Stein v Chodiev & Ors

This has been the hearing of the claim by Kirill Ace Stein (“the Claimant”) against originally six, now four, Defendants, Mr Patokh Chodiev (“the First Defendant”), Mr Alexander Machkevitch (“the Second Defendant”), Mr Alijan Ibragimov (“the Third Defendant”) and Ms Mounissa Chodiev, the daughter of the First Defendant, (“the Fourth Defendant”). The First, Second and Third Defendants, colloquially called “the Trio”, have held business interests together for over 20 years, and together run various successful businesses, primarily based in Kazakhstan, operating in mining, and in the processing and marketing of the products of those mines. Together they founded a business which became ENRC Plc, a natural resources company which was listed on the London Stock Exchange on 12 December 2007, but which has very recently been re-privatised. The Claimant is a US qualified lawyer, banker and corporate financier, who claims against the Trio and the Fourth Defendant sums due pursuant to an oral agreement allegedly concluded in January or early February 2006 (“the January Agreement”). Apart from substantial sums admittedly due and paid to him by various business entities of the Defendants between 2006 and 2011, a sum of US$4 million was paid by one of the Trio’s companies, CIM Global Investment N.V. (SA) (“CIM Global”) to a consultancy company which employs the Claimant, Aurdeley Enterprises Limited (“Aurdeley”) in April 2007; but the Claimant claims a substantial balance, which he asserts to be due pursuant to the January Agreement, relating to the balance of his entitlement to a success fee of 0.5% of monies raised by him for the Defendants and their Group (i) resulting from a syndicated pre-export finance facility, which produced between February and April 2007 US$1.48 billion, mostly used in order to fund the payment of dividends to the shareholders of the Group (substantially the Trio), who had themselves previously funded, through their companies, the construction, commenced in 2003, of a smelter in Kazakhstan (“the Trade Finance”) and (ii) from an Initial Public Offering (“IPO”) of the shares in ENRC Plc to obtain the listing to which I have referred, which raised for the shareholders, in respect of approximately 20% of the shares, the sum of US$3.1 billion.

The case requires my resolution of a number of disputed issues of fact, but I shall first endeavour to set out the relevant history by reference to common ground between the parties, to contemporaneous documents and to third party evidence.

In about Autumn 2004, the Claimant was introduced to the Fourth Defendant and her boyfriend Mr Radjabov by or in the company of a mutual friend, Mr Barinstein, a director at Deutsche Bank AG, who was the relationship banker of the Defendants’ business. It seems that in the following months the Claimant and the Fourth Defendant got together socially on a regular basis, and the Fourth Defendant began to seek advice and help from the Claimant. Mr Barinstein says that he understood from both the Claimant and the Fourth Defendant that they had been engaged in a number of discussions regarding the possibility of the Claimant managing an IPO which the Defendants were considering. At any rate he recommended to the Fourth Defendant that the Claimant would be a good candidate to be engaged by them, and the Fourth Defendant arranged for the Claimant to meet her father, the First Defendant, at his home in St. Jean Cap Ferrat in France, a meeting which took place on 28 July 2005. The Claimant and the First and Fourth Defendants discussed the appointment of the Claimant as a consultant, on terms of remuneration on the basis of a retainer and a success fee. It was agreed that the Claimant would seek further information about the Defendants’ business, and on 26 October 2005 the Claimant travelled to London from New York to meet with the Fourth Defendant, and Dr Sittard and Pieter Hammelink, senior figures in the ENRC organisation and to Kazakhstan, where on 30 October 2005 he had a further meeting with the First Defendant, who introduced him to the Group’s Financial Comptroller in Astana. Meanwhile Deutsche Bank presented on 27 September 2005 in Geneva a strategic roadmap for ENRC, including a draft equity IPO timetable for discussion, and according to the First Defendant the Government of Kazakhstan in late 2005 gave the Trio its consent for an IPO.

There were further discussions in December 2005 and early January 2006 between the Claimant and the Fourth Defendant, when she invited him to put a written proposal for his engagement to them in writing. According to the Claimant, by then (but on the Defendants’ case earlier) the Fourth Defendant had also mentioned to him the Defendants’ desire to raise finance in respect of the construction of the smelter, which was nearing completion, but had to be completed and operational by the end of 2007. The Proposal, dated 16 January 2006, based on those many discussions, was submitted by the Claimant to the Fourth Defendant (“the January Term Sheet”), prior to a meeting which was arranged between him and the First and Fourth Defendants at the Peninsula Hotel in New York to discuss it. The Fourth Defendant agrees that she had received and considered it before the Peninsula meeting, and although the First Defendant had not himself read it, she had summarised and explained it to him so that he knew its contents. As the document is of some importance in this case, I set out in full both the covering letter and the Term Sheet which formed part of it:

It is common ground that after some discussion the First Defendant indicated that the Claimant should make his proposal simpler, or less complicated, and that they should just say 0.5%. The Claimant said he would think about this, and the First Defendant said that he would speak to his partners (a reference to the Second and Third Defendants). It is agreed by the First Defendant that he told the Claimant this must be kept confidential. The Fourth Defendant and the Claimant spoke on the telephone some days later (“the post-Peninsula telephone call”), and reached agreement.

The Claimant relocated to London and started to work on 1 March 2006, based in the offices of Alferon Management Limited (“Alferon UK”), a company owned by Dr Sittard and associated with the Group. On 25 April 2006 the Claimant flew with the First Defendant to Kazakhstan, and met the Second Defendant, who had been reported in an article in the Mining Journal on 24 March 2006 as confirming that part of ENRC would be listed in London through an IPO in 2007, in Astana for the first time. The Third Defendant recollects meeting him prior to that in London.

The Claimant became extremely busy in negotiating and setting up the financing, which he recommended to be by way of Trade Finance. He was also meeting with, among others, McKinsey (who sent him and the Fourth Defendant a memorandum dated 2 May 2006) relating to preparation for a successful IPO. Although draft agreements were prepared in respect of the Claimant’s engagement, none was signed, nor remuneration paid, until September 2006, when there were two Service Agreements (“the Alferon Service Agreements”) executed between two Alferon companies and the Claimant relating to the period 1 August 2006 to 28 February 2007 (being one year from his start on 1 March 2006), with provision for renewal, relating to his service as Head of Corporate Finance with responsibility (by clause 4.3) for “assessing the appropriateness of the financial systems of the Company and/or any Group Company, including being responsible for all financial disciplines and providing general financial advice as and when required in connection with the possible flotation of the Company or any Group Company or any related entity on such securities exchange as the Board may seem fit [and] in addition the Executive shall be responsible for undertaking such work as may be necessary to enable the Company or any Group Company access to outside finance (whether through the capital markets or otherwise)”.

Additionally a contract was executed between Aurdeley and an entity obviously emanating from the Defendants, but whose identity neither any of the Defendants nor their witnesses could explain, called Darcon Marketing Ltd (“Darcon”). This was intended to pick up the balance of the retainer which had not been paid because of the delay in execution of the Alferon Service Agreements, amounting to a total of $243,000. In addition there was provision in clause 4.2 for what is called a “second retainer” of $500,000: it is common ground that this was the provision relating to the “guaranteed minimum bonus” in the January Term Sheet.

A draft of this contract had been prepared by the Claimant which contained definition clauses by reference to a “Closing” in respect to any “transaction”, and “Transaction” was defined in clause 1.1 as meaning “the raising of funds through the use of debt and/or equity instruments, whether through the public or banking markets or otherwise”. These definitions remained in the final agreement as executed. What, however, was included in the draft as clause 4.3, but was removed from the Agreement as executed, after clause 4.2 relating to the “second retainer” was the following clause:

For each Closing, [0.5%] (one half of one percent) of the total amount of funds raised, whether through debt and/or equity (the “Bonus”); and

Any such Bonus shall be paid on or before February 28, 2007.”

The Claimant continued to work on the Trade Finance. By virtue of what the Defendants concede was excellent work on his part, instead of what the Fourth Defendant accepts was originally discussed at the end of 2005 as being the raising of $300 million, the amount to be raised increased to $600 million by June 2006 and then by November 2006 to $1 billion, and eventually as a result of a successful syndication by March 2007 to $1.48 billion. The majority of the money was used, the smelter in fact having been self financed by the Group, to pay out dividends to the shareholders, including the Trio. He was also doing preparatory work in respect of the IPO, on which work started in earnest by October 2006, by which time he was arranging the necessary ‘beauty parades’ in respect of the professional advisers. Mr Charles Lucas, who from 2005 led ABN Amro’s relevant Equity Capital Markets Group, whose bank was appointed as joint book runner on the IPO, confirmed in an unchallenged witness statement that he understood the Claimant to be the “deal co-ordinator” on behalf of ENRC for the IPO, which was originally anticipated to take place before the end of June 2007.

By a memorandum of 16 January 2007 Deutsche Bank submitted its fee proposal for the IPO to the Claimant, in respect of its appointment as lead underwriter for the IPO. Once all the advisers were appointed, an IPO kick-off meeting took place in Kazakhstan at the beginning of February 2007. Dr Sittard announced to the meeting that the Claimant was leader of the IPO, and the Claimant addressed the meeting in that capacity.

