Case No. HC09C00581
Neutral Citation Number : [2010] EWHC 2015 (Ch) 
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand
London WC2A 2LL

Date: Friday, 9th July, 2010

BEFORE:

MR JUSTICE MORGAN

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BETWEEN:

MARIUS RYBAK & OTHERS

Claimants
-v-

LANGBAR INTERNATIONAL LIMITED
Defendant

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Digital transcript of Wordwave International, a Merrill Communications Company
165 Fleet Street, 8th Floor, London EC4A 2DY
Tel No: 020 8974 7300  Fax No: 020 8974 7301
Web Address: www.merrillcorp.com/mls Email Address: Tape@merrillcorp.com
(Official Shorthand Writers to the Court)
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MR J RAMSDEN (instructed by Devonshires Solicitors) appeared on behalf of the Claimants.

MR A PETO QC and MR D QUEST (instructed by Jones Day) appeared on behalf of the Defendant.

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J U D G M E N T

MR JUSTICE MORGAN: 

The Applications
1.	This judgment deals with two applications.  Those applications are connected and they are essentially cross applications, one by each side.

2.	In point of time, the first application is an application by the defendants, Langbar International Limited, to whom I will refer as Langbar.  Their application is dated 30 June 2010.  The application which is second in time is an application by the claimants.  The claimants are Mr Rybak, CMC Crown Management Corporation, Mrs Rybak, SCI Atol and Miss Rybak, the daughter of Mr and Mrs Rybak.  I will refer to those parties variously either as the claimants or as the Rybaks and I will refer to Mr Rybak as such from time to time.

3.	The application made by Langbar is for various heads of relief, the principal parts of which are as follows: Langbar requests that pursuant to an order dated 20 May 2010, or alternatively, pursuant to Civil Procedure Rules rule 3.4 subparagraph (2), the court makes an order that the claimants' claim and defence to counterclaim be struck out and that judgment be given for Langbar on its counterclaim.  Certain matters are then specified to which I need not refer.

4.	The application made by the Rybaks is for the following relief: an order under Civil Procedure Rules rule 3.9 that there be relief from sanction in relation to the relief sought in the defendant's application, that is to say, the relief which Langbar seeks that the claim and re‑amended defence to counterclaim be struck out.  The claimants' application goes on to state that the court is asked to consider relief from sanction pursuant to grounds 3.9(1)(a) to (i) of the Civil Procedure Rules.

5.	So those are the two applications which are before the court and which have been argued at a hearing that has now extended into a fourth day. Mr Ramsden of counsel has appeared on behalf of the claimants.  Mr Peto Queen's Counsel and Mr Quest have appeared on behalf of Langbar.  I am grateful to them for their written and their oral submissions.

My conclusions
6.	In a moment I will begin to give my detailed reasons for the conclusions that I have reached. However, those reasons are lengthy and it will take a little time to express them. I think in fairness to the parties I will say at the outset what my essential conclusions are. They are as follows.

1. The claimants are in breach of the unless order of 20th May 2010.
2. The result of the breach of the order is that the claim and the defence to counterclaim currently stand struck out.
3. I decline to grant relief against the sanction imposed by the order.
4. The consequence of the above is that the claim and the defence to counterclaim remain struck out.

The background facts
7.	The present action is not the first action between these parties.  These parties were involved in a much more substantial action which went to trial in November 2007 before Mr Justice Blackburne.  That trial continued for some 56 days but the action was settled in the course of the trial and before any judgment was drafted or given.  I need not, I think, describe what was involved in those earlier lengthy and no doubt complex proceedings. Something of the issues in that claim is described in the ninth witness statement of Mr Richards of Jones Day, solicitors for Langbar, but I need not, I think, read into this judgment what he says by way of description.
I think it is sufficient to say that the claims made by Langbar against the Rybaksinvolved allegations of very serious wrongdoing on the part of Mr Rybak.  It has been rightly stressed to me that there were no judicial determinations in relation to the allegations made in the previous proceedings.  I accept that it is simply not open to me, because it would be unfair, to come to any preliminary view or form any impression as to the truth or otherwise of the allegations which were made.  They were very serious allegations.  It would not be right to act upon an impression as to whether they had substance or were wholly without substance. However, Mr Peto does say to me in the course of the present hearing that he is able to point to a number of occasions in the earlier proceedings when Mr Rybak admitted to acts of dishonesty.  I agree with Mr Peto that it is open to him to draw those matters of admitted dishonesty to my attention and I will bear them in mind when I have to assess, as I do, the credibility of Mr Rybak as a witness giving evidence on the current applications.

8.	The previous action was settled, as I have described.  There was a Tomlin Order made by Mr Justice Blackburne on 25 April 2008.  The terms of settlement were set out in the schedule to that Tomlin Order.  The terms of settlement are relatively lengthy and it is not necessary for me to read into this judgment very much from the detailed terms of settlement.  I will try, however, to indicate the general nature of the terms so far as material for present purposes.

9.	Under the settlement, the parties associated with Mr Rybak, who were identified as the Rybak Defendants in the earlier proceedings, were to end up making payments to Langbar. Clauses 14 to 21 dealt with the subject of an apartment in Monaco in which Mr and Mrs Rybak resided. The terms of the settlement contemplated two possibilities.  One was that Mr and Mrs Rybak, or Mr Rybak alone, or, perhaps more accurately, the company SCI Atol, which was the legal owner of the apartment, would raise the money on the security of the apartment to enable the Rybak Defendants to make payments to Langbar. The alternative to raising money on the security of the apartment was that the apartment could be sold, and in that way the proceeds of sale would provide a fund to enable a payment to be made to Langbar.  The terms of settlement are detailed as to precisely what was to happen, and, in particular, what the consequences would be of a sale before or after a certain date.  
Under the settlement the parties associated with Mr Rybak who were identified as the Rybak defendants in the earlier proceedings were to end up making payments to Langbar.  Clauses 14 to 21 dealt with the subject of an apartment in Monaco in which Mr and Mrs Rybak resided. The terms of the settlement contemplated two possibilities.  One was that Mr and Mrs Rybak or Mr Rybak alone, or perhaps more accurately the company SCI Atol, which was the legal owner of the apartment, would raise money on the security of the apartment to enable the Rybak defendants to make payments to Langbar.  The alternative to raising money on the security of the apartment was that the apartment could be sold and in that way the proceeds of sale would provide a fund to enable a payment to be made to Langbar. The terms of settlement are detailed as to precisely what was to happen and in particular, what the consequences would be of a sale before or after a certain date.

10.	In the present proceedings before me, clause 17 of these terms is of some importance and I think I ought to read it.  It provides:

“The Rybak Defendants shall keep the Claimant fully informed at all times of the progress of the mortgage or any sale of the Apartment prior to 31 December 2010 and shall provide to the Claimant such documents in that respect as it shall require.”

In fact, these terms of settlement were subsequently varied when the parties entered into what was called a supplemental deed on 24 September 2008.  The supplemental deed is itself referred to in a consent order made by Mr Justice Blackburne on 23 October 2008.  In essence what the learned judge did was to vary the earlier Tomlin Order so that the relevant terms of  settlement were not the original terms of settlement but they were the terms of settlement as varied by the supplemental deed. Again, if the matter were to go to a full trial, the precise terms of the supplemental deed would be of some importance, but for present purposes I will endeavour to summarise the essential terms, to make my reasons intelligible.

