Select a region
A high-stakes employment dispute involving a Jersey-based mining company, its aggrieved former boss, and the firm's foreign owner is being played out in the Royal Court, in a case that pits the island against the might of the Chinese state.
In the latest chapter of a lengthy litigation, Consolidated Minerals Limited – which is involved in the exploration, mining, processing and sale of manganese products, with mining assets in Australia and Ghana – has failed in its appeal against a decision of the Master of the Royal Court, a judge who presides over civil cases.
Express breaks down the lengthy and complex case that sheds some light on the complexities of international trade and company ownership, and the difficultly in extracting information from a country which has a very different approach to doing business.
Last January, the Master, Matthew Thompson, struck out a counterclaim by CML, which is a defendant in proceedings brought by Oleg Sheyko, who was CEO of the company from July 2017, when he moved to the island.
However, he resigned less than a year later, and initiated court proceedings in July 2018, claiming that CML’s new Chinese owner, which had bought the business in May 2017, had undermined his authority.
Major decisions imposed on him were inexplicable and damaging to the company, he argued, including an alleged decision to sell manganese ore at fixed prices to a Chinese counter party on favourable payment terms.
CML, however, argued that Mr Sheyko was incompetent and difficult, and resigned because he had not got rich from an anticipated public listing.
In order to settle the dispute, Mr Thompson ordered that the Court should see emails, instant messages and other documents sent between key players, including Chinese senior executives of the parent company, which could prove or disprove the claims.
Pictured: The case was heard in the Royal Court.
The Master concluded that ‘discovery’ from these individuals in China was central to the complaints of Mr Sheyko and aspects of the defences which in the Master said went to the heart of the issues on liability between the parties. He did not think a fair trial on liability could take place without these documents.
However, he also concluded that CML had failed in its obligation to obtain them, despite the Court granting a number of extensions while a Chinese law firm reviewed the documentation.
This process of discovery concerned the Master, especially as it appeared to involve the Chinese State.
The Royal Court judgment dismissing CML’s appeal said: “The Master found the attempt to involve the Chinese state in the discovery process of concern. The impression of the Chinese authorities looking to assist CML and its parent was troubling and when taken with the approach of CML and the TMI Group [the owner] on balance suggested a wish to support CML’s approach.
“Ningren [the Chinese law firm] had been given a further six months since January 2020 to make matters clear and had not done so. When set against the context of how long had already passed since CML was put on notice of its discovery obligations, the Court not being given the full picture and only being given information just before relevant hearings, the Master did not consider that any further time allowed or further orders would lead to a change of approach.
“Even if it did, he asked who knows what has happened to devices, material held on such devices or to emails held on personal accounts in the meantime.”
It continued: “It did not help CML that Mr Sheyko had to battle to obtain notes of the latter’s conversation with the authorities in China, which were clearly relevant and should have been produced and explained in affidavit evidence.
“It was a combination of all of these factors taken together that led to the Master’s conclusion that the Court’s expectations had not been met, and in his judgment, would not be met.
“The discovery process had now taken over 18 months. This was simply not acceptable, even allowing for Covid-19. Mr Sheyko already had five court orders in his favour which had not been a deterrent to CML.”
CML, however, in making its appeal, argued that the Master had got it wrong. He had lost sight of the scope and effect of the discovery orders, the company’s lawyers argued, and his conclusions were fundamentally flawed, not least because he had failed completely to recognise, or to apply, the basic principle that CML could only make discovery of documents within its possession, custody or power.
The company also argued that it had always acknowledged and accepted its obligations to carry out “a reasonable and proportionate search” for the purpose of discovery and had done so.
It said it had collected and processed data from custodians in Jersey, England, Hong Kong, China, Ghana and Australia. More than 15 million documents have been processed by a discovery-specialist it had employed, CML said resulted in more than 200,000 documents for review, including 27,597 from London, 8,548 from Hong Kong and 10,204 from Australia.
However, the Royal Court rejected CML’s eight grounds of appeal.
Before doing so, however, judge Commissioner Julian Clyde-Smith, who was sitting with Jurats Jane Ronge and Kim Averty, said: “For the avoidance of doubt, Mr Sheyko’s strike out application and the Master’s judgment are founded on the conduct of CML and the people who control it.
"They are not founded on the actions of CML’s Jersey lawyers.”
The Court concluded that CML has not searched for all of the data held by the China-based custodians and has not, therefore, given discovery of all documents held in China as required by the Discovery Orders.
In particular, it said that searches for WeChat [a Chinese messaging service] and/or other communications held by individuals within China had either not been carried out, or the material had been withheld without justification, which again was a breach of the orders.
Pictured: The Royal Court said that CML had failed to provide details of text conversations that had taken place via the Chinese WeChat messaging service.
It also concluded: “We acknowledge that substantial discovery has been made from sources outside China, but there is no issue before us as to the proportionality of the Discovery Orders themselves made in this case largely by consent.
“Whatever the volume of documents sourced from outside China, it cannot detract from the importance of discovery of documents from within China where some of the key persons involved in this matter were based.
“CML itself acknowledged in November 2019 that the court could not justly resolve Mr Sheyko’s claim without the evidence then being reviewed in China.”
It ended: “A fair trial is not now possible. The damage has been done and it cannot now be repaired, nor can it be mitigated nor managed by any lesser sanction than a strike out."
“Having re-heard the matter, we have reached the same conclusions as the Master. The appeal is therefore dismissed.”
In making this judgment, the Royal Court has decided that CML's defence against the civil claim cannot continue; however, the company has said it intends to appeal.
Comments
Comments on this story express the views of the commentator only, not Bailiwick Publishing. We are unable to guarantee the accuracy of any of those comments.