On 28, 29 and 30 March 2007 the increase of the Trade Finance to $1.48 billion was agreed and signed off by the Board of ENRC Marketing AG, authorising (apart from the board members) the Claimant in that regard, and the completion date for receipt of the last tranche of $480 million was set for 12 April 2007.

On 1 April 2007 in Zurich the Claimant met with the Second Defendant and with the First Defendant’s nephew Olim Chodiev. The Second Defendant announced that the Claimant would be paid a bonus in respect of the Trade Finance, calculated by reference to 0.5% of $1 billion (not $1.48 billion), from which were to be deducted his $500,000 guaranteed bonus and his $500,000 annual retainer. So far as the IPO was concerned, he repeated an offer made some days earlier by Dr Sittard to pay him a bonus of $1 million for working on the IPO. It is common ground that the Claimant regarded this as unacceptable, and said he would be leaving the Group. An agreement was drawn up between another of the Defendants’ companies, whose representative was Mr Olim Chodiev, CIM Global Investments NV (SA), and Aurdeley dated 5 April 2007, which did not contain a full and final settlement clause (although it contained at clause 9 an entire agreement clause) and the $4 million was paid to Aurdeley on 11 April. On 13 April, the Claimant’s last day in the Alferon offices, the First Defendant came to see him, and it is common ground both that the Claimant vigorously complained, and that he threatened to sue. The First Defendant proposed that rather than engage in any legal action the Claimant should come and work for the Chodiev family businesses. The Claimant said that he would think about it. In August 2007 the Fourth Defendant telephoned the Claimant and asked him to help out with a problem that had arisen in the family business, and the Claimant agreed to accept the First Defendant’s offer which, when executed in service agreements with the Claimant and Aurdeley, backdated to September 2007, involved remuneration of $1 million per year.

The IPO was delayed from June to September 2007 but was completed in December 2007. A total of some $3.1 billion was raised.

The Claimant continued to work for the Chodiev family businesses. The First Defendant confirms (in paragraph 20 of his second witness statement) that “I clearly remember conversations, on more than one occasion, where I confirmed that despite his suggestions to the contrary no sums were outstanding from his time at ENRC, and that my partners and I had been true to our word. However [the Fourth Defendant] and I thought, despite his complaints, that he would be useful to our family and had done good work. I was happy to ensure that he earned good money going forward provided he succeeded in those projects.”

Between September 2009 and August 2010 these complaints led to discussions of paying the Claimant $3 million plus interest and giving him equity participation in the Chodiev businesses, while the annual consultancy agreements with the Claimant and/or Aurdeley continued, although for a time the Claimant’s remuneration was reduced, over his protests, until the First and Fourth Defendants personally agreed to reimburse that reduction by entering into service contracts with Aurdeley.

By an email to the Fourth Defendant (seemingly being the agreed method of communication, as the First Defendant does not use email) dated 26 September 2010 the Claimant set out in what, it is common ground, was the first time in writing his complaints. I set out the material parts of what was a lengthy email, which are important as they set out his case in detail:

There is little dispute as to what the response of the Fourth Defendant was to this email, because she and the Claimant each describe it in their witness statements, he in paragraph 405 to 409 of his first witness statement, and the Fourth Defendant in paragraph 58 of her second witness statement, which reads as follows:

The Claimant terminated his employment with the Chodiev family on 31 March 2011, as he had said in his letter he would. There was a final meeting on 22 April 2011 between the Claimant and the First and Fourth Defendants and two other members of their family. Termination payments in respect of the family contracts were agreed, as set out in his letter of 24 April 2011, and although he expressed a willingness to carry out further services for them (and for a short time did so) there was no agreement reached in this regard. No payment was made in respect of any of his claims in respect of his time with ENRC. He expressed a hope that “we can part ways professionally and amicably and remain until Wednesday at your disposal should you wish to discuss anything further or if you have any questions”.

The agreed severance payments were made on 11 May 2011. No settlement agreement was signed. The Claimant’s letter before action was sent on 24 February 2012.

The issues for me to resolve are as follows:

There is little or no law involved in the dispute. The decision in respect of Issue 1 will be largely if not entirely factual, although informed by such authorities as Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 and Maggs v Marsh [2006] BLR 396. Issue 4 may require implicit consideration of the law on usual authority and/or undisclosed principal and/or guarantee or indemnity, but again consideration of it will be marginal. As to Issues 5 and 6, the question of ‘effective cause’ was raised by amendment by the Defendants, but in the event it features hardly if at all. Finally as to Issue 7, this too will be largely if not wholly a matter of fact, but if necessary there could be consideration of the authorities on the law of compromise collected by Sir David Foskett in the 7^th edition of his book at paragraph 3-12 to 3-16.

In those circumstances, the case depends upon the resolution of disputed evidence, relating to events primarily in 2005 through to 2007. Much therefore depends upon my assessment of the witnesses whom I have heard and seen giving evidence, both in chief, because I requested that, in relation to the most disputed areas, the Claimant, First Defendant and Fourth Defendant gave oral evidence in chief, and when cross-examined and, to an extent, re-examined. Inevitably a judge of oral evidence will make allowances for inconsistencies and contradictions in relation to the recounting of recollections of events many years ago. He will also be astute to appreciate and to take account of those inconsistencies and contradictions which appear immaterial or can be accounted for or accepted as inevitable or accidental. The judge will also be looking for what has been described as a hook, upon which to peg a conclusion, or to give corroboration to one side or the other, which is not dependent upon the vagaries of recollection. In this case there was some contemporaneous documentation, although not as much as there should have been because for some reason ENRC, and/or the Defendants’ companies, have operated an unusually radical programme of disposition, not only of hard copies but of documents contained on computer. Clearly the most important contemporaneous documents were the January Term Sheet, and the draft Darcon contract referred to in paragraph 9 above. The other hook upon which a Judge can feel confident in resting, or at any rate testing, his conclusions is that of unchallenged evidence. In this case the evidence of two of the witnesses for the Claimant was not challenged, those of Mr Lucas, then of ABN Amro, and of Mr van Broekhoven, who gave evidence as to the Trade Finance. There was also third party evidence, from apparently independent parties with nothing to gain from their evidence (who in both cases attended under witness summons), both of whom supported the Claimant’s case as to his entitlement and involvement in respect of the IPO, Mr Barinstein, then of Deutsche Bank, the relationship banker for the Defendants but also a friend, and original recommender, of the Claimant, and Mr Radjabov, the former long-term boyfriend of the Fourth Defendant.

Inevitably there was some interlocutory jostling for position, not all of which reflected well on either party. The Claimant included in his witness statement a good deal of background information as to his work with the Defendants and their businesses in 2006, which the Defendants say was only included in order to create embarrassment for them and perhaps to encourage them to settle short of the court door. He also included as Defendants not only the Fourth Defendant, the First Defendant’s daughter, but the Fifth and Sixth Defendants, the children of the Second and Third Defendants, both of them involved in the business but neither on the evidence playing any material part in the relevant history, and the Defendants submit that the inclusion of those Defendants, only abandoned by the Claimant in the light of a summary judgment application brought by the Defendants on the first day of the hearing, was another indicator of the putting on of collateral pressure by the Claimant. On the other hand, the Claimant asserted, an issue which I cut short because it seemed to me likely to lead into collateral issues, that the influence of the Defendants has been such that he has not been able to obtain relevant work in his specialist field in Russia since bringing these proceedings. And just before the start of the trial separate leading and junior counsel and solicitors instructed by the now privatised ENRC intervened in order to seek injunctions not only preventing the airing of some of the matters in the Claimant’s witness statement to which I have referred (and which I excluded), but also of documents which, given the paucity of disclosure from the Defendants’ businesses, for the reasons I have given, were essential for him to seek to prove his case as to his involvement in the IPO: the issue of confidentiality as between the Claimant and ENRC remains to be resolved in new proceedings brought against him for that purpose and adjourned by me until after this trial. I do not regard any of this as playing any material role in my assessment of the witnesses.

Inevitably when assessing the credibility of a witness who seeks recovery of a very substantial sum allegedly due pursuant to an oral agreement made 8 years ago, a judge would approach such claim with scepticism, even without encouragement from the Defendants by reference to the words of Gloster J in paragraphs 90 to 95 of Berezovsky v Abramovich [2012] EWHC 2463 (Comm). However I found the Claimant a most impressive witness. He met the able cross-examination by Mr Flynn QC with steadfastness, moderation and credibility. On occasion he may have embellished his case – although it may well be that he was simply belatedly remembering matters which after so long had been forgotten – as in his assertion of the discussion of a 12 month ‘tail’ (referred to in paragraph 21 above) with the Fourth Defendant at St. Jean Cap Ferrat, or his recollection of a particular conversation with the First Defendant in Moscow in early 2008, not mentioned specifically in his witness statement and not put by Mr Oudkerk QC his equally able counsel, in cross-examination to the First Defendant, some time after the completion of the IPO. However, I found his evidence credible and consistent, and, in particular, consistent with and supported by the contemporaneous documents and the independent witnesses.

