Judgment in relation to three summonses and a letter received from the US Court
Before : |
Advocate David Michael Cadin, Master of the Royal Court |
Between |
Golden Sphinx Limited (In Creditors' Winding UP) |
Plaintiff |
And |
Garry Itkin |
Defendant |
Advocate M. O'Connell for the Plaintiff.
Advocate I. Jones for the Defendant
judgment
the MASTER:
1. This is my judgment in relation to three summonses that were before the Court on 2 and 3 December 2024:
(i) firstly, Mr Itkin's summons dated 14 June 2022, to strike out that part of Golden Sphinx Limited's ("GSL's") Order of Justice relating to the Promissory Note claim as it is, allegedly, vexatious and amounts to an abuse of process;
(ii) secondly, Mr Itkin's summons dated 14 June 2022, for security:
(a) of £505,000 in relation to an unpaid, default judgment obtained by him against GSL, and in respect of which GSL's application to set it aside was dismissed by the Royal Court on 20 April 2021; and
(b) for costs.
(iii) thirdly, GSL's summons dated 21 October 2024, for:
(a) an interim payment pursuant to RCR 12/2(3) in respect of the costs of, and incidental to, its application to amend the Order of Justice.
(b) further information arising out of Mr Itkin's Amended Answer.
2. In addition, this judgment deals with a letter received from the US Court.
3. GSL issued proceedings against Mr Itkin in April 2022, having been given permission by the Master to serve the proceedings out of the jurisdiction. That Order of Justice alleged that:
(i) Mr Itkin had been a director of GSL until 28 February 2017.
(ii) By a guarantee dated 9 October 2012, Mr Itkin pledged the assets of GSL as security for "unidentified obligations of Mr Alexander Sabadash" and for the "the benefit of one or more unidentified third parties". Mr Itkin subsequently called on that guarantee, personally, on the basis that he was a beneficiary of it. GSL submits that the guarantee is ineffective and/or void and/or voidable (the "Guarantee Claim").
(iii) On 21 August 2015, Mr Itkin issued a promissory note to himself from GSL for an alleged loan that he made to GSL of £295,000. GSL submits that there was no loan, and the promissory note is ineffective and/or void and/or voidable (the "Promissory Note Claim").
(iv) In or about 2014 or 2015, Mr Itkin misappropriated a bank account that GSL had at First Curaçao International Bank, and which contained USD 473,509.29 (the "Curaçao Claim").
4. In June 2022, Mr Itkin issued the two summonses referred to above.
5. The matter came before the Royal Court on 7 July 2022 when the Court noted that GSL had entered into a creditor's winding up on 6 July 2022 and that liquidators had been appointed. Accordingly, it stayed all the proceedings between the parties.
6. By consent, these proceedings were resurrected in 2024, and the stay was lifted on 6 February 2024. At a hearing on 7 February 2024, and by consent, I gave permission for the Plaintiff to file an Amended Order of Justice, and for the parties to file consequential amended pleadings. I ordered that Mr Itkin should pay the costs of and incidental to the Plaintiff's application to amend the Order of Justice, adjourned Mr Itkin's summonses, and granted a stay for ADR. That stay was subsequently extended, by consent, on 22 July and 15 August 2024.
7. In addition to the matters set out in the Order of Justice, the Amended Order of Justice now pleads that:
(i) GSL was owned by the Amber Trust, which is a Jersey-law-governed, discretionary trust settled by Mrs Larissa Sabadash on 8 November 1996 for the benefit of her family, and a charity;
(ii) her husband, Mr Alexander Sabadash, ceased to be a beneficiary of the Amber Trust pursuant to an Instrument of Exclusion and Acknowledgment of Disclaimer dated 6 July 2022;
(iii) in September 2016, Mr Itkin misappropriated assets belonging to GSL (the "Asset Misappropriation Claim"), namely:
(a) the shares in New Albion Property Limited, which company owned a property in Beverley Hills, California that had been purchased for some USD22 million and was occupied by Mrs Sabadash;
(b) a debt for approximately USD15.5 million owed by a company called M-Nice Limited, which debt had been assigned to GSL; and
(c) a debt for approximately USD19.5 million, owed by a company called M-BJEP Limited, which debt had been assigned to GSL.
(iv) in November 2016, Mr Itkin issued a summons in the Royal Court against GSL, of which he was the sole director, for allegedly unpaid directors fees and interest in the sum of £505,000. In breach of his duties to GSL and/or fraudulently, he allowed a default judgment to be entered against GSL (the "Default Judgment Claim").
(v) Mr Itkin misused GSL's bank accounts to pay off credit card debts in the sums of USD1.4 million and EUR138,000 (the "Credit Cards Claims").
8. Mr Itkin's Amended Answer denies the claims and pleads, amongst other things, that:
(i) The shares in GSL "were held on bare trust for the Itkin-Sabadash Partnership" and the arrangements in relation to that partnership were made by a Mr Conrad Stampfli.
(ii) All of the assets ever held and/or currently held by GSL were assets of the Itkin-Sabadash Partnership "and at no time were any of these assets ever settled in to trust and/or made subject to the terms of any trust arrangement".
(iii) He has the benefit of a judgment from the Royal Court dated 2 December 2016 against the Plaintiff in the sum of £505,000 and in relation to that judgment, has taken the shares in New Albion Property Limited but has been unable to satisfy the judgment from those shares as GSL brought proceedings in California claiming an equitable lien over the shares.
(iv) Mrs Sabadash is using the assets of the Itkin-Sabadash Partnership to fund the liquidators and to fund the litigation against him.
(v) The Promissory Note Claim relates to the same matters as the Default Judgment Claim, which GSL unsuccessfully applied to set aside.
(vi) The Asset Misappropriation Claim, and the Curaçao Claim are misconceived as the assets concerned all belong to the partnership.
9. GSL has filed an Amended Reply joining issue with the Amended Answer and alleging that that Amended Answer is inadequately particularised and/or liable to be struck out. In addition, it issued a request for further information under RCR 6/15 containing 93 requests, of which only 29 were substantively answered. It is the remaining 64 requests for information which forms part of GSL's summons.
10. Mr Itkin submits that the Promissory Note Claim and the Default Judgment Claim are essentially one in the same and have already been the subject of adjudication by the Royal Court in April 2021. That decision was reported as Itkin v Golden Sphinx [2021] JRC 117, and Commissioner Bailhache set out the facts in the following terms:
"1. On 2nd December 2016, judgment was given in favour of the Plaintiff by the Royal Court (Le Cocq Deputy Bailiff, sitting with Jurats Ramsden and Pitman) against the Defendant in the sum of £505,000 which the Plaintiff claimed to be due in respect of unpaid director's fees, interest and costs. It was a default judgment, the Defendant not having appeared. The present application arises out of a summons by the Defendant to have the judgment set aside...
2... As to the substance of the claim, it is said that the Plaintiff was the sole director of the Defendant as at 21st August 2015 when it is said he entered into an employment agreement, that agreement being made between him as an individual and also as agent for the Defendant. The Defendant complains that the Plaintiff purported to hold a meeting of the Board of Directors at which he was the sole attendee, the chairman and the secretary, and that at that meeting as director, he purported to resolve on behalf of the company to acknowledge a debt said to be owed to him personally, authorising the company to enter into a Promissory Note to secure that debt owed to him, and then on behalf of the company purported to resolve to hold himself as Plaintiff harmless in almost any circumstances notwithstanding any breaches of duty."
11. It is unclear from that summary whether the claim started by summons before the Royal Court was based on the purported acknowledgment of debt or was to enforce the promissory note allegedly issued. The summons itself does not make any reference whatsoever to any promissory note.
12. In an affidavit sworn by Mr Itkin in February 2024, he stated that:
"10...the subject matter of the Judgment included monies owing to me which were reflected in the Promissory Note. The reason the Promissory Note was agreed to was because I was owed significant sums of money in relation to my unpaid directors' fees. The Judgment was taken, in part, because I was not paid what I was owed pursuant to my entitlement under the Promissory Note."
13. For the purposes of this judgment, I proceed on the basis that the default judgment encompassed Mr Itkin's claims under both the promissory note for £295,000, and other claims for unpaid director's fees, interest and costs.
"... the Defendant comes far too late to bring this application to Court. It has not brought the application soon enough and, having brought it, has not proceeded with it expeditiously... Looking at the overall justice of the position, which we are required to do, we think it is impossible to say that it is necessarily unjust to the Defendant to allow the default judgment to stand. It may be difficult to say where the merits of the Plaintiff's substantive claim against the Defendant in Jersey lie. We think it is right to describe the Defendant as having an arguable defence, but there is no knockout blow with it. On the other hand, it has prevaricated for years and defaulted on performance of an order of the Court for over a year. In those circumstances, given the prejudice to the Plaintiff which we accept in relation to the Californian proceedings, we think it is right to refuse the application to set aside the default judgment and that application accordingly is dismissed."
15. There has been no appeal against that decision.
16. Mr Itkin submits that both the Promissory Note Claim and the Default Judgment Claim are res judicata and relies upon the speech of Lord Sumption in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, which was cited with approval in Dubai Islamic Bank -v- Ridley [2016] JRC 102 and Emirates NBD Bank P.J.S.C. v Almakhawi and Ors [2023] JRC 243. For the purposes of this judgment, I do not propose to recite Lord Sumption's speech, but it is very much part of my considerations. Mr Itkin submits that the Court should consider:
(i) whether or not the Promissory Note Claim and the Default Judgment Claim give rise to a cause of action estoppel;
(ii) if they do not, whether an issue estoppel arises; and
(iii) if it does not, whether to allow the claims to proceed would be an abuse of process.
17. In R (on the application of Gray) v Chief Constable of Nottinghamshire [2018] 1 WLR 1609, the English Court of Appeal considered res judicata in the context of disciplinary proceedings and a default judgment. Etherton MR held that:
"43. It is also common ground that the constituent elements of cause of action estoppel were the following six matters specified by Lord Clarke JSC in the Coke-Wallis case, para 34, endorsing para 1.02 of Spencer Bower & Handley, Res Judicata , 4th ed (2009): (1) the decision, whether domestic or foreign, was judicial in the relevant sense; (2) it was in fact pronounced; (3) the tribunal had jurisdiction over the parties and the subject matter; (4) the decision was (a) final and (b) on the merits; (5) it determined a question raised in the later litigation; and (6) the parties are the same or their privies, or the earlier decision was in rem. The critical issue in the present case is factor (4).
44. Cause of action estoppel is absolute in relation to all points which had to be and were decided in order to establish the existence or non-existence of a cause of action: Arnold v National Westminster Bank ple [1991/ 2 AC 93 ; Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd (formerly Contour Aerospace Lid) [2014] AC 160 , para 22...
50...My impression is that the judge assumed and...the claimant, did not oppose the thrust of the chief constable's case that a cause of action estoppel will only arise if, among other things, the first determination involved a judicial assessment or evaluation of the facts constituting the cause of action in the light of the applicable legal principles.
51. In principle, but without the benefit of legal argument, that would seem to me to be correct. Lord Clarke JSC's endorsement of the six elements of cause of action estoppel is binding on this court. The fourth factor is expressed to constitute two separate requirements that the decision was both (a) final and (b) on the merits. Accordingly, finality in the sense described by Lord Diplock in The Sennar (No 2) is not sufficient. There is an additional requirement of an assessment whether the necessary facts have been established to satisfy the legal elements of the cause of action. In an appropriate case, that will require an evaluation of the evidence. This makes sense in the light of Lord Sumption JSC's distinction in the Virgin Atlantic Airways case [2014] AC 160 between, on the one hand, res judicata as a rule of substantive law and, on the other hand, the court's procedural powers to prevent abuse of process. An action which is duplicative of the cause of action in earlier proceedings may, in appropriate circumstances, be struck out or dismissed for abuse of process even though it is not barred by cause of action estoppel.
