants joined in the New South Wales proceedings are Mr Robert Colin Nicholls and Mr David Ross Slater, being two of the persons previously employed by the plaintiff. A third previous employee, Mr Emmett is not a defendant as his contract of employment entitled him to have an arbitration in the United Kingdom which option he has elected to press. 3 The places in which the plaintiff has commenced its proceedings include New South Wales, the United Kingdom, the British Virgin Islands where certain freezing orders have been made, and the Island of Jersey, Colorado in the USA. There is also a suit against the plaintiff in the Bahamas. 4 The background to the present application concerns the plaintiff's proposal, on Wednesday of this week British Virgin Islands time, to there apply for the appointment of receivers and the plaintiff's anxiety at that information being closely held for obvious reasons [principally the need to ensure that there not be any movement of assets by the defendants, feared to likely or possibly take place in the event that there be advance information to the defendants of the proposed application]. The claim to orders 2-5 in the notice of motion 5 Thus far on the application presently before the Court, Mr Jones of Counsel, who appears for the applicant, has addressed detail on a number of the parameters before the Court, particularly referring to the affidavit of Mr Wilson of 26 March 2007 and particularly taking the Court through the submissions in support of the proposition that the orders sought in paragraphs 2 through to 5 inclusive of the notice of motion should be made. 6 I am satisfied from the materials presently before the Court that it is appropriate to make orders in terms of paragraphs 2 through to 5 inclusive of the notice of motion and shortly summarise the reasons for the principled exercise of the discretion being to make such orders. 7 The reasons justifying the issue of the subpoena to Macquarie Bank, hedged with the conditions, inter alia, that Macquarie Bank not inform any person or entity that it has been served with and/or produced documents pursuant to the subpoena other than for the purposes of obtaining legal advice in connection with the subpoena include the following:

The nature of the proceedings which involve allegations of breaches of fiduciary duty.

The relief sought includes the tracing of assets around the world.

The evidence suggests that there were a number of companies who received shares in Max Petroleum PLC.

The evidence suggests that a number of those company's shares were the subject of lock-in arrangements.

There is evidence that Mr Emmett and/or Eagle Point (a company related to him) received 14.75 million shares in Max Petroleum on 5 August 2005 - those shares being the subject of a lock-in agreement.

Mr Emmett has suggested in correspondence that those shares represented a gift from Sokol and that other persons working on the project received similar gifts.

There is evidence that on 5 August 2005 each of Incomeborts and Norgulf received shares in Max Petroleum and that each of them also entered into lock-in agreements. The plaintiff's belief is that Incomeborts and Norgulf have a relationship to a service provider in the Max transactions.

There is evidence that each of Mr Nicholls and Mr Slater provided services in relation to the Max transaction.

There is evidence that Messrs Nicholls and Slater appear to have been involved in seeking to raise US$10 million facility on the security of the shares held by Incomeborts and Norgulf in Max Petroleum.

There is evidence that at least one of the financial institutions who appear to have been approached for the purposes of the proposed facility was Macquarie Bank. 8 In those circumstances the plaintiff has satisfied the Court that it is appropriate for orders 2 to 5 inclusive in the motion to be made. 9 The significance of the need for confidentiality in relation to the issue of the subpoena and the documents produced pursuant to the subpoena is that the materials which are hoped to be produced by Macquarie Bank will, it is thought, likely aid the plaintiff in its pursuit in the British Virgin Islands of the appointment of a receiver on Wednesday of this week. 10 For those reasons that bracket of the orders sought in the notice of motion is acceded to in terms of the principled exercise of the Court's discretion. The time when the subpoena is to be returnable before the Court will be 28 March 2007 at 2.00pm. The claim to orders 6 and 7 in the notice of motion 11 The next matter which requires a decision comprises the plaintiff's application for orders in terms of paragraphs 6 and 7 of the notice of motion. 12 Paragraph 6 seeks an order that order 4 of the orders of Justice Bergin dated 20 October 2006 be varied to permit Mr Michael Wilson and the plaintiff's legal advisers retained in each of the United Kingdom, the British Virgin Islands, the Bahamas, the USA access to the affidavits filed by the defendants in accordance with order 8(b) of the orders of Justice Palmer dated 9 October 2006 and associated correspondence between the solicitors for the plaintiff and the defendants in these proceedings. 13 Order 7 seeks for the plaintiff to have leave to use the affidavits and correspondence [referred to in proposed order 6] obtained in connection with these proceedings for the purposes of:

(a) the plaintiff's proposed ex parte proceedings for a receiver to be appointed over Incomeborts Limited, Norgulf Holdings Limited and Tigakhan Limited in proceedings 307 of 2006 commenced by the plaintiff in the Eastern Caribbean Supreme High Court of the British Virgin Islands;

