Langbar International Ltd v Rybak & Ors

Specific disclosure is governed by the issues raised in the pleadings. The court should not order disclosure merely to discover whether a new case might be pleaded or to facilitate cross-examination on credit. Where relevant documents may be held by a third party, an applicant need not conclusively prove that they are within the respondent’s control before an order for a proper search is made. The respondent must investigate whether it has a right to obtain or inspect the documents and disclose documents located as a result. Where an account of profits or forfeiture of property is claimed, disclosure needed to establish the precise proceeds or remaining property may be ordered before trial if the account is to be taken at trial. A proprietary injunction may be granted where there is a serious claim to identifiable proceeds and the balance requires protection pending trial.

The claimant alleged that the defendants had participated in a fraudulent scheme involving fictitious assets, misleading market announcements and the sale of shares at a profit. It sought specific disclosure of trading records relating to post-6 June 2005 sales of shares, the addition of Magdalena Rybak as an eighth defendant, and an interim proprietary injunction over money paid to her.

The disclosure application concerned relevance, litigation privilege and whether records held by UBS and Wegelin were within the defendants’ control. The injunction application concerned competing explanations for payments made from alleged share-sale proceeds.

1. Specific disclosure. The application was determined by the pleaded issues. The trading records were not relevant merely because they might reveal a new pattern of conduct or assist in cross-examining Mr Rybak on credit. The pleaded claim did, however, include an account of profits on the sale of shares and forfeiture of unsold shares. Precise information about sales was therefore materially relevant to the relief claimed and to an account which, on counsel’s proposed approach, would be taken at trial.
2. The documents created by UBS to compile Mr Rybak’s evidence were protected by litigation privilege. That did not dispose of the wider request for trading records. The bank statements already disclosed did not necessarily provide the detail required to establish the dates, prices and number of shares sold.
3. Under CPR Part 31.8, control includes a right to possession, inspection or copying. The claimant was not required at this stage to prove conclusively that the defendants had such rights in relation to records held by Swiss banks. It was sufficient that the material did not establish that the documents were outside the defendants’ control. The defendants were ordered to carry out an appropriate search, including enquiries of the banks. If they had a right to obtain the documents, they had to do so; if they did not, they could say so.
4. A like order was made concerning the Demagistri and Michelluti shares. Although control was more uncertain because the relevant accounts stood in another person’s name, the defendants had disclosed some related contract notes and the court was not prepared to presume that they lacked control.
5. Joinder and injunction. Magdalena Rybak was added as the eighth defendant. The evidence disclosed at least a serious claim to be tried in respect of €1,114,855 and an admitted claim concerning €645,000 of share-sale proceeds. The first sum was protected by an arrangement under which it was held pending trial. A proprietary injunction was therefore made in respect of the €645,000. Permission was granted for service out of the jurisdiction in Monaco, but anticipatory alternative-service directions were refused.