Chodiev & Ors v Stein

Mr Stein, the Defendant, is a US qualified lawyer, banker and corporate financier. He brought proceedings in the Commercial Court against the three Claimants, who are very substantial businessmen, primarily based in Kazakhstan and colloquially called “the Trio”, who have held business interests together for over 20 years, and together run various successful businesses, operating in mining and in the processing and marketing of the products of those mines. In particular they founded a business which became ENRC Plc, a natural resources company which was listed in the London Stock Exchange on 12 December 2007 as a result of an Initial Public Offering (“IPO”) of its shares, which raised for them as shareholders, holding approximately 20% of the shares, the sum of US$3.1 billion between them. In those proceedings the Defendant claimed sums due pursuant to an oral agreement with them in January 2006 (“the January Agreement”) in respect of an entitlement to a success fee of 0.5% of monies raised by him for the Claimants, resulting first from a syndicated finance facility (“Trade Finance”), which produced between February and April 2007 US$1.48 billion, mostly used in order to fund the payment of dividends to the shareholders, primarily the Trio, and thereafter the US$3.1 billion from the IPO.

After a hotly contested trial before me, which lasted 11 days in February and March 2014, the Defendant obtained judgment on 16 April 2014 against the Claimants in the sum of US$2.9 million in debt in respect of the balance of his entitlement with regard to the Trade Finance and the sum of US$15.5 million damages in respect of the Claimants’ repudiatory breach of their obligation to pay him in respect of the IPO, together with interest and costs, of which a substantial proportion were on the indemnity basis.

Save for a small proportion of those costs which the Claimants were required to pay as a condition of a stay while they made an unsuccessful application for permission to appeal to the Court of Appeal (which, after refusal on paper, was refused at an oral hearing on 24 July 2014), no sum has been paid by the Claimants to the Defendant. Instead they issued on 14 October 2014 these proceedings, seeking to set aside my judgment in favour of the Defendant on the ground that it was obtained by fraud: they were subsequently required by an Order of Hamblen J on 27 October 2014 to pay the sums of US$30,495,673.60 and £1,459,739.69 into their solicitors’ client account as a condition of the stay of the judgment against them. The Defendant has issued an Application Notice on 9 December 2014 applying to strike out the Claimants’ Particulars of Claim, and/or seeking summary judgment against the Claimants pursuant to Part 24, and this has been the hearing of that application. By application of 27 February 2015 the Claimants have applied to amend the Particulars of Claim by adding additional pleas and matters and they have also applied to put in some additional documents, and it has been common ground that the contents of that proposed amendment (and those additional documents) should be considered before me, on the basis that if their contents can “save” the proceedings, then I should not strike out the claim (subject to any impact of costs); and I can thus consider the nature and strength of the Claimants’ claim by reference to the proposed amendment as well as the existing claim.

My judgment, of 47 pages and 105 paragraphs ([2014] EWHC 1201 (Comm)), was not challenged on appeal save in one respect, to which I shall return, and even as to that permission was refused by the Court of Appeal, as described above. It is that judgment which is now sought to be set aside, and in that context its contents must be fully considered. Of course I do not set that judgment out in full, but refer the reader to it, though it will be necessary to summarise and in part quote from it.

At the outset of that judgment (paragraphs 3 to 20) I set out the history on the basis of what was either common ground or not challenged, and I summarise it as follows:

At paragraph 21 of the judgment I set out the seven issues which I had to resolve, of which Issues 5 and 6 are of no materiality to the case now before me. They were as follows:

I addressed the witnesses in the judgment, of which I set out below the relevant parts:

When it came to my dealing with an application for indemnity costs against the Claimants in a judgment of 16 April 2014, I stated as follows:

“36.

Although I have made criticisms in my judgment, upon which [the Defendant’s solicitor] has based her own arguments, I conclude that there is only one area in this case which really is so out of the ordinary by way of unreasonableness or impropriety that it should be marked by indemnity costs. That is the fact that, in my judgment, a false case was put together by the [Claimants’] witnesses. In particular, Mr Ehrensberger, who gave evidence solely in relation to the IPO, but clearly also the [First and Fourth Claimants] and Dr Sittard, who all in their witness statements, as I have described in my judgment, put a false case forward.

37.

The first three whom I have named, and indeed the other [Claimants] to an extent, all gave oral evidence in support of that false case, but Dr Sittard was not prepared to do so and for that he must get credit - - although he did not immediately abandon the entirety of it, as I point out in my judgment, and as Mr Oudkerk has pointed out in his submissions: namely the false case that Mr Youness led the IPO, indeed was brought in to lead the IPO from October 2006 onwards, and that the [Defendant] had nothing whatever material to do with it, which was a significant part of their defence and which, if right, would have cast a considerable doubt on whether there ever was such an agreement as the [Defendant] asserted.”