11.	What the terms of settlement did was to provide that if the apartment was sold on or before 31 December 2008 then that would put a cap upon the monies payable by the Rybak defendants to Langbar.  What the Rybak defendants would have to pay would be 6.388 million euros pursuant to the original terms of settlement, together with a predetermined figure, not capable of going up or going down, of 1.2 million euros in the event of such a sale.  If, on the other hand, the property was not sold before 31 December 2008, but it was sold later, then it might come about that the sums payable to Langbar would be greater than the totals otherwise due in the event of an earlier sale. It is sufficient, I think, to note that this revision to the original settlement terms meant that it was very much in the Rybak defendants' interests to sell the apartment before 31 December 2008, rather than to allow a situation to come about where the sale was later, possibly generating a higher return to Langbar and a greater obligation upon the Rybak defendants.

12.	I can deal relatively quickly with what then happened at the end of 2008.  Ignoring everything that went before this time, what seems to have happened is that the Rybak defendants, the claimants in the present case, received an offer to purchase the interest in the apartment.  The offer, as I understand it, was for a gross figure of 14 million euros, which equates to a net figure of 13.44 million euros.  The claimants, the Rybaks, were eager to complete a sale at that figure and in particular, to do so before the end of the calendar year.  Langbar, by this point, at the end of 2008, was concerned about what was happening and it took steps by writing to the relevant "notaire" in Monaco to block the sale intended by the Rybaks. That led to an urgent hearing which took place on 19 December 2008.  As it happened, that hearing was in front of me.  The Rybak defendants, still proceeding in the earlier action, claimed interim relief to prevent Langbar continuing to block the sale.  Such relief would then enable, if all went well, the sale to complete and for the Rybaks to have their rights governed by the supplemental deed bearing the original terms of settlement. On the material before me at that hearing I granted the relief sought by the Rybaks.  I did so on terms that the proceeds of sale were to be kept secure so they could not be dissipated.  From recollection, the sums were paid into a secure account to abide later events.  The Rybaks also gave an undertaking in damages in the event that that injunction should not have been granted. What then happened, as I understand it, is that the sale was completed.  The Rybaks or SCI Atol sold the apartment to the purchaser as contemplated.  There may have been some minor changes but they do not matter.  And indeed, the Rybaks permitted payments to be made out to Langbar of, first, 6.388 million euros, pursuant to the original terms of settlement, together with, second, 1.2 million euros, pursuant to the supplemental deed.

These proceedings
13.	Those events having happened, the Rybaks brought the present proceedings.  The particulars of claim served by the Rybaks plead the relevant terms of the original settlement and the supplemental deed.  They plead the sale of the apartment in the way I have described.  They plead payment of a total of 7.588 million euros to the account of Langbar and the Rybaks then claimed various heads of relief.  In short, they claimed declaratory relief that they had satisfied the obligations upon them if one took into account the terms of the supplemental agreement.  Indeed, there has not really been any dispute about that fact as regards the payments due from the Rybaks and as I understand it, summary judgment has indeed been given to the Rybaks on the basis of that reading of the documents applied to the facts.  However, the Rybaks claimed further relief.  They claimed a declaration that the sale in question was a bona fide transaction at full market value.  They have not yet obtained that declaration; if the matter went to trial, that would be for trial.  Next, the Rybaks claimed an order that the remaining net proceeds of sale which were held in the account to which I have referred, should be paid out to the Rybaks.  Again, the Rybaks have not yet obtained that relief and if the matter went to trial, that would be for trial.

14.	Langbar filed a defence and a counterclaim. The defence and counterclaim in its current form is in a re-amended form. It seems that I gave permission to make the re-amendments as recently as 6th May 2010. The allegations in the defence are effectively that Langbar was induced to enter into the supplemental agreement by reason of a misrepresentation made by Mr Rybak on behalf of the other Rybak parties. The defence then refers to the counterclaim.  The counterclaim is put in various ways. Again I will try to summarise the more important parts of the counterclaim rather than read out in extenso what are quite detailed allegations.

15.	The allegations made by Langbar start with an allegation, for present purposes, that Mr Rybak made a misrepresentation to the representatives of Langbar in August 2008 causing Langbar to believe, contrary to the real position, that the value of the apartment was somewhere between €9 million and €10 million. Pausing there, if that had been the value of the apartment, splitting the difference of around €9.5 million, then the sort of sum payable to Langbar under the original terms of the settlement would have been the €6.388 million together with a further payment of €1.2 million. I refer to that because that is precisely how matters were arranged in the supplemental deed in the event of a sale before the end of the calendar year 2008. At any rate, Langbar pleads in its counterclaim that a misrepresentation was made, it was induced to change the terms of the settlement, it did so, and the terms of the settlement as varied in the events which have happened have now become massively less favourable to Langbar and massively more favourable to the Rybaks than the original terms.

16.	Langbar does not claim rescission of the supplemental deed. They put their case on misrepresentation, I think, in two ways. First, they say it was a fraudulent misrepresentation. Mr Rybak made his statement knowing it to be untrue or being reckless as to its truth. Alternatively, Langbar claimed damages under section 2(1) of the Misrepresentation Act 1967. That subsection places the burden upon the Rybaks to show that they had reasonable grounds for making the representation which it is alleged Mr Rybak made.

17.	The next way in which Langbar puts its counterclaim is to rely upon clause 17 of the original terms of settlement to which I have referred.   This, I daresay, relates to the period up to the time when the original terms were varied. In relation to that period it is said that the Rybak parties, in breach of their contractual obligation to disclose information, failed to give relevant information.  It is then pleaded that, if the contract had been performed, Langbar would have had an understanding of the value of the apartment, which would have meant that it would never have agreed to the terms of the supplemental deed. The supplemental deed would never have been entered into.  The parties’ rights would have been governed by the original terms of settlement. Indeed, Langbar build upon the allegation of non-disclosure to include a further allegation of misrepresentation.  It is said that where there is an obligation to disclose and non-disclosure, there is an implied representation that there is nothing to disclose. Then the case is put that relief can be given by reason of the implied representation.

18.	There is one final point that I should make as to the counterclaim. In paragraph 18 of the counterclaim Langbar assert that the sale which took place at the end of 2008 was at an undervalue, and indeed it is pleaded that the best price reasonably achievable for the apartment on the basis that it was offered for sale towards the end of 2008 would have been €20 million to €22 million, and a calculation is done as to the further sums payable by the Rybaks to Langbar if that, or anything like it, had actually happened.

19.	Those are the claims which Langbar would wish to put forward in these proceedings. They are, and each of them is, heavily contested by the Rybaks. There is a lengthy amended reply and re-amended defence to counterclaim extending to, I think, some 20 pages, settled first by leading counsel and later amended by Mr Ramsden. It is not necessary for today’s purposes to identify the points which the Rybaks would wish to make at any trial of this claim. I can collect together the essential points which they identify.

20.	They say there was no representation by Mr Rybak, certainly no express representation and no implied representation. Accordingly, they say there cannot have been a misrepresentation. Further, they say that, whatever might have been said in discussions with the representative of Langbar, it was not such as to induce or influence the mind of Langbar in entering into the supplemental deed. It is strenuously denied that there was any fraud, or deceit, or knowledge of wrongdoing, or knowledge of inaccuracy so as to give rise to liability in the tort of deceit. It is denied that there is any liability under section 2(1) of the Misrepresentation Act 1967.  As to clause 17 of the original terms of settlement imposing an obligation in some circumstances to disclose information, it is said that the relevant circumstances never arose, and anyway there was disclosure of accurate information and, accordingly, no breach of contract and no implied misrepresentation. There is an important issue between the parties as to what precisely clause 17 of the original terms of settlement means. Finally, the Rybaks says that they sold the apartment, as they did, for full market value, and the figures of €20 million to €22 million have no foundation in reality in this case. 

