Filed on behalf' of the: Clalmant.t
Deponene Stephen D11vid Jon~
Witness Statlt!llc:nl: No.7
&hihits: None
Dated: 23n1 September 2008
IN TIIE IDGH COURT OF JUSTI~

Claim No: HC07COB52

.. CHANCERY DIVISIOti
BET.WEEN:

(1) JlREHOUS.E CAPITAL
JlREHOUSE CAPITAL TRUSTEFs LIMlTED
(3) BUCKHEAD CAPITAL CORPOUTION

(2)

Claimants
·-and ..

(l) STANLEY SHERWIN BELLER

(2) GWEr.>P)OLEl'fMicmrtLE OWEN

Defendanq

Claim No: 111\:f of 2001

,_)

AND IN TBEMAITER. OB STANLEY SHERWJN BELLER

AND IN THE MATIER OFTBE lNSOLVJ;NcY ACT 1986
BETWEEN:

JIR.EBOUSE CAPITAL
AppUc:ang

-and-

(1) STANLEY SHERWIN BELLER
(l) ASHER MILLER

·····!

,~·
r

'~

Respondent,

AND lN THE IDGH COURT OF JUSTICE
IN BANKRUPTCY

Claim No: 8499 or2ooz

JIREIIOUSE CAPfl'AL
- and-

STANLEY SBXRWJN B.ELLER

SEVENTIJWITNESS STATEI\r.IENT OF STEPHEN DAVID JONES

)
4~1334.I

Petitioner

 114,

A3 to the second point, having spokc;n to Mr Brown and his attomoya at so~ length

about this, my llllrlcratanding is lhat Mr Puig had givea tne unpi:cssio11 that
investmen t opportuni ties we:ro limited to thOiO close to him hut it is

nm known

whether or not that was tho txuo poaition, In any event, I do not accept that such a
position would have, prevented Mr Young from investing (which ia what the Bellers
want to persuade the Court to accept) as MrYoung'a proposed investment was being.
racilitatrtl l;iy Bucldu:sd which had invested in Puig spcciu purpoao vehicles
previously. Furthermore, tho Promissory Noles arc as.slgnablc (together with security)
without rc:slriction.
Relevance of Beller Argument§
l JS.

Tho Beller Undmaking and the consi:qucuccs of 113' bri:ach have been the, mbject of
sub.stmitial diaputc by the Bellt:rl, They havo ralsed questions about proceedings and
cveota 1n tho US which. have made it necessary fur ma to explain the situation. in some,
detail. B'~or. I would emphasise agaiu. aa I did at the out&ct that the rcicV1111co of

()

the FP Invc:a!meo.t.and tho US Proceedings to thue procseding:t needs to ho kept in

mind. They am the cont~ in which tho Bellor Undcctaldng was given and in whlch
the claim against Mr Bc:llcr, which ha accepted was a gimuma claim at all times up
until bis rvA and Settlement. for breach of that un~crfaldng arose.
E.

· PROJECT MOSCOW
Introdµcffon

116.

As with the case of tho FP Investment and tha US P.rocc:cdings;. tho position
sunounding Project Moscow . Ia .complicated. Therefore, again, I stress that its
r~lcvancc in tho context of taese proceedings need.s U> bo kept in mind. It

is relevant

as it gives background to (1) cerlain c.la.i.ms against Mr Boller th;at were compromised

a

in his IVA/Settlc:me.ot and (2) :how Mr Beller procured rcleuo of claims against lilin

(throughhia uso of the Beller-Young Injunction).
117.

Dunng 2005,

Mr. Young offered to a number of JlrehQl!Se Capital's clients and other

investou (th.e "Invcstora'? the opportunit y lo participate in an investment proposal
involving the acqui.titlon and development of a property in Moscow. Tho .inve~
propOial and 11t1bsequcnt tn!OBactio.o became known as .Project Moscow. Project
.\IOS~ uwt11 ;ett Un,·u~opurent of.ille'l1il'a''6frt ~a:intinstftate--ar-atat1ttt:-· · ·
2"' Zvenligorodskaya Street. Moscow. ·
1

•1021ll~.l

·

 -----------.
118.

The property in Moscow was owned by a R~Bian c;ompany called OAO NPF Spektr
LK C'Spektr'l Spektr was in tum owned as to 70% by another Russi11;11 company
called 000 R.esurs Development Limited ~'R.csur.,·~. lksura waa in tum owed as to'

99% by Parasol. Until 2006, tho shares in. Parasol wero indirectly owned by two
Russian individuals called Mr Ruslan Fomichcv and Mr Vasily Peganov (the
''Fou.ader,").
119.