52. That analysis may be said to be at odds with authority that a default judgment may give rise to an estoppel. There are, for example, statements to that effect in New Brunswick Railway Co v British and French Trust Corpn Ltd [1939] AC I and Kok Hoong v Leong Cheong Kweng Mines Lid [1964] AC 993 As I have said, we have not had the benefit of any submissions by counsel on this matter. There would appear to be at least six reasons to treat those statements with caution. Firstly, they were all obiter since in neither case was it held that there was an estoppel. Secondly, they were cases of issue estoppel. Thirdly, the members of the appellate committee in the New Brunswick Railway case did not speak with one voice on the subject. Fourthly, it was emphasised in the Hoong case that any estoppel arising from a default judgment must be given a restricted operation and was limited to what must necessarily and with complete precision have been determined. Fifthly, there are different types of default judgments. In some cases, for example most non-money claims, it is not possible to obtain an order automatically but will require an application to a judge to satisfy himself or herself that the relief sought is justified on the alleged facts: see CPR r. 12.4 . It would appear that this was the situation in the New Brunswick Railway Co case where in the earlier action, following the failure of the appellants to enter an appearance in the action, the respondents had filed a notice of motion for judgment in the same terms as the relief claimed (which included a declaration as to the proper construction of the bond in question). There is no difficulty in regarding a judgment in those circumstances as "on the merits". Sixthly, those decisions were given without the benefit of the most recent analysis in the Virgin Atlantic Airways case, drawing a distinction between cause of action estoppel as a rule of substantive law and abuse of process."
18. In my judgment, the default judgment, given by the Samedi Court when this matter first appeared on the table, cannot in any way be said to be a judgment "on the merits" such as to establish either a cause of action estoppel or an issue estoppel. No evidence would have been heard and judgment would have been pronounced solely on the basis of the Defendant's défaut in failing to attend the Court to ask that the matter be placed on the pending list.
19. Although it pre-dates the decision in Virgin Atlantic Airways, in Mullen v Conoco Ltd [1998] QB 382 the English High Court considered the estoppels which might arise from a default judgment following an unsuccessful application by the defendant to set it aside. Evans LJ held that:
"It must be noted, however, that the court's power to set aside a default judgment under R.S.C ., Ord. 13, r. 9 is discretionary...If the court's power is exercised on a discretionary basis - for example, delay, though it was not so exercised here - then it is difficult to say that any issues have been decided by the court's ruling."
20. In this case, as set out in his judgment at paragraph 14 above, Commissioner Bailhache declined to set aside the default judgment, on the basis of delay, a purely discretionary ground. In the absence of any decision "on the merits", the fact that GSL may also have made reference to the matters upon which it now relies, is irrelevant. In my judgment, Commissioner Bailhache's finding does not give rise to any cause of action estoppel or any issue estoppel. I therefore reject Mr Itkin's submission that the issues raised by GSL in the Promissory Note Claim and/or the Default Judgment Claim are res judicata.
21. Further, insofar as Mr Itkin submits that the only basis of challenge to the default judgment was the application to set it aside, I disagree. A party can separately challenge a judgment on the basis of fraud. In the English decision of Park v CNH [2021] EWCA Civ 1766, CNH had obtained a judgment against Mr Park on the basis of a document bearing his signature which had been obtained fraudulently and CNH had deceived the court into granting judgment by default by making deliberately false statements in their particulars of claim. Mr Park subsequently brought an action to set aside the judgment for fraud, but that claim was struck out as an abuse of process on the basis that, amongst other things, it was based on facts known to him at the time of the original action. Mr Park appealed, successfully, and the Court of Appeal held that:
"...In any event, once a judgment is tainted by deceit it is fatally flawed: see Takhar, especially the discussion by Lord Kerr JSC of the policy considerations underlying the maxim that "fraud unravels all" in the section beginning at para 43. He observed at paras 52-53 that:
"52...The idea that a fraudulent individual should profit from passivity or lack of reasonable diligence on the part of his or her opponent seems antithetical to any notion of justice. Quite apart from this, the defrauder, in obtaining a judgment, has perpetrated a deception not only on their opponent and the court but on the rule of law...
53... the policy arguments for permitting a litigant to apply to have judgment set aside where it can be shown that it has been obtained by fraud are overwhelming.""
22. That principle of challenging a judgment on the basis that it was obtained fraudulently is one that is recognised in Jersey (see Golder v. Dodd (1982) J.J. 23 and Vekaplast K.G. v. T.A. Picot (C.I.) Ltd. [1990] JLR 163). Most recently, Birt D.B. held in Ball v King [2008] JRC 169 that:
"35. Mr Sinel's final point is that the Court has power to set aside or vary a decision which has been obtained by fraud. Here, he was on somewhat stronger ground. He cited in support of that proposition the case of Sturrock v Littlejohn (1898) 68 LJQB 165...
36. The case is an example of a well established principle. Although it was not cited to the Court, a convenient summary of the principle is to be found in Halsbury (4th Edition) Vol 37 at para 1210:-
"A judgment which has been obtained by fraud either in the court or of one or more of the parties may be set aside if challenged in fresh proceedings alleging and proving the fraud. In such proceedings it is not sufficient merely to allege fraud without giving any particulars, and the fraud must relate to matters which prima facie would be a reason for setting the judgment aside if they were established by proof, and not to matters which are merely collateral. The court requires a strong case to be established before it will set aside a judgment on this ground and the proceedings will be stayed or dismissed as vexatious unless the fraud alleged raises a reasonable prospect of success and was discovered since the judgment."
23. Mr Itkin submits that GSL knew of all the matters which it now alleges amount to a fraud in this case when it applied to set aside the default judgment, and it could and should have deployed them previously. He submits that it is an abuse of process to seek to pursue them through these proceedings. In my judgment, the answer to this criticism is to be found in the headnote of Park v CNH where the Court held:
"(2) That there was no principle to the effect that it would always be an abuse of process for a party to seek to set aside a judgment for fraud in circumstances where the facts or evidence relied upon in support of the fraud claim had been known to that party at the time of the original action; that it was true that a party who had had full knowledge of the truth at the time of the other party's dishonest conduct could not establish that he had been deceived by it, but where the party had not had knowledge of the truth at the time of the dishonest conduct the fact that he had gained such knowledge by the time of the judgment which he later sought to set aside for fraud would not preclude him from doing so;..." (Emphasis Added)
24. In this case, Commissioner Bailhache's judgment dealt with GSL's knowledge when the default judgment was entered:
"16. What are we to make of this in relation to the default judgment obtained on 2nd December 2016? On the one hand, the Plaintiff, acting as sole director of the Defendant, procured that a summons be delivered to the company's registered office in Jersey with a return date on which the company was advised that a default judgment would be taken if it did not appear. We do not know what, if any, steps were taken to bring this action to the attention of Mr Sabadash or his colleagues. We can anticipate that if it had been brought to their attention, arrangements would have been made for the company to appear in Court to place the action on the pending list. On the other hand, Advocate Garrood, who, as has been said, was lined up with the Plaintiff's opponents, spotted the action on the Court list the day before it was called, and was in correspondence by email with the Plaintiff. Although we do not have evidence from Advocate Garrood on this point, it is obvious from that exchange of emails that he must have appreciated that judgment would be taken in default. It seems to us to be likely, given that Advocate Garrood took the step of contacting the Plaintiff in the first place, that he brought the proceedings to the attention of those hostile to the interests of the Plaintiff. He may not have done so; but on the balance of probabilities, we think it is likely that he did and there is no evidence to the contrary. Equally, we take the view that the probability is that Advocate Garrood contacted the Judicial Greffe after the return date to ascertain whether a default judgment had been taken. On the assumption that he did so, he would have been informed that judgment had been taken and, we think it more likely than not, that he would have been in contact with those hostile to the Plaintiff to inform them that the judgment had been taken.
17. In this analysis we emphasise that these are provisional views expressed on the balance of probability as to what is likely to have been the case. If it were the case, then of course the Defendant cannot attribute blame for the default judgment to any default on the part of its lawyers. The fact is that neither the Defendant nor Advocate Garrood has provided any evidence one way or the other. This Court is therefore left with making the best it can of the information which has been provided. In those circumstances, we find it more likely than not that the taking of the default judgment was permitted by the Defendant company because it would have been quite straightforward to instruct Advocate Garrood to attend the Court to place the matter on the pending list, or, at the very least, to attend on behalf of the members of the company to indicate that there was a real conflict between the Plaintiff acting in his individual capacity and the Plaintiff as sole director of the Defendant company, and for that reason judgment ought not to be given. Indeed, we are sure that had he done so, the Court would not have given such a judgment."
25. In my judgment, Commissioner Bailhache did not reach any decision on the merits as to what GSL did or did not know; rather he drew inferences on the basis of the evidence available to him at the application to set aside the default judgment. There is nothing before me to counter those inferences.
26. The relevant date for assessing GSL's knowledge is at the date judgment was entered in 2016; not the date when it applied to set it aside in 2021. GSL has not filed any affidavit dealing with its knowledge in 2016 and Commissioner Bailhache's judgment provides limited assistance in this regard given that he had to proceed, in part, on the basis of inference. On the face of the Amended Order of Justice alone, almost all of the matters GSL now raises in support of the allegation of fraud concerning the default judgment would have been apparent in 2016, and to that extent, it might appear that GSL's prospects of success are not high. However, the mere fact that a case is weak is not a ground for striking it out. As Beloff JA noted in Trant v AG [2007] JLR 231:
"22 The test on an application to strike out is well established. It is only where it is plain and obvious that the claim cannot succeed that recourse should be had to the court's summary jurisdiction to strike out. Particular caution is required in a developing field of law. Provided that a pleading discloses some cause of action or raises some question fit to be decided by a judge, jurats or jury, the mere fact that a case is weak is not a ground for striking it out. These propositions are vouched for by a wealth of Jersey authority embracing principles deployed by the courts of the United Kingdom, see e.g. In re Esteem Settlement (6) (2000 JLR at 127) (we note en passant that a new regime, arguably more favourable to an application to strike out, has been introduced in England and Wales by the Civil Procedure Rules).
23 On an application to strike out under sub-para. (a) of r.6/13(1) (that there is no reasonable cause of action) evidence is not admissible. The facts alleged in the Order of Justice must be taken as correct. However, where an application is made under sub-para. (b) (scandalous, frivolous or vexatious), or sub-para. (d) (abuse of process), or where the application to strike out is made out under the inherent jurisdiction of the court, evidence is admissible and may be considered by the court. It follows that, on this application, evidence was and is admissible."
27. Commissioner Bailhache had rather more evidence before him than has been adduced before me. His conclusion in the light of that evidence was that "both sides have an arguable case, and a decision as to which was correct could only be reached following evidence being given at trial". Given that finding, it does not seem to me plain and obvious that GSL's claim cannot succeed such that it should be struck out. Nor in my judgment does it appear plain and obvious that it would be vexatious or otherwise an abuse of process for these claims to be pursued to a trial. Accordingly, I decline to strike out the claims made in relation to the Promissory Note and/or the Default Judgment.