21.	It is not necessary to refer to the various procedural steps that have been taken in the action before the present time save in relation to two matters. The first concerns an application for summary judgment, and the second concerns the subject of disclosure on the part of the claimants.  I take what happened in relation to the application for summary judgment from a judgment which was given by his Honour Judge Waksman on 29th July 2009. The relevant parts of that judgment are paragraphs 4, 5 and 6, followed by paragraphs 96, 97, 98 and 110. I will again attempt to give a sufficient summary for present purposes.

22.	His Honour Judge Waksman pointed out that the Rybaks were claiming summary judgment in relation to the plea made by Langbar that the value of the apartment was in excess of the price realised, and that would give Langbar an entitlement to a further payment in some way or other. In paragraph 6 of his judgment His Honour described how it was put. The Rybaks said that, on the true construction of the original terms of settlement, there was no obligation to sell at the best reasonably achievable price, but, secondly, whatever the state of affairs about an obligation of that kind, there was no prospect of Langbar showing on the facts that that price had not been achieved. The learned judge dealt with the matter in a detailed judgment.  He gave a ruling on whether there was an obligation to sell at the best reasonably achievable price, and then he considered the evidence as to the price which had been arrived at.  He referred to the submissions made to him on behalf of the Rybaks that there was simply nothing in the suggestion that there had been a sale at an undervalue.  The Rybaks said that was a wholly fanciful case put forward by Langbar.  The judge reached the conclusion that Langbar had discharged the burden under Part 24 dealing with summary judgment of demonstrating a real prospect of success on this point.  He then said this:
“But only just. Langbar’s case does contain various unsatisfactory features and weaknesses noted above.”

	In paragraph 110 of his judgment he said he was not prepared to give summary judgment to the Rybaks on their contentions in relation to either the interpretation of the terms of settlement or the valuation point.   So that matter, by a short head, was allowed to go to a forthcoming trial. 

23.	I referred to the application for summary judgment made by the Rybaks because it is material to a conclusion I have to come to as to the reliability of Mr Rybak as a witness before me on the present applications.   In two witness statements signed by Mr Rybak put before Judge Waksman, Mr Rybak put forward certain evidence as to the developments in marketing the apartment in the year 2008. In his first witness statement signed on 27th May 2009 he said at paragraph 17 that he attached a table of “all the valuations obtained on the apartment between April 2006 and December 2008 showing their net and gross valuations”.   The table in question does more than defer to valuations. It refers to two sorts of information: first, certain valuations and, secondly, offers made at various points in time. So although the text of the witness statement does not refer to the offers, the table on the face of it appears to deal with offers. The reference to valuations refers to the formal valuations. One, for example, is referred to as a “professional valuation”, another is referred to as a “bank valuation”, and others yet referred to as “valuation”.  It emerged in the course of the hearing before me that the Rybaks had obtained an opinion on value giving the value of the apartment at some €25 million. That was not included in this list.  In my judgment, having heard Mr Rybak give his explanation for why it was not included in the list, I am quite satisfied that the Rybaks gave misleading evidence to Judge Waksman and deliberately suppressed a document that was relevant to the application they were themselves making, to the effect that the suggestion that the property had been sold at an undervalue was fanciful. That was the first witness statement. 

24.	The second witness statement signed by Mr Rybak on 23rd July 2009 returned to this question of valuations in respect of the apartment. In paragraph 4 of his second witness statement he says he has re-read his first witness statement and he has noticed the schedule. He describes the schedule this time, correctly, as setting out the various offers and valuations of the apartment. He then says there is some ambiguous information which leads him to re-draft the schedule. Going then to the revised schedule attached to his second witness statement, again we have a reference to the former valuations, and we also have a reference to offers. I remind myself that the second witness statement describes this as being a “schedule of offers”.  It does not say in terms that it is every single offer in the relevant period, but that is the very clear inference which is to be drawn. In fact, on the evidence before me on this application, it is clear that there was another offer for €25 million which is not referred to in the schedules.  I have heard Mr Rybak give his explanation as to why he did not refer to that offer. I am wholly unpersuaded by his explanation. It seems to me that it was an attempt to disguise the fact that he had suppressed a highly relevant matter of fact when he made his application to Judge Waksman seeking summary judgment on the basis that the assertion that the sale was at an undervalue was a fanciful assertion.
 
25.	So that is background which has come into being in the course of the litigation in this present action. 

26.	Langbar does not claim rescission of the supplemental deed.  They put their case on misrepresentation, I think, in two ways.  First, they say it was a fraudulent misrepresentation, that Mr Rybak made his statement knowing it to be untrue or being reckless as to its truth.  Alternatively, Langbar claims damages under section 2 subsection (1) of the Misrepresentation Act 1967.  That subsection places the burden upon the Rybaks to show that they had reasonable grounds for making the representation which it is alleged that Mr Rybak made.

27.	The next way in which Langbar puts its counterclaim is to rely upon clause 17 of the original terms of settlement to which I have referred.  This I dare say relates to the period up to the time when the original terms were varied.  In relation to that period, it is said that the Rybak parties, in breach of their contractual obligation to disclose information, failed to give relevant information.  It is then pleaded that if the contract had been performed, Langbar would have had an understanding of the value of the apartment which would have meant that it would never have agreed to the terms of the supplemental deed.  The supplemental deed would never have been entered into, the parties' rights would have been governed by the original terms of settlement. Indeed, Langbar build upon the allegation of non‑disclosure to include a further allegation of misrepresentation.  It is said that where there is an obligation to disclose and non‑disclosure, there is an implied representation that there is nothing to disclose.  And then the case is put that relief can be given by reason of the implied representation.

28.	There is one final point I should make as to the counterclaim.  In paragraph 18 of the counterclaim, Langbar assert that the sale which took place at the end of 2008 was at an undervalue.  Indeed, it has pleaded that the best price reasonably achievable for the apartment on the basis that it was offered for sale towards the end of 2008 would have been 20 million to 22 million euros, and a calculation is done as to the further sums payable by the Rybaks to Langbar if that or anything like it had actually happened.

29.	Those are the claims which Langbar would wish to put forward in these proceedings.  Each of them is heavily contested by the Rybaks.  There is a lengthy amended reply and re‑amended defence to counterclaim extending to I think some 20 pages, settled first by leading counsel and later amended by Mr Ramsden.  It is not necessary for today's purposes to identify the points which the Rybaks would wish to make at any trial of this claim.  I can collect together the essential points which they identify.

30.	They say there was no representation by Mr Rybak ‑‑ certainly no express representation ‑‑ and no implied representation.  Accordingly, they say there cannot have been a misrepresentation.  Further, they say that whatever might have been said in discussions with the representative of Langbar, it was not such as to induce or influence the mind of Langbar in entering into the supplemental deed.  It is strenuously denied that there was any fraud or deceit or knowledge of wrongdoing or knowledge of inaccuracy so as to give rise to liability in the tort of deceit.  It is denied that there is any liability under section 2 subsection (1) of the Misrepresentation Act 1967.As to clause 17 of the original terms of settlement imposing an obligation in some circumstances to disclose information, it is said that the relevant circumstances never arose and anyway, that there was disclosure of accurate information and accordingly, no breach of contract, and no implied misrepresentation.  There is an important issue between the parties as to what precisely clause 17 of the original terms of settlement means. Finally, the Rybaks say that they sold the apartment, as they did, for full market value and the figures of 20 to 22 million euros have no foundation in reality in this case.

31.	It is not necessary to refer to the various procedural steps that have been taken in the action before the present time, save in relation to two matters.  The first concerns an application for summary judgment and the second concerns the subject of disclosure on the part of the claimants.  take what happened in relation to the application for summary judgment from a judgment which was given by His Honour Judge Waksman on 29 July 2009.  The relevant parts of that judgment are paragraphs 4, 5 and 6, followed by paragraphs 96, 97, 98 and 110.  Again, I will attempt to give a sufficient summary for present purposes.