I resolved all of the issues, for reasons which I set out at length in my judgment, and to part of which I shall return below, in favour of the Defendant. There was no appeal in respect of any of my findings. The only application for permission to appeal related to the position of Aurdeley. Until closing submissions on behalf of the Claimants, Issue 4, set out in paragraph 6 above, was limited to the question as to with whom the Defendant made the contract, it being denied that the contract was with the Claimants personally: hence the reference to a fall back case on confirmation or ratification. However, as described in paragraph 75 of my judgment, Mr Flynn QC for the first time in such closing submissions submitted that the Defendant was not entitled to sue on the January Agreement, or that such oral agreement was not enforceable by the Defendant, but by Aurdeley. Aurdeley had of course been referred to during the trial, not least because, as set out in paragraph 5(v), (vi) and (vii) above, a number of the written contracts were entered into with Aurdeley, which the Defendant described in evidence as a company of which Mr Zakharov was the principal, as was known to Mounissa, who confirmed in her own evidence that she had been so told by the Defendant (and had indeed met Mr Zakharov on occasion). The Defendant said he had an arrangement that Aurdeley would fund him by way of a monthly retainer, and he would then share the proceeds of any project he entered into with Aurdeley on a 60:40 basis. As set out in paragraph 75 of my judgment, the Defendant explained during the trial that his arrangement with Mr Zakharov was such that he could either enter into a contract with a client in his own name or in that of Aurdeley, so that he could personally enter into a contract with Alferon or Darcon or the Chodiev family without being in breach of his agreement with Aurdeley.

As I set out in paragraph 76 of my judgment:

“Mr Flynn submitted that if there was an exclusive agreement between the [Defendant] and Aurdeley, then he could not contract personally with the [Claimants]. 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 [Mr Oudkerk] in his following closing submissions:

(i)

I was satisfied that the point was not expressly pleaded in paragraph 8(c) of the Re-amended Defence. If I permitted such an amendment as was suggested by the [Claimants] in their supplementary closing submissions, there would be substantial, if not irremediable, prejudice to the [Defendant], as the [Defendant] would have needed to seek an adjournment to consider calling Mr Zakharov, and/or causing Aurdeley to be joined as a co-claimant, to which there would almost certainly be a limitation defence.

(ii)

Even if it could be said that the Defence did not require amending, I am satisfied that the question whether Aurdeley rather than the [Defendant] was party to the January Agreement was not one of the list of issues which had been ordered to be tried and which I had tried for thirteen days.

(iii)

It could not be said that the point had only arisen for the first time as a result of the precise evidence given by the [Defendant]. Indeed the issue had been canvassed, but not pursued, in a summary judgment application, upon which I made no order on the first day of the trial . . .

(iv)

Even if all the above could be excused and overlooked on the basis that the [Defendant] still retains the burden of proof to establish entitlement pursuant to the January Agreement, I am satisfied that the [Defendant’s] own answer in evidence is perfectly satisfactory, certainly given the belated way in which the point has arisen. No doubt if it had been made earlier Mr Zakharov could have been called:

(a)

As the [Defendant] explains, there was no breach of the exclusive agreement, because it is part of his arrangement with Aurdeley that he could contract in his own name where appropriate.

(b)

This is exemplified by the fact that some but not all of the written contracts in this case were with Aurdeley.

(c)

In any event the [Defendant] as agent for an undisclosed principal would be entitled to sue (see Bowstead & Reynolds on Agency (19^th ed) 9-005).”

This argument (alone) was the basis of the Claimant’s applications, made on paper and then renewed orally, to the Court of Appeal, and Aikens LJ rejected, largely for the same reasons that I had done, the Claimants’ arguments, including a submission that, by reference to a number of documents which fresh counsel, Mr Head QC, showed to the Court of Appeal, such documents “indicate very strongly that it was intended that the contracting party should be Aurdeley rather than the [Defendant] himself”. Aikens LJ refused permission on the basis that the point was “simply unarguable. The [Claimants] have had their trial. They have lost, they must now obey the Judge’s order”. As referred to in paragraph 3 above, the Claimants did not obey my order, but, even before the hearing on 1 October 2014 when, after previous adjournments, I adjudicated on the amount of interest to be paid by the Claimants, they had obtained from the court in Cyprus an order for disclosure of documents by Abacus Limited, a corporate services company responsible for administering Aurdeley, whose details openly appeared on at least two of the agreements providing the Defendant’s services to the Chodiev family referred to in paragraph 5(vii) above, with a view to issuing these proceedings. The case now brought in these proceedings is based upon the assertion that Aurdeley was not owned by Mr Zakharov, but that the Defendant himself beneficially owned Aurdeley, and that the Defendant thus dishonestly told lies in that regard.

The case so brought, based upon such assertion, is put, by reference to the words of Aikens LJ in The Royal Bank of Scotland Plc v Highland Financial Partners [2013] EWCA Civ 328 at paragraph 106, on the basis that such alleged dishonesty is fresh evidence and if known “would have entirely changed the way in which [I as] the first Court approached and came to [my] decision [and was] relevant, conscious and deliberate dishonesty . . . causative of the impugned judgment being obtained in the terms that it was”:

Mr Rubin QC, now appearing for the Claimants, submits:

The first issue to address is whether fresh evidence, as defined by Ladd v Marshall [1954] 1 WLR 1489 CA, is required, i.e. whether that must not only be evidence that was not before the first court but evidence which could not have been obtained by reasonable diligence (the “Reasonable Diligence requirement”). Mr Rubin relies upon the words of the editor of Spencer Bower & Handley: Res Judicata (Fourth Edition), now edited by Handley J of the New South Wales Court of Appeal, who in the book at paragraph 17-05 (and judicially in a New South Wales case Toubia v Schwenke [2002] 54 NSWLR 46 CA at 54-55, suggested, “despite dicta from eminent judges” that the Reasonable Diligence requirement was not necessary in seeking a new trial “where fraud can be established”. Those dicta from eminent judges were however made in decisions of the Court of Appeal and the House of Lords and in any event do not seem to me to be capable of challenge. In Dicey, Morris & Collins Conflict of Laws (15^th Edition) at 14-138, though noting the doubts in Toubia, Lord Collins as editor at 14-138 said that “a party against whom an English judgment has been given may bring an independent action to set aside the judgment on the ground that it was obtained by fraud; but this is subject to very stringent safeguards, which are found to be necessary because otherwise they would be no end to litigation and no solemnity in judgments. The most important of these safeguards is that the second action will be summarily dismissed unless the Claimant can produce evidence newly discovered since the trial, which evidence could not have been produced at the trial with reasonable diligence,[my underlining] and which is so material that its production at the trial would probably have affected the result, and (when the fraud consists of perjury) so strong that it would reasonably be expected to be decisive at the rehearing and if unanswered must have that result”.

Hip Foong Hong v H Neotia & Co [1918] AC 888, upon which Spencer Bower appears to rely, does not in terms address the Reasonable Diligence requirement, and its impact was in any event doubted by Langley J in Sphere Drake Insurance Plc v The Orion Insurance Co Plc (unreported, 11 February 1999) at 182-3.

The authorities in the House of Lords and the Court of Appeal, which seem to me clear and compelling, are Hunter v Chief Constable of the West Midlands Police [1982] AC 529 and Owens Bank Ltd v Bracco in the CA and HL [1992] 2 AC 443. I shall underline in what follows the references to the Reasonable Diligence requirement. Hunter was a case where the decision of a criminal Court was sought to be reopened by way of challenge in a subsequent civil action, where, at 545B, in a passage with which Lords Russell, Keith, Roskill and Brandon agreed, Lord Diplock expressed himself in full agreement with the judgment in the Court of Appeal of Goff LJ, who had concluded that the challenge failed in limine because the “so called ‘fresh evidence’ on which they seek to rely on the civil action was available at the trial, or could by reasonable diligence have been obtained then”. He approved that proposition, and also Goff LJ’s adoption of the test “as to the character of fresh evidence which would justify departing from the general policy by permitting the plaintiff to challenge a previous final decision against him by a court of competent jurisdiction” as being that the new evidence must be such as “entirely changes the aspect of the case”.

In the Court of Appeal in Owens Bank Parker LJ records at 459G that: “Our law had long permitted the party against whom an English judgment had been given to bring an independent action to set aside the judgment on the ground that it had been obtained by fraud, but strict limits were imposed in order to preserve the principle that a judgment which brings litigation to an end should not be too easily disturbed. In particular the Court would not permit the new action to proceed unless the plaintiff would put forward fresh evidence, discovered since the first trial, being evidence which could not have been produced then with reasonable diligence and which is such that, if it had been put forward at the trial, it would in probability have caused a different conclusion to be reached”. Lord Bridge’s speech in the House of Lords is significant, because he records that their Lordships were “taken, in the course of argument, through the many authorities” in which the rule he was expressing had been developed and applied, which he sets out at 483F-H:

“The common law rule that the unsuccessful party who has been sued to judgment is not permitted to challenge that judgment on the ground that it was obtained by fraud unless he is able to prove that fraud by fresh evidence that was not available to him and could not have been discovered with reasonable diligence before the judgment was delivered . . . is the rule to be applied in an action brought to set aside an English judgment on the ground that it was obtained by fraud. The rule rests on the principle that there must be finality in litigation which would be defeated if it were open to the unsuccessful party in one action to bring a second action to re-litigate the issue determined against him simply on the ground that the opposing party had obtained judgment in the first action by perjured evidence. Your Lordships were taken, in the course of argument, through the many authorities in which this salutary English rule has been developed and applied and which demonstrate the stringency of the criterion which the fresh evidence must satisfy if it is to be admissible to impeach a judgment on the ground of fraud. I do not find it necessary to examine these authorities. The rule they establish is unquestionable and the principle on which they rest is clear.”

This (binding) proposition relating to actions to set aside a judgment as obtained by fraud is followed by Langley J in Sphere Drake at 182:

“There must be apparently credible evidence as to the fraud or perjury which not only was not available at the trial and could not have been obtained with reasonable diligence for use at the trial, but which is such as entirely changes the aspect of the case, in the sense that it must be likely to be decisive of the outcome of the claim in question.”

David Steel J in KAC v IAC [2003] 1 Lloyd’s Law Rep 448 at paragraph 146 sets out the principles, relying not only on Hunter and Langley J, but seemingly also (though the reference appears wrong) on a previous edition of Spencer Bower, before the editor had enunciated his new theory, as follows:

“(a)

A judgment obtained by perjury is a judgment obtained by fraud for this purpose.

(b)

The action seeking an order setting aside the earlier judgment must be based on new evidence which was not before the Court that first heard the action and which the claimant could not with reasonable diligence have placed before that Court.

(c)

The new evidence must establish perjury in the sense that a person or persons sworn as a witness in the earlier action who could properly be treated as the successful party itself wilfully made a statement in those proceedings which statement the person knew to be false or did not believe to be true.