To thG best of my. knowledgi,, in 2005 and early 2{106, Mr Young

entered into two

separate, (and, as it is row sp,Parcnt, inconsistent) sets of artangements 111 r1::latian to
Project Moscow:
(1)

'.··

Tho

~~Ila()'

foundcm,

Sluircbold~· Agreemmn: As bctwcc:n Mr Young and tho

then,

was tha January Sharcholclc;ni• Agreement by which thci B

Shares were to be acquired. To tho best of my knowledge. tho Foundm did
not know of tho ex.istciu:c of tho Investors and believed Mr Young to be
investing hia own money. As I \VI'Il e«plain below. as a resolt ofth Young' a

)

failure to pay the full consideration duo under tho J~ Sbareholdcrs'
Agreement, this agre=ent never reached completion and i~ provisions never
took effect.
(2)

Investments/Loans to Mr YoUllg: As between Mr Young and each of tho
Investnnr. thcr11 were individual

amin~

by which tho Investors

invested and/or lent money to Mr Young and/or tho B Share Companies fur
tho pusposca of acquiring the B Shares and fm one case) for the ptlrP,Oses of
wor)dng capital. Tho Invostora dld not know the !emu on which tho B Share$
were to be acquired. Uniiko tho

JIIIllllUy

Shareholdem' AgreQIIlent; these

arran~emcots did in fact take effect and money was in fact invested and/ru:
lent by !ha mvcstars.
The January Shareholders' Agreement

120.

On 12 January 2006, Mr Young enten:d illto a. Share Purchase and Shareholder's
Agreement with tho Fouodcca and Parasol (and one othr:t party) (the "January
Shareholders· Agreement",. Pursuant to the Janulllj' Sha.rehotders' ~c:nt, Mr

121,

4021)34.1

Tho ti:;mis of tho January Shareholders• ~ included tho following:

JI
1 "70

 (I)

Consideration fur the purchasa of t:1111 Plll'!laol shares was to be
US$19,546,412. By tho date, of the Jauuary Shareholders' Agr~emeot, Mr
Young had already amtnged for payment of SUIDB totalling US$l3,943,S9S,
of which US$6 million was held as a non-refundable deposit,

(2)

fu addition, Mr Young agreed to pro cum that US$l0 million of debt funding
would be made availab]s to Parasol cm reasonable c~mmereial terms, By the
date of the 1aouary Agreement, Mr Young had already arranged for US$4.l
milliou to be, loaned to Parasol

(3)

(4)

,''r\. )

Tho balance, of tho considc.ration and tho loana were due. to be paid on
completion. faillog which. tho Founders could tetminato and repay tho
advance payments less the deposit.
The date for completion of th& Iamary Shacch.oJdcra• Agreement was 26
JililUIIIy 2006.

)

122.

The Foundera were represented, at tho time, by Streathera Solicitors LLP of 128

Wlgmoro Street, London, Wt U 3SA. Mr Youns wu represented for tho puzposes of
the January Shareholders' Agrc~ment by Fox Williama LL.P, solioitorn, of Ten.
Dominion Street, London .EC2M 2Ea
123.

My flan (Jirchousa Capital) acted solely for Silvcrwing and as explained above, I was

instruc!ed
on this transaction in or around July 200S.
I did not act fur .US Open
.
'

Limitcd/Camroso Limited and/or L&EIW'ilshaw at tho time, but was retained by them
subsequently after the Beller-Y~g D~fau1ts as I had .the niosflmb'wlcdgo of tho

ltansacli~ ThQ same applied to the B Share Companies, which became clients of
record.
124,

I believe that, at lhe time of tho January Shareholder,' Agreemen t. Mr Beller bad
some knowledge of Project Moacow. I do not know what bowledge b.c had but I do

know that, by that date, ho had reccived fimda through the BeUc:r & Co and/or Beller
Owen LLP client accow:its on account of tho tr~on from invcstt:in ~or lcndm
and had given undcnakings in respect of these· fui1ds. I believe that Mr Beller'i
pc.sit1an a 1iil!11'(!c!9cn~ ui'~ Afr...tmAtton or .Laura Whtkel':·- - ·- -· - ...... ·• · · -· .... "· · · .

)

125.