28. Mr Itkin's judgment from the Royal Court on 2 December 2016 for £505,000 remains unsatisfied. He seeks an order that unless GSL pays that sum into Court, the Amended Order of Justice be struck out and relies upon the facts that:
(i) the judgment debt is against GSL, which is itself, invoking the jurisdiction of the Court in relation to the current proceedings;
(ii) GSL's litigation conduct amounts to an abuse of process, particularly given that Commissioner Bailhache made a finding that GSL had behaved dishonestly ("prevaricated for years");
(iii) the litigation brought by GSL is being funded by Mrs Sabadash and if the Court were to order a payment in, he assumes that Mrs Sabadash will put the liquidators in funds, albeit that he has not seen the funding agreement;
(iv) he does not seek a payment to himself, but rather a payment into Court to ensure that funds are available to satisfy his judgment if he prevails; and if he fails, those monies can go back into the liquidation estate.
29. In support of his submissions, he relies upon the decision of the Southwell JA in Jakobsson v Offshore Nautical Sales Limited [2003] JLR 71 where the Court imposed a stay of execution in respect of a judgment debt owed to Mr Jakobsson on condition that ONS made a payment into Court, in circumstances where it had found that ONS was abusing the Court process. Southwell JA held that:
"20 The circumstances are these:
(a) Since October 18th, 2002, Mr. Jakobsson has had a judgment of the Royal Court against ONS for £125,500 plus interest and costs. There has been no stay of execution as yet. The order of the Royal Court has to be obeyed by ONS, and ONS's failure to comply with that order is a serious breach.
(b) It appears that all debts of ONS have been met by the Neal group or family, except this judgment debt in favour of Mr. Jakobsson. The Neal group has declared through Dr. Kelleher its intention not to meet this one debt.
(c) The major asset of ONS, the Fairline franchise, was moved from ONS to ON(CI) in circumstances which remain inadequately explained, and which may be consistent with a desire on the part of the Neal group and family to remove from ONS an asset through which ONS might have been enabled to meet some at least of its debts. I stress, however, that the transfer of this franchise took place about three months before Mr. Jakobsson made his first claim against ONS.
(d) The Neal group or family have funded ONS's defence of these proceedings in the Royal Court, the payment of security for Mr. Jakobsson's costs of the appeal, and ONS's costs of the appeal.
(e) The Neal group and family apparently intend that, if the appeal is unsuccessful, Mr. Jakobsson will be faced with an insolvent judgment debtor, and with the long and expensive task of seeking to pursue companies and individuals in the Neal group and family for payment of the judgment debt.
21 In my judgment, those circumstances do constitute an abuse of process. ONS and the Neal group and family seek to use the courts of Jersey to further their own interests, while refusing to comply with the judgment of the Royal Court...
22 I take first ONS's application for a stay of execution. In the circumstances I have described, it is appropriate to order a stay of execution but on appropriate conditions. The appeal is arguable on both liability and quantum. Mr. Olsen accepted that a stay could be made subject to conditions, in particular, a payment into court. There must be a condition of the grant of a stay in this case that a substantial payment into court is made. I observe that it would not be appropriate on the evidence before this court to order payment to Mr. Jakobsson because, if the appeal were to succeed, recovery by ONS would be difficult."
30. Advocate O'Connell, for GSL, submits that:
(i) notwithstanding that GSL's historic litigation conduct might have been criticised, his clients cannot be. Having been appointed, they are officers of the Court and have engaged with a Beddoes' Court and obtained directions for the purposes of this litigation. Whatever abuse of process might have occurred previously, that came to an end with their appointment;
(ii) GSL does not have the assets to make a payment into Court, whether in the sum of £505,000 or at all, and were the Court to so order, it would contravene the provisions applicable to a creditor's winding up;
(iii) it would be wrong as a matter of principle to order a payment in as it would give Mr Itkin security in that sum, following Crumpler v Candey Limited [2017] EWHC 1511 (Ch).
31. The jurisdiction to require a payment into Court was considered by Master Thompson in Kinstellar LLC v Eagle Properties (No.14) Ltd [2020] JRC 117. He referred to an extract from the decision of the Supreme Court in IPCO (Nigeria) Ltd v Nigerian National Petroleum Corpn [2017] 1 WLR 970 and held that:
"26. The Supreme Court also explored whether the general procedural powers under the Civil Procedure Rules could be used to require a payment into court. On this question the Supreme Court observed at paragraphs 44 and 45:-
"44. Finally, I turn to CPR r 3.1(3). In my opinion, this takes IPCO nowhere. It is a power, expressed in general terms, to impose conditions on orders. It cannot authorise the imposition, on a person exercising its right to raise a properly arguable challenge to recognition or enforcement, of a condition requiring security for all or any part of the amount of the award in issue. Its obvious subject matter is the imposition of a condition as the price of relief sought as a matter of discretion or concession, not the imposition of a fetter on a person exercising an entirely properly arguable right. The Court of Appeal was right to underline in Huscroft v P & O Ferries Ltd (Practice Note) [2011] 1 WLR 939 , paras 18-19 that "rule 3.1(3) does not give the court a general power to impose conditions on one or other party whenever it happens to be making an order", and that its purpose is "to enable the court to grant relief on terms" and that the court should "focus attention on whether the condition (and any supporting sanction) is a proper price for the party to pay for the relief being granted", satisfying itself also that "the condition it has in mind represents a proportionate and effective means of achieving that purpose"...
28....following IPCO, that the general powers in the Royal Court Rules may not be used to require a payment into court, just as the general powers in the Civil Procedure Rules cannot be used to require such a payment."
32. Although the decision in Jakobsson predates that in Kinstellar, in my judgment, it reflects the principles set out in the later decision and is an example of the Court imposing a condition as the proper price for the relief sought by ONS, and granted by the Court, namely a stay of execution on an extant, unsatisfied judgment. Contrary to Mr Itkin's submissions, Jakobsson does not support the proposition that the Court can order a payment into Court whenever it finds an abuse of process.
33. Whilst GSL's Request for Further Information does not amount to seeking relief in terms of the exercise of a discretion or a concession, GSL has also sought an interim payment on account of costs which does involve the exercise of a discretion. In my judgment, I therefore have power to impose a condition of payment into Court insofar as it might be the proper price for the relief being granted.
34. Objectively, there is a certain symmetry about requiring a party seeking an order for an interim payment on account of costs to have discharged, or at the very least secured, any existing liabilities it might have to the paying party. However, in this case, that potential symmetry is upset by the facts that GSL does not have assets and is insolvent, as evidenced by the Statement of Affairs which formed the basis for the winding up application and showed that as at 5 July 2022, GSL had "liquid or readily converted assets of £2 and liabilities of £2,248,011.80". There is no evidence to contradict this statement and I cannot attach any weight to the suggestion that Mrs Sabadash will satisfy any orders made against GSL.
35. Even were GSL to have assets, it is far from clear to me that they could simply be used for the purposes of a payment into Court in relation to the Default Judgment. There is a line of authority in the UK, reflected in Crumpler v Candey Ltd., to the effect that a payment into Court by one party to proceedings gives the other security in that money. Were that reasoning to apply in Jersey (and I have not heard full argument on it), a payment into Court could undermine the fundamental requirement to pay all admitted proofs of debts on an equal footing, as set out in Chapter 4 of the Companies (Jersey) Law 1991 which imports the provisions of the Bankruptcy Désastre (Jersey) Law 1990.
36. Further, GSL alleges that the reason for its insolvency is the fraud perpetrated by Mr Itkin. Mr Itkin disputes this. However:
(i) in his pleading, he accepts that he took assets but pleads that he was entitled so to do;
(ii) whilst I have not heard evidence on the substantive claims, Commissioner Bailhache was of the view that in relation to the Promissory Note Claim, "both sides have an arguable case" and in my judgment, there is a real (as opposed to fanciful) possibility that GSL will prevail at trial;
(iii) in his deposition for the Californian State Proceedings, Mr Itkin accepted that he has taken assets belonging to GSL to "lock down" the position and to protect them from "outside creditors" and "to keep them safe" such that he already has some security;
37. In the circumstances, and taking into account that GSL, through its joint liquidators, is subject to the control of the Royal Court, I do not think that it a necessary or appropriate price for GSL to pay into Court the amount of the default judgment in order for the Court to consider, and/or grant, an interim payment on account of costs. I therefore decline to order any payment into Court in respect of the Default Judgment.
38. Although this was a live issue on the face of the Skeleton Arguments, by the time of the hearing the parties had agreed that it was appropriate for GSL to provide security for Mr Itkin's costs and Mr Itkin had provided a schedule of anticipated costs. By consent, this aspect of Mr Itkin's summons was adjourned to facilitate discussions between the parties.
39. The principles to be applied when considering a payment on account of costs are well known and set out, for example, by Commissioner Bailhache in MB & Services Ltd v United Company Rusal PLC [2020] JRC 151:
"11. In relation to the amount of the interim payment, the principles are clear from case law, as the parties seem to agree. In Crociani v Crociani [2014] (1) JLR 503, Beloff JA said:-
"16. In my view, the achievement of justice, to which all exercises of discretion under procedural rules aspire, would usually require that a party who is, pursuant to a court order, entitled to his costs, should be paid on account a percentage of the amount he is likely to recover on taxation calculated on a conservative basis to avoid any real risk of over payment".
12. In Marange Investments (Proprietary) Limited v Le General de Carrière et des mines sarl [2013] JRC 119A, Clyde-Smith, Commissioner said this at paragraph 44:-
"The Court should not therefore, seek to conduct a taxation or detailed view of the successful party's costs but adopt "a rough and ready" approach in order to arrive at a figure which the successful party "will almost certainly collect".
15. In Francis v Jersey Financial Services Commission [2018] JRC 064A, Sir Michael Birt, Commissioner, said this at paragraph 27:-
"I respectfully agree with observation of the Court of Appeal at paragraph 16 in Crociani (see paragraph 18 above) that the achievement of justice will usually require that a party entitled to his costs should be paid on account a percentage of the amount he is likely to recover on taxation, calculated on a conservative basis to avoid any real risk of overpayment. I further agree that, in respect of an order for standard costs, the starting point will be to order an interim payment of 50% of the costs claimed by the successful party on the standard basis, i.e. Factor A and Factor B applied to the number of hours worked. This does not require a full bill of taxation ..... ""
40. GSL has quantified its claim for the costs of, and incidental to, its application to amend the Order of Justice in the sum of £313,727.70, inclusive of disbursements, comprising (in summary):
(i) its Jersey lawyers', Collas Crill's, costs - 395 hours amounting to £163,508.39, using Factor B uplifts of 35%, and 50% for preparation and attendance at the hearing;
(ii) Advocate O'Connell, who was assisting Collas Crill - 118 hours amounting to £61,538.40;
(iii) two English Counsel - £41,905;
(iv) US lawyers - 56 hours, amounting to £29,670.48;
(v) Mr Grossman, an expert witness - 16 hours amounting to £9,465;
(vi) disbursements of £590; and
(vii) a costs draftsman, £7,050
41. GSL states that:
(i) Mr Itkin has not filed objections to costs totalling £67,829.51 and submits that these costs are "undisputed";
(ii) that the balance of the costs amounting to £245,898.19 is disputed and will be taxed;
(iii) the appropriate interim payment on account of costs is to add the undisputed costs of £67,829 to 50% of the disputed costs, which gives a figure of £190,778.60.
