Ghura & Ors v Dalal & Ors

At the conclusion of my judgment in the main action I indicated that there should be a further hearing to deal with consequential matters, including what was to be done with an interim injunction granted to Nindy, Apinder and Ama directing Shokat how he should act in relation to the claim then before the Dubai World Tribunal (“DWT”) for the recovery of the deposit paid in respect of plot D55. The proceedings before the DWT also claimed repayment to Shokat of monies which he personally had paid in respect of plots D54 and D103.

The origins of the injunction lie in indications given by Shokat (beginning in November 2011 but in particular contained in a telephone conversation occurring on the 12 December 2011) that he would proceed only with his own claims in respect of plots D54 and D103 unless a binding agreement was reached with Nindy, Apinder and Ama as to how the overall costs of the DWT proceedings were to be borne. Shokat admits the threats, but says that he never intended to carry them out. In my judgment the Claimants were entitled to take them at face value and to seek “without notice” relief. The “without notice” injunction was renewed and varied at subsequent “on notice” hearings, in each case on an interim basis until trial. Mr Chaisty QC takes the point that there is no formal application before the Court for a final injunction, and that he has had to react to an informal proposal in the skeleton argument served for this hearing. But he has capably dealt with the issues, and technical matters should not stand in the way of giving parties who have spent huge sums of money on this case clear guidance as to future conduct.

I am satisfied that a final injunction is warranted. I have held that Shokat holds any recoveries in respect of D55 as a result of the DWT award upon trust for the Claimants to the extent that they contributed in dirhams to the deposit recovered. Until recoveries are effected, he holds the benefit of that part of the award as relates to the Claimants’ contribution in dirhams to a recoverable deposit in a fiduciary capacity as trustee for the Claimants. I accept Mr Anderson QC’s submission that as a general rule a beneficiary is entitled to inspect the title documents relating to trust property and to the provision of proper information as to the state of the trust: see the cases collected in footnotes 145 and 150 to paragraph 23-030 in Lewin on Trusts (19^th edition). I consider that there have been times when Shokat has failed to provide proper information: and there have been times when he has taken too ready refuge in “I don’t know” as an answer, as he did at trial with his answer “I can’t remember”. In particular, Shokat was not open with the Claimants as to his pursuit of enforcement proceedings relating to the DWT award, or as to the terms on which he had engaged lawyers or as to the identity of those lawyers: and he was not open in disclosing the existence and nature of the set-off claim being advanced against the DWT award.

The terms of the injunction required careful formulation both so that the demands upon Shokat are not unreasonable (because he is not obliged to answer never-ending and voluminous inquiries and is entitled to be reimbursed for any expenditure he incurs, though not to be remunerated) and because Shokat must be told as precisely as possible what he must do and when (because the Claimants are likely to have their fingers on the trigger of a contempt application).

The draft at the end of this judgment is designed to strike that balance. I anticipate that drafting points may arise, and Counsel are free to agree amendments or to request me to determine points that require clarification. Their conduct of the trial suggests that I may trust them to deal with matters sensibly and fairly without micro-management by me.

I must also deal with the question of costs, both in relation to Nindy, Apinder and Ama’s claim and in relation to Shokat’s counterclaim: and with some reserved costs. It is plain that I should consider making an order about costs at the end of intense litigation such as this has been.

On that footing, the first question is whether I should view claim and counterclaim as separate claims or whether I should treat them as issues within a single action. In my judgment they should be treated as separate claims. The claim was essentially about loan transactions (requiring a review of historic dealings): it is true that declaratory relief was sought in relation to the benefit of the DWT award, but in itself this was not an issue since Shokat had never claimed the benefit of this for himself (and the declaratory relief was really a preliminary to a claim by the Claimants for breach of trust against Shokat, which failed). The counterclaim was essentially about the enforcement of a share allocation agreement relating to AKA and about losses arising from an alleged breach of that agreement (with a discrete issue about how litigation costs were to be borne). It had a life of its own, and was not a correlative of a successful defence of the claim. But in treating claim and counterclaim separately for the purposes of analysis I must be careful to avoid any unfairness arising out of the decision in Medway Oil v Continental Contractors [1929] AC 88 which might require the costs of the claim to be assessed and then the costs of the counterclaim assessed only by reference to the amount by which the costs of the proceedings so assessed have been increased by the existence of the counterclaim.