(d)

The burden is on the claimants to establish perjury as “distinctly more probable than not”.

(e)

The disparity between the perjured evidence and the new evidence would be material if it “entirely changed the nature of the case”.”

Mr Rubin made some concession towards an argument based on the House of Lords authority rather than on the opinion of Spencer Bower, when he proposed in opening that: “the further away you get from the central issues, the more this issue of reasonable diligence becomes less important”, i.e. that insofar as his case relies upon Proposition 1, set out in paragraph 13 above, as to the entire change to my decision on Issues 3 and 7, the fresh evidence might need to comply with the Reasonable Diligence requirement, but insofar as he relied upon Propositions 2 and 3, based upon an assertion that the credibility of the Defendant has been destroyed, or upon the alleged Fundamental Deception, then the Reasonable Diligence requirement might be of less significance. I do not consider there to be any such distinction. In any event Mr Oudkerk QC submits that, particularly in this case, the Reasonable Diligence requirement is only another way of enforcing an election on the Claimants (he refers to Khetani v Kanbi [2006] EWCA Civ 1621 at para 29) i.e. in that they knew about Aurdeley, and indeed Abacus, and chose (and that belatedly) to run a case based upon the ownership of Mr Zakharov, rather than asserting that Mr Zakharov held Aurdeley on the Defendant’s behalf. I shall return to these matters below.

Leaving aside the Reasonable Diligence requirement, there was not entire agreement between counsel on the appropriate wording for the test to be applied to justify the exceptional course of setting aside a judgment, in breach of the presumption of finality, as allegedly obtained by fraud; although it is common ground that, whatever the test, it is difficult to comply with, and must be rarely permitted. In the course of my citation of the significant judgments above, the words which have been previously adopted have been quoted: “so strong that it would reasonably be expected to be decisive at the rehearing and if unanswered must have that result” (Dicey, Morris & Collins), “such that it would in probability have caused a different conclusion to be reached” (Parker LJ in Owens), then as per Hunter, as interpreted by Langley J at 182(3) and by David Steel J in his further KAE v IAC judgment [2005] EWHC 2524 (Comm) (colloquially called “Perjury II”) at 197-8, that the “disparity between the concealed (or perjured) evidence and the new evidence would be material if it “entirely changed the nature of the case” . . . [which] at least requires material which was likely to be decisive of the outcome”. The most recent articulation has been that of Aikens LJ in RBS v Highland, referred to in paragraph 12 above, at paragraph 106.

As appears from paragraph 13 above, Mr Rubin submits that even if he cannot succeed by reference to any fresh evidence entirely changing the nature or aspect of the case with regard to Issues 3 and 7, or being reasonably expected or likely to be decisive or which probably would have caused a different conclusion to be reached on those issues, then he relies more generally, by reference to his alternative Proposition 2, upon what he alleges to be the lies by the Defendant in relation to his ownership of Aurdeley as destroying or damaging his credibility, such that my reliance upon him as a “most impressive witness” (see paragraph 25 of my judgment, quoted in paragraph 7(iii) above) would have been entirely changed.

Mr Rubin accepts that this is a heavy burden for him to fulfil. Both counsel have referred me to three Court of Appeal decisions in which credibility was thus under the spotlight:

If the Claimants are to be left to fall back on this route, then they will need to address it in a context in which, as recorded in paragraph 23 of my judgment, I was expressly looking for a hook or peg or corroboration in contemporaneous documentation and the existence of independent witnesses, and where I reminded myself (in paragraph 53) that a deliberately inaccurate case which I had found to be put forward by the Claimants at the trial (not challenged on appeal or now before me) was not decisive as against them.

I should address one question, and that is whether it is in any way a factor that, as in RBS v Highland, I was the trial Judge, and have subsequently been tasked (in this case only with a Part 24/strike out application) to consider whether my judgment should (arguably) be set aside as obtained by fraud. There was no objection by either party to my hearing this application either before or during the hearing, but I raised the matter myself in the course of submissions. Plainly on the one hand I have no role in ‘defending’ my own judgment, not least where there was no appeal against it, and even the subject matter of the present action does not in any way challenge any of my findings on the evidence that was before me: and equally there is no role for me to consider whether I am personally concerned at there having been, if there were, undisclosed lies put before me. It seems to me advantageous that, at least on this application, I should be the Judge considering whether there is an arguable case for the Claimants, because of my very considerable familiarity with the case, not of course because I have carried the facts with me in the 12 months or so since the hearing, but because I have been much more easily able to familiarise myself with the detail than would have been another Judge. I actually consider that it is helpful that, to adopt the words of Langley J in Sphere Drake at 186, it is the same Judge who is considering whether the fresh evidence would have entirely changed the way in which I approached and came to my decision. The important caveat is that I must ensure that I follow the course laid down by David Steel J in Perjury II at 198 (and repeated and adopted by the Court of Appeal in RBS v Highland at 106) that “the question of materiality [of the fresh evidence] is to be assessed by reference to its impact on the evidence supporting the original decision, not to its impact on what might be the decision if the matter were retried on honest evidence”. The question is the impact, if any, upon my decision if in cross-examination of the Defendant it had been put that he was the owner of Aurdeley, and if I had disbelieved him.