42. Advocate Jones, on behalf of Mr Itkin, submits that, amongst other things:
(i) this is an unreasonable and disproportionate amount of costs given that the application itself was scheduled to be heard in a single day, together with the Defendant's summonses, and a bill of over 500 hours is excessive for an application to amend an Order of Justice;
(ii) notwithstanding that he has not raised the issue in correspondence, the costs claimed include costs which are not recoverable as part of the Order, such as the costs of preparing the draft Amended Order of Justice;
(iii) there are no agreed costs and all costs, whether they are subject to a specific objection or not, will be taxed;
(iv) the headline figure claimed by the recipient cannot be determinative of the amount awarded by way of interim payment and the Court must carry out a rough and ready assessment;
(v) given the issues with this bill of costs, it is difficult, if not impossible, for the Court to make any meaningful assessment without carrying out a taxation, which is something it specifically must not do. Accordingly, he submits that I should decline to make any order for payment on account and should simply send the matter to taxation.
43. In my judgment, the Court has sufficient information, in terms of its knowledge of the proceedings, its experience of taxations generally, and the schedule of costs, to carry out a rough and ready assessment to determine the figure which GSL "will almost certainly collect", and I decline Advocate Jones' request to make no order for a payment on account. To do so would run contrary to the interests of justice identified by Beloff JA in Crociani (and cited with approval in MB & Services Ltd at paragraph 39 above).
44. I remind myself that:
(i) the proposed amendments were largely by way of consolidation, not expansion, in that they added claims that were the subject of Californian State Proceedings, and the only new claims were the Default Judgment Claim and the Credit Cards Claim;
(ii) whilst the amendments may not have appeared to be extensive or novel, they were, until the last moment, vigorously contested by Mr Itkin and it was necessary for directions to be given in advance of the hearing for expert evidence to be adduced in relation to firstly, United States bankruptcy law and secondly, Californian law. Until the morning of the hearing, it was unclear whether cross-examination of the experts would be required;
(iii) this was not a "run-of-the-mill" application to amend.
45. Applying a broad-brush approach:
(i) there are clearly numerous, potentially significant, matters of detail relating to the bill that will have to be considered on taxation;
(ii) whilst the involvement of Advocate O'Connell and Collas Crill might appear to be disproportionate, the schedule of costs claims for the senior associate and the associate only at Collas Crill to assist Advocate O'Connell, which does not appear to me to be an unreasonable number of fee earners;
(iii) however, given that this application was listed, with two other summonses, for 1 day only, the headline figures for the costs of the application, and the hours spent, appear to be disproportionate to the amount of Court time allocated, as does the involvement of two English Counsel, and US lawyers;
(iv) whilst ordinarily, the receiving party would be entitled to the costs of the taxation pursuant to RCR 12/8, that is not a given, particularly if significant sums are taxed off the bill; those costs should be removed for the purposes of assessing the correct level of an interim payment;
(v) on a rough and ready basis, I think that there may be a significant reduction in the bill of costs on taxation.
46. As to the extent of that reduction, I note the approach taken by Commissioner Bailhache in MB & Services Ltd in relation to a claim for costs arising out of a contested Representation. On a pro-rated, Court-day basis, that claim was for an amount similar to that claimed by GSL. The Court held that:
"27. Whereas in some of the cases, the Court has taken a figure of 50% of the claimed sum as being an appropriate sum to award for the purposes of an interim payment, I consider that that percentage would be too high in the present case for the reasons for which I have given. Taking a step back from the litigation, the sum claimed by the Respondent for what was thought to be a two day application is £715,000.00 (as it were without prejudice because it reserves the right to seek a higher sum on taxation). That seems to me to be too high a figure to start from for the purposes of the argument that was involved in this case, even making due allowance for the fact that this is major litigation. In the light of the complexities, I propose to take the sum of £350,000.00 as an overall starting point, and allow a 50% deduction against that. Accordingly, I make an Order that the Representors should pay the sum of £175,000.00 as an interim payment pending taxation."
47. In the current case, GSL has claimed over £313,000 for an application that was to take, at most, 1 day. As with MB & Services Ltd, that seems to me to be too high a starting point, notwithstanding that this was not a run of the mill application. Accordingly, I reduce it by 50% to give a starting point of £156,863, and then allow 50% of that sum by way of an interim payment, amounting to £78,432. In my judgment, this is a sum that GSL will almost certainly collect on taxation, and I order accordingly.
48. In Financial Technology Ventures v ETFS Capital Limited [2021] JCA 176, Crow JA set out the function of pleadings in the following terms:
"42. Turning more generally to the function of pleadings, it is stating the obvious to say that, as between the parties inter se, they are intended to identify the issues in dispute, so that each side knows what case it has to meet and what evidence it needs to adduce at trial. As between the parties (on the one hand) and the court (on the other), the function of pleadings is to provide the court with an appropriate tool for understanding the case it has to decide and for managing the proceedings in the run-up to trial, and during the trial process. In order properly to fulfil those functions, it is critically important that pleadings should always avoid (at one extreme) including an unnecessary torrent of detail which may obscure the essential issues, and (at the other extreme) pleading the case in such exiguous terms that the court and the other side are uncertain as to the basis on which the case is being put: Three Rivers DC v. Govemor & Company of the Bank of England [2003] 2 AC 1, at 49 - 51.
43. That explains the governing provisions of rule 6/8 of the Royal Court Rules, 2004. Paragraphs (1) and (6) provide as follows (emphasis added): "(1) Subject to the provisions of this Rule, every pleading must contain, and contain only, a statement in summary form of the material facts on which the party pleading relies for that party's claim or defence, as the case may be, but not the evidence by which those facts are to be proved, and the statement must be as brief as the nature of the case admits, (6) A party may in pleadings raise any point of law.
44. As the underlining indicates, we consider it important to emphasise that the Rules require that (i) facts are pleaded, not evidence; (ii) only material facts are pleaded, not all incidental facts; and (iii) points of law may be pleaded, but do not always have to be.
45. It is also important to emphasise that rule 6/15 confers a power on the court, either of its own motion or on application by a party, to make an order requiring a party to clarify any matter in dispute in the proceedings or give additional information in relation to any such matter. Accordingly, if in any case a litigant genuinely does not understand some part of the case against him, he can apply to the court for an order under rule 6/15 to clarify that matter. If he fails to do so (whether through inadvertence or as a result of a deliberate, tactical choice) and if the trial court subsequently bases its decision on a finding which can properly be said to have been raised on the pleadings, albeit not prominently or perfectly clearly, it may not lie in the litigant's mouth to say on appeal that he did not realise that was the case being put against him. Litigants should not be tempted to adopt Nelsonian blindness in the hope of being able to shut out inconvenient issues at trial. Conversely, we wish to say nothing to encourage Delphic pleading. Each side is expected to set out its case both clearly and succinctly in its pleading. If it is in any doubt about the other side's case, it is expected to seek clarification."
49. The principles in relation to RCR 6/15 were set out by Master Thompson in Monteagle International v Grocery Market Research Limited [2020] JRC 244:
"15. The power to order a party to provide further information is set out in Rule 6/15(1) of the Royal Court Rules 2004, as amended, ("RCR") as follows: -
"6/15 Obtaining further information [54] (1) The Court may at any time of its own motion or on application order a party to - (a) Clarify any matter which is in dispute in the proceedings; or (b) give additional information in relation to any such matter, whether or not the matter is contained or referred to in a pleading."
16. This rule is supported by Practice Direction RC17/04. Paragraph 5 of that RC17/04 provides as follows:-
"5. The Request should be concise and should only relate to matters that are reasonably necessary and proportionate for a requesting party to prepare its own case, or to understand the case it has to meet."
17. At paragraph 9 of Holmes v Lingard [2018] JRC 184 I stated as follows: -
"Rule 6/15 was introduced by Royal Court (Amendment No.20) Rules 2017. The new Rule 6/15 replaced requests for further and better particulars, interrogatories and requests for further and better statement of case. The intended effect of Rule 6/15 (which is identical to an equivalent found in the Civil Procedure Rules) is that each party is required to make its case clear if its pleading does not do so."
18. In paragraph 10 I made this observation: -
"10. Rule 6/15 should not however open the floodgates to numerous or lengthy requests. The court has previously rejected for further and better particulars in similar fashion. The court also rejected requests amounting to evidence as not being an appropriate way to proceed e.g. Crociani & Anor v Crociani & Ors [2015] JRC 177. Nor will requests that go beyond an understanding of a case be granted (e.g. see Booth v Collas Crill [2017] JRC 038). The touch stone is whether a party's pleading is understandable or not."...
20. It is also well known that requests for information will not be granted where they relate to matters known to the requesting party, or where they are requests for evidence.
21. In Booth v Collas Crill [2017] JRC 038, one of the criticisms made of the defendant was that it had served an extensive request for further and better particulars which comprised 138 separate requests for a 9-page order of justice. At paragraph 48 I stated the following: -
"The defendant could have put its requests much more plainly and simply." [Emphasis Added]
22. I have referred to the above authorities because in evaluating requests for information made of particular paragraphs, I consider that the court should not just analyse the particular paragraph but also the pleading as a whole to see whether the case is clear. This is because, while there may be ambiguity in a particular paragraph, that ambiguity may be answered or clarified in another paragraph of the pleading. When drafting requests for information, parties and their advisers should stand-back and focus on what it is they do not understand having regard to the pleading as a whole, not just a particular sentence or paragraph. This approach may narrow the number of requests. It may also avoid repetition of largely the same requests where a sentence by sentence or paragraph by paragraph approach only is applied to the framing of requests. The focus should therefore be on clarification of an issue being sought which may be raised in a number of different parts of a pleading, issues that are not understood or the key material facts supporting those issues. Parties should avoid descending into the minutiae or repeating requests in respect of the same issue. Brevity and clarity are to be encouraged. ""
50. In this case, GSL has issued a summons seeking further information under 93 numbered requests, some of which contain further sub-paragraphs, in respect of an Amended Answer which is 15 pages long. Mr Itkin has answered 29 of the requests and they are no longer pursued by the summons. As to the remaining requests, the majority have been met with the statement that it is not "a proper request for information and/or clarification". In my judgment, that repeated response singularly fails to comply with paragraph 11 of Practice Direction RC 17/04 which states that:
"11. If the party responding refuses to agree to respond to the Request, the responding party must give full reasons for its refusal."
51. As to the outstanding requests, Advocate O'Connell submits that:
(i) The shape of Mr Itkin's defence to GSL's claims is not always easy to discern from his Amended Answer but in broad terms, Mr Itkin appears to admit the underlying factual allegations that assets were transferred to him or otherwise used for his benefit, but pleads that there was nothing wrongful in his so doing as:
(a) there was (and is) a Californian law business partnership between Mr Itkin and Mr Sabadash;
(b) the shares in GSL were held on bare trust for that partnership; and
(c) according to the terms of the partnership, Mr Itkin and Mr Sabadash were entitled to use or to appropriate assets owned by the partnership.
(ii) All of those pleaded issues are in dispute in the proceedings, and they must be pleaded properly and with sufficient particularity if GSL, and the Court, are to understand them, and GSL is to prepare its own case. At present they are not properly pleaded.
