North Shore Ventures Ltd v Anstead Holdings Inc [2012] EWCA Civ 11

Analysis

The substantive action concerned a written agreement between North Shore Ventures Limited (North Shore) and Anstead Holdings Inc (Anstead) made in March 2003 (the agreement). In 2008 Anstead’s assets were transferred into trusts of which Mr Fomichev and Mr Peganov (the appellants) and their family members were discretionary beneficiaries (the trusts). On 20 August 2008 North Shore issued a claim against Anstead and the appellants for monies owing under the agreement. On 21 June 2010, Newey J gave judgment against the appellants for sums in excess of $50m. On 9 March 2011, the Court of Appeal allowed an appeal in apart and reduced the sum owing to approximately $35m.

The appellants paid only a small fraction of the judgment debt. The appellants had previously swore affidavits to the effect that they had disposed of virtually all of their assets into the trusts. On 7 October 2010, following applications from North Shore, Floyd J made an order requiring the appellants to produce the trust deeds, letters of wishes and other trust documents relating to the trusts and that they were no longer beneficiaries of the trusts. The order requiring them to produce these documents was not limited by the words ‘in so far as they are within the knowledge, possession, custody or control’ of the appellants.

The appellants stated that they did not have copies of the trust documents subject to the order and appealed Floyd J’s decision on the following grounds:

1. (i) Floyd J erred in taking the view that an order could be made in respect of documents that were outside the appellants control, provided that they were in a position to obtain them;
2. (ii) He misdirected himself as to the meaning of control, wrongly equating the ability to obtain documents with having the documents in their control.

North Shore argued that that the judge was entitled to hold that the appellants were in fact in control of the relevant documents and that the trustees of the trusts had not acted as independent trustees but rather to fulfil the appellants wishes. It was also argued that as beneficiaries or former beneficiaries of the trusts the appellants had sufficient legal rights to give Floyd J jurisdiction to make the order he did.

Held (dismissing the appeal):

1. (1) Whether Floyd J was entitled to make the order depends on the conclusion he was properly entitled to draw on the material before him as to the nature of the relationship between the appellants and the trustees of the trusts.
2. (2) The circumstances surrounding the trusts were suspicious. For wealthy men such as the appellants to make themselves paupers with no ability to control any of their former assets was an unlikely scenario. Family trusts were a well known device for placing assets beyond the reach of creditors. Suspicion was heightened by the later actions of the trustees. The circumstantial evidence gave reasonable grounds for Floyd J to infer there was an understanding or arrangement between the appellants and the trustees by which the trustees were to shelter the appellants’ assets. In those circumstances Floyd J was entitled to deduce that such was the true nature of the relationship and although he did not express himself in those terms that appeared to be the thrust of his conclusion.
3. (3) If the relationship between the appellants and the trustees was such, then Floyd J was entitled to regard documents in the physical possession of the trustees relating to the administration of the trusts as documents in the appellants’ control within the meaning of CPR 31.8. In determining whether documents are in a party’s control the court must have regard to the true nature of the relationship between the third party and the litigant. CPR 31.8(2)(b) covered situations where a third party was holding documents as agent and the same would apply in situations where a party was a puppet master to a third party. The situation was akin to agency. Even if there was no strict legal right to possession it would be open to the English court to find as a matter of fact that documents were in the control of a party within the meaning of CPR 31.8.
4. (4) Although North Shore’s application was made on short notice there was no indication that the appellants wished to produce more specific evidence in opposition to the application. If the appellants were to fail to comply with Floyd J’s order it would be open to them to put evidence before the court to explain their non-compliance and in particular evidence to cast a different light on their relationship with the trustees. In those circumstances it was well within Floyd J’s case management powers to make the order he did.
5. (5) North Shore’s broad argument that the appellants were entitled to the trust documents as former beneficiaries and that that of itself provided sufficient foundation for an order under CPR 31.8 or, in this case CPR 71.2 was rejected. This was not the basis upon which Floyd J made the order. Rather, on the particular circumstances of this case he regarded, and was entitled to regard, the trust documents as being in the appellants’ possession or control.

JUDGMENT Lord Justice Toulson: [1] North Shore is owed a sum in the region of US$35m by the appellants, Mr Fomichev and Mr Peganov, under a judgment debt. The appeal is against an order of Floyd J requiring the appellants to produce documents to North Shore pursuant to CPR 71.2(6). The documents in dispute relate …

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