As to his witnesses, the credibility or honesty of Mr Barinstein was not challenged. It was pointed out that he was a long standing friend, and indeed business associate of the Claimant, but also (indeed for longer) of the Fourth Defendant, and not only does his wife remain in business with the Fourth Defendant, but he continues to have a professional relationship with ENRC. His evidence was sensible and persuasive, and he gave accounts of conversations both with the Claimant and with the Fourth Defendant at the relevant time which substantially supported the case of the Claimant. I have already referred to the supportive evidence of the plainly independent, and unchallenged, Mr Lucas of ABN Amro. So far as concerns Mr Radjabov, he was not challenged in relation to any specific evidence he gave as to the conversations at the material time, of which he also spoke, both with the Claimant, with whom he was friendly, and with the Fourth Defendant, with whom he had a long standing and intimate relationship. I am entirely satisfied that he was giving honest evidence and was not in any way motivated, as was suggested, by any antipathy towards either the Fourth Defendant, with whom he had had a close relationship, on and off, for some 8 years, or her father, the First Defendant. I am entirely satisfied that the third party witnesses called by the Claimant were indeed independent.

As for the Defendants, they called no independent witnesses. The First, Second and Third Defendants are all very experienced and powerful men. They gave evidence with the assistance of an interpreter, but such was the ability of the interpreter that I am satisfied nothing was lost in relation either to lack of spontaneity or comprehensibility in relation to their giving of evidence. I found Mr Olim Chodiev an unpersuasive witness, although he gave evidence primarily only of the meeting of April 2007, particularly in the respect detailed below. There were material differences between the evidence of the First and Fourth Defendants, to which I shall return, and which Mr Flynn invited me to accept were the inevitable differences of recollection by witnesses honestly intending to give a true account. There was however a significant feature in relation to the Defendants’ evidence, which is relevant to the credibility of all their leading witnesses. I shall describe below how Dr Sittard, the CEO of Alferon UK, and subsequently the CEO of ENRC after the IPO, included a false case in his witness statements, which he only (and then at first only partially) corrected on going into the witness box, and before deposing to the truth of those statements in the witness box. He in fact was the last witness to go into the box, and therefore that false case was not withdrawn until he did so on Day 11.

The case was that the Claimant had never had anything material to do with the IPO, and that Mr Amre Youness was appointed in October 2006 to lead the IPO, not the Claimant. Dr Sittard accepted, by his correction, that Mr Youness was not appointed to lead the IPO until after the Claimant had left in April 2007 (a case which had been painstakingly put by Mr Oudkerk to the earlier witnesses and rejected by them), and that he had appointed the Claimant to lead the IPO (admittedly only in February 2007, on his case). Prior to this correction, in relation to a matter of considerable importance to the question of whether the Claimant had been asked to lead the IPO on terms of receiving a success fee, all of the First, Second and Fourth Defendants and a Mr Ehrensberger, who had been called specifically to give evidence as to the preparatory work done on the IPO prior to April 2007, had firmly rejected any suggestion of the Claimant having any role, never mind a leading one, in the IPO or its preparation. For example the First Defendant said (Day 10/47):

Careful assessment of the evidence is required, and the Claimant carries the burden of proof of the oral agreement. But I preferred his evidence and those of his witnesses.

This is in the end not a difficult issue to resolve. The January Term Sheet plainly contained the provision for a success fee or bonus. The First Defendant said this should be simplified. 0.5% had been plainly reached, by the end of the Peninsula meeting, as the figure which both sides were to consider (e.g. Day 6/113). The Fourth Defendant and Claimant “locked” (as she put it, by reference to reaching agreement) in the subsequent telephone conversation, on 0.5% on sums raised. The 0.5% was later the basis for the $4 million in April 2007 (referred to in paragraph 13 above) which was apparently the result of prior discussions between all the Trio, albeit announced to the Claimant by the Second Defendant. There was no ‘floor’, as had been proposed in the January Term Sheet, once the First Defendant insisted that the terms should be kept simple – i.e. the 0.5% on sums raised. There was the severance provision, which was not specifically discussed, nor any tail agreed, even if the tail was raised. But what was on any basis agreed was 0.5% on funds raised. It does not feature in either of the Alferon Service Agreements, (the responsibility of Dr Sittard, who knew nothing about it), but where it did feature was in the draft Darcon contract; and it was then removed from that draft not because it was not agreed but because (per the Fourth Defendant) it should have been described as discretionary or (per the Claimant) because he agreed to take it out as he was told that it should remain confidential. What however was not agreed was that it was subject to being subsequently incorporated in a service contract, because the Alferon Service Agreements did not contain it, and yet it was, as I am satisfied, treated by both sides as binding.

The Third Defendant lucidly addressed how in fact the Claimant started work in March 2006 on an oral agreement, albeit by reference to his assertion that the 0.5% only applied to the Trade Finance and not to the IPO (Day 8/160-161), and he refers (at Day 8/165) to the fact that, on his case, the payment by CIM Global in April 2007 “honoured our verbal agreements on bonuses”.

I am entirely satisfied that:

The significance of this issue is that there is no plea by the Claimant that, if the success fee was discretionary, i.e. at the discretion of the Trio or Dr Sittard, they were obliged to exercise such discretion reasonably, or were only entitled to exercise it so as to award 0.5%, or certainly not to exercise the discretion so as (i) to deduct the $500,000 salary retainer (ii) to award no fee at all in relation to the $0.48 billion or (iii) to award no fee, or only the $1 million that they offered on 1 April 2011, in respect of the IPO. Hence the result would be that the Claimant’s claim would fail in all respects

The Claimant’s claim is straightforward. It is that he was invited to put forward a fee proposal, having discussed with the Fourth Defendant, and with Mr Barinstein, beforehand what terms to propose, and that he proposed, indeed he believed that in relation to the IPO it had at least been provisionally agreed by the Fourth Defendant, that he should receive, in addition to the $500,000 salary retainer and a $500,000 guaranteed bonus, the percentage set out in the January Term Sheet, that the First Defendant then said (as the Fourth Defendant accepts) that this was too complicated, and suggested 0.5% (which the First Defendant would discuss with his partners and the Claimant would consider) and that in the subsequent telephone conversation, when he and the Fourth Defendant locked, the 0.5% was agreed. There was no mention of discretion, and had there been he would not have agreed to it, as that would have left him at the mercy of the Trio, who had no prior experience in the banking field.

The Defendants’ case varies, as between the First Defendant and the Fourth Defendant:

There are difficulties, apart from such inconsistency, in such evidence by each of these Defendants, in each case not appearing in their witness statements:

It is plainly more likely that a bonus could be discretionary, particularly a bonus not calculated by reference to any formula, than a success fee of a certain percentage of monies raised, but understandably Mr Flynn pointed to two pieces of evidence in his support: first, the evidence of Mr Barinstein at Day 7/48-49:

So by reference to Mr Barinstein’s evidence there can be a fixed success fee or a discretionary success fee. The Defence pleads the Defendants’ case at paragraph 6, as follows, that what was agreed was that “the companies for which the Claimant would work would have the discretion as to whether to pay a bonus at all, and that, if they were satisfied generally with his performance, their current indicative suggestion would be to pay 0.5% of any trade finance raised”.

There are a number of significant factors as to whether there was a fixed success fee.

First, to set against the clear terms of the January Term Sheet, which makes no reference to discretion, the evidence of the First and Fourth Defendants is unimpressive. Each has put forward a case, relating (respectively) to the pretty name at the Cap Ferrat meeting and to the showing up of the whole discretionary component only in the post-Peninsula telephone conversation, which are both inconsistent with each other and with their own accounts of Cap Ferrat and the Peninsula meeting. Quite apart from the unlikelihood of both the Fourth Defendant and the Claimant having no recollection of the pretty name conversation at Cap Ferrat, the recollection of the First Defendant, the Claimant and indeed the Fourth Defendant herself (e.g. Day 7/124) as to how the Peninsula Hotel meeting ended, with the simplified 0.5%, renders it unlikely that the ‘discretionary component’ would have then come up (and for the first time) afterwards.

Secondly, it seems to me to be common sense that unless the words “discretionary” or “discretion” are used, or at any rate fall to be implied, as in the example used by Mr Barinstein (where there are two different percentages), then a success fee of a percentage of monies raised is not dependent upon discretion. Of course there may be other ways of expressing the existence of a discretion, for example if the percentage is said to be a ‘maximum’; but the First Defendant was clear (Day 9/126) that the word maximum was never mentioned, and although the Fourth Defendant suggested that the Claimant used the word in her new account of the telephone conversation at Day 6/124, quoted above, she expressly says at Day 8/30 that she is not saying that it was ever agreed that there would be a “discretionary success fee of a maximum of 0.5%”. Without words such as maximum or up to, it is difficult to see how there could be any implication of discretion.

