Kirill Ace Stein v Eugene Jaffe

This judgment concerns the costs of these proceedings, consequential on my judgment handed down on 19 September 2025 ([2025] EWHC 3400 (Ch)). By the judgment, I dismissed the claimant’s claim for compensation for breach of trust, having found that no trust had been declared over the Payment (as defined in the judgment).

The general rule is that the unsuccessful party is ordered to pay the costs of the successful party, but the court may make a different order: CPR r 44.2(2). Rule 44.2(4) and (5) provides that:

Ms Lacob submits for the defendant that I should follow the general rule and make an order that the claimant pay the defendant’s costs of the claim on the standard basis. For a series of reasons, Mr Page submits that the claimant should be ordered to pay 50% of the defendant’s costs of the claim on the standard basis, or such other percentage as the court thinks fit.

I would note that the costs of two pre-trial applications were reserved. Mr Page submits that the costs of those applications should follow the order made in the case, i.e. on the footing that there is a global reduction to the costs recoverable by the claimant.

The two applications were, first, an application by the claimant dated 28 March 2025 to amend the particulars of claim. The contested part of that application involved a proposed amendment to claim equitable compensation for loss of the use of the disputed funds or compound interest. As explained in my ruling on that application, which was heard at the PTR on 22 April 2025 ([2025] EWHC 1337 (Ch) at [22]-[29]), I did not permit the disputed amendment, but permitted the claimant another opportunity to put forward an amendment identifying the general characteristics relied on insofar as they went to the claim to interest in the event the claim succeeded. Such an amendment was subsequently proposed on behalf of the claimant and the defendant indicated consent to it. In the event the court was never asked to consider the further amendment and no order was made to give effect to the defendant’s consent.

The second application was an application by the defendant dated 30 April 2025. On 15 April 2025, the claimant’s solicitors were served with the defendant’s second witness statement, together with further disclosure. The statement corrected Mr Jaffe’s evidence as to when he indicated that Mr Stein had first raised with him the Payment, and then went on to discuss a number of other communications between the parties. At the PTR, Mr Page objected to the attempt to introduce the witness statement without making an application, and indicated that such an application would be opposed. I required an application to be made. The claimant then consented to it, and an order was made accordingly with the costs reserved.

Mr Page submits that the claimant should have an order for only 50% of his costs for a series of reasons set out in his skeleton argument and further explained at the hearing.

First, it is said that in the judgment I concluded that the facts did establish a trust. I did not understand Mr Page to pursue this point, but for the avoidance of doubt my conclusion in the judgment was that I was not satisfied that Mr Anisimov had declared an express bare trust in favour of the claimant. Neither party contended that he had declared any other form of trust and I did not consider whether he had done so (although I did consider it appropriate to note my discussion with counsel on the subject).

It is then pointed out that various legal arguments raised by the defendant were rejected in the judgment, even though they did not arise, notably the defence of laches, and the issue concerned with the effect of the Trustee Act 2000. Mr Page pointed out on the first day of the trial that the Trustee Act point was unpleaded and he had not been given notice of it. He was nonetheless able properly to deal with it (and indeed I agreed with his submissions). I do not consider that the costs incurred by the claimant before the trial will have been increased by these points, but it is clear that considerable thought had been given to them by the defendant’s legal team, and some costs will be directly attributable to them. The claimant’s team then had to deal with them during the trial.

The next points taken relate to Mr Jaffe’s conduct during the period between 2012 and the Revoker Proceedings. It is submitted that Mr Jaffe did not in the years that followed 2012 set out the true position to Mr Stein, there is no evidence that Mr Stein was told that Mr Anisimov had decided to repurpose the Payment as a gift to him and that he made positive statements that he had not received the Payment. This is connected to the following objection, which refers to Mr Jaffe’s evidence in the Revoker Proceedings, both in his fifth witness statement in those proceedings and in cross examination during the quantum trial before Cockerill J.

I consider that the question of costs should be determined by reference to the decision in the judgment, rather than by reference to submissions based on contemporaneous events which were part of the evidence at trial. There is an overlap between Mr Page’s position here and his submissions on the application for permission to appeal. The two issues should be considered separately. The defendant effectively seeks in his submissions on costs to go behind the finding in the judgment that Mr Stein knew in July 2012 that Mr Jaffe told him that he had received the Payment, or at least realised that he might have been referring to the Payment and chose not to pursue matters, and that Mr Jaffe was not concealing the fact of the Payment.