The second question is to identify who is the successful party in relation to claim and counterclaim. (In truth this is really an enquiry into who was the least unsuccessful party in the litigation, since “success” in this litigation has meant defeating claims not vindicating rights, as Mr Anderson QC observed). In real life Shokat won the claim (because he avoided personal liability for the Claimants’ loans to Khalid, liability for extremely high interest rate claims, liability for the deposit on D55, and liability for damages for misrepresentation). But he undoubtedly lost his counterclaim for damages of about £22 million (as originally pleaded, though reduced at trial); and, of much less significance, he also lost his discrete claim that the Claimants should pay two thirds of the DWT costs (though he established that the 30% he could recover included certain elements that it seemed to me the Claimants had put in doubt). It is true that the Claimants obtained declaratory relief on their claim: but I have explained that that was not really an issue, but rather a preliminary for a claim which failed.

The third question is to decide whether to apply the general rule that the successful party should recover his costs from the unsuccessful party, or whether a consideration of all the circumstances warrants a departure from the approach.

The Claimants submit that they should not be ordered to pay all of the costs of the claim because they made an admissible offer to settle both the claim and the counterclaim which Shokat has failed to better: see CPR 44.2(4)(c). On 2 April 2014 the Claimants wrote “without prejudice save as to costs” and “subject to contract” making what they characterised as “an offer of settlement”. The letter stated that

“the offer is expressed in broad, high-level, terms and is subject to contract, with the detail to be negotiated and agreed between the parties’ representatives in a meeting if agreement can be reached as to the general principle.”

The terms proposed that Shokat should acknowledge that he was trustee of the judgment in the DWT litigation in so far as it related to the D55 monies, that the Claimants would acknowledge that they were liable for one third of any outstanding amount of Shokat’s costs reasonably incurred in the DWT litigation “after receipt of all payments from Nakheel”, that the Claimants would be entitled to retain the proceeds of “The Edge” and that there should be no order as to costs. It was in essence a “walk away” offer (as Shokat’s representatives themselves described it). After two months Shokat made a counter offer (later withdrawn) requiring payment of £3.5 million on his counterclaim together with his costs, and a contribution of two thirds of the DWT litigation costs.

In my judgment the letter of 2 April 2014 was not “an admissible offer” to settle because it was not capable of acceptance so as to put an end to the litigation. If “accepted” it could only have led to an unenforceable agreement to agree. But it (and its rejection by Shokat) is without doubt part of “the conduct of… the parties” within CPR 44.2(4)(a). It was a realistic proposal to negotiate, although there were (and were acknowledged to be) some “rough edges”, especially in relation to the costs contribution arising from the quoted condition attached. What put an end to the proposal was the valuation that Shokat put upon his counterclaim.

But I reject the submission of the Claimants that in the light of those facts there should be no order for costs up until 2 April 2014 and that thereafter Shokat should pay their costs. First, the Claimants persisted in their full claim at trial and required Shokat to defend himself; so they are not entitled to be treated more favourably than if they had abandoned or discontinued their claim. Second, the offer to negotiate was made in circumstances where the Claimants had exchanged lists of documents in February 2014 but had failed to disclose a raft of fabricated documents. This concealed a weakness in their claim (for the purpose of comparing it with the strength of the counterclaim) and might have impacted upon the proposal for “no order as to costs”. A party who says that significant effect should be given to an offer to negotiate should be able to demonstrate that the offer is put forward in circumstances where “all cards were on the table”. Subject to that, in principle I would be willing (absent any competing factors) to reflect the conduct of Claimants in offering to negotiate by relieving them of part of the costs otherwise payable by them.

Counsel for the Claimants further submit that the order for costs should reflect the fact that the Counterclaim was exaggerated. Mr Chaisty QC responds by saying that the Counterclaim as pursued at trial reflected the expert advice received by Shokat, and it was only deliberate exaggeration that was relevant. I accept neither submission.

Shokat’s counterclaim was founded upon two propositions: (a) that he was entitled to a majority shareholding in AKA: and (b) that he could and would have postponed the realisation of “The Edge” until the market improved (and that the Claimants were under a duty to him, pending allocation of shares, to do likewise). Neither was dependent upon Mr Sweetman’s expert evidence (whose residual valuation simply reflected the assumption that one could wait to realise value, and cannot in any event have contributed to the claim originally pleaded).

But even if Shokat’s counterclaim was exaggerated or unreasonable (because of the assumption that realisation of “The Edge” could be postponed) I do not see what impact that has in a case where, having lost his counterclaim, Shokat is presumptively bound to pay the Claimants their costs anyway. “Exaggeration” founds a challenge to the reasonableness of costs incurred by the receiving party (because the receiving part cannot recover the costs of making an exaggerated claim): but it cannot increase the costs otherwise payable by a paying party (who simply pays what it was reasonable for the successful party to expend in resisting the claim made). As CPR 44.5(d) highlights, the question is whether a party “who has succeeded in the claim….exaggerated its claim”.