Thirdly, that this is so is quite clear from the disputed evidence about the draft Darcon contract, to which I referred in paragraph 9 above. The Fourth Defendant says that she insisted that draft clause 4.3 (a) and (b), set out in that paragraph, should come out of the agreement because it did not provide that the bonus was discretionary. This account is of itself significant in two respects. First, it implies that without qualifying the bonuses as being discretionary, they would be fixed, and secondly, it shows that the Claimant believed that it was a fixed percentage. In any event, as Mr Oudkerk submits, it seems a wholly unpersuasive reason for taking the clause out of the draft, when all that would be necessary would be for the clause to be amended to include the necessary wording. The Claimant however says, as set out in paragraph 9, that what actually happened is that the Fourth Defendant insisted on the clause being taken out because it was to be confidential. If that was so, then it was plainly agreed to be a fixed fee, and was to be taken out specifically because what had been agreed was to be kept confidential. The Fourth Defendant denies that this was the position. However the evidence is all the other way:

The significance of this is not only that it contradicts the Fourth Defendant’s explanation of the reason for the exclusion of the fixed fee provision from the draft Darcon contract, and supports the Claimant’s case in that regard, but it also undermines the First Defendant’s belated account as to the pretty name, at least insofar as it suggests that the Claimant was to have the same kind of bonus as his other employees. The fact that it was to be kept confidential from the other employees supports the likelihood that it was different, at least from the terms offered to the ordinary employee: it remains unknown as to what the terms of remuneration of Messrs Sittard, Hamelink and Youness were in their contracts, as they have not been disclosed by the Defendants, not even that of Mr Youness, which Mr Ehrensberger said in evidence ought to be available.

Fourthly, as Mr Oudkerk pointed out in his closing, the fact that the Claimant was asking for a fixed fee of 0.5% was reported by the First Defendant to the Trio, according to the evidence of the Second Defendant (Day 11/25), and apparently agreed amongst themselves to be unacceptable as contrary to normal practice. The Second Defendant could not remember when that conversation took place, but there is no sign whatsoever of any alleged rejection by the Trio being imparted to the Claimant, and as Mr Oudkerk submitted, it clearly supports the proposition that the Claimant was seeking, and in the light of the inadequate evidence of the First and Fourth Defendants and the contemporaneous documents, obtained, a fixed success fee of 0.5%.

The January Term Sheet itself together with the draft Darcon contract are persuasive contemporaneous documents to show that the 0.5% success fee was agreed and was not discretionary. The $500,000 guaranteed bonus (but not the $500,000 salary retainer) fell to be set off against it in the event that, as in fact eventuated, at least in relation to the Trade Finance, the 0.5% success fee fell to be paid. The account given by Mr Olim Chodiev of how the alleged discretionary bonus was said to work, namely by subtracting not only the guaranteed bonus but the salary retainer (which is what in the event occurred when the Trio purported in April 2007 to recognise the Claimant’s achievement in respect of the Trade Finance), so that a discretionary bonus of $1 million could lead to a nil payout (Day 10/130-134), only emphasises the unlikely nature of what the Claimant is said to have agreed with the Defendants. I am satisfied that he, and they, did not. What was agreed was not a current indicative suggestion, but a fixed success fee.

The Claimant’s case is that, very early in the discussions between him and the Fourth Defendant, there was raised the fact that they were planning for an IPO, and that when he attended the meeting with the First Defendant, which the Fourth Defendant had fixed up, at Cap Ferrat, the First Defendant asked him about the work he had done in the finance industry, told the Claimant a little bit about his business and the fact that he had partners in the business and that they had been planning to undertake an IPO of the business, and that he was looking for a finance professional to help him and his partners to take an IPO forward (Day 2/127). Hence after a number of further discussions with the Fourth Defendant and Mr Barinstein, as a mutual friend and the Defendants’ relationship banker, and the meetings with various senior employees in the Defendants’ business referred to in paragraph 3 above, the Claimant began to formulate a proposal whereby he could join the Defendants as a consultant to prepare for, and in due course lead, an IPO. He was looking for remuneration of $1 million per year, but on the basis that $500,000 of it would be as a guaranteed bonus to set off against the success fee of 0.5%, which he was proposing, with a floor, or guaranteed minimum, of $10 million. His case is that it was only towards the latter end of his discussions with the Fourth Defendant, in November or December 2005, that the Fourth Defendant also suggested that he should assist in the raising of finance in respect of the smelter which the Defendants were constructing, and so he formulated a range of percentages for the latter. At her request, he then formulated a written proposal (the January Term Sheet) which related to both an IPO (a “liquidity event”) and “regular transactions”, such as the financing then being discussed. The percentages in his proposal differed as between an IPO and the loan finance, but the response by the First Defendant was that this was too complicated, so the 0.5% should apply to any moneys raised, i.e. a regular transaction or a liquidity event, by implication without any floor or minimum. This is what the Claimant then says was agreed to in the post-Peninsula telephone conversation.

The Defendants’ case is that there was no question of the 0.5% success fee applying to an IPO. The agreement related only to the proposed Trade Finance, and the 0.5% was only applicable to the Trade Finance.

I shall first set out the matters upon which Mr Oudkerk relies in support of the Claimant’s case.

First, there is no disagreement between the Claimant and the First and Fourth Defendants that the First Defendant did indeed say that he wanted to simplify the arrangements. The Claimant described it in chief at Day 2/179:-

Secondly, the Defendants’ case as to the fact that there could not have been, and hence was not, an agreement in relation to a percentage success fee of an IPO, was that the Defendant had no plans for an IPO at the end of 2005/beginning of 2006. The First Defendant positively said (Day 9/61) “naturally, we didn’t discuss the IPO and any results from the potential IPO, because I didn’t know myself anything about the IPO.” It is however plain that an IPO was being discussed and planned for by the Trio by late 2005/early 2006. Among the documents produced by the Claimant is the strategic road map dated 27 September 2005 prepared by Deutsche Bank (referred to in paragraph 3 above), containing proposals for a possible IPO with a draft timetable. As also set out in paragraph 3, the Trio obtained consent from the Government of Kazakhstan to an IPO in late 2005, and a presentation was made to that Government by ENRC on 8 February 2006 containing an IPO timetable aiming for an IPO in the second and third quarter of 2007. In March 2006 Dr Sittard noted decisions taken regarding the structure and management of a proposed new structure after listing, and in a press release in the Mining Journal of March 24 2006 the Second Defendant is recorded as having “confirmed that part of the Eurasia Natural Resources Corp Group will be listed in London through an initial public offering of shares in 2007”. That the IPO was plainly in mind and indeed, contrary to the evidence of the First Defendant, considered at their meetings with the Claimant appears from the Fourth Defendant’s evidence in chief (Day 6/126-7):-

Thirdly, the proposal that the success fee should apply to the IPO is plain from the January Term Sheet, which the Fourth Defendant accepts she had received and read prior to the meeting, and which she had summarised for and discussed with the First Defendant. There is no doubt from the January Term Sheet itself that it is not being suggested that the IPO is imminent, but rather that “a successful future liquidity event will require significant preparatory work and therefore any compensation upon completion should be more appropriately viewed as having been earned over the entire period of employment”. Yet although this was clearly the proposal, neither the First Defendant nor the Fourth Defendant gives any evidence that they at any stage rejected the suggestion that the agreement extend to the IPO. The Claimant made it clear in his witness statement (paragraph 93) that his case is that there was express discussion that the “simplified 0.5% was to apply to both types of transaction”. Mr Flynn points out that in paragraph 24 of her first witness statement the Fourth Defendant says that she “suggested that we take things in stages and focus on one thing at a time rather than thinking too far ahead. The first stage was to procure the finance for the smelter, which was the purpose for which the group needed his assistance”. But this suggested account was said to have formed part of the post-Peninsula telephone conversation, in which she, at that stage of her case, was saying that she had said that the proposal was unacceptable. In her oral evidence (Day 8/136) she withdrew that suggestion, and described, as set out in paragraph 35(ii) above, how she and the Claimant locked in agreement, and she did not repeat the originally suggested account. All that she can be said to have recalled in this regard is what I have recorded in paragraph 49 above from Day 7/126-7.

Fourthly, the case by the Defendants that it was unthinkable that the Claimant could have been asked to lead the IPO and hence to be entitled to any kind of fee in respect of the IPO is bolstered by the case referred to in paragraphs 27-28 above that in the event he did not have anything to do with the IPO. This is a case which Mr Oudkerk valiantly sought to address in cross-examination by reference to documents such as those eventually set out in a helpful agreed schedule, namely documents showing his involvement in work preparatory for the IPO (supported by the reference in his Alferon Service Agreement set out in paragraph 7 above) and his dealings with McKinsey and Deutsche Bank, referred to in paragraphs 7 and 11 above; but such case evaporated, as set out above, when Dr Sittard eventually went into the witness box:-

Dr Sittard had said in no less than three paragraphs of his first witness statement and three of his second that the Claimant “did not in any sense lead the team or project manage the IPO process, as this was Amre Youness’ role” (paragraph 16), that “we recruited [Amre Youness] in October 2006 to lead the IPO and manage the team and the process” (paragraph 17), that “it was Amre Youness who led the IPO” (paragraph 10, second statement) and that “[Youness’] role from October 2006 onwards was to . . . project manage the IPO” (paragraph 11, second statement).

Mr Ehrensberger, who was only produced in order to give evidence about the IPO, said (paragraph 10) that, “I never heard that [the Claimant] was being considered by the Group as a possible candidate to lead the IPO. Given my position within the Group’s management, I would have certainly been aware if that was the case”, and that “He did not lead or manage the IPO process” (paragraph 16), “That [the Claimant] was leading on the IPO is inconceivable to me” (paragraph 19), and see also paragraph 21(b). He confirmed this evidence, and that Mr Youness was in charge of the IPO from October 2006, in the witness box (Day 6/34 and 56).