32.	His Honour Judge Waksman pointed out that the Rybaks were claiming summary judgment in relation to the plea made by Langbar that the value of the apartment was in excess of the price realised and that would give Langbar an entitlement to a further payment in some way or other. In paragraph 6 of his judgment His Honour described how it was put.  The Rybaks said that on the true construction of the original terms of settlement there was no obligation to sell at the best reasonably achievable price; secondly, whatever the state of affairs about an obligation of that kind there was no prospect of Langbar showing on the facts that that price had not been achieved. The learned judge dealt with the matter in a detailed judgment.  He gave a ruling on whether there was an obligation to sell at the best reasonably achievable price and then he considered the evidence as to the price which had been arrived at. He referred to the submissions made to him on behalf of the Rybaks that there was simply nothing in the suggestion that there had been a sale at an undervalue.  The Rybaks said that was a wholly fanciful case put forward by Langbar.  The judge reached the conclusion that Langbar had discharged the burden under part 24 dealing with summary judgment of demonstrating a real prospect of success on this point.  He then said this:

 “But only just. Langbar’s case does contain various unsatisfactory features and weaknesses noted above.”

At paragraph 110 of his judgment he said he was not prepared to give summary judgment to the Rybaks on their contentions in relation to either the interpretation of the terms of settlement or the valuation point.

33.	So that matter, by a short head, was allowed to go to a forthcoming trial.

Disclosure
34.	Mr Ramsden, appearing for the Rybaks, does not pretend that the Rybaks have conducted disclosure in a satisfactory way. I have been given the disclosure statements. There were, I think, seven disclosure statements prepared by the Rybaks. The first is dated 16th December 2009 and the most recent is dated 24th June 2010.  So in a period of six months or so it has been necessary for the Rybaks to serve seven disclosure statements. Mr Peto has examined these disclosure statements in the course of his submissions. He has drawn my attention to the lengthy correspondence between solicitors, where one sees solicitors for Langbar pressing again and again for gaps in disclosure to be made good, and various explanations and reasons put forward by the Rybaks. It seems to me, without going into the detail of those matters, that it is really very clear that the Rybaks have withheld documents until they could withhold them no longer, or until indeed they were extracted from them pursuant to the orders to which I will shortly refer. My conclusion is that the Rybaks, who after all are claimants in these proceedings, have throughout wished to conduct these proceedings and have them determined on the basis of the documents they chose to put forward and not on the basis of any documents that might be adverse to their case. In relation to the adverse documents, the Rybaks have taken the view that they will do everything to resist the handing over of those documents to be used as material against them.

The orders of May 2010
35.	On 6th May 2010 I myself made an order in this case. The background to the making of the order was that the Rybaks had, as I briefly described, failed to perform their duty to give disclosure, failed to cooperate with the process of disclosure, and were putting forward a number of reasons why they were unable to do more. Those reasons included difficulties they asserted to exist in relation to their various computers. It was said they had crashed, they had failed, there were viruses, and data had been lost. In those circumstances, Langbar sought and obtained on 6th May 2010 an order whereby the computer equipment would essentially be delivered up for inspection subject to certain safeguards to protect the legitimate interests of the Rybaks.  The order is a lengthy one. I do not need to read it all, but I do need to read some of it. In paragraph 1 of the order of 6th May 2010 the following was ordered:
“Within 24 hours of a written request from the Defendant’s Solicitors, the Claimants shall deliver up to a jointly appointed expert (based in London to be agreed between the parties) (‘the IT Expert’) and permit inspection of the offices of Richard Mullot Esq in Monaco (subject always to the procedure set out at Section 1 of Appendix A to this Order):
 
1.1 Mr Rybak’s Sony Vaio computer.

1.2 Mr Rybak’s Mac computer.

1.3 any other electronic storage device (including hosted email accounts or storage facilities) under the Claimants’ control and used by any of the Claimants between 1 April 2008 and 1 January 2009 from which disclosable documents have not been recovered because of IT related issues;

(being, together, the ‘Delivered IT Media’);

1.4 all documents contained on the Delivered IT Media; and

1.5 any passwords and/or information required to access the Delivered IT Media and/or any documents and files contained on the Delivered IT Media.”

Paragraph 2 dealt with any difficulty that might arise about choosing the IT expert.  Later paragraphs of the order placed upon the Rybaks obligations to serve witness statements and give disclosure in relation to various matters.  Appendix A section 1 to the order identified what was to happen with media delivered up to the IT expert.  The IT expert was to take full forensic image. There were steps to enable a review of the material so that privileged material and irrelevant material could be filtered out. There was to be a search for certain data in a specified period. There was to be analysis of the consequence of any virus that might have attacked the computers resulting in the data upon the computers being lost, corrupted, deleted or over-written, and so on. Other lengthy provisions in the schedules or appendices to the order dealt with other matters.

36.	The Rybaks did not agree upon the identity of a joint expert. It has not been said to me in the course of this hearing that they had any justification for that stance. They simply did not cooperate. So Langbar applied to the court again for an order appointing a named expert, and I made such an order on 14th May 2010. The Rybaks did not cooperate with the orders made up to that point. There was a difficulty as to the office in Monaco at which the computers would be delivered up. This led Langbar to apply to Norris J on 20th May 2010 for further assistance from the court.   I ought to read one or two parts of the order made by the learned judge. In paragraph 1 he varied the earlier order as to the place in Monaco where the computers were to be delivered up. In paragraph 2 the judge placed a time limit of 12 noon on 28th May 2010 for such delivery up, and then in paragraph 3 of the order the following was provided:
“Unless the Claimants comply with paragraph 2 of this order and deliver up and permit inspection of the Delivered IT Media in accordance with paragraph 1 of the Disclosure Order at the time and in the manner specified above, the Claimants’ claim and defence to counterclaim be struck out.”

That was the order made on 20th May 2010. The order recites that the judge made the order upon hearing leading counsel for Langbar, with the Rybaks not appearing or being represented.  The position at that point was that the Rybaks had solicitors on the record, Withers LLP, but there was a real or perceived conflict of interest between the Rybaks and Withers whereby Withers were not performing active services on behalf of the Rybaks. It was sometime after this date that the Rybaks had new solicitors come on the record, the firm of Devonshires.  I do note, however, that on the very same day before Norris J the Rybaks were represented by counsel; perhaps more accurately, reading the other order, counsel appeared for Mr Rybak rather than the other Rybaks. At any rate, it is not submitted to me that the order made on 20th May 2010 was in any sense an inappropriate order. Because of what comes later, I should say that it appears to me to have been an entirely appropriate order. An order had been made on 6th May 2010 following an unacceptable course of conduct on the part of the Rybaks as regards disclosure. The order of 6th May 2010 was not complied with, or at any rate there was a wholesale withdrawal of cooperation on the Rybaks’ side. The trial was coming up and there were still difficulties with disclosure which might turn out to be of great importance at the trial. The judge was, with respect, entirely justified in making an unless order of the kind which he made.  I should also say at this point that nothing had happened since 20th May as invalidated the appropriateness of the order made on that occasion.