The references to the evidence at trial also need to be considered in light of all the evidence and it is not appropriate for points such as this to be reargued in costs submissions. For instance, Mr Page submits by reference to paragraph 19 of Mr Jaffe’s second witness statement that his evidence is that the first time he told Mr Stein about (what he describes as) Mr Anisimov’s new intention was in 2016. That paragraph does not say that it was the first time Mr Jaffe had said anything to Mr Stein about Mr Anisimov’s intentions (and the judgment discusses what was said in 2012). The statement that Mr Anisimov had decided to repurpose the money as a gift to Mr Jaffe is also a mischaracterisation of the findings at trial.

At the consequentials hearing, I asked whether there had been any pre-action correspondence. I was told that the parties had met before the claim was issued and Mr Stein asked Mr Jaffe for USD1 million, but that proceedings were issued without any pre-action letter because Mr Stein was concerned that Mr Jaffe had left the jurisdiction. There was thus no pre-action correspondence even though nearly 18 months had passed since the quantum trial in the Revoker Proceedings. In those circumstances, I do not consider that there is anything in Mr Jaffe’s pre-action conduct to justify departing from the usual order as to costs.

In terms of conduct during the litigation, Mr Page mentioned the fact that the defendant’s initial response to the claim was to issue a misconceived strike out application, which was withdrawn in the course of a hearing on 8 February 2024 without my having to determine it. He recognised that the costs of that application had followed the event, but pointed out that there was a significant delay before Mr Jaffe’s defence was eventually filed. It was not said that the delay caused Mr Stein to incur particular additional costs (other than in relation to the failed application) than would otherwise have been the case.

The main complaint about litigation conduct, as far as costs was concerned, related to disclosure. I was shown correspondence from the defendant’s solicitors, disclosing further documents after the deadline for disclosure, especially messages passing between the parties at different points. This included several documents served together with Mr Jaffe’s second witness statement, shortly before trial. As Ms Lacob pointed out in reply, the claimant also disclosed documents after the deadline for disclosure, and revealed the existence of an additional email address to be searched after the process was underway. It does not seem to me likely that the late disclosure caused very significant additional cost to the claimant, and Mr Page did not specifically rely on incurred cost in this regard. The discovery of some further documents after disclosure has been given is not unusual in a case of this kind and there does not seem to be any reason here to make a reduction in the defendant’s entitlement to costs.

Ms Lacob relied on the comment in the White Book at 44.2.10, by reference to Fox v Foundation Piling Ltd [2011] EWCA Civ 790, that criticism has been made of a growing and unwelcome tendency of judges to depart from the starting point of the general rule (that costs follow the event) too far and too often, particularly with reference to an issue-based approach. Certainly, there is ample authority for the proposition that the mere fact that a successful party does not win on every point argued is not sufficient to justify a reduction in the costs to which they are entitled.

The only factor which I consider merits attention in this regard is the failure of the defendant to succeed on the points concerning the effect of the Trustee Act 2000 on the constitution of the claimed trust. These were significant points, which had entailed significant preparation (and thus, it is to be inferred, cost) on the part of the defendant. These were not issues on which the claimant could have protected himself on costs because he was unaware of them until shortly before trial (see the final proposition stated in the White Book at 44.2.10). I consider that the justice and circumstances of the case should entail a modest reduction to the costs recoverable by the claimant for the trial preparation and trial stages so as to take account of this issue. As an issues-based order would be cumbersome to assess, I will reduce the recoverable costs of the claimant for the trial preparation and trial stages (i.e. the costs incurred during those phases as budgeted for in the defendant’s approved costs budget) by 10%.

Subject to that, I will make an order that the costs of the claim be paid by the claimant to the defendant, on the standard basis to be assessed if not agreed.