52. Advocate Jones submits that:
(i) this type of request is redolent of a request for Further and Better Particulars which is no longer permissible under the principles applicable to RCR 6/15;
(ii) in any event, the information sought by the Requests is neither necessary nor proportionate because the Amended Answer is adequately pleaded and further, all of the matters subject to the Requests were matters raised in the Californian State Proceedings where Mr Itkin also raised a cross-complaint in relation to the partnership. Those proceedings were sufficiently advanced that Mr Itkin had been deposed, and the trial was part-heard, albeit that it was subsequently abandoned as a result of the pandemic;
(iii) the joint liquidators have refused to answer his repeated questions about whether they have considered the material filed in the US proceedings and given that refusal, he assumes that they have not reviewed the material and are therefore trying to get him to do their work;
(iv) had the joint liquidators reviewed the material filed in the US, they would have readily discovered the answers to the requests.
53. As to the form of the Request, I agree with Advocate Jones that it reads like a request for Further and Better Particulars, with each request or series of requests being referenced to a particular paragraph of the Amended Answer. Indeed, the schedule attached to GSL's Skeleton Argument sets out each request, Mr Itkin's response, and has a final column entitled "Why the RFI is Necessary". Of the 93 requests, 38 refer to a justification set out in an earlier paragraph and in my judgment, evidence an approach deprecated by Master Thompson in Monteagle International, namely "repetition of largely the same requests where a sentence by sentence or paragraph by paragraph approach only is applied to the framing of requests".
54. In submissions, Advocate O'Connell accepted that the requests could have been expressed more concisely, particularly given that his Skeleton Argument referred to the Requests as encompassing the two issues in relation to which information was sought, namely:
(i) ownership - who or what owned GSL, and if it were owned by a partnership, what partnership was it and what assets were owned by it?
(ii) entitlement - why was Mr Itkin allowed to appropriate assets belonging to the partnership?
55. It was also canvassed in submissions that, if the Court were so minded, it was open to the Court to redraft GSL's requests into a form that it regarded more in keeping with the provisions of RCR 6/15. In my judgment, such an approach would stray into the territory identified by Macrae DB in Patel v JTC Trust Company Ltd [2023] JRC 152 as being inappropriate:
"16. This, in my view, is going too far. The Plaintiffs were not unrepresented. All parties appear to be advised by highly skilled teams of lawyers. The Court should not enter the fray and help a party to plead its case. It is not necessary, and it is also inappropriate as it gives these pleaded paragraphs, if they are adopted, a kind of judicial imprimatur."
56. Accordingly, the issue for the Court is as to whether all or any of the individual requests should be answered and I have addressed the individual requests in a schedule to this judgment.
57. In my judgment:
(i) it is no answer to a Request for Further Information to say that the requesting party should know the information sought and/or that they can go and find it in the material filed in proceedings in another jurisdiction;
"...if the trial court subsequently bases its decision on a finding which can properly be said to have been raised on the pleadings, albeit not prominently or perfectly clearly, it may not lie in the litigant's mouth to say on appeal that he did not realise that was the case being put against him..."
(iii) parties must plead their cases clearly and precisely, and identify the issues in dispute, so that each side knows what case it has to meet and what evidence it needs to adduce at trial, and to ensure that the Court is similarly sighted on the issues.
58. The Amended Answer does not read like the type of pleading expected by the Royal Court in that it pleads a multitude of factual matters, not all of them material; does so imprecisely and without providing particulars; and uses terms inconsistently. On first reading, it appears somewhat obfuscatory and this was an impression reinforced in the course of submissions. Whilst it is possible, but by no means easy, to read the Amended Answer as a whole and get a superficial understanding of Mr Itkin's case, it is far from clear to me that any such understanding will be a common one shared with the Court, or reflects the case that Mr Itkin intends to advance at trial.
59. In my judgment:
(i) the risk presented by this pleading is precisely that identified by Crow JA in Financial Technology Ventures v ETFS Capital Limited (set out at paragraph 57(ii) above) and in respect of which he held that:
"Each side is expected to set out its case both clearly and succinctly in its pleading. If it is in any doubt about the other side's case, it is expected to seek clarification."
(ii) the Amended Answer lacks clarity and I reject Mr Itkin's submission that it has been adequately pleaded;
(iii) it is both necessary and proportionate, to require answers to some, but not all, of the Requests made.
60. For the reasons set out above:
(i) I dismiss Mr Itkin's application to strike out those parts of the Amended Order of Justice dealing with the Promissory Note Claim and/or the Default Judgment Claim;
(ii) I dismiss Mr Itkin's application for security in the sum of £505,000 in respect of the Default Judgment;
(iii) I adjourn Mr Itkin's application for security for costs;
(iv) I order that Mr Itkin shall make a payment to GSL in the sum of £78,432 on account of the costs ordered pursuant to the Act of Court dated 7 February 2024;
(v) I direct that Mr Itkin answer Requests 2 (ii) to (viii); 5, 6, 10, 13, 14, 15, 19, 20, 22, 23, 24, 25, 26, 41, 43, 44, 45, 49, 50, 51, 52, 54, 57, 58, 59, 60, 61, 62, 63, 64, 69, 77, 79, 80, 87, and 92 of GSL's Requests for Further Information.
61. At the handing down of this judgment, I will give further directions for the expeditious progression of this litigation, and make such orders for costs as may be appropriate.
62. By an Order dated 9 April 2024, the Los Angeles Division of United States Bankruptcy Court of the Central District of California, ordered Mr Itkin to present a letter to the Royal Court. Mr Itkin's Advocate emailed that letter to the Bailiff's Judicial Secretary on 9 May 2024 and the following day, GSL's Advocate replied to all parties to that email. Neither party took any further steps in relation to that letter, and in particular neither chased for a response nor issued a summons in order that the Court might consider the issues raised with the benefit of argument and/or evidence. The existence of the letter only came to my attention at the end of November 2024 in the course of my preparations for the recent hearing.
63. The letter is from the Honourable Neil Bason, a United States Bankruptcy Judge, who notes that:
"To facilitate cross-border cooperation, Chapter 15 authorizes this Bankruptcy Court to "communicate directly with, or to request information or assistance directly from, a foreign court or a foreign representative, subject to the rights of a party in interest to notice and participation." This Bankruptcy Court would benefit from the perspective of the Royal Court as to the automatic stay issues that have arisen in Golden Sphinx's Chapter 15 case."
64. The letter goes on to ask 3 specific questions of the Royal Court:
"(a) To what extent would further modifying, conditioning, terminating, or otherwise granting relief from the automatic stay as to either or both of the California Actions aid, interfere with, or otherwise affect the ability of the Joint Liquidators to discharge their obligations to creditors and other parties in interest, or the ability of the Royal Court to discharge its own duties, in the proceedings pending before it, particularly with respect to (i) New Albion's claims against Mr. Itkin in the State Court Action; (ii) Mr. Itkin's cross-claims in the State Court Action; (iii) Golden Sphinx's claims in the State Court Action; (iv) Mr. Itkin's claims in the District Court Action; and (v) Golden Sphinx's counterclaims in the District Court Action?..
(b)...In the event that the Royal Court would prefer for this Bankruptcy Court to deny or limit any further relief from the automatic stay, how long would the Royal Court prefer for the automatic stay to remain in effect?
(c) Are there any other facts and circumstances regarding the proceedings before the Royal Court that this Court should be aware of when making its decision on whether to grant any further relief from the automatic stay?"
65. Whilst I can readily appreciate the very progressive and multilateral approach adopted by the US Court, which accords with the UNCITRAL Model Law on Cross Border Insolvency, from the perspective of the Royal Court, direct correspondence between Courts is unusual and can present challenges.
66. Article 49 of the Bankruptcy (Désastre) (Jersey) Law 1990 provides that:
"49 Assistance for other courts in insolvency matters
(1) The court may, to the extent it thinks fit, assist the courts of a relevant country or territory in all matters relating to the insolvency of a person, and when doing so may have regard to the extent it considers appropriate to the provisions for the time being of any model law on cross border insolvency prepared by the United Nations Commission on International Trade Law.[92]
(2) For the purposes of paragraph (1), a request from a court of a relevant country or territory for assistance shall be sufficient authority for the court to exercise, in relation to the matters to which the request relates, any jurisdiction which it or the requesting court could exercise in relation to these matters if they otherwise fell within its jurisdiction.[93]
(3) In exercising its discretion for the purposes of this Article the court shall have regard in particular to the rules of private international law.
(4) In this Article "relevant country or territory" means a country or territory prescribed by the Minister."
67. The US is not a relevant country or territory under the Bankruptcy (Désastre) (Jersey) Order 2006 and whilst that does not prohibit cooperation, might require specific gateways and/or parameters to be identified, or for the Royal Court to rely on comity.
68. Moreover, to a Court unused to writing directly to other Courts, the process of corresponding itself appears rather strained. In order to formulate the contents of any response, the Royal Court would have to engage with the parties. However, the parties have already participated in the formulation of Mr Bason's letter and in my judgment, there is a risk that this could result in the parties litigating further in correspondence, with themselves, through the agency of the Courts, which would be unsatisfactory.
69. With the greatest respect to my fellow judge in the United States of America, I do not think that I can assist materially in terms of a formal response to his letter. It is, and remains, a matter for the US Court alone as to how it chooses to proceed.
70. However, insofar as it might be possible for this Court and/or desirable from the perspective of the US Court, for the Royal Court to provide relevant information which might assist the US Court's deliberations, I would respectfully note that:
(i) all of the claims made between GSL and Mr Itkin, whether originally brought in the US or in Jersey, are now being pursued in Jersey;
(ii) the proceedings brought by GSL against Mr Itkin in Jersey are being progressed and further directions will be given at the handing down of this judgment with a view to achieving a trial of all issues as expeditiously as possible and within the next 12 months or so, should the case not settle;
(iii) having noted that the claims in Jersey have previously been stayed repeatedly by consent without any resolution having been achieved, and that the parties singularly failed to chase a response to Mr Bason's letter, the Royal Court will be far more proactive in its management of these proceedings going forward;
(iv) subject to any further Order, the Royal Court is content for its judgments and orders in relation to these proceedings to be shared with the US Court;
(v) absent resolution of the claims in Jersey, the liquidation estate is unlikely to increase;
(vi) resolution of the issues between the parties in Jersey may thereafter allow any unresolved issues to be addressed expeditiously in the US or elsewhere;
(vii) from the Royal Court's perspective, parallel proceedings in multiple jurisdictions in relation to the same or similar subject matter are likely to serve only to deplete the liquidation estate, add to the complexity presented by this insolvency and increase the time that it will take to resolve outstanding matters.
Authorities
Itkin v Golden Sphinx [2021] JRC 117.
Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46.
Dubai Islamic Bank -v- Ridley [2016] JRC 102.
Emirates NBD Bank P.J.S.C. v Almakhawi and Ors [2023] JRC 243
R (on the application of Gray) v Chief Constable of Nottinghamshire [2018] 1 WLR 1609
Mullen v Conoco Ltd [1998] QB 382
Park v CNH [2021] EWCA Civ 1766
Golder v. Dodd (1982) J.J. 23
Vekaplast K.G. v. T.A. Picot (C.I.) Ltd [1990] JLR 163
Jakobsson v Offshore Nautical Sales Limited [2003] JLR 71
Crumpler v Candey Limited [2017] EWHC 1511 (Ch)
Kinstellar LLC v Eagle Properties (No.14) Ltd [2020] JRC 117
IPCO (Nigeria) Ltd v Nigerian National Petroleum Corpn [2017] 1 WLR 970
Companies (Jersey) Law 1991
Bankruptcy Désastre (Jersey) Law 1990
MB & Services Ltd v United Company Rusal PLC [2020] JRC 151
Financial Technology Ventures v ETFS Capital Limited [2021] JCA 176
Monteagle International v Grocery Market Research Limited [2020] JRC 244.