The last question to raise at this stage is by reference to the application before me being under Part 24 and/or by way of a strike out. There is no doubt that, even before the modern interlocutory practices, it was appropriate to consider at an early stage whether an action to set aside an earlier judgment should be permitted to proceed. That is exactly what occurred in Boswell v Coaks [1894] 6 R167. The previous practice had apparently been that no action could be brought to set aside a judgment without leave of the Court, but, that practice having been abolished, it was appropriate in a suitable case for a defendant to move to stay such an action as frivolous and vexatious and an abuse of the process of the Court, and the House of Lords dismissed an appeal by the plaintiff against a decision of the Court of Appeal which struck out his action. Spencer Bower & Handley records at paragraph 17.04, by reference to English and Australian cases, that “the action can be summarily dismissed if it does not disclose a proper case”, and Dicey, Morris & Collins at 13-138 records that “the second action will be summarily dismissed unless the claimant can produce evidence newly discovered since the trial [etc]”. There is not only the important presumption in favour of finality, referred to in the decisions which I have set out above, but also the heavy burden upon a claimant who alleges fraud or (as referred to by Dicey, Morris & Collins at 14-138, set out in paragraph 18 above) perjury.

Mr Oudkerk referred to paragraph 184 of Three Rivers DC v Bank of England (No.3) [2003] 2 AC 1 at paragraph 184 per Lord Millett:

“It is well established that fraud or dishonesty . . . must be distinctly alleged and as distinctly proved; that it must be sufficiently particularised, and that it is not sufficiently particularised if the facts pleaded are consistent with innocence”.

There is thus not only the requirement upon the Claimants to show that they have, at any rate arguably, what is often referred to as irrefragable evidence of fraud, but that they have a sufficient case to set aside a fully argued and contested inter partes judgment. I refer to David Steel J’s statement of the burden on the claimant at trial to establish perjury set out in paragraph 19 above: “distinctly more probable than not”. The most recent recitation of the requirements on an application for summary judgment by defendants was set out by Lewison J in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) namely:

“i)

The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success.

ii)

A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable.

iii)

In reaching its conclusion the court must not conduct a "mini-trial".

iv)

This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents.”

I turn to Mr Rubin’s case as to the alleged lies of the Defendant at the first hearing. Mr Rubin addressed this topic by taking me through 4 passages of transcript of his cross-examination by Mr Flynn, Day 2/pages 192-218, Day 3/page 140, Day 4/pages 129-134 and, when the Defendant was recalled for matters to be put to him which had not been put, Day 11/pages 151-158. As Mr Rubin took me through the transcript, I allocated numbers to the statements or answers which Mr Rubin said to be lies, and they total 35 (some of them overlapping) – hence described in argument as the ‘35 lies’. Many of them were however ‘repeats’ and I aggregate them together as follows:

The first four categories of alleged lies must be addressed together. I can immediately deal with (ii) and (iv) as in any event the least significant:

The lie at (v) I deal with below, as it is relied on in relation to the judgment for interest on costs. I turn to the central alleged lie, combining (i) and (iii), namely that the Defendant was not Aurdeley, and that Mr Zakharov was its beneficial owner. Mr Pavel Nazariyan is a director within the Alfa Bank Group, for which the Defendant used to work. He describes how in May 2003 the Defendant, who had a managerial position at Alfa Bank at that time, asked him to assist him in acquiring an off-shore company for his own purposes, and he agreed to assist the Defendant in the acquisition of a shelf company from Abacus. He says that he was sure that the Defendant was to be the ultimate beneficial owner of the new company:

“7.

. . at a late stage in the process, Mr Stein identified an individual named Mr Zakhar Zakharov to act instead of him as owner on the record of the new company. It was clear to me that Mr Zakharov was acting as the nominee shareholder, whereas the actual ultimate beneficial owner was Mr Stein.”

He continues in paragraph 8 by stating that he does not recall instructions from Mr Zakharov, and that as far as he was concerned Aurdeley was the Defendant’s company, and that he had never met Mr Zakharov and never communicated with him directly, and has never provided corporate services to Mr Zakharov.

It is difficult to know what Mr Nazariyan meant by “at a late stage in the process”, when in one of the documents produced by Abacus, and exhibited by the Claimants, dated 15 May 2003 by which Mr Nazariyan is first reserving the off the shelf company Aurdeley, Mr Zakharov is already mentioned by him to Ms Ioannou, who was or was to be a director of Aurdeley. But, more significantly, Mr Oudkerk relies upon another email from Mr Nazariyan to Ms Ioannou in October 2003 when he describes Mr Stein to her as “a representative person of company’s principal”, which appears positively contradictory of Mr Nazariyan’s own evidence.

Mr Oudkerk sets against the evidence of Mr Nazariyan the evidence of Ms Raouna, whom I have referred to in paragraph 29(i) above. At paragraph 5 of her affidavit she refers to the shelf company Aurdeley and confirms that the sole shareholder was originally Abacus (Cyprus) Ltd, from the date of establishment, when Aurdeley’s shares were transferred on 2 June 2003 to Mr Zakharov. She confirms in paragraph 6 that, by reference to the Abacus Service Agreement, the authorised person for providing instructions regarding Aurdeley to Abacus was Mr Zakharov. In paragraph 8 she refers to Mr Stein as a business consultant/associate of the company, paid a monthly salary by Aurdeley from 2004. She then confirms:

“9.