So f~ as the Silvenvi.og interest is conccmcd; following on from the initial meeting In.
July 2005, as a sign of good faith and at the rcque,t of Mr

4021334,1

)9

Young,

tho sum of

 ,.J
US$5mi1Iion !n total in two lrnnchc:, was tntmfcncd to Mr Beller's client accOW1t on
account of Silvorw~'a iDicndo:1 investment. This sum

w'." to be held ~gainst Mr

Bellor's undertakin g ptmding tho outcome of duo diligcru:o investigations, which wcro
being undertaken thmugh Mr Young's then. sallcitors, Fox Williams. ~ was
subsequently discovered over a year later, immediately following C?ceipt of tho funds,
Mr Boller in fact di5burscd the monies in direct breach of his~ .
Intended Arnngemeny
126.

Mr Bella ha.a stated that ?1r Young was tho bCllllficial. owner of some or all of the B
Shares and ho refem to l'llliow documont, to SUpport thi& Eiowcver, this !s not the
case, When Mr Young entered i.oto ~ January Sharebotdcra' Agreement:
(1)

He did so on behalf of a Dllmber· of tho$o lnvcstm!. h:ll:luding Sil:verwing,
Camrosc and/or US Open and tho B Sham Companle1, who had advanced.

funds for tho puq,oscs of in.vesting

m

and/or· leading to tho B Simo

Compan.ics for tho pmpose, of acqlliring tho B Swices in .Para.sot·

and ~

funds availabto to Paruol for the purpose.s of Project M~w..
(~)

It waa not intended that ho would become tho beneficial owJJer of the Parasol
shares, Tho inte.ailmi was always that the B Shat6 Companies were to b11 lho
owner of those shares and that the Investors wonld invest and/or lend mom es
to the B Share Compani~ It was intended that the B Sharea Qcquired by Mr
YoU113

un4er tho January Shareholdors' .Agreement were acquired for the B

Share ·Companies. CJauso 11.2 af the January Shareholders• Asreemtnt
pennittcd such a transru and the B Stuu,, Companies were also listed in the
.
. . . ~·•
Januacy Shareholders• A&recment as permitted transferees.
127.

I havo illustrated below what the man~ were intended to be in terms of the,
structure:

o

1011334.I

O

-

•••..

o

I

............

······

 [Trllld 111a)

'T
. zl
U.C,.Alf

'

.

'[§]
:.!~ 1

@:]

m

. ·.
l ••

~

(

)

128.

~

-

:ll'.

>-""-

-6"
4"

_, .a·"!l ,J~-

.... _
.....

_.,I

AB I undenta.nd it. as between tbo FO'tllldeu· and Mr Youn, it was intended that, after
completion of the January Slwoboldera' Agreement (\vhich never ~ook. place), the ·
legal arul beneficial own.ermip of'tht, shari:s in Paruol would be as follows:

(l)

Tho Jamwy Shmhcldem' Agreement provided that Mr Young would
· acquire 50% (I,e, 500) of tho shares .in Pansol (defined

Shares"). Tho Founders agreed. by clause 2.4,

to

M

the "Parasol

procure that MTM

Nominees Limited would transfer legal title to the Parasol Sba:es to Mr

Young.
(2)

By clawie 11.2, Mr Young was peanltted wilhin six weekJ of completion to

transfer up to 451% of tho Peraso! Shares (i.e. 245 ehares) lo the B

Share

Companies. Two of the B Sharo Companies (namely Solar Bxeezo Limited
and Ca.a.yanroso Limited) were identified a, ''Investor Transferees" to each of
which 50 Parasol Shares would be tm:Jsf=rcd iimni:diatcly after completiou,
The number of shares t11 be transfemd to the othet four B Share Companies

was nol stipulated.
(3)

4021334.l

By ·clause U.l, unless previously agreed by the Founders in writing. Mr
.... _ ... -·· .. . . . .
·-"-• ... Young was not peanitted to ~f«thoremaining S1% of tho Parasol Share!
before planning pCOllis&on fur the' project had been obtained.

-

4(

1 Q1

 .J
As between Mr Young and the, Investor!, it was lllldetstood that all 'of tho B Shares·

129.

would be lransfettcd to this B Share C-Ompanics In wbich the Invostors had invested,
There were two methods by which this investments were made.
(1)

Some of the lilvcstora mado invostmcnts in the B Share Companie, ci~ by
way of loan or direct i!ivestmcnt for tho pwposcs of acquiring shares in
Parasol Title or security for such investment, or loan:i was in the, form 'Jf the
shares in such B Shan, Companies, whlch w~ intended to become
bc:nciicially entitled to B Shares. A sl2IlmlllIY of such investmcota iJ as

follows:

Investor

Alrui wit
invested

B Share Company to which

investment related

SHverwing Speciality usss,000.000
Finaneo Limited

Camrose Iimitcd
Tamares Real. Estate·

Limited

(2)

So~ Breeze Limited

uss2,ooo,ooo
end £3,000,000

lake Go!~ Limited

US$5,00f>,D00

Canyonrosc Limited

Some of the Investors made a Ioan to Mr Young as agent for a B Share

Company for the purposes of providing working capital for the deal A
summl!I)' of such invcstmeam i~ aa follows:

t

Investor
Legal & Equitable
Secaritlcs·

Ple/Wilshaw Pie

Amount
invested

B Share Compauy to which
investment related

£770,000 (plus

further

.£1,225,000 loan
also secured on B

Jaggcrsfield Limited, Readywood
Limited and Wes~ Holdinga
Limited

Share

Companies)

Ms Elcatefina
BCl'C'lOvsb.ya
(referred to as the

US$6,044,04[

Solar B.cczc Limited

~ "unoiuned investor'')
•• ..J ~
W.

(3)

I

i

1.;;,

Ms &rcmvskaya's identity was not disclosed at the: timi,

=

·ror

WWW

.

political

reasons. Accordingly, although an ll!ldcrtafcing was gtv=n to her by Mr Beller
4-021JJ4, I

41

 in relation to bl:I' investmQnt, Mr Beller, I believi,, would havo been unawaro

of the reason for tbc fucility granted by Ms BCCC20vskaya to Mr. Young and
to which hit llllderiaking related. I refer to tho affidavit of Mr Young ozi
which I relied with I'C:3pcct to understanding tlionaturo of Ms Berezovsbya's
interest. Neither Ms Berczovslcnya oar ha solicitotS, Stteathcrs Solicitors
LLP, ha.vc ever admitted that this was in fact tho position.

130.

. To the beat my knowledgi; the owncmup of tho shar~ in Parasol aad the owncnhip
of the B Share Companlca was aa follows:
(l)

Tho shu=s in Parasol were indirectly owned by tho .Founders. The legal and
bcn.e&iat owncrnhip ofth.o shares in Parasol prior to completion was as set
out In Part l of Schedulo 2 to tho JanuB1Y Shareholders' Agreement which
stated that there were, l,000 ordimuy SWll'CI in Parasol and that "M'IM

Nom.Inces Limited ll.ol.d.t tho legal title to l,000 shar=s for the benefit of .
TwinBphcn, Trading Limited and Agrandiac:: AJsociates Limi~ (each aa to
.500 shares)". Those companies were owned by the Founders,
(2)

( On 13 June 2005, the B Share CornpBllies wen, lllCOrpOiated in tho British)
Virgin

Islands

by Gwifym Davies (who

worked for Mr Young) fur the

pu.poses of holding the B Shares upon complctfon of the January

Shareholders• Agreement. On 5 Decembl!I" 2005, tho B Share Companies
were transferred to the o~hlp of

MaYo Secretaries Limited,

a wholly

owned 5Ubsidiary of Caversham, Trustees Limited, an independent trust

company baaed in Ge!lCVa, Switzerland. At that time, the B Share Companies
were merely shcll companies and had no va.Jue,
(3)

fu. or around 1 !l!l1Wy 2006, it is understood that Mayo Secretaries Limiti:d
m~c declarations that the B Share, Companies wcra held on trust for two
Llechtcnatel.n foUlldatioos, The ~a Foundation and The Espino
Foundation, both set up on th.o instruction, of Mr Young in December 200S.

(4)

Five of thi, B Sham Companie, (namely, Solar Breeze Limited, Canyonrosc
Limifed-, J11ggmficlii Limitc'd; Westczeek Holdibgrtimitcct and-R!sdt,vboci"· · '
Limited) were held on trust for the Kilmona Foundation. There wero no
named benefici.anes oftheKilmona Foundation,

•1021334.1

 J
(5)

One of tha B Share Companies (namely, Lake Oaldcm Limited) was held on
trust. for tho Espino Foundation. h I undcraland it. Mr Young's wifa end
childrai were originally fut.coded to be named as ultimate, dlscmionary
beneficiaries of the Espino Pouodatioi:J but this \VU never foana.lised.

Fgilurc ro Complete theJan.usry Shareholders' Auem:ruau
Complctlo11 of the Janna:ry Sharcholden' Agreement pwport=!ly took place on 26

131.

January 2006but as at Ibis Utnc, Mr Young wa, stilt short of tho balence of tho funds
required to be paid, Mr Beller provided aii undc$kfug in.arckc
Sbareholdeni' Agreement lo complete.
011 26 Janu.uy 2006 Mt Beller wrote

132.