Patel v JTC Trust Company Ltd [2023] JRC 152.
Bankruptcy (Désastre) (Jersey) Order 2006
Requests 2 and 3
1. Mr Itkin pleads that:
"3. The Defendant admits that to the best of his understanding the Golden Sphinx Shares were originally held through a nominee arrangement but avers that the Golden Sphinx Shares were held on bare trust for the Itkin-Sabadash Partnership (as described below) through 'Lynx Corporate Services Limited'..."
2. GSL makes the following requests:
2. In respect of the alleged "Itkin-Sabadash Partnership' (i.e. the Alleged Partnership):...
(ii) On what date was it formed? (ii) Was it formed pursuant to a written or oral agreement or agreements? (iv) (If written) please identify the document(s) containing such agreement(s). (v) (If oral) please identify the conversation(s) in which the agreement(s) were reached, and set out the words spoken (or their gist) said to constitute any such agreement(s). (vi) To the extent not elicited by the above requests, please set out the material terms of the Alleged Partnership. (vii) For what reason was the Alleged Partnership formed? (viii) What was the business of the Alleged Partnership? (ix) Is it still in existence? If not, please explain when and how it ceased to exist.
3. In what jurisdiction is or was 'Lynx Corporate Services Limited incorporated?
3. GSL submits that these requests "are necessary to understand Mr Itkin's case, in particular the Ownership Issue. Mr Itkin seems to be advancing a case that the Alleged Partnership was the ultimate owner of GSL, and held it according to its terms. Yet his case is vague about any of the details of the Alleged Partnership."
4. Mr Itkin's response is that:
(i) In relation to request (ii) to (viii):
"These are improper requests for information and clarification. The operations of the Company and the assets which it managed as pleaded are a matter of record and evidence and the subject of wide-ranging disclosure in the various Californian proceedings."
(ii) In relation to request (ix):
"(ix) The partnership is still in existence and is the subject inter alia of Californian Partnership Litigation with which it is assumed the Plaintiff and the Joint Liquidators will be intimately familiar."
(iii) In relation to Request 3:
"This is not a proper request for information and clarification. Given the content of the Amended Order of Justice it is concerning that the Plaintiff and / or the Joint Liquidators are not aware of Lynx Corporate Services."
5. In my judgment:
(i) the existence or otherwise of the alleged partnership is a fundamental matter in dispute between the parties;
(ii) it is necessary for both the parties and the Court, if all are to understand the issue and to have a common appreciation of it, that all matters relating to the alleged partnership, including its terms and assets, are identified clearly and precisely;
(iii) the current pleading, as a whole, does not do so;
(iv) it is no answer to the request that information might be available in another jurisdiction;
(v) Request 2(ix) has been answered;
(vi) Request 3 seeks matters of evidence which are not permissible;
(vii) the remaining parts of Request 2 should be answered.
Requests 5 and 6
6. As set out above, Mr Itkin pleads both a nominee arrangement and a bare trust in relation to the GSL shares.
7. GSL makes the following requests:
5. Regarding the alleged "bare trust' on which the Defendant alleges the Golden Sphinx Shares were held, please explain what the relationship is (if any) between the 'nominee arrangement' and the 'bare trust', and, in particular and without limiting the generality of the request, what (if any) difference is said to exist between those two arrangements as they apply to the Golden Sphinx Shares.
6. If the answer to the previous request is something other than that the 'bare trust' and 'nominee arrangement are merely different terms to describe precisely the same thing: (i) Please identify the settlor(s), beneficiary or beneficiaries, trustee(s) and any protector(s) of the "bare trust' at all relevant times. (ii) On what date was the 'bare trust formed? (iii) Was it formed in writing or otherwise? (iv) (If in writing) please identify the document(s) containing such agreement(s). (v) (If otherwise) please explain how the 'bare trust was formed. (vi) What was the purpose of the "bare trust'? (vii) Please explain the relationship (if any) between the 'bare trust and the Alleged Partnership. (vill) Is the 'bare trust' still in existence? If not, please explain when and how it ceased to exist.
8. Mr Itkin's response is that:
5. This is not a proper request for information. The position as averred by Mr Itkin is set out inter alia in paragraph 3 of the Amended Answer.
6. No response is necessary.
9. GSL submits that:
Mr Itkin's Amended Answer (and his Response: see e.g. para 4(viii)) refers at different times to the shares in GSL being held on 'bare trust' and a 'nominee arrangement'. GSL sought confirmation that Mr Itkin uses these terms interchangeably to describe the same thing, alternatively an explanation of (broadly) what the differences are. Mr Itkin has, for unclear reasons, refused. This goes to the Ownership Issue, and is necessary for GSL to understand the case it has to meet.
10. In my judgment:
(i) paragraph 3 of the Amended Answer refers to both a bare trust and a nominee arrangement;
(ii) whilst they are likely to refer to the same thing, both as a matter of law and given the current response to Request 6, all matters relating to the alleged partnership must be pleaded with precision if the parties and the Court are to have a common understanding of the case being advanced;
(iii) Requests 5 and 6 should be answered.
Request 7
11. Mr Itkin pleads that Mr Stampfli acted "contrary to the instructions of both Mr Sabadash and the Defendant".
12. GSL makes the following request:
7. Regarding the 'joint instruction of Mr Alexander Sabadash and the Defendant' given to Mr Stampfli: (i) When and how was such instruction given (including whether written or oral)? (ii) What was the substance of such instruction?
13. Mr Itkin's response is that:
This paragraph refers to events, conversations and interactions which happened over 20 years ago. It is anticipated that these topics, to the extent which they are relevant to the causes of action pleaded, will be the subject of witness evidence and latterly cross-examination following the completion and exchange of the discovery process.
14. GSL submits that this is a circular argument. Unless it is able to understand what Mr Itkin's case is on the incorporation of GSL, it can neither understand the case it has to meet nor prepare its own case (including obtaining its own appropriate evidence) in response.
15. In my judgment, this is an impermissible request for evidence, and I decline to order that Mr Itkin answer it.
Request 10
16. Mr Itkin pleads that:
5. The Defendant avers that all assets ever held and / or currently held by the Plaintiff were all assets of the Itkin-Sabadash Partnership and at no time were any of these assets ever settled in to trust and / or made subject to the terms of any trust arrangement...
17. GSL asks why "If (as averred in paragraph 3) the Golden Sphinx Shares were held on 'bare trust for the Alleged Partnership, please explain why the Plaintiff's assets were also assets of the Alleged Partnership".
18. Mr Itkin's response simply states "Purusant (sic) to the usual rules and terms of assets being held on a bare trust."
19. GSL submits that:
This request asks Mr Itkin to give further information as to, or to clarify, his confusing and apparently contradictory pleas that (i) GSL's shares were held on 'bare trust' for the Alleged Partnership, but that (ii) GSL's own assets were also assets of the Alleged Partnership (para 5 of the Amended Answer). His response leaves Mr Itkin's case very unclear; it is necessary that he confirms what his case is on these matters (which go to the Ownership Issue and Entitlement Issue).
20. In my judgment:
(i) there is an inconsistency between paragraphs 3 and 5 of the Amended Answer which should be clarified in order that matters relating to the partnership are pleaded with precision;
(ii) this request should be answered.
Requests 13, 14 and 15
21. Mr Itkin pleads that "It is averred that the Plaintiff was incorporated and operated by Mr Sabadash and the Defendant as a vehicle through which to (inter alia) manage the assets of the Itkin-Sabadash Partnership and to expatriate funds generated from the partnership's business operations in Russia."
22. GSL makes the following requests:
13. Please identify which 'assets of the Itkin-Sabadash Partnership' the Plaintiff was incorporated to manage (and, if different, those assets which it did in fact manage).
14. Please provide particulars of the Alleged Partnership's alleged 'business operations in Russia', of the 'funds generated' by them, and of the role of the Plaintiff in expatriating such funds.
15. Please provide particulars of how and when the Plaintiff was 'operated, and when it ceased to be so operated.
23. Mr Itkin's response is that "these are improper requests for information and clarification. The operations of the Company and the assets which it managed as pleaded are a matter of record and evidence and the subject of wide-ranging disclosure in the various Californian proceedings."
24. In my judgment, these Requests should be answered by the answer to Request 2(viii) and to the extent that they are not, they should be.
Requests 19, 20 and 21
25. Mr Itkin pleads that:
13...The partnership interest was agreed as a 2/3 - 1/3 split in favour of Mr Sabadash thus forming the Itkin-Sabadash Partnership (the "Partnership"). At the inception of the Partnership Mr Itkin was expected to draw the minimum sum of $4m per year. The Partnership was established pursuant to and is subject to the laws of the State of California...
26. GSL makes the following requests:
19. Please explain what is meant by the 'partnership interest was agreed as a 2/3 - 1/3 split in favour of Mr Sabadash'.
20. As regards the Defendant being 'expected to draw the minimum sum of $4m per year': (i) Who expected that, and why? (ii) How was any entitlement to drawings from the Alleged Partnership to be calculated? (ii) Why was the figure of US$4 million 'expected to be a minimum? (iv) Was there any maximum level of drawings? (v) Approximately how much has the Defendant drawn from the Alleged Partnership in total?
21. Please set out all facts and matters relied upon in support of the averment that the Alleged Partnership 'was established pursuant to and is subject to the laws of the State of California'.
27. Mr Itkin's response is that:
19. This does not require any further explanation or clarification.
20. These are matters of evidence and not proper requests for information and / or clarification.
21. This is a matter of evidence including evidence of foreign law. Much of this subject matter is also the subject of extant proceedings before the Californian Courts. This is not a proper request for information or clarification.
28. GSL submits that:
(i) in relation to Request 19, the quoted phrase could refer to (for example) the way profits were to be shared, to the parties' agreement as to their respective ownership shares of the partnership's assets in the event of a dissolution, or to something else and the answer to the Request is necessary to understand Mr Itkin's case;
(ii) in relation to Request 20, Mr Itkin has declined to explain why he expected to draw the minimum sum of $4m per year from the partnership and this could be as a result of the terms of the partnership, and/or to its activities, and/or to its assets.
(iii) in relation to Request 21:
"the governing law of a partnership will plainly be relevant to such matters as the nature and incidents of the partnership's ownership of its assets; the nature of an individual partner's rights in relation to partnership assets, both prior to and after dissolution; and the parties' entitlements to profit (and possibly capital) shares. The function of evidence, including of expert evidence of foreign law, is to prove the facts upon which a party relies to establish its pleaded case. Mr Itkin must first plead his case on what foreign law he says governed and governs the Alleged Partnership. Only then can the JLs take advice on Californian law, and then (if issue is joined on the point, once properly elaborated upon) the proper scope of, and questions to be answered by, evidence of California law can be ascertained. A response is accordingly necessary to enable GSL to understand Mr Itkin's case, and to prepare its own."
29. In my judgment:
(i) Request 19 should be answered by the answer to Request 2(vi) and to the extent that it is not, it should be;
(ii) Request 20 should be answered by the answers to Request 2(vi), (vii) and (viii) and to the extent that it is not, it should be;
(iii) Request 21 is an impermissible request for evidence and I decline to order that Mr Itkin answer it.