Since 2 June 2003, when the company became active, any and all the instructions concerning Aurdeley’s administration were coming from Mr Zakharov.

10.

In January 2004, Mr Zakharov informed us in his letter of 14 January 2004 that he instructed Mr Stein to represent him in certain business activities, and consequently he provided us with the directions to accept Mr Stein’s instructions on certain matters concerning trading and transactions in foreign currency . . .

11.

. . for each instruction concerning payment to Mr Stein, in all cases other than those covered by the [exhibited] authorities . . . we asked Mr Zakharov’s approval.”

She then makes the statement, which I have set out in paragraph 29(i) above, as to the lack of involvement of the Defendant in many aspects of Aurdeley’s business. Mr Rubin’s submission is that Ms Raouna and Aurdeley have been misled into believing that Mr Zakharov, and now since 14 August 2014 Mr Topper (to whom I shall now refer), have been the beneficial owners of Aurdeley.

Mr Zakharov is said to have been intimidated by the Claimants, and a recent intimidatory contact with him in Moscow by a representative on their behalf is alleged by the Defendant: in the witness statement of the Claimants’ solicitor the contact is not denied but the intimidation is. The Defendant relies on some other evidence of alleged intimidation of one of his witnesses at the first trial, Mr Radjabov, and Mr Oudkerk also refers to paragraph 24 of my judgment. At any rate Mr Zakharov is not (at least at this stage) giving any evidence. He has, according to the Defendant, transferred his interest in Aurdeley to a Mr Topper, and Mr Rubin points out that there is no evidence produced as to the dealings between Mr Zakharov and Mr Topper or, save for a nominal $1000 consideration, as to what value was paid for Aurdeley as between Mr Zakharov and Mr Topper when, if the Defendant be right, Aurdeley is entitled to receive a very substantial sum, being 60% of a substantial part of the judgment debt owed by the Claimants to the Defendant.

Mr Rubin also raises questions about the Declaration of Trust in favour of Aurdeley of 26 June 2014. Although it is plain that it was drafted by counsel in Wilberforce Chambers in June 2014 and delivered to the Defendant’s solicitors, and sent on by them to the Defendant for signature, on 26 June, and although there is evidence by a witness statement from Mr Eugene Jaffe of 23 March 2015 that the Defendant signed it at his house on 26 June and he witnessed it, there are unanswered questions:

There are certain matters that seem to me to be clear even at this stage:

Nevertheless on this application I am of the view that in the light of the (albeit questioned) evidence of Mr Nazariyan, the unanswered questions about the transfer to Mr Topper and the Declaration of Trust, and the occasional references in the documents from Abacus to “Stein Loan Agreement”, or to “my [rather than Aurdeley’s] USD account”, there is an arguable case that, contrary to what the Defendant said in cross-examination at the trial, he is the beneficial owner of Aurdeley.

I turn then to consider the question of whether, if the Defendant was the beneficial owner of Aurdeley, and if I had concluded that he had lied in this regard (a matter to which I shall return at paragraph 47 below) that would have entirely changed the way in which I approached and came to my decision, or would probably have caused a different conclusion to be reached, in respect of Issues 2 and 7, being expressly the only areas of the case where Mr Rubin suggests that the alleged lies would have had an impact on any of the central issues in the case (Proposition 1).

I deal first with Issue 2. It is understandable that Mr Rubin, particularly coming fresh to the case, should emphasise my comment in paragraph 23 of the judgment (set out in paragraph 7 above) as to the problems of relying on oral evidence, and draw attention to my conclusion in paragraph 25 that I found that the Defendant was a most impressive witness. I am now asked to assume that, in respect of Issue 2 (Was the oral January Agreement for 0.5% a fixed or discretionary success fee?), I had resolved the issue of the beneficial ownership of Aurdeley against the Defendant (see further at paragraph 47 below) and thus that, on the assumptions, I had concluded that he had lied in that regard. I would thus have been faced with the Defendant, whom I had found to have lied in relation to the beneficial ownership of Aurdeley, and with the Claimants whom I had found to have lied (“put forward a deliberately inaccurate case”) in respect of Issue 3 i.e. on a directly relevant issue in the case. Of course, just as I said in relation to the Claimants in paragraph 53 that the fact that they had lied did not necessarily mean that I had to disbelieve them on all matters (and I did in fact address Issue 3 on its own merits), so I would no doubt have considered whether such a lie about the beneficial ownership of Aurdeley was for some other reason than misleading me as to the merits of the case, for example disguising such beneficial ownership in case judgment came to be enforced against him for a substantial costs order by the Claimants if he were unsuccessful. However, if I had been faced with a choice between two sets of oral evidence in relation to Issue 2 by parties both of whom I had cause to conclude had lied to me, or to have doubts about their credibility, I would have all the more done exactly that which I did do, namely looked for reliable corroboration of the evidence for one side or another, and such process was and remains entirely clear.

I could not simply have accepted straightforwardly the Defendant’s evidence, as set out in paragraph 34 of my judgment. But in any event, impressive witness or not, I did not do that:

I am entirely satisfied that had I known, and found, that the Defendant had lied in relation to beneficial ownership of Aurdeley, I should of course have addressed it, but it would have made no difference whatever to my conclusion.