11.

to

allow the Jflllllacy'

letttr to Streadica; (represcming

tho

Founders). The letter rcfemd to Mr Young as "Scot" and was in the following teons:

,,.-- .

r;
'

.

"At Scot'J req11e.rt I enclose my cheque dated 27 January 2006for
£Jm draW1J on t~ account of BBi/er 0wtl1' LLP. 11111 cheque !r(u
been drawn aga/1181 an uncleared bakmc« lreldfor ~cot'3 credit.

)

ff the c~us ts Mt met on presentation tlien you ,nay acetpt /bu:
let/er tU my und1rtaki11g ta remit to you tht$ sum of £1,n by
telegraphic tran4i,r. "
133,

To tha best of m.y knowledge, this undertaking was not honoUicd. I uruierstatld U S$1
million was paid (or thereabouts) and a balance of £270,000 was then left
outstandini,. This ba!ancc,. was owed to Mr Fomichev (aa one of the Fouruiers) and
foons the basis of e. claim against Mr Beller In his WA.

134.

rn light of the failur" of Mr Young to pay tho full consideration duo on the intended
completion datn, tbc

Jaouaiy

Shareholders' Agreemeot: did not tab, effect and the

intended transfers of tho B Shares set out
place, As a result:
(I)

Those transfers of beneficial owncxship ultimately made (as

descnbed below)
Mr Yoong.

·""
.

',}

·ID21Jl-4.1

126-129 above did not take

Mr Yell.Ilg did not become the legal or beocficial owner of any of the B
Shares.

(2)

Bl paragraphs

Wete made

directly to th~ B Share Companies and not via

In fact, the Founders, having not rcccl.vcd full consideratloo under the Share· .. ·
Puxchaso and Sharcholdcra• Agreement, refus ed to procure M'IM Nollliaci:a

 )
Llmlted to transfer legal tit!o to or beneficial interest ia. tho B Shares, Formal
ownership of' the B Shares did not change until 11 Auguat 2006. .

(3)

Tho position as described above, was reflected in a letter from MtM
Nominees Limited to Jirehouao .Capital Trustee, dated 011 or about 12dl
Oclobcr, 2006.

(4)

However, on or prior to tho anticipated completion date of tho Jauuary
. Shareholdcra' Agreement, very substantial sums were

transfen-~ by way of

coosidc_ration to. tho Founder.,, including sums ultimately paid by clienbr of

Jirthouso. Capital, wilhaut a completed agreement or any agrccmcnt at all.

Mr Young may or may not haw, Imow11 the true position at the time of purported

135,

completion on 26,i. January, 2006, Howeva, in Man:h 2006, I.to led hls solicitOD Fox
Williama to believe that certain transfers to and via him had taken place.. In
particular:
(1)

{2)

Mr Young asserted that JOO a Shaccs had been transfettcd tCJ Solar BreC"Zc
Limited and CanyODrosc Limited.
Mr Young signed pu.ported inatniments of transfer of B Shares from him to
the four otber B ShQ.fe Coutpunios (as enclosed with tbe letter dated 7 March
2006 from Fox. Will.iams). Theso purporti;d instruments of transfer were null
and void.

136.

He .subilcquattl:y
clarified. . the true posiiion in an Affidavit swom on 14 Septi::mbcr
.
2005 which included tho following stat~s:
(1)

Mr·Yollllg's role in relation to Project Moscow was to "front''. the project. Hs
was to bring in urvestOlll' fund:i for tho purchase of 50% of the sbare.s in

Parasol. His own o&jective was to secure "at feast a 50% interat of tlte
development profi/3" for himself (or a fiunily trust) "once all investment$ or
/00113 advaneedfor th« Project had been

repaitl'.

slraru". Ho stated "I maintain at no lime did [ hold any beneficta/ interest in
the B Sharu".

{021334.1
4S

 V
(3)

"/ dld not own JO%.~although it wa.r tits lnrelllior, 011 lurve said earliv'. .. to
securr a 50% upnda of tile project after all the '11vestmrm/3 and/or leans had

been repald.•• : and th• agreemenfl with Jnve,ytcrr, such as Silverwing. did or
were to reflect thii'.
(4)

Mr Young confirmed that "rJesperaJe to stay afloat'', he "arran~dfarther

/acllitie, willz Legal & Ei]_uflabl•for £1milllon and ig95, 000 an 7 Marclt and
IO March 2006 respectively." However ho stated"/ did 1101 reallss t/1atwha1
I had executed wa, inaccurate as I did not own th! /Jenejidal holdings in the

,

Yendor con!Pf1Jliu tU tltefacility leuer« said 111td tliere/on$ could not glve the
security'.