The construction of the orders of 6th May and 20th May 2010
37.	In the course of the hearing of these applications, a point has been raised as to the intended operation of these two orders.  In particular, is it the case under these orders that the Rybaks were advised to deliver up for inspection not only the hardware represented by the computers but also such electronic data as existed on those computers on 6th May 2010 as distinct from such electronic data as existed on the computers at the moment they were delivered up? On the first reading, any destruction of data following 6th May 2010 would give rise to a non-compliance with the order. On the second reading, the Rybaks would remain free to destroy data on the computers after 6th May 2010 so that when they were delivered up they could have removed from them any harmful or unhelpful documents that might otherwise affect the Rybaks in this litigation.  I hope that is not a tendentious way of putting the question, because, if that is the question, the suggestion that the Rybaks were free under this order to remove data and fail to deliver it up and yet comply with the order to my mind is an astonishing one. Mr Ramsden put his case on this point as attractively as it could possibly be put. He stressed the difference between the obligation on the Rybaks to give disclosure which would, of course, prevent them destroying data and, he says, the obligation under these more narrowly expressed orders which did not in terms prevent the destruction of data and were drafted having regard to handing over hardware with whatever was on it at the time of the handover.

38.	It seems to me absolutely clear from the order of 6th May 2010 and, in particular, from paragraph 1.4 of the order of 6th May 2010, that what was required to be delivered and what was obliged to be available for inspection were any documents contained on the relevant hardware at the date of the order.  Of course, if further data were put upon the computers after the date of the order prior to delivery up, that too would be captured by the order. What the order did not permit was the removal of data or the destruction of data after the date the order was made. As I say, that appears from paragraph 1.4 of the order in particular.  It is a sensible interpretation. I fear I have to say that any other interpretation would be a quite senseless one having regard to the admitted obligation on the Rybaks not to destroy data.  That is what the order of 6th May 2010 meant. 

39.	I then turn to consider what was required in paragraph 3 of the unless order. I read paragraph 3 as an order to the effect that, unless the Rybaks delivered up and permitted inspection (in accordance with paragraph 1 of 6th May order), then the consequences would follow.  So I approach the later questions in this judgment on the basis that destruction of data after 6th May 2010, where such data had existed on the relevant hardware on 6th May 2010, is non-compliance with these two orders.

Was there a breach of the unless order?
40.	The question under this heading comes to essentially this.  Is it the case that data which existed on the relevant computers as at 6th May 2010 was destroyed before the computers were ultimately handed over, as they were, on 28th May 2010? 

41.	I need at this point to go to the facts as to what actually happened in relation to relevant computers. Four computers were delivered up at the appointed time. Two of them (two Sony Vaio laptops) have not been discussed in any detail in the evidence. Two others have received more attention. The one which has been central stage in the argument on these applications is an Apple Mac laptop said to be owned by Mr Rybak. The second computer, which has received less prominence, is a Sony Vaio desktop said to be owned by Mrs Rybak.

42.	At this point in the judgment I am not dealing with Mr Rybak’s state of mind and why something happened or did not happen; I am dealing with the different question of whether in fact any data which existed on 6th May 2010 was destroyed before 28th May 2010.  For this purpose I need to refer to the reports which have been prepared by the IT experts. I will leave until later some of the more technical material and I will seek to summarise the material I need to answer the present question which is: was data in fact destroyed, or was no data destroyed?  There is a report on the Apple Mac prepared by Mr Thwarries (?) on 25th June 2010. He has printed out the log which exists on that computer showing a certain function being used on 24th May 2010. On that date, on two occasions, someone operated the Disk Utility function and, in particular, pressed the button which led to what was called the “Secure Erasing of Free Space” on the Apple Mac. The first time that procedure was run it took 1 hour 41 minutes to complete. Later in the evening of 24th May the procedure was run again and it took 6 hours to complete.  Both times the procedure operated successfully.  Again, hoping to summarise a large body of technical data, I ought to describe what is meant by the Secure Erasure function on Disk Utility on the Apple Mac in this case.  When one operates the Secure Erasure function, one does not affect active files; one only affects previously deleted files. In the case of previously deleted files, they are essentially overwritten. Before they are overwritten, they are capable of being recovered by experts such as the IT expert in this case. After they are overwritten they are not capable of being recovered. Accordingly, that which was recoverable has ceased to be recoverable. Data which was available has, for practical purposes, been destroyed. Documents which might have come to the attention of Langbar and, in that way, the court, cannot now be put in that way before Langbar and the court. 

43.	Mr Rybak in his evidence accepts that he did indeed operate the Secure Erase function on two occasions on 24th May 2010, as the log says. He does not say that somebody else broke in and did this without his knowledge. He accepts that he himself must have done it.  Prima facie, therefore, he did something which was designed to and had the effect of destroying electronic data which was on the computer immediately prior to these events on 24th May.  One would have thought that would be sufficient for a finding that data had been destroyed and the orders had been broken. In his witness statement served in response to Langbar’s application and in support of Mr Rybak’s application Mr Rybak does not put forward any proposition to the effect that data was not destroyed. However, he came to give oral evidence in this application and he was cross-examined.  In the course of his cross-examination he put forward two ways in which he said the prima facie conclusion of destruction was in fact falsified or rebutted.  The first thing he said, picking up on the point I have made, was that the Erase Data function only operates on deleted files, not active files. He says that on 24th May 2010 there simply were no deleted files anywhere on the computer. Therefore, Erase Data would not have operated on any deleted file. Therefore, no deleted file was overwritten, no data was destroyed, and he has not broken the order, whatever his intentions might have been.  

44.	I am wholly unable to accept this assertion put forward by Mr Rybak.  First of all, it seems wholly improbable that there was nowhere on his Apple Mac computer a deleted file.  It seems very much more likely that there will have been, for whatever reason, deleted files of one kind or another. Secondly, it seemed to me that Mr Rybak’s evidence was wholly opportunistic. Having heard that Erase Data only applies to deleted files, he set about putting forward the suggestion that there were no deleted files. In other words, he was reacting to the possibility that had identified itself and he felt able to say that that possibility was indeed reality. I do not think that Mr Rybak was in any position to say whether there were deleted files or no deleted files. He told me, and this I accept, that he did not have access to any of his email files in the period up to 28th November 2008. That is a little while ago at the present time and I do not believe that anyone, including Mr Rybak, could possibly say as of July 2010 that there were no deleted files in the period February 2008 to November 2008. So I do not accept this suggested rebuttal of the prima facie conclusion that there was destruction of electronic data.

45.	Mr Rybak put forward a second point in the course of his oral evidence. He referred to a separate function pursuant to some software called “CleanMyMac.”  He said he used that software regularly.  He said that that software also had the effect of overwriting files and, therefore, prior to 24th May 2010 relevant files were already overwritten, so that overwriting them again did not destroy data.  You cannot destroy data twice. There are a number of answers to that, but I will content myself with one. The way in which CleanMyMac operates, as has been explained to me in the expert evidence, is that it overwrites active files. It does a process which involves deleting the file and overwriting it. It does not overwrite previously deleted files. So if there were previously deleted files, as I find in the bounds of probabilities there were, then previous operation of CleanMyMac will not have previously done that which in fact I find happened on 24th May 2010.

46.	Before I express my conclusion as to whether there was destruction of data in relation to the Apple Mac, I ought to refer briefly to the Sony Vaio desktop. In the course of his submissions to me, Mr Peto, on behalf of Langbar, did not give much emphasis to the allegations of destruction of data on the Sony Vaio desktop.  Indeed, I am not going to make findings as to whether such data was destroyed or was not destroyed, nor as to whether such destruction was done in a culpable way.  I did however raise with Mr Ramsden whether some of the relevant behaviour in relation to the desktop might appear to be innocent behaviour and might, on the grounds of it being similar to what was done with the Apple Mac, suggest that the behaviour in relation to the Apple Mac was also innocent behaviour.  Mr Ramsden in his submissions in reply did put forward submissions to that effect and persuasively argued that I should go into the question of what happened on the desktop, and that would enable me to reach conclusions on vital issues in relation to the Apple Mac.