The Claimants submit that I should also take into account that on 20 December 2011 the Claimants made an open offer “to contribute to the costs of the litigation in proportion to their interest in the total fund”. But the great difficulty they face is that every attempt to tie them down as to exactly what that phrase meant had hitherto failed. They had prevaricated over whether this included Haider’s fees, were evasive about whether it included adverse costs orders, and still failed clearly to state (i) that the costs to be shared included the costs of enforcing the DWT award and (ii) that the costs would be paid even if the attempted recovery was unsuccessful. These were the apparently unresolved issues following the 8 June 2011 e-mail which the Claimants’ letter of 5 December 2011 had described as “wholly inappropriate and unacceptable”. So this is not conduct to be taken into account in favour of the Claimants.

The fourth issue relates to the basis of assessment. Mr Chaisty QC made a submission that part of the costs payable by the Claimants to Shokat should be assessed on the indemnity basis. The Claimants fabricated documents to pursue a claim for tax relief. They did not disclose all the fabricated documents in these proceedings. The documents were relevant because they characterised the transactions as loans and did not include Shokat as a primary obligor or indemnifier (though they did so characterise Khalid). The Claimants also produced at the very last moment in the trial (and relied upon) an undisclosed hard copy of an e-mail which purported to evidence Shokat agreeing on 19 September 2011 to the sharing of certain assets: I did not accept the authenticity of this document (as having been printed off by Shokat on 19 September 2011 and given to the Claimants).

In my judgment this conduct is worthy of being marked by the Court. I propose to mark it not by ordering that part of the costs recoverable by Shokat shall be assessed on the indemnity basis, but treating it as “conduct” which entirely cancels out any credit deriving from the Claimants offer to negotiate, and which counterbalances any residual demerit deriving from Shokat’s exaggeration of his counterclaim.

The fifth issue is to determine whether an order that Shokat should receive from the Claimants his costs of resisting the claim and Shokat should pay to the Claimants their costs of resisting the counterclaim (having regard to the Medway Oil principle) would be fair. In my judgment this would not be a just outcome, or a practically sensible one.

Claim and counterclaim had independent lives. They arose out of different facts (albeit as different chapters in the same narrative). The counterclaim was not a simple “tit-for-tat”, as demonstrated by Shokat’s demand for £3.5 million even if the Claimants abandoned their claim. It would be unfair to load the Claimants with all of the common costs of the action simply because they issued proceedings first.

Nor is it a practically sensible order because it requires two assessments of costs, each involving questions of attribution of particular activities to claim or to counterclaim, or of apportionment between them. The Medway Oil approach has undoubtedly survived the introduction of the CPR: Dyson Technology v Strutt [2007] EWHC 1756 (Ch). But CPR 44 makes explicit the availability of a range of other options in the exercise of the Court’s discretion and gives firm guidance as to which are to be preferred. Before making an order relating to the assessment of the costs of a distinct part of the proceedings the court must consider whether an order based on a proportion of the whole proceedings is more appropriate: a point emphasised in Burchell v Bullard [2005] EWCA Civ 358.

Provided that I can justly do so I would propose to make some other order than that indicated in paragraph [19]. I do not have available figures for the costs expended by the parties on claim and counterclaim. But I may fairly assume that in each case the parties expended what was reasonable having regard to the nature and significance of the issues: and that the costs judge will on assessment ensure that that is so when determining actual figures. Given the nature of the dispute I can see no reason why either side should spend disproportionately more than the other on the assertion of their own claim or the defence of their opponent’s, either in respect of the claim or the counterclaim (notwithstanding that the Claimants called four witnesses and Shokat only one). I may rely upon my conduct of the trial as underpinning an identification of the issues, a measurement of how they were addressed, and an assessment of their significance.

To treat the costs of claim and counterclaim as essentially the same, to set the one of against the other, and to make no order as to costs would not be fair. The claim was of greater significance than the counterclaim.

The claim concerned a detailed analysis of the purchase of plot D55, of the “bundled” loan of 1 July 2008 and of Ama’s loan of August 2008. To understand these it was necessary to review the history of the dealings and to consider the documents. When considering the documents significant time was spent exploring the fabrication of some of the disclosed documents and with other fabricated documents that had not been disclosed. It was also necessary to examine subsequent dealings (because the Claimants said that Shokat’s conduct demonstrated that he had earlier agreed something or represented something).

The main counterclaim concerned what happened at a single meeting in June 2009, a largely uncontested account of what the Claimants thereafter actually did with “The Edge” (there was a small dispute over the nature of the advice they took), a legal argument about what they should have done, and a contest between experts as to how one would assess compensation for any breach. The involvement of experts would have made this element of the dispute relatively expensive.