.. ·.
(S)

Mr Young did not comment sp11eifically in hla Affidavit of 14 September
2005 upon the scbcdulo dated 10 Match 2006, the lcttcc from Peters & Peters
dated a April 2006, hh Affidavit dated 17 April 2006 or tM letter fh>m CMS

0

Camero n McR:enna !LP dated 14 Juno 2005, each ofwhlch tho Bcllcrs rely
upon to evidtuco Mr Young's beneficial interest in BOlllO or all of the B
Shares. Howover, Mr Yo!Jllg confumcd that hls earlier statements, and the
effect conveyed fu these documents, were wrong or ~sleadlng in the form
and context in whicfl thct appeared.
137,

As stated. above, !he Inveslo:a .bad advanced substantial sums by the timo when the
Ja:nuacy S~eboldezs• Agre=mcm failed to complete. Upon the Young Defaults, the
Investors sought to reach a new agr~~t dlrectly

:,nth the Founders (who bad

received tho Investors• molley bnt retained tho B ·shares) to exit the Project Moscow
deal. During tho period Febroazy to AUg,Jst 2006, J!rehouso Capital negotiated witl:t
the Founders on bc,half of tho Investorll.. In. order to facilitate a .new transa ction.
JirehoUBO Capital arranged for all of the B Sharo Campllllies (which, as yet, had no
title to the B Shares) to be held by a special PUipOso tmst as follows:

(1)

,

On 1 · March 2004, Jircbous o Flduciares Nevis Limited (form~Iy Jirehouse
Capital Nevil Li:nitcd) (as Trustee) and Jirehouso Capital Trastces Limited
(as Protector) had entered into a Trust Deed .relating to various ptUpOsc sub~
trusts from time to time to be established tbcrcund er and rogcthec to be
.• ,w.,

known as ''The Jirehou.sc Special P\JrpOSCJ Tmst" .

~021334.l
46

' ~ """'---J ...

 .)
I
(2)

On 3 April 2006, one such sub-trust by the, name of the "PIIJ'asol HoL:ling

Company Tru.st" ·was created, n related to th& sharu in
Companies (rcfcm:d · to tbefflia
P,Urposc wat aa follows:

t.!x, B Sb.m:

as tho "Parasol Holding Comp~').

Its

"To hold the S!iaru [in th• B Shan Companl~J UJ1til all IJie actual 1111d

conlingeru liabilit/ey of the Parasol Holding Companie, to {T1ose perso,..,

who have· invuted ,'tr, or made loan advo.ncu to, have been discharged,·
sellfe.d or compromised and uni{/ sucl, time to receive and hold any net
avai/abla disfJ'ihutJo,u to dlschargd all 'suclt actual and conlf11genl /fabi/itfeJ
and lltueafler to hold tht: Sliare.r and any distribution therefrom for the
be11e.fit of tl,e Residual Beneficiary [namely t/1e Jfrehouse Settlement .
f'oundatlan (/ontierly known as the Jirel,oll8e Capital Trurt Fourrdatlon)J, "
(3)

Oa and from 3 Apri.l 2006, at tho direction of the Kilmon" and Espino
Foundations, tho shares -Ia the B Share Companies w~ registered and

transferred iDto the name of Jirehouso.Capital Noaunoes (Nevis) Lhruted (a.a

)

"Nominoo'') and were held by the N'omuico for tho I'irch.ousc Special
Purposes Trust. Such transfer was for tho uitima.to benefit of tho Investors
who bad invested in and/or advanced monies to tho B Shara Companies for
the purposes of acquiring au interest .in Parasol, and to allow the Invc:stoca-'
respccti'IIIS inwesta iu the B Share Companlea to bi, secured. This was
confumed by a letter dated 18 August 2006 .frozn the Jirchouso Capita]

Specjil Purposes Trust and Jirehoµsc Cap.ital No.m.!nees (Nevis) Limited to
thcFoWldations and.McYonng.
13&.