Requests 22 to 26
30. Mr Itkin pleads that:
14. Pursuant to the agreed terms of the Partnership, Mr Sabadash and the Defendant were able to / and permitted to draw from any bank account that the Partnership controlled which included the bank accounts in the name of the Plaintiff. From the date of its incorporation both Mr Sabadash and the Defendant understood that the Plaintiff was a partnership asset. The Defendant was the primary signatory on each bank account under the control of the Partnership, In the case of all bank accounts (including those of the Plaintiff) Mr Sabadash was listed as a 'beneficiary signatory', Pursuant to the Partnership Mr Sabadash and the Defendant were entitled to draw on the Partnership's accounts as needed on the proviso that they would account to one another for any differences outside of their agreed shares.
31. GSL makes the following requests:
22. Please set out the 'agreed terms' referred to.
23. Please clarify what is meant by Mr Sabadash and the Defendant being 'able to / and permitted to draw from bank accounts, and identify the basis for any such entitlement.
24. Please explain how the Alleged Partnership 'controlled' the Plaintiff's bank accounts.
25. To the extent not already answered above, please clarify what is meant by the Plaintiff being 'a partnership asset'.
26. Regarding the final sentence: (i) On what basis were Mr Sabadash and the Defendant so 'entitled'? (ii) What were their "agreed shares', and how were they calculated?
32. Mr Itkin's response is that these Requests are not a proper request for further information and/or clarification.
33. GSL submits that these requests ask Mr Itkin to give directly relevant information and clarification, including what the relevant 'terms' of the Alleged Partnership are, and on what basis Mr Itkin and Mr Sabadash were 'entitled' as alleged. These matters are central to the issues, and are necessary for GSL to understand Mr Itkin's case.
34. In my judgment, these Requests should be answered by the answers to Request 2(vi), (vii) and (viii) and to the extent that they are not, they should be.
Requests 27 to 29
35. Mr Itkin pleads that:
"15. In 2003, at which the point the Partnership had become successful Mr Sabadash was elected to the Russian Senate, Owing to the operation of Russian Low Mr Sabadash had to step back from any formal role in the Partnership and its various businesses and in many cases, the Defendant became the sole Director and / or controlling officer of various entities. This included the Plaintiff, In most cases the Defendant entered into formal contracts of employment with these entities, One such example of this includes a Jersey company called 'Diesel Limited'. Another example is the Plaintiff."
36. GSL makes the following requests:
27. Please explain in what way the Alleged Partnership had become successful in 2003.
28. Please identify the provision(s) and/or principle(s) of Russian law referred to.
29. Please explain what is meant by 'step[ping] back from any formal role in the' Alleged Partnership.
37. Mr Itkin's response is that these Requests are not a proper request for further information and/or clarification.
38. GSL submits that:
These Requests go to Mr Itkin's case in relation to his alleged employment agreement (and, relatedly, to the relationship between that alleged employment agreement and the Alleged Partnership). They also go to the basis of Mr Itkin's supposed entitlement to what he says are 'partnership assets', given that (he says) Mr Sabadash 'stepped back from any formal role in' the Alleged Partnership. They go to the issues in the case and are necessary for GSL to understand Mr Itkin's case.
39. In my judgment, these Requests are impermissible requests for evidence, and I decline to order that Mr Itkin answer them.
Requests 31, 32, 36 and 37
40. Mr Itkin pleads that:
18...The G550 and G200 were each owned by entities incorporated in the Isle of Man, M-BJEP Ltd. ("MBJEP") and M-NICE Ltd. ("MNICE"), respectively, which are in turn owned by AFB Trading One, Inc. ("AFB"), a California corporation. The Beverly Hills Mansion is owned by NAPL, which was in turn owned by the Plaintiff), but is now wholly owned by the Defendant. The Cap Ferrat Mansion was also owned by a corporate entity but is understood to have been taken and dissipated by Alexander and/or Larissa Sabadash and/or those acting on her behalf.
41. GSL makes the following requests:
31. Please explain why a business partnership would, and did, acquire such assets (which are illiquid and apparently not intended for the purposes of the business) for the use of one partner only.
32. Please explain how the Alleged Partnership held each of the four assets identified in this paragraph: (i) at the time they were first acquired and (ii) thereafter. (Please provide particulars of any chain of legal and/or beneficial ownership if one is asserted.)
36. Before M-BJEP and M-NICE acquired the G550 and G200, by whom were the aircraft owned (legally and beneficially)?
37. Who is (and are) the legal and beneficial owner(s) of AFB Trading One, Inc.?
42. Mr Itkin's response is that:
(i) In relation to Requests 31, 36 and 37, these are not proper requests for further information and/or clarification.
(ii) For Request 32, "See paragraph 18 of the Amended Answer."
43. GSL submits that:
In paragraphs 16 to 18 of his Amended Answer, Mr Itkin claims that information and or the Alleged Partnership acquired four illiquid assets: two aircrafts, the Beverly Hills Property (as defined in para 16 of the Amended Answer) and a property in France. It may be that Mr Itkin seeks to rely on the Alleged Partnership's purported ownership of the Beverly Hills Property as an attempt to defend the NAPL Claim; and to set up his case in relation to the other three assets as similar fact
However, Mr Itkin provides only sparse details in relation to these acquisitions, which are not sufficient for GSL to understand the case it must meet. These requests accordingly seek information and clarification going to the Ownership Issue and the Entitlement Issue, which is necessary for GSL to understand Mr Itkin's case.
44. In my judgment, these Requests are impermissible requests for evidence, and I decline to order that Mr Itkin answer them.
Request 38
45. Mr Itkin pleads that he "suspects that Partnership Assets are being used to fund this (and other] litigation against him".
46. GSL asks to which assets of the Alleged Partnership Mr Itkin is referring.
47. Mr Itkin's response is that this is not a proper request for further information and/or clarification.
48. GSL submits that:
Mr Itkin appears to be making (or threatening to make) veiled criticisms of the JLs; and he evidently regards this as somehow relevant to his defence the claims against him, because he purports to 'expressly reserve[e]' the right to 'plead further on this point' following discovery. It is incumbent on him, to set out his case clearly, by identifying the Alleged Partnership assets he is referring to. Without that clarity, GSL is not able to understand the case it must meet.
49. In my judgment, this is a non-material averment, and it is unnecessary for it to be answered.
Requests 41, 43, 44, 45 and 47
50. Mr Itkin pleads that:
23...The Plaintiff was initially incorporated to be part of a supply and distribution network [for the Partnership) but eventually ceased this function and was latterly used by Mr Sabadash as a means of meeting his and his family's expenses. It is averred that as a part and parcel of its function Mr Sabadash relied on the Plaintiff to manage and / or otherwise discharge his personal liabilities to the Defendant. This was done through agreements between Mr Sabadash and the Defendant as partners of the Partnership. It is denied that the Trust was, is or could be operated as a 'passive investment holding vehicle'. To the best of the knowledge of the Defendant the Trust never held any investments, The Trust was initially established for charitable purposes with its main beneficiary being the Red Cross.
51. GSL makes the following requests:
41. Please clarify what is meant by 'supply and distribution network', and what the Plaintiff's role was (or was to be) in relation to that 'network'.
43. Please explain what is meant by the reference to, and give particulars of, Mr Sabadash relying on the Plaintiff 'to manage and / or otherwise discharge his personal liabilities to the Defendant.
44. What 'personal liabilities' are referred to?
45. If the Trust never held any investments, what did it hold (to the Defendant's knowledge)?
47. What is the source of the Defendant's belief that the Trust was established for charitable purposes?
52. Mr Itkin's response is that these Requests are not proper requests for further information and/or clarification.
53. In relation to requests 41 to 45, GSL refers back to the rationale for Request 13. In relation to request 47, GSL submits that:
Mr Itkin has alleged that the Trust was originally established for charitable purposes. However, it is unclear whether he says this merely because the Trust's initial default beneficiary was the Red Cross;4 or whether he is asserting a positive, factual case based on his own recollection. In either case Mr Itkin's case directly contradicts GSL's. However, in preparing its case, GSL needs to know which of these is the case (because it potentially affects what inquiries are made and what searches for documents are carried out, and/or the scope of witness evidence).
54. In my judgment:
(i) for similar reasons to Request 13, Requests 41 to 45 should be answered by the answer to Request 2(viii) and to the extent that they are not, they should be;
(ii) Request 47 is an impermissible request for evidence.
Request 49
55. Mr Itkin pleads that he called in a guarantee from GSL and that:
29...The demand was in the amount of fifty-five million five hundred and twenty thousand dollars (US), which pursuant to the Guaranty was payable by the Plaintiff upon demand.
56. GSL asks for a breakdown as to how that figure was arrived at, identifying the primary obligation or obligations of Mr Sabadash which the Guaranty purported to guarantee.
57. Mr Itkin's response is that this is not a proper request for further information and/or clarification.
58. GSL submit that:
A guarantor is only liable as such to pay if there existed a primary liability which was within the scope of the guarantee, and which was unpaid. On Mr Itkin's case, there can be few matters more important to resolving the Guaranty Claim than clarity as to the basis or bases on which Mr Itkin says he was owed the sum of US$55 million by Mr Sabadash, such that GSL was liable in that sum under the Guaranty. This goes squarely to the Entitlement Issue.
59. In my judgment, this is a material fact for the purposes of the Guarantee claim and should be answered:
Requests 50 to 52, and 54
60. Mr Itkin pleads that:
31.1...the registered ultimate beneficial owner of the Plaintiff, Mr Sabadash, not only authorised the Plaintiff to enter into the Guaranty (in respect of his own obligations) but that it was Mr Sabadash who first suggested and proposed the entry by the Plaintiff into the Guaranty.
61. GSL makes the following requests:
50. Why is Mr Sabadash referred to as the 'registered ultimate beneficial owner of the Plaintiff?
51. As to Mr Sabadash having 'authorised the Plaintiff to enter into the Guaranty and having suggested and proposed' the same: (i) When and how did Mr Sabadash do each of those things? (ii) Why did Mr Sabadash do so? (iii) On what basis did Mr Sabadash have authority to do so? (iv) Why was Mr Itkin the only individual to execute the Guaranty?
52. Please clarify what is meant by the reference to the Plaintiff "lending assistance to Mr Sabadash and the Partnership"?
54. What is the connection between (a) the Guaranty, and (b) "loans and other desperately needed liquidity?
62. Mr Itkin's response is that these are not proper requests for further information and/or clarification.
63. GSL submit that these are critical parts of Mr Itkin's case and at present, they cannot understand them.
64. In my judgment, these Requests go to the heart of the issues in dispute between the parties in relation to the ownership of GSL and the entitlement of Mr Itkin and others to act as they did. They should be answered.
Requests 55 to 56
65. Mr Itkin pleads that a contract of guarantee is a unilateral contract.
66. GSL makes the following requests:
55. Please clarify what is meant by the assertion that a guarantee is by its nature a unilateral contract.
56. To the extent not answered above, please explain when and how the Guaranty was 'agreed to by Mr Sabadash' (including whether this was agreed in writing or orally, giving particulars in either case).
67. Mr Itkin's response is that these are not proper requests for further information and/or clarification.
68. GSL submits that Mr Itkin's pleading is vague and is not understood; GSL requires a response to that request in order to understand the case it must meet.
69. In my judgment, this is a matter of law which it is unnecessary to particularise further and I decline to order that it be answered.