As to Issue 7, it was made entirely clear by Mr Rubin that his only case relates to Issue 7A, i.e. Was there a compromise of the Claimants’ claims (in respect of the Trade Finance and/or of the IPO) on 1 April 2007?: not the (in my judgment almost unarguable) case in respect of an alleged compromise in April 2011.

Once again I am to assume that I had been persuaded that the issue of beneficial ownership of Aurdeley was one which I had to decide and was not collateral (see paragraph 47 below), and that I had resolved that issue by concluding that the Defendant was lying. I would thus again be regarding him as not wholly or always reliable, of being capable of telling lies where it suited him, and perhaps would conclude that I was unable to accept his evidence unless it were corroborated. Thus again I would not be able to accept without more the account he gave, set out in paragraph 94 of my judgment. Once again however there were powerful independent factors supporting his account and rebutting that of the Claimants:

As with Issue 2, therefore, I am entirely satisfied that knowledge of, and a finding as to, lies by the Defendant with regard to his beneficial ownership of Aurdeley, would have made no difference whatever to my conclusion in respect of Issue 7A, and Proposition 1 is unarguable.

I am sure that Mr Rubin picked Issues 2 and 7A as being the only issues in relation to which there might be the ghost of an argument that my decision would have been, or even might have been, different. I do not need to consider the other issues therefore, but, had I done so, I am satisfied the answer would have been the same: indeed even more clearly so in relation to Issue 3, where I found 10 supportive points in favour of the Defendant, and concluded that the Claimants’ witnesses had all lied on this very significant issue in the case.

The Claimants’ case on Proposition 2, as set out in paragraph 13(ii) above, and by reference to the authorities in paragraph 23 above, is that had the Defendant’s alleged lie summarised in paragraph 36 above been revealed at the trial it would have had such an impact on his credibility that “no reasonable [Judge] could have acted upon his evidence” or that the “additional evidence [as to his credit] must have led a reasonable [Judge] to a different conclusion from that actually arrived at”, that “the character of the [defendant] was of peculiarly vital significance” and/or “that there was a feature of paramount importance outweighing the grave disadvantage of protracting the litigation”. However characterised by the various dicta, it is a very high hurdle.

I take into account the alleged lies as to the ownership of Aurdeley, as summarised above, and in addition the assertion that he had spent his life savings in pursuing the litigation, which Mr Flynn suggested to me in his closing submissions had been influential in my approach to the case. However (i) I have and had no recollection at all of this – I was I believe far more influenced by the manifest dishonesty of the Claimants and their witnesses, as described vividly in paragraphs 52 to 56 of my judgment and (ii) if the Defendant did indeed own Aurdeley as now suggested, and Aurdeley was receiving his earnings, then it was those very funds i.e. his earnings which he was using to meet the very substantial costs.

It is important to bear in mind that the alleged lies related to his ownership of (and involvement in) Aurdeley. The case I was actually deciding was whether the Claimants had agreed to engage the Defendant on the basis of a fixed percentage success fee for both Trade Finance and the IPO, and whether that had been compromised. The issues about Aurdeley were plainly collateral issues, as indeed is recognised by Mr Rubin’s argument, which I have recorded in paragraph 20 above, with regard to ‘getting away from the central issues’. I had already ruled out (see paragraph 24 of my judgment set out in paragraph 7(ii) above) a number of collateral and satellite issues, namely (i) the Defendant’s allegations as to misconduct by the Claimants, which had it been admitted might, if established, have damaged the credibility of the Claimants (ii) the Defendant’s allegation as to intimidation by the Claimants. It does not seem to me therefore that I would necessarily have resolved the collateral issues as to the ownership of Aurdeley.

I have already determined, in relation to my conclusions with regard to Proposition 1, that such alleged lies (even if established) were not operative or causative in relation to the only Issues relied upon in that regard by Mr Rubin. Had I concluded that, by reference to the alleged lies, I had to regard his credibility as damaged, I would have been required to set that against the severely damaged credibility of the Claimants on central issues (see paragraphs 27 and 28 of the judgment in particular). I have no doubt that it would have made no difference, given (i) the support and corroboration to be looked for, and which was obtained, from contemporaneous documents (ii) such support and corroboration of the Defendant’s case by reference to the convincing evidence from independent witnesses (iii) the inconsistent and, in important respects, dishonest evidence of the Claimants on central issues. I must of course consider the Claimants’ case at this stage by reference to whether it satisfies the test of being arguable or having a realistic prospect of success (see paragraph 27 above), noting that, as appears from all the authorities to which I have referred, the hurdle at trial would be a high one for the Claimants to surmount. It is important to record, in respect of both Propositions 1 and 2, that I disbelieved the Claimants and their witnesses for good and substantial reasons, irrespective of any conclusion as to the credibility or character of the Defendant. Thus in relation to Proposition 1, I have already explained this in paragraphs 37 to 44 above, and as to Proposition 2, this was not a straightforward ‘obverse of honesty’ scenario, as it was on the facts of Meek, referred to in paragraph 23(ii) above. I have no doubt that, by reference to any of the ways in which Proposition 2 can be put on the basis of the authorities, it is not arguable.