Transfer of the bcneBclal ownership of tho B Shares to the B Share Canipaoies did.
not take place µntiJ. as a reso.It of the negotiatiOllS led by mo through rire1iou.sc
Capita.I,. agre~t bad been reached as to, their reacquisition. by the Founders.
Agreement wu re~hed i.n pnnciple in earJy August 2006 and was formalised

iii the

Repuro~o Agrccmcm as set. out in tho .fullowing para~h,. Tho Repurchase
Agreement WM a new tran:Jaction which reflcotcd a COllllllarc'ial resolution of tho
situation created by tho fu.ct that the Januiry Sharcboldera' Agr~ failed to

complete.. Tho intc:nt was lo retuai to I.be l'nvestora ~ loam and/or l.nvestments by
agreeing a repun:hasc of the B Shares by the Founders from tho Investors (lo the

••

extent that they could ho re~ a.'I havin!. hecn mll'ch:u:e,j i~ ttie firnt nl~.,f!, ..
•

"

•

•

•

"· ~--

-· -· --

••• ..,,,_ ......... ~ h

Ackno\vledging what they had acquired or owned. or had securi ty over (or belii;ved to
have acquired or owned or taken security· over from their arrangemen11 ..yith Mr

)

Yotlllg) provided that basis on which a repun:haso could tab, place by the FOUnden.
i021J34,I
47

•••

 _

·· --·-------.. . ,__

)

Th& Foundo~ wero adamant. that th:,y wanted to buy out tho l'nvcstors and did not
want any {\Jture participation of Inv~~ ill tho deal

Tho Repurchase Agreemel!!
139,

After tho Young Ocfault.s in Match 2006, th.a Founders excroiscd their tights under
the, January Shardioldm' Agn:ement to reacquiro the B Shares from Mt Young and
served notico 011 him lo that effect. By so doing, as advised by their la~ . they
. appeared to declar11 completion um1atamlly and at least aeknowledged that Mr Young
has certain conlractual ri&hl3, despito tho mi:t that it was subsequently argued by tho
Investors thiit du, B Shares we.re held fur them.

140.

This led to detailed aud leogthy negotia!Iona which I than undertook for Jirchouso
Capital on bclwf of tho B Share, Companies with tho Foundczs

as to tl!c tcnns on

which the Founders would reacqwro the ~ Shares, Eventually, in August 2005, the
Foundexs agreed to reacquire the, B Share:I on teons including that a sum in excess of

)

US$20 ·.million wauld be paid to various Investonr including clients of Jirohouso
Capital. Thia iru:Iuded an an1ount of US$S.5 million on account of tho Ioaa made.
available to Parasol (vill Solar Breeze Limited) and US$15 million on account oftb.c,
purohaso of tho B Shares. Tho Agrecmcm was written and is referred to as "the

Repurchase Agreement". Its intended effect is Ulu$trate.d below:

:· ·

.....

)

141.

J

The B Sharc.1 were formally transferred to the beneficial owncnbip of tho B Sharo·
Companies with agmd effect from on or about 25 Janua:y 2006 and 21 Fe,bnlary

4021334.I

-ton

 -I
2006 by an Instrument dated 11

Auaust 2006. Tho B Share, were never held for. or

ever registered In the name o( Mr Young (see the declaration givon by MTM
Nominees Limltcd (!ho Cypriot b:u3tce) in October 2006).
I 42.

On 11 August 2006, the following Decll!llltiona ofTtllSt were made in respect of tho
B Shares:

Nomlaeo
(Legal owner) ·

MTM Nominee,

Solac Breeza Lhnltcd

Limited
MTMNomineca

Caaycnrose Limited

Limiled
MT.M Nominee:,

,.

i

Limited
MTM: Nominee.,
Limited

MIMNaminecs

.

Limited

)

Owner
(Benefftfal QW.ller)

Jaggezsfi!l!d Limited
Westcreek Holding.,
Limited
Readywood Limited

MTMN~ 'I.ab GoldcnLimitcd
Limited
Total·
143.

~:·

!1t Parasol

S.hareh~lclfng

Effective date .

50 B ShlU'CI

25 January 2006

SOB Shares
"

26 Jennary 2006

Shares

2! Fcbruazy 2005

sqe Shares

2 ! February 2006

40B

508Shares
260BShan:a

21 February 2006
21 February 2005

,n"Rllha-

The Dccluation of Trust dated 11 Augu.rt 2006 1n relation to Lake Golden Limited
odgina.Uy conl;lined en error; It referred to 240 B shares, rather than 250 B shares
which had been intended. Th.ls error "':'BS coirected by a manuscript a~ent to
the Dc:clanillou of Trust. :To tho best of my recoUection Sil.Ch correction wa11 mado at
the meeting i:n Cypru, in on. or IU'<>und 1111r August, 2006 at Whicli the declarations
were signet! by MTM Nominees Limited. Tho eouect figure of 260 B share., held fur

Lake Golden Limited is re.fleeted in tho letter from Mn.{ Nominec:s Limited to which
refi::~c<1 is made at paragraph 134(3) above.
144.