47.	My overall approach is to focus on the Apple Mac and not attempt to make findings on what happened in relation to the desktop. The position in relation to the desktop is not identical to the position in relation to the Apple Mac. The occasions on which certain steps were taken in relation to the desktop differ from what happened in relation to the Apple Mac. The software in relation to the desktop is a Windows-based system and it is different from either of the two systems used in relation to the Apple Mac, namely the Disk Utility function and the CleanMyMac function. To go into the question of the desktop would therefore require one to go deeply into the technical differences. Those matters have not been explored in the sort of detail that one would need if one was to use the desktop experience as a guide to what seems to have been happening with the Apple Mac. Mrs Rybak, who is said to be the owner of the desktop, did not give evidence as to what happened in relation to the desktop. My conclusion is that I am able to make confident findings about whether there was destruction of data on the desktop and how that came about without examining the position in relation to the desktop. I am therefore able to reach my conclusion in relation to whether there was a breach of the 6th May and 20th May orders by reason of what happened on 24th May 2010 in relation to the Mac.  My conclusion is that the Rybak parties did, through Mr Rybak, destroy electronic data which had previously existed and, in particular, had existed at 6th May 2010. 

48.	That conclusion leads to the next conclusion that there was a breach of the unless order of 20th May 2010. The consequence of that breach of the unless order expressed in the terms of paragraph 3 of 20th May 2010 is that the current position is that the claim and defence to counterclaim are struck out. The legal analysis necessary for that conclusion is spelt out in the decision of the Court of Appeal in Marcan Shipping (London) Ltd v Kefalas [2007] 2 WLR 1864, and I record that there was no dispute as to the correctness of that analysis or its application to the present case. That means that, unless I give relief from sanction under Rules 3.8 and 3.9 of the Civil Procedure Rules, the claim and the defence to counterclaim are struck out. I then need to deal with the applications under Rules 3.8 and 3.9.

49.	In view of the importance of the wording of those rules, I will quote the relevant parts in full. I will start with Rule 3.8(1) which reads:
“Where a party has failed to comply with a rule, practice direction or court order, any sanction for failure to comply imposed by the rule, practice direction or court order has effect unless the party in default applies for and obtains relief from the sanction.

(Rule 3.9 sets out the circumstances which the court may consider on an application to grant relief from a sanction).”

	Rule 3.9(1) reads:
“On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order the court will consider all the circumstances including –
(a) the interests of the administration of justice;
(b) whether the application for relief has been made promptly;
(c) whether the failure to comply was intentional;
(d) whether there is a good explanation for the failure;
(e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant preaction protocol;
(f) whether the failure to comply was caused by the party or his legal representative;
(g) whether the trial date or the likely trial date can still be met if relief is granted;
(h) the effect which the failure to comply had on each party; and
(i) the effect which the granting of relief would have on each party.”

	Rule 3.9(2) makes it clear that an application for relief from sanction must be supported by evidence.

50.	Before attempting to apply those various matters and considering indeed all the circumstances, I need to make findings of fact as to how it came about that on 24th May 2010 there was a destruction of data which formerly existed on the Apple Mac. To address this point I need to describe the expert evidence as to what is involved in the Erase Data function.  Perforce I will need to go into this in a little detail in view of the explanations which have been given by Mr Rybak in his evidence.

51.	For this purpose I can go straight to a letter of 5th July 2010 from the IT expert. On the lower part of the first page there is question 1, which asks for a screen to be printed showing what a user of an Apple Mac would see before that user would press the button marked “Erase Free Space”. My attention is drawn in particular to one statement which appears on the screen to this effect: “To help prevent recovery of deleted files click the Erase Free Space button.” Question 2 asks as to the purpose of this function. The answer given is that it is correct to say that the use of the function is to prevent the recovery by forensic means of files that have previously been deleted by the user. The answer expands on that by saying that the data becomes irrecoverable because it is overwritten in the case of previously deleted content. Turning on to question 4 in this letter, the question reads: “Apart from preventing the recovery of deleted files, what other purposes if any does Erase Free Space have? Is Erase Free Space typically used for improving system performance? Would it be likely to improve system performance materially?” The answer to that is: “I am not aware of the Erase Free Space being used for any other purpose than to irrecoverably overwrite all previously deleted content such that it cannot be recovered by data recovery techniques. I believe that use of this function cannot improve system performance.”  Question 5 reads: “Is there anything in the documentation for Disk Utility or on the screens displayed to the user which indicates that Erase Free Space would or can be used to improve system performance?” Summarising the answer, the short answer is “No.”  Question 6 asks for a copy of the screen to be displayed in the form it would take after the Erase Free Space button has been selected. That screen identifies three possibilities. One can choose “Zero Out Deleted Files”, or “7-Pass Erase of Deleted Files” or “35-Pass Erase of Deleted Files”, and there is explanatory information which I need not recite.  So when Mr Rybak pressed the Erase Free Space button on two occasions on 24th May 2010, one can now see with crystal clarity what information was given as to the consequence of his actions.

52.	I can go from there to Mr Rybak’s witness statement dealing with what happened and why it happened on 24th May 2010.  The relevant part of his sixth witness statement of 2nd July 2010 is the group of paragraphs under 16.4.  I think it will be sufficient for me to identify what he says and my finding in relation to it without constantly referring to the expert evidence on the subject. In paragraph 16.4.2 Mr Rybak says that his computer encountered several problems in its operation. I will return to that later in my judgment. He then refers to the built-in facility in the Apple Mac, and it is clear he is referring to the Erase Free Space function on the disk Utility part of the computer. He says he has used this function for exactly the purpose of “Securely wiping Disk Free Space.”  He gives the impression there, but more clearly later, that he has used this function regularly.  At 16.4.3 he states that he regularly uses such operations for the purpose of the efficient running of his computer. He refers to this as a standard feature on the Mac. That makes it clear that he is correctly distinguishing between the Erase Free Space function, which is a standard feature, and the CleanMyMac software, which is an installation one can purchase and was not fitted on the supply of the computer. 

53.	I need to make a finding at this point as to his statement that he regularly used this operation. The log which has been recovered from the Mac computer shows that the function was used on one day only, although it was used twice on that day. That day was 24th May 2010.  The log covers the period of some months before 24th May 2010 during which time this function was not used. That would seem to contradict the statement put in evidence by Mr Rybak that he regularly used the function. The contrary view, which I prefer, is that this was used as a one-off and not as a routine matter, as he would suggest.

54.	Turning from there to 16.4.4 he refers to Erase Free Space cleaning up the free space on the computer. I have referred to what the expert has said about the purpose of using this function. It overwrites deleted material. It does not have any other purpose.  The impression which Mr Rybak was at pains to give was that the function helped him by making his computer run better, improving memory, and matters of that kind. Technically that is incorrect. It does not mean to say that he did not believe it (I will deal with that in a moment), but it is incorrect to say that that is what it does.

55.	Turning to 16.4.5 Mr Rybak draws attention to the log and the fact that the Disk Utility function was operated on other occasions.  He points out, or he says that shows that he is using the erase application regularly. In fact he has, I fear in an opportunistic way, misread the log.  It does not show that Erase Free Space was used on any occasion other than the two on 24th May 2010.

56.	In 16.4.6 he says this:
“The erase application was never run by me in order to deliberately remove any files from the hard disk drive or to prevent access to such files. The function was used only to provide additional level clean up in order to improve the performance of the computer.”

	On the expert evidence in this case the only purpose of running Erase Free Space is to overwrite deleted files. The overwriting of the deleted files does not involve any element of cleaning up and does not improve the performance of the computer. So if Mr Rybak understood that was the purpose of the function, he was incorrect about that. I will make a finding in due course as to whether that was his genuine state of mind.