14 Each of the three affidavits relied upon by the plaintiff is taken into account in the principled exercise of the Court's material discretion. 15 The affidavit of Ms Dixon of 26 March 2007 not in fact marked as 'confidential', serves a number of purposes, one important purpose being the description of the proceedings related to the New South Wales proceedings which have been commenced in a number of countries. 16 Importantly, that same affidavit generally summarises the factual background and claims which underpin the several sets of proceedings. 17 It is unnecessary to do more than to note that the vortex of the claim concerns the relevant duties claimed to have been owed by the defendants, Mr Nicholls and Mr Slater, and by Mr Emmett, whose position in relation to the litigation is that he has enforced an entitlement to an arbitral procedure, which I understand is to be heard in the United Kingdom. 18 The alleged contractual and fiduciary duties and obligations are set out in detail in Ms Dixon's said affidavit. It is unnecessary to go beyond the general overview description, which is that the complaint involves Messrs Emmett, Nicholls and Slater said to have engaged in the task of setting up and conducting businesses in competition to MWP and in doing so, to have so acted in concert to divert away from MWP [to those new businesses or themselves or nominees personally] MWP clients and contacts, fees and other income, remuneration and compensation. 19 That short description belies the complexity of the plaintiff's attempts to trace the relevant assets and to unravel the alleged dealings of these defendants in the several jurisdictions. 20 It is important that the Court scrutinise very closely an application which is made ex parte to vary orders which had been made by consent, this being what is being pursued in paragraph 6 of the notice of motion. 21 To that end I am satisfied that it is necessary for the plaintiff to establish that there has been a significant change in the circumstances since the making by Justice Bergin of orders on 20 October 2006. 22 What has occurred is that there are a number of stark inconsistencies between the affidavits and disclosure information furnished by Mr Slater in the British Virgin Island proceedings as compared with that furnished in similar documents in this jurisdiction, being affidavits sworn on his own information and on information and belief based upon information given to him by Mr Nicholls. These inconsistencies relate to:

iii. Mr Nicholl's bank accounts and interest in TFZE;

iv. Loans allegedly made to and received from TEMUJIN;

[the more particular detail of those discrepancies are set out in the 'confidential' affidavit of Ms Dixon of 26 March 2007] 23 There are likewise discrepancies in the affidavits made by Mr Nicholls [including the Slater evidence on information and belief from Mr Nicholls'] which are detailed in Ms Dixon's said affidavit [at 16-27]] 24 These matters include:

iii. Discrepancies in consulting fees. 25 Generally, the materials presently before the Court have satisfied the Court that there are a number of significant, indeed very significant, differences in the content of the affidavits sworn in the two jurisdictions. These are identified in the Dixon confidential affidavit as described. 26 The principal difficulty for the plaintiff, as is established on this application, inheres in the procuring of instructions in the unusual circumstances where there have been these inconsistencies in the versions sworn to in the different jurisdictions. 27 I accept that it is oppressive for the plaintiff's lawyers, being aware of the inconsistencies and differences, not to be able to obtain full instructions from the plaintiff in this situation. It is the interests of justice which the Court must treat as its lodestar. When, as is here the case, a plaintiff is intent upon, very shortly, applying to a foreign jurisdiction, [here the British Virgin Islands], to have receivers appointed outside of the usual circumstance where a freezing of asset orders would be made only later to be followed by receiver applications, it is particularly important that the legal advisers for the plaintiff place all of the material information before the court pertinent to the application. 28 In their capacity as officers of the court, the legal advisers of the plaintiff have precisely that obligation on any ex parte application. In that same situation it is in the interests of justice that the lawyers have fully informed instructions. The fact is that the present regime, unless varied, simply means that by definition those legal advisers cannot receive fully informed instructions. 29 The disclosure affidavits ordered by Justice Bergin were ordered as ancillary to the making of the freezing orders. It is simply, in the current framework, necessary for the plaintiff to give fully informed instructions in order to protect the plaintiff in the making of the proposed ex parte receivership applications. There is a materiality in placing the inconsistent affidavit material before the Court in the British Virgin Islands receivership application . 30 The very inconsistency is arguably a good reason why the court in the Virgin Islands may be persuaded to bypass the usual stepped first freezing of assets orders and may be persuaded to accede to a receiver application. 31 [ .] 32 Those significant changes from the anterior circumstances are persuasive in satisfying the Court that it is a principled exercise of the Court's discretion to make the orders sought in paragraph 6. 33 As to the order sought in paragraph 7 of the notice of motion, much of what has already been said is also relevant. This is an application by the plaintiff ex parte to have a relaxation of the usual rule in Harman v Secretary of State for the Home Department [1983] AC 280 [the implied undertaking that documents obtained during the course of proceedings will only be used for the purpose of the proceedings]. 34 That type of circumstance where a court will grant leave to litigants before it to utilise pleadings and affidavits and materials which are in the ordinary course only able to be utilised for one set of proceedings is able to be justified in particular situations. In Springfield Nominees Pty Ltd v Bridgelands Securities Ltd, a decision of Wilcox J, [reported at (1992) 38 FCR 217], his Honour observed that it is necessary for special circumstances to be shown before the usual Harmon undertaking to the court can be relaxed. Justice Wilcox said inter alia at 225:

"For 'special circumstances' to exist it is enough that there is a special feature of the case which affords a reason for modifying or releasing the undertaking and is not usually present. The matter then becomes one of the proper exercise of the court's discretion, many factors being relevant." 35 Earlier in the same judgment [at 224], Wilcox J referred to the fact that Lockhardt J in Sweetman v Australian Thoroughbred Finance Pty Limited, [unreported, FedCt (NSW), 23 July 2002], had taken into account the extent of commonality as between applications in different jurisdictions, as constituting special circumstances. 36 Likewise, in Prentice & Barila v Treetop Projects Ltd, a decision of Gzell J of 4 October 2006 [BC 200607990], Gzell J accepted that one of the matters which constituted special circumstances was the commonality of issues between the two sets of proceedings. 37 Plainly enough, the evidence presently before the Court establishes an enormous commonality as between the claims to relief and the underlying facts to those claims to relief, sought in the many jurisdictions in which the plaintiff has commenced tracing proceedings. 38 For those reasons, the principled exercise of the Court's discretion is to make orders in terms of paragraph 7(a) and (b).

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