Requests 57 to 59
70. Mr Itkin pleads that:
32... In causing the Plaintiff to execute the Guaranty the Defendant was acting in the best interests of the Plaintiff, as unless the issues that had arisen between Mr Sabadash and the Defendant could be resolved, the Plaintiff would inevitably have been drawn into expensive litigation, and the Partnership's business operations in Russia [and the Plaintiff's source of funds) would have ground to a halt. At the time of executing the Guaranty the Plaintiff was an asset of the Partnership. All of the assets which the Plaintiff held were held pursuant to the terms of the Partnership and the execution of the Guaranty was in the best interests of all of the Plaintiff, Mr Sabadash and the Defendant.
71. GSL makes the following requests:
57. Please explain why the Plaintiff 'would have been drawn into expensive litigation' unless the issues between Mr Sabadash and the Defendant were resolved.
58. Please explain why the Alleged Partnership's business in Russia would have ground to a halt.
59. Please clarify (with precision) what is meant by the assertion that 'the assets which the Plaintiff held were held pursuant to the terms of the Alleged Partnership (including giving particulars of the terms referred to insofar as material).
72. Mr Itkin's response is that these are not proper requests for further information and/or clarification.
73. GSL refers back to the rationale behind Requests 52 and 10.
74. In my judgment:
(i) these Requests should be answered by the answers to Requests 2(vi), (vii) and/or (viii) and to the extent that they are not, they should be;
(ii) in addition, Request 57 goes to the heart of the issues in dispute between the parties in relation to the ownership of GSL and the entitlement of Mr Itkin and others to act as they did and should be answered.
Requests 60 to 61
75. Mr Itkin pleads that:
34. Paragraph 11 is denied. The execution by the Plaintiff of the Guaranty on 9th October 2012 had the effect of avoiding and / or settling (temporarily) a dispute between Mr Sabadash and the Defendant, and avoiding insolvency in relation to their-partnership-the Partnership (the "Partnership"). In the absence of that dispute being settled and / or managed the Defendant and other creditors (on the assumption he was successful in the dispute) would have had recourse to the assets of the Plaintiff inter alia. Mr Sabadash therefore authorised / directed the Plaintiff to execute the Guaranty with a view to protecting the assets of the Plaintiff with the result that the Plaintiff did not lose its means of generating any income. Execution of the Guaranty directly served to protect the assets of the Plaintiff.
76. GSL makes the following requests:
60. Please explain why (a) the Defendant, and (b) other creditors of Mr Sabadash, would have had recourse to the Plaintiff's assets.
61. To the extent not answered above, please explain when, and how, Mr Sabadash 'authorised / directed the Plaintiff to execute the Guaranty.
77. Mr Itkin's response is that these are not proper requests for further information and/or clarification.
78. GSL refers back to the rationale behind Requests 52 and 10.
79. In my judgment, these Requests go to the heart of the issues in dispute between the parties in relation to the ownership of GSL and the entitlement of Mr Itkin and others to act as they did and should be answered.
Requests 62 to 64
80. Mr Itkin pleads that:
AFB is not the 'counterparty' to the 2015 Promissory Note but rather 'approves and ratifies' the Plaintiff's entry into the 2015 Promissory Note.
81. GSL makes the following requests:
62. Of what relevance was the 2015 Promissory Note to AFB, and why did it approve and ratify the Plaintiff's entry into it?
63. What authority did AFB have to approve and ratify the Plaintiff's entry into the 2015 Promissory Note?
64. What was the effect of AFB's approval and ratification of the Plaintiff's entry into the 2015 Promissory Note?
82. Mr Itkin's response is that these are not proper requests for further information and/or clarification.
83. GSL submit that answers to these requests are relevant to the Entitlement Issue and he should set out his case on these matters.
84. In my judgment, on the face of the Amended Answer, AFB's involvement is wholly opaque and these Requests goes to the heart of the issues in dispute between the parties in relation to the ownership of GSL and the entitlement of Mr Itkin and others to act as they did and should be answered.
Request 66, 67, 68
85. Mr Itkin pleads that:
44... It is denied that the Beverly Hills Property was purchased for the express or specific purpose of being a family home for the Sabadash Family.
86. GSL makes the following requests:
66. Regarding the purchase of NAPL, please explain when, how, by whom and for what purpose NAPL was purchased.
67. To the extent not answered above, please explain when and how the Beverly Hills Property was an asset acquired by the Alleged Partnership for the benefit of Mr Sabadash and the Defendant.
68. To the extent not answered above, please explain with specificity the purpose for which the Beverly Hills Property was acquired.
87. Mr Itkin's response is that these are not proper requests for further information and/or clarification.
88. GSL refers back to the rationale behind Request 31.
89. In my judgment, these are impermissible requests for evidence.
Request 69
90. Mr Itkin pleads that:
48... it is denied that the Defendant knew that the Plaintiff had no employees or other individuals who could be characterised as executive officers. It is admitted that in September 2016 the Defendant was the sole Director of the Plaintiff.
91. GSL asks Mr Itkin to identify each of the Plaintiff's (a) employees, and (b) other individuals who could be characterised as executive officers, at the relevant time.
92. Mr Itkin's response is that this is not a proper request for further information and / or clarification.
93. GSL submits that:
His pleading is ambiguous as to whether Mr Itkin:
(i) admits that GSL had no such employees /executive officers, and simply denies knowledge of that (despite being GSL's only director, or
(ii) maintains that in fact there were employees/executive officers of GSL.
This request is intended to elicit necessary information and clarification as to what exactly the dispute between the parties is on this point.
94. In my judgment, this Request goes to the heart of the dispute in relation to the Promissory Note and the Default Judgment Claims and should be answered.
Requests 71 to 73
95. Mr Itkin pleads that:
50...The Defendant avers that he was not only entitled but authorised to take these steps as a matter of Californian Law, pursuant to his direct interest in the assets of the Partnership...
96. GSL makes the following requests:
71. Please identify specifically the provision(s) and/or principle(s) of Californian law relied upon.
72. Please set out the facts and matters relied upon in support of the statement that Mr Sabadash knew and agreed that the steps in question could be taken.
73. Please explain the assertion that the Defendant was entitled to take such steps 'pursuant to the positions he held', including identifying those positions and the entitlement said to attach to them.
97. Mr Itkin's response is that these are not proper requests for further information and/or clarification.
98. GSL refers back to the rationale behind Request 21.
99. In my judgment, these Requests are impermissible requests for evidence.
Requests 74 and 75
100. Mr Itkin pleads that:
52... Following that arrest the Plaintiff inter alia was not able to make use of its bank account in Curacao owing to its connection with Mr Sabadash.
101. GSL makes the following requests:
74. Please clarify what is meant by 'not able to make use of that account, and from when it ceased to be able to do so.
75. Please explain with precision the reasons given by Curacao First International Bank for such inability.
102. Mr Itkin's response is that these are not proper requests for further information and/or clarification.
103. GSL submits that:
Possibly (though it is unclear), Mr Itkin is attempting to say that these transfers were, given that inability, a legitimate means to extract funds from GSL's account. GSL, by these requests, seeks further information as to what Mr Itkin means by this plea, and why (Mr Itkin says) GSL was unable to use that account; yet he has refused to provide it without explanation. This goes to the Entitlement Issue, and is necessary for GSL to understand the case it has to meet.
104. In my judgment, this is an impermissible request for evidence.
Requests 77, 79 and 80
105. Mr Itkin pleads that:
53... It is averred that the Defendant made the name change and opened the bank account as described at the request / direction of / with the knowledge of Mr Sabadash. It is averred that these actions were taken following agreement between the partners of the Partnership.
106. GSL makes the following requests:
77. Please explain why Mr Sabadash requested and directed the (a) opening of the account, and (b) name change. (Please include any explanation given by Mr Sabadash.)
79. Please identify precisely when and how such agreement was reached (including whether it was agreed in writing or orally, giving particulars in either case),
80. Please identify the material terms of such agreement.
107. Mr Itkin's response is that these are not proper requests for further information and/or clarification.
108. GSL submits that:
Mr Itkin's reliance on Mr Sabadash's agreement, knowledge and authorisation relies on scant detail. These matters go (on Mr Itkin's case) squarely to the Entitlement Issue in relation to the Curaçao Claim; he is attempting to run a defence of authorisation, and it is necessary that he set out how, exactly, he says he was authorised. Further, Mr Sabadash's knowledge and agreement has the potential, on Mr Itkin's case, to bear directly on the matter of any fully informed consent.
109. In my judgment, these Requests go to the heart of the issues in dispute between the parties in relation to the ownership of GSL and the entitlement of Mr Itkin and others to act as they did and should be answered.
Requests 81 and 83
110. Mr Itkin pleads that "Famous Brands was a Partnership Asset".
111. GSL asks:
81. Please explain what is meant by that averment. (Please provide details of any chain of legal and/or beneficial ownership if one is asserted.)
83. Please identify the legal and beneficial owner(s) of Famous Brands at all material times.
112. Mr Itkin's response is that these are not proper requests for further information and/or clarification.
113. GSL submits that:
Mr Itkin has refused to clarify what exactly he means by a 'Partnership asset', or to identify the legal and beneficial owner(s) of Famous Brands at all material times. Again, these matters go (on Mr Itkin's case) squarely to the Entitlement Issue in relation to the Curaçao Claim, and are necessary for GSL to understand the case it must meet.
114. In my judgment, these Requests are impermissible requests for evidence.
Request 87
115. Mr Itkin pleads that:
56. The Defendant was then requested to and authorised by Mr Sabadash to apply the monies transferred from the Account towards paying down the debt owed to FBDMC.
116. GSL asks Mr Itkin to identify precisely when and how (including whether orally or in writing, giving particulars in either case) Mr Sabadash 'requested ... and authorised' the Defendant to apply monies from the Account in the way alleged.
117. Mr Itkin's response is that this is not a proper request for further information and/or clarification.
118. GSL refers back to the justification for Request 77.
119. In my judgment, this Request goes to the heart of the issues in dispute between the parties in relation to the ownership of GSL and the entitlement of Mr Itkin and others to act as they did and should be answered.
Requests 88 to 90
120. Mr Itkin pleads that:
62... It is averred that the Defendant had entered into a contract of employment with the Plaintiff and that fees pursuant to the contract of employment were owing to the Defendant at the time of the Summons. It is denied that the debt was fictitious.
121. GSL makes the following requests:
88. Please identify the contract of employment referred to, and explain when and how it was formed (including whether orally or in writing, giving particulars in either case).
89. Please identify all individuals involved in the formation of such contract.
90. Please provide a breakdown of the sum claimed by the Summons in question.
122. Mr Itkin's response is that these are not proper requests for further information and/or clarification.
123. GSL refers back to the justification for Request 27.
124. In my judgment, these Requests are impermissible requests for evidence.
Request 92
125. Mr Itkin pleads that:
68... To the extent that it is ultimately admitted or proved that any of the pleaded funds were used to discharge the personal liabilities of the Defendant, it is averred that pursuant to the terms of the Partnership, the Defendant was entitled to have recourse to such funds.
126. GSL asks Mr Itkin to identify which terms of the Partnership the Defendant relies upon in this paragraph when asserting an entitlement to have recourse to funds in the Plaintiff's accounts.
127. Mr Itkin's response is that this is not a proper request for further information and/or clarification.
128. GSL refers back to the justification for Request 22.
129. In my judgment, this Request should be answered by the answer to Request 2(vi) and to the extent that it is not, it should be.