The First Defendant took the same line in his first witness statement (paragraph 27), and at Day 9/105 said that one of the reasons he could not have been looking to the Claimant to lead on an IPO was that he already had Mr Youness, and even believes that he told that to the Claimant. He went so far as to say (Day 10/41 and Day 10/80) that the Claimant was not working for the IPO and not a member of the IPO team, that “if the IPO leaders Dr Sittard and Amre Youness indeed thought that he had such abilities they would have insisted that he would join the IPO team”, and forthrightly that the Claimant was trying retrospectively to latch on to the IPO team or pretend to have been part of it, presumably to seek to improve his case.

The Fourth Defendant in her witness statement (paragraph 34) said that the Claimant was included in the IPO Committee for a short period of time at the beginning of 2007, but did not lead or project manage it, and that (paragraphs 41-42 of her second statement) Youness was brought in to coordinate the IPO as “the obvious choice to lead the IPO project” and “their roles were fundamentally different – Kirill dealt with the debt finance and Amre was leading the IPO”. She confirmed this in the witness box (Day 8/56, 61, 64, 68).

The Second Defendant took the same position (Day 11/40).

In fact, as set out above, Dr Sittard was not prepared when he went into the witness box to support what he had said in his witness statement and (Day 11/62-3, 91-8) after initially correcting some of his statements, he was driven to correct them all. What he now said was that Mr Youness had not been brought in to lead the IPO, and had never done so until after the Claimant departed in April 2007 (as the Claimant had always said), and that the Claimant was indeed appointed to lead the IPO, and was announced as such at the kick-off meeting in February 2007. He gave no explanation as to why his witness statements were so inaccurate, and it is clear, that unlike all the other witnesses for the Defendant, he was finally prepared to correct those misstatements. Of course the fact that once the IPO started to be prepared and in due course got off the ground the Claimant did indeed lead it does not prove that in January 2006, when it is plain that the IPO was already in the minds of the Defendants, he was asked to take up that role, as he asserts. Nor does the fact that a deliberately inaccurate case to the contrary was put forward by the Defendants’ witnesses, and pursued until Dr Sittard went into the witness box, prove that the First and Fourth Defendants are not to be believed in relation to their denial that they had asked him to take on that role in return for a success fee in January 2006, but it plainly supports the Claimant’s case and his credibility, and undermines the Defendants’.

In fact it is clear that at least from October 2006 he – and not Youness – was putting the IPO together on behalf of the Defendants. This is supported by the evidence from the independent witnesses:-

Mr Barinstein persuasively describes the Claimant’s role in his witness statement (paragraphs 70-77) and in evidence (Day 7/59-60) from the point of view of Deutsche Bank, which was lead underwriter on the IPO. He confirmed (paragraph 79) that by April 2007 almost all of the work on the IPO was completed. There was then a delay, as accountancy problems were revealed within the Group, which required to be resolved, and work on the IPO restarted, after the Claimant had left, in September 2007, leading to listing in December.

Mr Lucas of ABM Amro, joint book runner on the IPO, gave evidence which was unchallenged, and consequently, although he attended at court, he did not need to give evidence. In paragraphs 13 and 16 of his witness statement he confirms his understanding that the Claimant was deal co-ordinator of the IPO, and that he was his principal point of contact in relation to the IPO until (paragraph 22) the Claimant ceased to be deal co-ordinator and Mr Youness took over.

Fifthly, in parallel with the down-playing of the IPO (paragraph 50 above) and of any role in it by the Claimant (paragraph 52 above) was what Mr Oudkerk submitted to be a playing-up by the Defendants, in their evidence, as to the smelter. As set out above, the Claimant’s case is that this need for financing in respect of the smelter came later in discussions between him and the Fourth Defendant and effectively as an add-on to what the Defendants principally wanted him to concentrate on, namely preparations for a listing. This accords with, and is supported by, the evidence of Mr Barinstein, resulting from his recollection of his separate conversations with the Claimant and with the Defendant (paragraphs 42 to 45 of his witness statement and Day 7/38 of his evidence). The impression sought to be given by the Defendants was that there was urgency in relation to the raising of the finance, because the smelter had to be constructed and completed and in operation by December 2007. However the reality is that the Defendants had started construction of the smelter in 2004, and were well on track for completion within time, by virtue of the fact that they had funded the smelter project themselves out of their own Group’s monies. There was therefore no urgency to raise finance, but it seemed desirable to do so, not least, as the Claimant soon discovered and recommended, since there were unpaid dividends which, if finance could be arranged, could now be paid out to the Trio. It is plain that what was anticipated at the time of the Fourth Defendant’s discussions with the Claimant was the possible raising of finance in a sum of $300 million, which was indeed the subject of a contemporaneous Term Sheet from China Ex-Im Bank. The Fourth Defendant confirmed in evidence that $300 million is what was then required, and was discussed with the Claimant (Day 6/68-87, 181, Day 7/182). It was only later, after the Claimant had started work, that the Claimant suggested that more money could be raised, first, in June 2006, $600-650 million, and then between June and November 2006 $1 billion, and finally the $1.48 billion eventually achieved. This was, as the Defendants accepted, the result of admirable work by the Claimant, and it was far more than was necessary for the smelter: it resulted in a substantial payment to the Trio, by way of dividends.

Sixthly, Mr Oudkerk relies on the lack of credibility of a new case made by the First Defendant in the course of his evidence, not contained in his witness statement. Whereas when he first gave evidence, in chief, he still effectively remembered little about the Peninsula Hotel meeting (Day 9/55), in cross-examination he gave the following account (Day 10/11):

This is all based upon his case that the only discussion was of a percentage success fee in respect of the Trade Finance. The suggestion that $1 billion was discussed at that time is what Mr Oudkerk has called an “anachronism”. The figure that was in the Fourth Defendant’s mind, as discussed with the Claimant, was $300 million, and $1 billion did not arise till much later. There was no discussion of figures at the Peninsula Hotel, and, if there had been, this figure would certainly not have been the anticipated figure in respect of the smelter.

Even with the detailed discussion of figures to which he refers, he still feels the need to return to reiterate the question of discretion, which I have already found did not in fact arise, nor was mentioned at this meeting.

Not only was this account not previously raised by the First Defendant, but it is not consistent with the evidence of the Fourth Defendant. It seems clear that his belated account of how to arrive at a figure of $4 million is to seek to justify what in fact happened in April 2007, more than two years later.

Seventhly, another significant feature relied upon by Mr Oudkerk is that, in order to make it seem more unlikely that the Defendants would have agreed the success fee in relation to the IPO, the Defendants sought to ridicule the possibility of paying the amount of money to the Claimant which in the event resulted. In the event $3.1 billion was obtained by the shareholders in respect of the shares placed, which leads to the Claimant’s present claim for $15.5 million. In fact it is clear that no one at the time foresaw how successful the IPO would in the event be – the Claimant has explained that he thought a likely result, having discussed the matter with Mr Barinstein, would be an estimate of the value of the company at some $5 to $6 billion, which would mean, at an anticipated placement of 20% of the shares, recoupment of some $1 billion, which would mean a success fee of some $5 to $6 million. The Defendants’ witness statements all postulate the unacceptability of such a sum by reference to other bonuses paid – in paragraph 29 of the First Defendant’s statement in particular - although there was no disclosure of the bonuses in fact paid. On the evidence now before me, in fact a total of $278 million was paid in bonuses, and Dr Sittard was paid $24 million, Mr Hamelink $20.7 million and Mr Youness, who took over from the Claimant as leader of the IPO only in April 2007, received $16 million. It is fair to point out that some of the bonuses were paid in shares, but as the contracts of these last three gentlemen were not disclosed (and Mr Youness was not called), it is not easy to compare the position. What is clear however, is that if indeed the Claimant was to prepare for and then lead the IPO, his percentage success fee would not have been out of line (as indeed, as a result of her investigation in the market at the time at the request of the First Defendant, the Fourth Defendant plainly will have appreciated).

Eighthly, Mr Barinstein gives significant support to the Claimant’s case. I have already referred, in paragraph 26 above, to the fact that I find him a credible witness, and one who is genuinely independent, in the sense of having ties with both sides, but favouring neither. The Claimant gave evidence as to his contemporaneous discussions with Mr Barinstein, both as to reporting to him and taking advice from him, during the course of the negotiations in late 2005 and onwards. Of course to that extent Mr Barinstein’s evidence is hearsay, though nevertheless admissible. However, insofar as Mr Barinstein was also speaking to, and obtaining reports from, the Fourth Defendant, his evidence is the more valuable. His material evidence begins (paragraph 28 of his witness statement) with his account of the fact, learned from both the Claimant and the Fourth Defendant separately, that they had been engaged during 2005 in a number of discussions regarding the possibility of the Claimant managing the IPO, and he was kept in touch by both sides. He discussed the size of the potential IPO (paragraph 38), and then significantly he states at paragraph 44ff as follows:-

Ninthly, the Claimant’s evidence is supported by that of Mr Radjabov. I refer to what I have said in paragraph 26 above. Again he gives evidence both as to conversations with the Claimant and, because he was regularly in her company and close to her, the Fourth Defendant. Although in general terms Mr Flynn put to him that he had reason for a grievance against the Fourth and/or First Defendants (which I have not accepted), such that his evidence should not be accepted, he did not challenge any specific accounts or conversations. His evidence is persuasive and thorough. His understanding from the Fourth Defendant was that they were looking for someone to get the Group ready for an IPO and then to lead it, that she was impressed with the Claimant’s skills and experience (paragraphs 21-23) that he was seeking a fee of 0.5% of the value of any finance raised by way of an IPO, which she thought would be agreed by her father (paragraphs 26-28), that he understood that such deal had been agreed (although he understood it to have been in New York) (paragraphs 29-31) and that he learned later about the smelter (paragraph 35).