57.	In 16.4.7 he accepts that he used this function on 24th May 2010. He says it was in accordance with his usual practice. That again is contrary to what is shown on the log.  He then says that his understanding was that it secured free disk space, and again whether or not he had that understanding I will return to, but, if he did have it, it was incorrect. He then refers to the fact that he was working on a great number of files at this important period and he used the Disk Utility function as part of a general maintenance of the computer. The suggestion is that the computer was in active use, and to make sure that everything went smoothly he used this function.

58.	I interject at that point that this statement, like all of Mr Rybak’s statements, has not been corroborated, and this is something which one can see would have been capable of being corroborated if it was desired to show that Mr Rybak was to be believed in this respect.

59.	At 16.4.9 Mr Rybak deals with the CleanMyMac application. He said it was installed on 10th March 2010. He identifies the sort of thing it does. He says the following, and this is stressed by Mr Peto: 
“This application was used only for the purpose of the running of the computer and not to erase data.”

	So that falsified a statement I had to deal with earlier that data had been erased by CleanMyMac so that no further data existed to be erased by Erase Free Space. 

60.	I think I need, having mentioned CleanMyMac, to refer briefly to what the experts say. I will endeavour to do this exercise as quickly as I am able. On 8th July 2010 the independent expert wrote an email to the parties and their solicitors setting out a comparison and a contrast between Erase Free Space and CleanMyMac.  Paragraph 1 stated that Erase Free Space erased the entire free space on the disk, making all previously deleted files irrecoverable. The application did not delete active files, it did not free up space, it did not find additional free space, and there was no performance benefit or system health to be gained by using it. Paragraph 2 dealt with CleanMyMac. It was stated that it had no equivalent facility. It had a Quick Erase function, which allowed a user to choose specific files to be deleted. That required one to drag and drop the relevant file. Within that function there was indeed a Secure Erase option which, if selected, overwrote the data as well as deleting it, but this applied to specific files which were active files. I remind myself that Mr Rybak said in his witness statement that he did not use CleanMyMac for the purpose of erasing data. I think I can skip some other content on that email and go to paragraph 5, which says that the Secure Erase function within the CleanMyMac application can only be applied to active files, whereas the Erase Free Space function can only be applied to free space on the hard disk which comprises unused virgin space and deleted second-hand space.  I, of course, accept that evidence, which has not been challenged.

61.	Pausing there, before I turn to the oral evidence given by Mr Rybak, it is clear that he used the Erase Free Space function on 24th May 2010.  He says that this was part of a regular course of conduct. I reject that. He did it on this day on two occasions but not previously. He says it was for the purpose of cleaning up the computer and making it run more efficiently. That is not the consequence of him using this function. As I say, I will consider later whether I can accept his evidence that that is what he erroneously but innocently believed. 

62.	I turn then to what Mr Rybak said when he gave oral evidence. He stressed that he was running this function not for the purpose of erasing data but for the purpose of improving performance.  This is the same point I have now touched on more than once in his written evidence. Did Mr Rybak erroneously but innocently believe that that was the purpose of him using Erase Free Space? He has not been able to identify any possible source for that belief.  The computer itself does not say so. The screen does not say so. The screen says something radically different, which should have rung alarm bells with Mr Rybak if he was genuinely trying to comply with the orders of May 2010. He has not been able to point to any publicity material or any informant as to where he got the idea from that Erase Free Space would help with the operation of the computer. In the end, I simply do not believe Mr Rybak’s evidence on this point. I will deal in a moment with his credibility and then give my reasons as to why I find him an unsatisfactory witness on this and other points.

63.	The second point Mr Rybak made in his oral evidence was that there was a specific malfunction of the computer on 24th May 2010, and that shows him and should persuade me that that is why he used Erase Free Space on 24th May.  He did not say in his witness statement that there had been a specific malfunction on 24th May.  It is true that he did say that he was using the computer a great deal around that time, but the suggestion that there had been a specific malfunction appears to again have been an opportunistic response to something in the log which suggested that there was a gremlin of some kind in some other respect on the computer at that time. I reject his evidence that there was a specific malfunction on 24th May 2010.

64.	In the course of reacting to Mr Rybak’s evidence, I have had to consider the probability of the evidence being true and the credibility of the witness. In the end, I am not prepared to accept anything that Mr Rybak says unless it is corroborated by a reliable source – either a contemporaneous document or an honest reliable witness. First of all, he has given evidence which is contradicted by the facts. Secondly, some of his evidence is implausible. It beggars belief that he could have knowingly pressed a button saying, “This prevents recovery of certain material”, not appreciating that that would be the consequence, but instead genuinely believing that an entirely different unstated consequence would come about. Secondly, I had the advantage of seeing Mr Rybak give his evidence orally in this court. He said things that did not impress me about why he had suppressed evidence about the valuation and the offers when he asked the court to give him summary judgment on the earlier occasion. I find his evidence, putting it at its most charitable, to be very evasive on those questions.  Based on my observation of him and my, I hope, careful attention to what he said, he struck me as a witness about whom one should show the greatest possible caution in accepting his evidence. Perhaps I should couple with that the fact that it is not just my observation of him in this court. The fact that he prepared his first and second witness statements suppressing highly relevant information before Judge Waksman is also material. I also take into account the fact that in the earlier proceedings he made admissions of serious dishonesty.  Those cause me to have the gravest concerns about Mr Rybak’s evidence when it is not corroborated.  It is true that none of his evidence has been corroborated. Some of his evidence could be corroborated if it had been true.  It would have been open to him to call evidence to show the amount of traffic between himself and his solicitor at the critical time in May 2010 to demonstrate the assertion he made in that respect. I cannot be sure, but I expect it would have been open to his wife and his daughter to corroborate his account of what he was doing in general terms at the critical time.

65.	The matter which has caused me to pause before making final findings in relation to Mr Rybak is to question why he would have destroyed data on 24th May 2010 when he must have realised that this would be a breach of the unless order which would have led to the serious consequences described in that order. Mr Ramsden stressed this point in the course of his submissions in reply.  I think there are a number of reasons why he did what I think he did, namely deliberately destroy data.  One cannot be certain in relation to any one of the suggestions, but the overall combination of these suggestions is sufficient to persuade me that Mr Rybak went ahead and did what he did with his eyes open, even though it has turned out that it has landed him in the difficulty he is in today. 

66.	The first consideration is that I think it is more likely than not that he thought he had covered his tracks by deleting the log. There was considerable evidence about whether he had or whether he had not deleted the log. My finding is that on 24th May 2010 he genuinely believed that he had covered his tracks by an effective deletion of the log. When he found he had not deleted the log, he had to, of course, think up another story, and that is what he did. Secondly, I think that Mr Rybak has a very high degree of commitment to suppressing in this case documents which are adverse to the case he wishes to put forward. That makes it enormously tempting for him to suppress those documents. He had a ready method to hand in the form of Erase Free Space, and he yielded to the temptation. Thirdly, insofar as he had thought through the possibility of being found out, he is the sort of person, I find, who thought he would have a pretty good chance of arguing his way out of the difficulty.  He has taken considerable risks in this litigation in the past, and he has kept alive to this point. That would have given him a certain confidence that he can act in the way he prefers without in the end the other party or the court being able to sanction his conduct. Another real possibility is that he did not appreciate how seriously this point would be taken, first by Langbar and, secondly, by the court.  It is also suggested to me by Mr Peto that there is something much more sinister in play here and that it was calculated to be better for Mr Rybak to destroy the data rather than to reveal it – possibly something far worse than has so far been alleged against Mr Rybak in the pleaded case. I note that submission. I do not say that it lacks foundation. There may be something in it. Of course, it is pure speculation and, as Mr Ramsden urges upon me, I do not feel that I can give it any real weight. However, there are other considerations which point in a particular way without that one.