That leaves the two applications for which costs were reserved. Ms Lacob asks for her costs of the two applications. As I have indicated, Mr Page was content for the reserved costs to follow the principal costs order (as is the general rule in the absence of contrary order: CPR Practice Direction 44, para 4.2), on the footing that there would be a global reduction. In the absence of that, he submitted that the claimant had behaved reasonably in relation to both application, supporting a submission that Mr Stein should have his costs of the applications.

As far as the amendment application is concerned, it was argued out and I declined to make the requested amendment. When a further amendment was proposed, the claimant consented to it without the court being further troubled. As the application was unsuccessful when argued, the defendant was not unreasonable in opposing it. I see no reason to depart from the general rule and no separate costs order will be made in relation to it, such that the costs order made at the conclusion of the claim will apply to it.

As to the defendant’s application to rely on his second witness statement, the proposed statement was served on the claimant’s solicitors just before the Easter weekend of 2025, when the PTR was to be on the first working day after it. The statement went beyond a correction of an error in the first witness statement and the claimant’s position of requiring a formal application to be made and having a proper opportunity to consider the contents was entirely reasonable. When these steps had been taken, the claimant reasonably consented to the application on condition that a response could be made. The defendant necessarily had to make the application given the lateness of the production of the statement (and supporting disclosure) and the claimant was put to the trouble of dealing with it at the same time as preparing for trial. I will therefore order that the costs of this application be paid by the defendant to the claimant.

I will order a payment on account of costs. This is a claim which was costs managed. I will direct the payment to be 70% of the costs in the budget that were already incurred at the date of the costs and case management conference (and of the defendant’s costs of the amendment application), and 90% of the budgeted costs thereafter (in the case of trial preparation and trial after an initial reduction of 10% as set out above). I do not consider that an adjustment is required at the payment on account stage to take account of the defendant’s witness statement application. These costs will relate only to the application and not to the underlying documents and should not be substantial. Any dispute about precisely what costs are costs of that application is to be resolved on assessment. The date for making the payment on account will be 14 days from the handing down of this judgment.

That leaves the question of interest on costs. The usual practice now is for the trial judge to determine this question, rather than for it to be left to detailed assessment. Mr Page suggested that the issue should go to assessment as further disclosure is required, including to confirm whether Mr Jaffe has already paid the invoices which have been rendered to him. I am satisfied that his solicitors have confirmed that their invoices have been settled and that there is no other reason why the question of interest on costs should not be determined now. Interest must be calculated from the date on which invoices were in fact paid.

Ms Lacob asks for 2% over base rate for the relevant period. She submitted that Mr Jaffe had in fact borrowed at much higher rates, although there is no evidence before the court of that. Mr Page suggests that there should be a lower rate, and contended for a rate based on the European Central Bank rate, such as that in Phones 4U Ltd (In Administration) v EE Ltd [2023] EWHC 3378 (Ch), where Roth J awarded the successful defendant interest on costs at 1.5% over the ECB main refinancing operations rate.

Roth J said the following, at [4]-[5]:

This is not a case where the defendant was billed in euros, although he was based overseas. He was billed in pounds sterling, and was defending a claim formulated in US dollars. Even though he was not resident in the UK, it is not self-evident to me that he should have borrowed in euros. Furthermore, I was provided with no details about ECB lending rates. It is apparent from the judgment of Roth J that the ECB has several different rates and that he was provided with detailed submissions on these, and I have received no such submissions.

For these reasons, I consider that a rate based on Bank of England base rate should be used. As Sharp LJ said in the passage quoted above, ultimately, the court conducts a general appraisal of the position having regard to what is reasonable for both the paying and the receiving parties. While Ms Lacob indicated that Mr Jaffe in fact borrowed at a higher rate than is sought, the court is principally concerned with the general characteristics of him as borrower and no characteristic has been identified which would cause his borrowing rate to be high. Furthermore, the defendant delayed in responding to the claim, both (when represented by different solicitors and counsel) by seeking extensions of time for filing a defence, and then issuing a strike out application that was abandoned at the last possible moment rather than filing a defence. That will have had some financial consequence for the claimant even if not significant, as the claim was not progressing as it otherwise might. Standing back, I consider that the award of interest on costs should be at 1% over base rate, to run from 13 March 2024, being the date when the defence was filed, to the date of this judgment from when the costs order will become a judgment debt.