Tenthly, it should be added that the fact that the Claimant turned down the $1 million offer in respect of a bonus for the IPO, made to him by Dr Sittard in March and repeated by the Second Defendant on 1 April 2007, is at least supportive of his case that he had an entitlement to considerably more if and when the IPO took place.

I turn to the points put in opposition to this by Mr Flynn on the Defendants’ behalf, in addition to his emphasis that I should not be surprised by, and should make allowances for, the existence of inconsistencies in the evidence for the Defendants, given the passage of time.

The Darcon draft. I have already referred to this in paragraphs 42-43 above as substantially supporting the Claimant’s case that the agreement was not for a discretionary success fee or bonus. It provides for a fixed fee. There is also support for the Claimant’s case in respect of this issue, by virtue of the fact that, as set out in paragraph 9 above, it is plain that the transaction, upon whose closing depends an entitlement for bonus under the draft clause 4.3, is of a transaction whose definition is apt to cover both an IPO and trade finance. Mr Flynn however relies upon the terms of that draft clause 4.3 as heavily supportive of his case, because it provides for the 0.5% bonus to be paid on or before 28 February 2007. Both the Alferon Service Agreements were to expire on 28 February 2007, although they provided for good faith negotiations to be entered into not less than three months before that date, with a view to entering into a new service agreement. The Darcon Contract itself terminates on 28 February 2007 (although capable of being terminated on one month’s prior written notice). Mr Flynn submits that in putting forward the draft Darcon contract with its clause 4.3 the Claimant cannot possibly have thought that he would be entitled to a bonus based upon the closing of an IPO, which on any basis could not have completed before 28 February 2007. In mid-2006 when the draft Darcon contract was put forward, it cannot have been thought that the IPO then being contemplated (as I find it plainly was being) could have been completed by the end of February 2007: indeed all the plans indicate second quarter 2007 at the earliest. Thus the Claimant was putting forward an agreement which was said by him to record the oral January agreement, which could not give him the 0.5% on the IPO which he is asserting he was entitled to. This shows that he cannot have thought he was entitled to such a 0.5% bonus. This is a good advocate’s argument, not dependent at all, nor drawing at all, upon his clients’ evidence, as they do not accept that there was such an oral agreement, or that the Darcon draft contract was put forward on the basis the Claimant suggests, and there is no evidence at all as to discussion of how any entitlement to a bonus would or was to expire on 28 February 2007.

However I am satisfied that it is not right:

If the agreement was made for the 0.5% success fee, then it was quite independent of and irrelevant to the Alferon Service Agreements (Dr Sittard not knowing anything of it), which were to expire in one year, as was the Darcon draft contract. If the year expired without a bonus/success fee accruing – even in respect of the Trade Finance, which was not certain to accrue by February 2007 (indeed in the event $0.48 billion did not come through till April) – that did not mean that the entitlement to the success fee pursuant to the oral January agreement would expire, but that he would simply receive at that stage the minimum bonus of $500,000. If the oral January agreement existed, then it is highly unlikely that the Claimant would voluntarily have given up his entitlement to the success fee after one year, unless of course that was a term of the original oral agreement, which it is not suggested to have been. If the January Agreement did not exist, then the Claimant is, for the first time and without spelling anything out, trying to get himself a success fee not previously agreed, but for some reason causing it to expire after (as of September 2006, when the agreement was executed) five months.

This possibility is made even more unlikely by the fact that the contract itself (and that draft) provides for either side to give one month’s prior written notice, rendering it even less likely that the Claimant would have, at any rate consciously, imperilled his entitlement to the success fee, or for the first time created such a fragile entitlement.

As the Claimant explains, if a success fee, for example in respect of the Trade Finance, were to arise during a period prior to 28 February 2007, then it would be payable on 28 February 2007, in order to arise simultaneously with the minimum bonus, which would thus be offset, such offsetting being intended, but not expressly otherwise provided for.

The simple January oral agreement became confused by the one year agreements. The Darcon Contract was to expire on 28 February 2007, but, in this event, a different entity than Darcon might be found to be the Defendants’ paying party.

The draft provision is not entirely consistent with the Claimant’s case that it was intended to record the oral January agreement, but it certainly does not contradict its existence. But the one thing that is clear is that it is not consistent with the Defendants’ case.

Mr Flynn’s next point is that it was not necessary or appropriate to appoint the Claimant to lead the IPO, as he asserts was done in January 2006. It seems to me plain that there is nothing unlikely, given what the Fourth Defendant was, with Mr Barinstein’s advice, trying to do, and given the clear desire of the Trio at that stage to have an IPO as soon as possible, to appoint someone like the Claimant to do the necessary preparatory work and then lead the IPO. They plainly needed someone to lead the IPO, and they asserted (falsely as I conclude) that it was to be Mr Youness.

Mr Flynn submits that the agreement which the Claimant alleges was unlikely, and far too generous, for someone with his track record. The Claimant had not led an IPO before, and his previous entitlement was, as he explained (Day 11/148-9) $2.5 million for ten months’ work. He came with a high recommendation from Mr Barinstein and after a good deal of research by the Fourth Defendant and, it seems, contact by the First Defendant with his previous employer, and was, as Mr Radjabov discussed with the Fourth Defendant, exactly what they wanted. Indeed the Fourth Defendant herself said to him (as set out in paragraph 50 above) that he could lead the IPO. He is likely to have been extremely impressive to the Defendants, as indeed he was in the witness box (Day 3/185-186):

Mr Flynn submits that the agreement submitted by the Claimant is most unlikely because it would result in what he called ‘double dipping’ – i.e. an entitlement to a percentage success fee on the Trade Finance and then, although a good deal of the Claimant’s work in respect of the Trade Finance would be of use, indeed essential, by way of preparation work for the IPO, another percentage fee on the IPO. This was however what the Claimant says was agreed, and the shareholders could and did earn substantial sums on each transaction, the majority of the $1.48 billion from the Trade Finance paid out in dividends, and the recoupment from the IPO: and so his interest would parallel that of the shareholders. As appears from the evidence of the Fourth Defendant set out in paragraph 49 above, no distinction was drawn between the two transactions, and in any event Mr Barinstein’s evidence (paragraph 44, set out in paragraph 58 above) supports the proposition that “such an arrangement would not be unusual”.

Mr Flynn then submits that the Claimant would not have accepted the First Defendant’s offer on 13th April 2007, on his last day with Alferon, after what he alleges to have been the repudiation of the January agreement on 1 April, to make it up to him by giving him the opportunity to earn substantial sums with the family business; because if he had thought that he had not only been deprived of his percentage on the balance of the Trade Finance but also the loss of his opportunity to earn a success fee on the IPO, such offer would not have been sufficient. This is however what he says he did, and it can be seen that at that stage, with the IPO stalling and an uncertainty as to the size of it in any event, it may not have been at all clear what his expectations would be in respect of repudiatory breach of the agreement in relation to the IPO. However it seems clear from the Claimant’s evidence that his priority was to seek favour with such influential people, and to trust in them, particularly as the offer from the First Defendant came when, it is common ground, he had threatened to sue. He himself addressed this very point, as to the size and scope of the business offered to him compared with his claim, in his letter of 26 September 2010, set out in paragraph 17 above, when he says how ‘persistent’ the First Defendant was.

There are two significant further factors. The first is that it is not suggested, nor asserted, that his acceptance of such employment was in settlement of any right to sue, which he plainly retained. Secondly he is supported by the evidence of Mr Barinstein (paragraphs 87-88 of his witness statement) at least in relation to his expressed intention at that time.

The last of Mr Flynn’s arguments in relation to his contention that the Claimant may have had a (but he asserts an unjustified) complaint in respect of the balance of the trade financing, but had no claim in respect of the IPO, relates to his alleged lack of complaint in the latter regard until the letter of 26 September 2010, which I have set out at length in paragraph 17 above. The Claimant says that he did complain orally on a fairly regular basis whenever he could get a private moment with the First and/or Fourth Defendants, both on 13 April 2007 itself, but also subsequently (with which he deals in paragraphs 386-7 of his witness statement). What he said in the letter of 26 September 2010 quoted above was “Although I’m very confident that you and your father have always understood my position, but pretended not to because it was convenient for you, now that I have taken the trouble to put all of it in writing in one document, this will no longer work”. Mr Flynn suggested that this is inconsistent with his case that effectively the First Defendant had bought him off with previous promises. His response was as follows (Day 11/159-161).