67.	The other final thought in relation to this is that Mr Rybak is plainly a complicated individual. It may be naïve to think that a judge can work out the psychological forces at play. I may be part of the way towards the right answer. I may have arrived at the right answer. In the end I will not know.  

68.	Standing back from this lengthy assessment of the evidence in the case, there are two matters that come through with complete clarity. The first is that when Mr Rybak pressed the Erase Free Space button twice on 24th May 2010 he was told in terms by the screen that the consequence of his doing so would be to make irrecoverable data that would otherwise be recovered. He must have appreciated that, when he did what he did, he was doing something which was unhelpful to Langbar and eventually the court in seeking to have a complete picture of the real facts which happened. 

69.	The second matter that comes through quite clearly is that Mr Rybak has not put forward a satisfactory explanation which would enable me to regard his behaviour, deliberately producing the consequence I have described, in a favourable light or in a less unfavourable light. In fact, I do without hesitation make the finding that what drove Mr Rybak to do what he did was his desire to delete by overwriting electronic data. But even if it is more complex than that, one of the reasons he did what he did was that reason. That means that Mr Rybak has committed a deliberate breach with his eyes open of the unless order.

70.	I think with that series of findings I can consider the circumstances and, in particular, the matters in Rule 3.9 relatively briefly. Rule 3.9(1)(a) refers to the interests of the administration of justice. Mr Peto has drawn my attention to the decision of the Court of Appeal in Tarn Insurance Services v Kirby [2009] EWCA (Civ) 19. The judgment of the Court of Appeal in that case was given by Sir John Chadwick, with whom the other members of the Court agreed. I will not read out in extenso the observations of Sir John Chadwick. The relevant observations are contained in paragraphs 72, 78, 79 and 82. The facts of that case were not, of course, identical to the present, but it did involve a deliberate failure to comply with a disclosure order. It was described as a “wilful and conscious failure” to comply. Sir John Chadwick approved a passage from an earlier judgment in which the earlier judge had indicated that to relieve someone against such a default was sending “entirely the wrong message to those who face allegations of fraud”.  I have also paid attention to how matters were put in paragraphs 78 and 79. I find that the unless order in this case was appropriate when it was made and has remained appropriate ever since. I then consider paragraph 82 of that judgment, and I quote the last part of it, which reads:
“In a case of deliberate and persistent non-compliance with orders to provide information and deliver documents made in order to safeguard proprietary claims, a proper administration of justice requires that, save in very exceptional circumstances, sanctions imposed should take effect.”

71.	In the present case there was a clear unless order. It was an appropriate order. It has remained appropriate. It has been broken. It was deliberately broken. The person breaking it did commit the breach with his eyes open.  It is in the interests of the administration of justice to hold the perpetrator to the pre-stated consequences rather than to relieve against those consequences.  It is also highly material that the breach is not said to be remedial. This data, whatever precisely it was, will never be available to Langbar and will never be shown to the court if the matter proceeds.

72.	Moving on through the other paragraphs of 3.9, there is no issue about the promptness of the application under Rule 3.8. The failure to comply in this case was intentional based on the findings I have made. There is no good explanation for the failure based on the findings I have made. Paragraph (e) refers to the extent to which the party in default has complied with other rules, etc. In this case Mr Rybak, and through him the other Rybak claimants, have not shown a readiness to comply with their obligations to give disclosure, most notably and grievously by breaking the unless order, but it is not confined to that. Paragraph (f) concerns the question whether the failure was caused by Mr Rybak or his legal representative. On my findings it was Mr Rybak himself. (g) deals with the trial date, which is not a material matter as events have turned out. (h) deals with the effect which the failure to comply has on each party. The effect on Langbar of the failure to comply with the unless order is that some data has been overwritten and is not recoverable. The breach is irremediable. The data cannot be recovered by any electronic process.  It is not said by anyone, in particular not said by the Rybaks, that these documents could be reconstituted from another source. There is no offer of that kind to do anything to help in that respect. One does not know, because of the destruction of the data, whether this data would have been of critical importance or of minor importance or of somewhere in between on the spectrum. One is tempted to say that, because Mr Rybak deliberately destroyed it, as I have held, that it must have been judged by him to be adverse to his case and potentially beneficial to Langbar’s case.  If his psychology was more complex, of the type I have described, it may be that he did not have to go that far to think that it was that important. He was just fairly determined to shut down the process of disclosure as far as he was able. 

73.	I think I am justified in coming to the conclusion that it is more likely than not that the information in question would have been adverse to Mr Rybak. I think in view of the fact that he has destroyed the data and will prevent any proper evaluation of its significance, it is proper to draw that inference in accordance with established principle.  Mr Ramsden, on behalf of Mr Rybak, says that Langbar already has a considerable body of documents in what has become the ex-file.  That does not meet the question. The question remains: what else has been kept from Langbar?  And one does not know, but I think one can draw the inference, that what has been kept from Langbar would have been beneficial to Langbar. Mr Peto says that the documents might also have shown quite different wrongdoing over and above that which is pleaded. For the reasons I have already given, I do not rule that out, but I attach little if any weight to it.  That is the effect on Langbar.

74.	The effect on Mr Rybak of what he has done is, of course, the converse of what I have just described.  Paragraph (i) refers to the effect of relief being granted to the Rybak Claimants.  If I relieve against the striking out sanction in the unless order, then I allow the Rybak claimants to come to this court to seek relief, to ask for a judicial determination on the evidence that they have chosen to put before the court, without the evidence that they have chosen to deny the other party and the court. That seems to me to be the antithesis of doing justice between these parties. 

75.	Having looked at the individual paragraphs, I remind myself that I must also consider all the circumstances. Much of what I will say has already been said, but, drawing the strands together, there was a clear unless order. The order was appropriate and remained appropriate. Mr Rybak understood what the order meant. He deliberately destroyed data. The destruction of data is not remedial. It is difficult to assess what advantage he has gained. It is proper to infer that he has gained some advantage which is not insignificant. 

76.	I also say that I should send a very clear message to Mr Rybak and anyone else who considers behaving as he has done. The court will not assist a litigant in destroying data and will not assist a litigant to fight a case on the limited material that that litigant chooses to make available, suppressing other material which would be material to the decision of the court. 

77.	There are two other matters that I finally need to deal with. I have, for obvious reasons, focused on the position of Mr Rybak personally.  It is not suggested on behalf of any of the other Rybak claimants that I could make a distinction between him and others. In particular, it is not said that I could strike out the claim effective as against him but allow it to proceed against the others. That must be right. They must stand or fail with Mr Rybak. The case being put forward is a joint case being put forward. They have left Mr Rybak to conduct himself, and he has conducted himself in the way in which I have described.  

78.	The second final point I make is that Mr Peto relied, in addition, on the court’s power to strike out cases where one party has so abused the process of the court so as to expose the other to a substantial risk that a fair trial is no longer possible. In particular, Mr Peto drew my attention to what is today a well-known case, which is the decision of the Court of Appeal in Arrow Nominees Inc v Blackledge [2000] 2 BCLC 167. I think it is not necessary for me to discuss that as if there had not been an unless order and as if there had not been a clear breach of an unless order.  It is not essential for my finding under Rule 3.9 that I come to the view as to whether a fair trial is possible or is not possible. There is inevitable difficulty in making that prediction when one party has suppressed information which would have to be evaluated for that purpose. So I will not come to any conclusion on the alternative way of putting the case. I will refuse to grant relief against the sanction already imposed and already in effect pursuant to the order of 20th May 2010.  

79.	That deals with the two applications. 

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