The sa.lo of the B Shares under the Repurc!ia .s~ ~ produced proceeds of

USSt0,500,000. Tho costg of the Rcpurohaso A~ in tbc sum of US$750,000
1verc paid out of this sum, leaving a baJan:o of USSl.9, 750,000 fer distribution as
follows:

Investor
B Share Company

I Al!lount received

Solar B,reczc -Umited

I US$2, 79§,005

 Investor

B Shan Company

Amount received

Limited

Cainroso Limited

~ Gorden, Limited

Ta.mare., ReaJ E8!ate Liniited
(owned by the Tuiit)
legal & Equitable, Securities
Pio (including syndicate:

members)

US$3,970,J26

Canyonrose I.united
Jaggersfielcf
R.eadywood
and

US$2, 796,005

Limited, US.$3,637,664

Limited

Westcreek
Holdings Limited·
SY Re.finances Foundatf~ (11
special purpose
Solar Bnezelimited
foundation
established in Nevi,.
Jirehousc Capital for by
the
purposes of giving effect to
scttli:rncat)

US$6,5SO,OOO

Total

U~l2.Z~a~

145.

Tho "SY Refinance, Foundation" was established bi Nevis on the .instructio.as of
Jirehouso CapitaL The solo representative mcinber of tb.e lllaiiagl!ttleot board is
Jiccbottae Fiduciarcs Nevis Limited .a.ad tho protector or s~sar of tho Foundation
is Ttrebou.so Capital Trustees.

146.

The,

Pll)'lllen ts made, to 'the, SY Refinanc e Foundation consisted of two elc:mcnt,,.

First, a paym.eiit _in reapcct of the funds advanced. or treated as advanced, by Ms
Berezovskaya. Secondly, a mechacisrn by which the fuvcstora (through J'irehouao
Capital aod Jicehouso Capita.I TlWitees) collectively used llo.me of tho global proceeds
of tho sale, of the B Sha.es (to

whic.h they were entitled)

to purehuc

certain debts

owed to various creditors of Mr Beller. Such, debts were nothing to do with Project
Moscow. (As I explain below, Mr .Beller would only consent lo release the BellerYoung Inj!Jl)Clion jf these creditors released their claims agairut him, which the
creditors were only prepared to do if they wen, paid off. It waa a COnnntrcfal
compromise by which th~ Investom received le:ia thm that to \\'.hlch they wers
entitled, in e.itchan.1111 for Hefting their money released so9ner.)
,•

,.

147,

~021Jl4.I

The alloa.tion of tho B ""-

1n-..

m,,Jc.......,. to

to lbc

~ ..
B Shan,

:"'· ····
. '···c,-.;.. """""'

__ '-·

lhc ,..

!ho""""°""'" botw"" MrY"""g anatboin"'ton,
50

 )

,,I

aod did not relate to the intended allocation ofB Shares uodcr the redtmdant January
Sbareholdea• Agreement. It reflected agreed ~onomic ialerests.

148.

The partie, to the Repurchase Agreezne.nt cx:changcci' contracts· 011 30 August 2006
and tho tramaction compl=d on 22 December 2006.

149.

I

ha~ illustrated below tho basb on which each of tho B Slwo Companies both

repaid In.vest.om• investments ancVor loans and dislrlbutcd 111ty suq,Ius~ to tho 5Y
Rcflnancc Foundation:

--- ·~----------------- - -----

/

iwu,
.. ,
(IMJ

i ~-- .

St,s119 and

Loan

PfOl:ae ct.

~~~~-)

~
~

--

- [~.§]

~G~

1
I
-------- Sll>twtn-~

i

L

":C'"· j

/I
,-·-·-·-·--·-·. ·-·

1

-..,~:::.:DMd

I

-·-·-·-·---·-·

t

F. THE BELLER YOUNG IN.rIJNCTIOl:f
.The Beller-Young Defaultung the Pro c~dfngs agaigrt Mr B~
150,
I believe that between March 2006 and March 2007,

thrco of the Financial Creditoni

brought Proceedinga against Mr Young ancVor Mt Beller; (1) Tho Z Trust, (2) tho
Bank and (3) Ms BerozovskayL These claims ar1,'descnbed ins~ bc!ow. It
was. these three proceedinga in particular, in one of whicft tho Z Trust obtained a11
asset freezing order against Mr Beller, that led 111 Juno ro Mr Beller oommcnciog hia

51