The Defendants themselves accept that he made frequent complaints, and on the face of it not limited to the Trade Finance:

However Mr Flynn makes particular criticism of the fact that the Claimant, when asked in cross-examination why he had not made a complaint shortly after the listing was completed in December 2007, when it could be seen that his success fee on the IPO should have crystallised, said that he had done so, in Moscow in early 2008, although he had not said so either in his witness statements or in his evidence in chief. He asserted (Day 5/15) that he remembered the occasion, because the First Defendant asked him to sit on the Board of the listed company, because the UK Listing Authority would not permit any of the Trio or their relatives to hold a Board seat. Mr Flynn suggested that it was or should have been a ‘champagne moment’, when the listing had now gone through, and he ought to have been in a position to make a more persuasive claim and could not have forgotten about it if it had truly occurred. The Claimant accepted that it was not in his witness statement, but asserted that he had had a number of conversations with the First Defendant, but did not feel that any of the conversations was getting anywhere. It may be that this conversation, omitted by the Claimant in his witness statement, is one of the conversations to which the First and Fourth Defendants refer, as set out above in their witness statements, or that it is supported by Mr Barinstein’s recollection at paragraph 89 of his witness statement. Or it may be that it is embellishment or wishful thinking. However:

What I do find very significant is the Defendants’ reaction to the letter of 26 September 2010, when, as quoted at length in paragraph 17 above, the Claimant set out for the first time in writing his entitlement to the balance of the Trade Finance success fee and to the IPO success fee. The letter is now, and was then, a very persuasive document. There was no response to the letter at all. If the Defendants are right, he was making a claim which he knew to be false and which in any event was totally unfounded, and yet he continued to be engaged by them for the family businesses in a position of trust, as Mr Oudkerk points out. Even more significant is the reaction to the letter when it was finally expressed, at a meeting between the Claimant and the Fourth Defendant on 16 March 2011. The Fourth Defendant sets it out in paragraph 58 of her second witness statement, which I have quoted in paragraph 18 above. She did not accuse the Claimant of making a false claim, in respect of the IPO. She simply said that it would not be fair for her father to have to pay it.

I weigh up all the points made by Mr Flynn, but I am persuaded by all the matters set out in paragraphs 49 to 60 above, and in particular the content of the January Term Sheet, the fact that I am satisfied as to the simplification of the 0.5% on all funds raised, and that I conclude that there was no rejection by the Defendants of the fact that it extended to the IPO, by the Darcon draft contract, the support of the independent witnesses and what I conclude to be the lack of credibility of the Defendants’ evidence. Although it has cost the Defendants much more than they anticipated, it is, I am satisfied, what the Defendants wanted and agreed to at the time. I resolve the third issue in favour of the Claimant.

In his closing submissions, Mr Flynn for the first time at the trial submitted that the Claimant was not entitled to sue on the January Agreement, or that such oral agreement was not enforceable by the Claimant, but by Aurdeley. This was said to be put forward on the basis of the Claimant’s evidence in cross-examination that he had an arm’s length, independently negotiated and transparent agreement with Aurdeley in respect of his services (Day 2/198), which was exclusive (Day 2/216). He explained (at Day 2/217) how he could personally enter into a contract with the Defendants without being in breach of his agreement with Aurdeley:

Mr Flynn submitted that if there was an exclusive agreement between the Claimant and Aurdeley, then he could not contract personally with the Defendants. I was satisfied that this contention was unarguable and in any event was not entitled to be pursued at the trial, and did not call upon the Claimant in his following closing submissions:

I see no basis upon which the Claimant has a claim against the Fourth Defendant personally. As she said, and I accept, she was the communications bridge between the Claimant and her father and his partners, the Trio. She was an important figure, in that she recommended and introduced the Claimant to her father, took part (not simply serving the tea) in the two significant meetings and locked the agreement in the post-Peninsula telephone call. However I am satisfied that, even though she was, as a family member, a minor shareholder together with the Trio, she was not a principal. This is made entirely clear by the Claimant’s own words in which he sets out his case in the letter of 26 September 2010 quoted in paragraph 17 above:

It is equally plain that the oral agreement was not made with any Alferon company. Dr Sittard, the CEO of Alferon UK, had no knowledge of the January Agreement or the 0.5% success fee, and both the First and Third Defendants accepted in evidence that the payment of bonus to the Claimant was not the decision of Dr Sittard but that of the First and the Second and Third Defendants (Day 7/76, 8-18, 9/84). In a clear passage, to which I shall return, the Third Defendant stated in cross-examination (Day 9/17):

Equally it is quite clear that the January Agreement was not with Darcon, a company whose identity remains wholly mysterious, apparently even to the Defendants themselves. In any event, even though the Claimant may have expected that there would be a record in writing (plainly he did, as per his Darcon draft contract and his chasing up of the Fourth Defendant in September 2006) it is clear that the First Defendant had no such intention (see paragraph 42 above). The January Agreement was not made by any company.

The January Agreement which I have found was reached with the Claimant for his engagement as a consultant to arrange what subsequently became the Trade Finance and to prepare for and subsequently lead an IPO, on terms including a fixed 0.5% success fee, was plainly made by the First Defendant. As I have concluded, it was not made by any particular company, and, not least as appears from the evidence to which I shall refer below, it was for the benefit of the Trio who gained enormous advantage both from the proceeds of the Trade Finance and the proceeds of the IPO. The Claimant explained in chief (Day 2/183) that:

Now that it is clear, contrary to her original evidence, that it is accepted by both the First and Fourth Defendants that it was the post-Peninsula telephone call which finalised the agreement which had been all but reached at the Peninsula Hotel, the picture is even clearer, as stated by the Fourth Defendant (Day 6/113):

The Fourth Defendant certainly accepted that the decision was that of the First Defendant and his partners (Day 7/76) and (Day 8/4): “It was enough for my father to speak to his two partners, to agree with them and then communicate the decision.”

The evidence of the First Defendant himself puts it beyond doubt that the main decisions, including the decision as to a bonus for the Claimant, was that of the Trio (Day 9/84, Day 9/122, Day 10/3). All of the Trio in their evidence insisted that there had not been an agreement with the Claimant either to pay a fixed fee or to pay the success fee in respect of the IPO, and I have found that that was not the case. But it is plain from the evidence of the Second and Third Defendants that whatever it was that was agreed, they left to the First Defendant after consultation with them.

The Third Defendant said as follows:

As for the Second Defendant, I have referred, at paragraph 44, above to his knowledge that the Claimant was asking for a fixed 0.5% bonus, which had been imparted to him by the First Defendant. He accepted that he did not meet the Claimant until March or April, when he had already started work, so it is plain (as indeed the Third Defendant accepted and asserted (paragraph 31 above)) that he was working on the basis of the oral agreement made with the First Defendant.

I conclude that the First Defendant did regularly consult with the Second and Third Defendants, as he and the Fourth Defendant explained, but that they left it to him to reach an agreement with the Claimant. He made that agreement on behalf of himself and the Second and Third Defendants as the other two members of the Trio. It was either with their actual authority or it was within his usual authority. They were content to accept whatever agreement it was that he had made with the Claimant, and they were bound by it. There is no need for me to consider whether any of the subsequent promises by the First Defendant constituted a separate confirmatory or ratificatory action.

As set out in paragraph 13 above, when the Second Defendant purported to pay the Claimant a bonus in respect of the Trade Finance in April 2007, after discussion with the other members of the Trio, he purported in the exercise of a discretion to set off or deduct not only the minimum bonus of $500,000, which was properly in accordance with the January Agreement, but the $500,000 salary retainer. He was plainly not entitled to take that course and that sum is due and payable pursuant to the January agreement.

I have no doubt at all that the agreed 0.5% success fee extended to the total sum that was obtained as a result of the Claimant’s work on the Trade Finance. In the unchallenged evidence of Mr van Broekhoven, he explains (paragraph 4 of his first witness statement) that the syndicated pre-export finance facility, originally US$1 billion, was increased to $1.48 billion, as a result of the discussion between him and the Claimant (paragraphs 31-33), that in the light of the over-subscription of the issue ENRC AG wished to take more, namely up to just short of the maximum available of US$1.5 billion, the increase in the amount of dividends thus available to the shareholders of the Group being one of the reasons for this increase (paragraph 43). Insofar as there is, as a result of the late amendment by the Defendants, an issue as to ‘effective cause’, the Claimant was as much an effective cause of the extra $0.48 billion as he was of the original $1 billion, and, as set out in paragraph 12 above, he remained as of 27 March 2007 the board-authorised signatory in relation to the further payment. Mr van Broekhoven explains in paragraph 20 of his second witness statement:

In terms of the success, for which the 0.5% fee was agreed, that success had been achieved by 1 April 2007 when the Defendants repudiated the January Agreement with the Claimant, as I conclude that they did by refusing to comply with that agreement, and only offering the sum of $4 million, itself arrived at by a wrongful deduction of the $500,000 salary referred to above. But the Claimant did not accept that repudiation until he left the Defendants’ employment on 13 April 2007, his last day in the Alferon offices, and the day when he had the conversation with the First Defendant, referred to in paragraph 13 above. By that date, on any basis, the success had been achieved, because 12 April was the date of completion of the last tranche of $0.48 billion. In those circumstances, and without my needing to consider the question as to whether the “severance provision” was operative and to what effect, the Claimant is entitled to his 0.5% on the remaining $0.48 billion. In the alternative I would have found that he was entitled to damages in the same sum as the consequence of the Defendants’ repudiation.