The subsidiary element of the counterclaim (concerning the agreement over litigation costs) was determined largely upon the documents and a very short passage of cross-examination.

I consider I can fairly and justly rely in this case upon my impression of the trial (refreshed by reading my notes and considering the form of my judgment) as a proper basis for disposing of the costs of the action. As is always the case when the costs of interim relief proceedings are reserved to the trial judge I can only take a bird’s eye view of the merits of the various applications. I would make no separate costs order relating to the injunction. Whilst I regard an application for injunctive relief relating to the prosecution of DWT proceedings as justified, I regard the restraint upon dealing with the judgment up to £5 million as wholly unwarranted. It was an attempt to protect the Claimant’s personal claims against Shokat (which have failed): and it was maintained in place for 5 months. The one cancels out the other. I have no material on which to adjudicate upon the reserved costs of the variation of the injunction made by consent on 14 November 2013.

On that basis, rather than order that Shokat shall receive 100% of his costs of defending the claim and pay the Claimants 100% of their costs of defending the counterclaim, I would order the Claimants jointly and severally to pay 30% of Shokat’s costs of defending the claim. Because some of Shokat’s costs of defending the claim may also be attributable to his pursuit of the counterclaim and it would not be fair that he should recover the entirety of those common costs, I will direct the costs judge to treat costs attributable to both claim and counterclaim as being as to 65% the costs of defending the claim. Provision to this effect should be added to my draft Order.

It is declared

The following claims dismissed:-

The First Defendant shall within seven days of its receipt transfer the whole or such part of any monies forming part of the Claimants’ Fund as he may receive to the solicitors for the Claimants (or otherwise as the Claimants may direct) and if not so paid such monies shall (at the option of the Claimants jointly) bear interest at judgment debt rate Provided That the First Defendant may retain therefrom any sums which have fallen due as at any Settlement Date but which remain unpaid.

The First Defendant (whether himself or by his agents or employees) must not (without the prior written consent of the Individual Claimants) otherwise deal with or diminish the value of the Claimants’ Fund.

The First Defendant ( whether himself or by his agents or employees) must not (without the prior written consent of the Individual Claimants) omit to do any act or thing which it could reasonably be anticipated would prejudice the full recovery of the Claimants’ Fund Provided That if the positive act required to avoid such prejudice would cause the First Defendant to incur costs or expenses that would not form part of the Individual Claimants’ Costs Liability then the First Defendant shall not be obliged to act until such time as he receives a solicitors’ undertaking or other adequate security in respect of the anticipated expense.

Where the written consent of the Individual Claimants is sought then the Individual Claimants shall jointly respond to any such request within three working days and in the absence of a response ( giving or withholding consent) then the First Defendant shall be entitled to take such steps as he reasonably considers to be appropriate (having where prudent taken appropriate advice).

The First Defendant shall on the 1 August 2015 and upon the first working day of every other month thereafter provide to the solicitors for the Claimants a brief accurate and informative summary of all material occurrences in relation to the DWT Judgment (including that part relating to costs), its preservation and its enforcement, provided always that the First Defendant shall not be obliged to report occurrences in relation to the DWT Judgment which do not affect or impact upon the Claimants’ Fund but only that part of the DWT Judgment as concerns the First Defendant (“the Personal Interest Exception”). The Claimants may at their own expense (secured by solicitors’ undertaking or by payment of a reasonable provisional sum in advance) request copies of material communications between the First Defendant and any legal representatives who are taking steps to preserve or enforce the DWT Judgment (including advice to and copies of court documents presented on behalf of the First Defendant or received by him from the judgment debtors) save that the Personal Interest Exception applies.

In addition to such periodic reports the First Defendant shall within three working days of becoming aware of the events report to the solicitors for the Claimants the making or receipt of any application concerning the enforcement of or a challenge to or the assertion of some contrary right over DWT Judgement (save that the Personal Interest Exception applies).

There is liberty to apply on two clear day’s notice as to the working out of this order. It the issue concerns the reasonableness of a sum of money then the application may be may to a Chancery District Judge for the resolution of the issue. Any other application may be made to any judge of the High Court (Chancery Division).

No application to commit the First Defendant for contempt of Court shall be made unless an application has been made under the preceding paragraph for directions.

The Claimants shall pay to the First Defendant 30% of his costs of defending the claim such costs to be assessed on the standard basis in default of agreement. In the assessment the costs judge is directed to apportion any costs which have been incurred by the First Defendant in relation both to his defence of the claim and to his prosecution of the counterclaim as to 65% to the defence of the claim.