By April 2007, the IPO had not been executed. No implied term is relied on, such as was found in the case of Alpha Trading Limited v Dunnshaw-Patten Limited [1981] QB 290 in respect of a principal’s obligation not to terminate an agency agreement in bad faith deliberately so as to avoid the obligation to pay a commission. I am also not able (nor do I need) to rest my conclusion upon a construction of the severance term referred to above, given that its nature and effect were never discussed, or even if I concluded that the Claimant did indeed explain the consequences of a twelve month ‘tail’, never agreed; in the circumstances of the January Agreement, which I have found, resulting from the First Defendant’s insistence upon simplification and the proposition of the 0.5% success fee agreed and accepted in the post-Peninsula telephone call. Consequently, the Claimant’s entitlement arises only by way of a claim for damages for repudiation of the January Agreement. In the light of my finding that there was an oral agreement for a fixed 0.5% success fee in respect of the IPO, that agreement was plainly repudiated on 1 April 2007, when the Defendants refused to pay any sum, save for a discretionary bonus of $1 million.

It is plain that the Defendants were not prepared to comply with their obligations as to the Trade Finance or the IPO, and the Claimant accepted their repudiation on 13 April. In evidence which the First Defendant accepts, the Claimant said (Day 3/163):

No case has been put forward that, assuming that the agreement had not been repudiated, the Claimant would not have been entitled to such success fee. It is in any event not at all out of line with the amounts which the Defendants paid, as set out in paragraph 57 above, especially to Mr Youness, who only took over as leader of the IPO from the Claimant when, as I am satisfied was the case (see paragraph 54(i) above) effectively almost all of the internal work on the IPO had been completed, save of course for the surmounting of the problems which had been discovered and which led to a delay of some three months. Subject therefore to Issue 7, the Claimant would be entitled to damages in the sum of $15.5 million.

The first occasion when the Defendants allege that there was a compromise, such that the Claimant is not entitled to make a claim either in respect of the balance of his fee on the Trade Finance or his claim in respect of the IPO, was in April 2007. The first basis of the Defendants’ case rests upon oral evidence as to what was said on 1 April 2007 and the second upon the Claimant’s acceptance of the $4 million and the existence of the agreement of 5 April 2007, under which the monies were paid to the Claimant on 11 April.

The Claimant said in his witness statement and in his evidence that he said to the Second Defendant (and afterwards to Mr Olim Chodiev) that he was taking the $4 million, which is all they were offering him (and refusing the $1 million), and would use it to sue them. The Defendants deny that this was said, and the Second Defendant gave evidence that if it had been said he would not have made the payment, particularly given that a claim could put a spoke in the IPO which was, though at that stage in limbo, still intended. The Claimant said that he had indeed wanted to make that clear, because he believed in being open and not holding back his intentions. Further he said it again to the First Defendant in their conversation on 13 April – and that is admitted by the First Defendant which, the Claimant says, confirms his approach. He further says that he took the same open approach four years later in April 2011 in his meeting with the First and Fourth Defendants on 22 April 2011, referred to in paragraph 29 above (although this is denied by the First Defendant). Mr Flynn submits that the (admitted) fact that he said it on 13 April 2007 may be explicable by the fact that he had by then already received the $4 million. On the other hand it could be equally argued that the reason why the First Defendant came to see the Claimant on 13 April and offered (successfully) to engage him within the family was to prevent exactly what they anticipated, namely his suing them at an inconvenient time. In any event there is no suggestion that when the Claimant admittedly told the First Defendant that he was intending to sue for the balance of what was owed him the First Defendant said he could not do so because there had been a binding compromise.

The Defendants on the other hand rely upon evidence that was given by the Second Defendant in cross-examination as to what he allegedly said on 1 April, which was not in his first witness statement, or even in his second witness statement when he was addressing the Claimant’s case discussed above, namely that he made it clear to the Claimant on 1 April that the money being paid was in final settlement “and there will be no claims from either side”, because he ‘always says this as a matter of course when he pays somebody’ (Day 11/49). It seems to me very unlikely that this belated evidence is right, given the context, namely where he was purporting to announce to the Claimant a decision (which he confirmed had been previously discussed and agreed with the other members of the Trio) to give the Claimant a predetermined bonus of $4 million. As I have said above, the First Defendant does not appear to have appreciated at the time of his discussion with the Claimant on 13 April that this was his or the Second Defendant’s position.

As to the agreement of 5 April under which the $4 million was paid, it seems to me wholly unlikely that, if it was intended that the payment was in full and final settlement, such agreement would not have so recorded, which it does not. Mr Flynn relies on the entire agreement clause, which is in fairly conventional terms, and is certainly not tailored so as to adapt to become a full and final settlement clause:

I agree with Mr Oudkerk that the words of Popplewell J in Barclays Bank plc v Unicredit Bank AG [2013] 2 Lloyds Law Rep 1 at 83-85 (following Lightman J in Inntrepreneur Pub Co v East Crown Limited [2002] Lloyds Rep 611, as approved in Axa Sun Life Services plc v Campbell Martin Limited [2011] 2 Lloyds Rep 1) as considered in the Court of Appeal ([2014] EWCA Civ 302) do not encourage, or indeed support, reliance on such an entire agreement clause to do anything other than rule out what otherwise might be oral or implied assurances or understandings, and certainly not so as to constitute and effect a full and final settlement of all previous claims of and between the parties including claims which, according to the Second Defendant, had not been adumbrated, in respect of the IPO .

Again Mr Barinstein’s independent evidence supports the Claimant (paragraphs 87 and 88).

On balance I tend to prefer the Claimant’s evidence as to what he said to the Second Defendant, but in any event I am entirely satisfied that the Second Defendant did not say, nor was the payment made upon the basis, that it was in full and final settlement of any claims of and between the parties. The Claimant did not then sue because he hoped that by keeping in with such important people he would be able to find a way to recoup what was due to him, as he subsequently explains in his letter of 26 September 2010 (above).

I do not therefore need to address the argument of Mr Oudkerk that even if the payment did purport to be made in full and final settlement, because the Defendants were only paying what they agreed to be due (having previously decided to make a bonus of $4 million) there could not be consideration for a settlement by virtue of the principle in Foakes v Beer [1884] 9 App. Cas. 605.

I turn to the last of the Defendants’ defences, namely that, if there was not a full and final settlement in April 2007, there was such in April/May 2011. All that was paid on 11 May 2011 (as set out in paragraph 19 above) was what was due under and in order to terminate the family agreements. Leaving aside the question of Foakes v Beer, and the Claimant’s evidence (paragraph 416) that he said that he intended to pursue his legal rights and that the First Defendant responded that he was free to do so (denied by the First Defendant, although he said he had little recollection of the meeting (Day 10/76-8)), the simple question is whether there is anything to support the proposition that there was a full and final settlement. The only evidence of an agreement is that set out by the Claimant in his letter of 24 April 2011 (which he expected would be signed as accepted and agreed by the First and Fourth Defendants, but never was) which recorded the sums being paid under the family consulting agreements. I am satisfied that that is what was meant by the words “we discussed and agreed the terms of the termination of my consulting services to you and your organisation” addressed to the First and Fourth Defendants, who had indeed been personally contracted in relation to the last agreements of 30 September 2009; and no full and final settlement is expressed - indeed it was at least anticipated by the Claimant that the Defendants might wish him to continue work on various projects, although that never eventuated. The reality was that, as he said in his letter of 26 September 2010, if no compromise was reached in regard of his ‘ENRC claim’, he would simply take what was due to him under the family contracts and leave.

The evidence of neither the First nor the Fourth Defendant supports any suggestion of a full and final settlement:-

The First Defendant, when asked why the Claimant stopped working for him said (Day 10/78):

The Fourth Defendant said (Day 8/108-9) in answer to questions from Mr Oudkerk:

The only matter upon which Mr Flynn relies in seeking to argue that the agreement of 22 April 2011, as recorded in the Claimant’s letter of 24 April 2011 (without a full and final settlement clause) was in full and final settlement are the words of the Claimant in a subsequent letter, namely “I still hold out hope that we can part ways professionally and amicably”. He submits that it was not amicable, after the Claimant had then received the sums due under the family agreements, for the Claimant to send his letter before action and issue these proceedings.

There was no compromise of the Claimant’s claims under the January Agreement.

I therefore resolve all seven issues against the Defendants, save for the Fourth Defendant (and the Fifth and Sixth Defendants who have already been dismissed from the action), and give judgment for the Claimant against the First, Second and Third Defendants for the sum of US$2.9 million (being the wrongly deducted $500,000 and the balance of the 0.5% success fee in respect of the $0.48 billion Trade Finance) and for damages in the sum of US$15.5 million in respect of the 0.5% success fee in respect of the IPO.