In any event, there is an important further obstacle for the Claimants to surmount in relation to both Propositions 1 and 2, which I have not yet brought into account. This is the issue of fresh evidence, which I am quite satisfied requires the satisfaction of the Reasonable Diligence requirement. The Claimants always knew about Aurdeley. The Defendant provided his services through Aurdeley, as the Claimants knew. The Darcon contract, the April Agreement, and several of the family contracts with the Chodievs under which the Defendant provided his services to them from 2007 to 2011, were entered into with Aurdeley. The case now is based upon the information obtained by the Claimants pursuant to the order of the Cypriot Court against Abacus obtained on 22 July 2014, referred to in paragraph 29(i) above. It is plain that the Claimants could have similarly obtained that information prior to the trial. For example in the two Agreements of 30 September 2009 between Aurdeley as Consultant (providing the services of the Defendant as Associate) and, respectively, the First Claimant and Mounissa, the authorised address of the Consultant was stated as Abacus Services, with its address in Nicosia, Cyprus, and listing Ms Raouna’s name. Reasonable or any diligence would have enabled the Claimants to access Abacus to find out the desired information as to the identity of the owner of Aurdeley, and to obtain all and any other documents which were subsequently obtained by the July 2014 Order. Instead they ‘elected’ (see paragraph 20 above) to pursue correspondence prior to trial with the Defendant’s solicitors as to the role of Aurdeley, and then issue, and not pursue, a summary judgment application, and then run closing submissions, all upon the quite different basis that the Defendant did not have a claim because the claim was that of another party, Aurdeley.

What is more, it is now clear from the documents recently disclosed in these proceedings, which I permitted the Claimants to put in ‘de bene esse’ for the purposes of this application, that there were other communications in 2007 and 2008 between the Defendant and various representatives of the Claimants or the Chodiev family (Akmal Bekmirzaev, Sabir Chodiev) in which the Defendant referred to Aurdeley as “my company” and to an Aurdeley account as “my account”, which was consequently available to them.

If there had been, by reference to Propositions 1 and 2, any arguable case by reference to fresh evidence that my judgment in favour of the Defendant should be set aside by reference to alleged lies with regard to his ownership of or involvement in Aurdeley, it would in any event be unarguable by reference to the Reasonable Diligence requirement.

I turn to Proposition 3, the “Fundamental Deception”. This is put in the proposed Amended Particulars of Claim by way of addition to paragraph 1 as follows:

“(1)

Mr Stein brought the claim in his own name rather than in the name of Aurdeley Enterprises Limited (“Aurdeley”) knowing that the claim, if any, was really Aurdeley’s claim. He did this to prevent exposure of the fact that he had been using Aurdeley as a vehicle to evade tax in the United States and/or to prevent the proper disclosure of documents and/or to prevent it being apparent that the claim was truly Aurdeley’s claim.

(2)

To maintain that deception he was obliged to give knowingly false evidence at the trial about Aurdeley and his relationship with it.

(3)

The Original Stein Proceedings were thus fraudulent in their very inception (the “Fundamental Deception”).”

This is characterised by Mr Shiu of the Claimants’ solicitors, in paragraph 73 of his witness statement, by the words “Mr Stein thus appears to have deliberately constructed a bogus claim in his own name in such a way that its ownership of Aurdeley would not be revealed”. To describe the claim as “bogus” is somewhat of an excessive statement, given the (unchallenged) conclusions in my judgment on all 7 Issues. The proposed amended pleading is in any event difficult to grasp once it condescends to particulars. Paragraph 9 of the original Particulars of Claim remains, setting out four agreements, the Darcon contract, the two agreements between the Defendant and the Alferon companies and the April Agreement. The new paragraph 10(A) now states:

“10A Mr Stein, while acknowledging the existence of previous agreements for service between Aurdeley and various companies in the ownership or control of the Claimants, asserted that the agreements set out in paragraph 9 above were made between him in his personal capacity and the Claimants, even though he had previously drafted a letter for Aurdeley to send (9^th February 2010) claiming the same bonus payments for that company and which he deliberately did not disclose.”

This makes no sense. Two of the four agreements in paragraph 9 were indeed made between him in his personal capacity and associate companies of the Claimants, and he at no stage asserted that the Darcon contract or the April Agreement were entered into by him in his personal capacity. What his case was, and I found, and the Court of Appeal upheld, was that the oral agreement made in January 2006 was by him personally (with the Trio personally).

The Proposition 3 case is that he dishonestly brought the claim in his own name and not in that of Aurdeley, when Aurdeley had the claim. This is on the face of it inconsistent with the case discussed above that he was Aurdeley, because if he was Aurdeley then it is plain that he would have had no problem with establishing an entitlement as agent for an undisclosed principal, since he would also have controlled the principal, and there would have been no ‘rival’ claim by a third party; but then, as Mr Rubin at one stage in his submissions disarmingly said: “in this case one has to ride several horses”.

There are two reasons put forward why it is alleged that he was dishonestly putting forward a claim in his own name when he knew it belonged to Aurdeley. The first is (paragraph 21B(v) of the proposed Amended Particulars of Claim) a motive of “avoiding the Claimants advancing a defence of illegality in relation to his use of Aurdeley” which he allegedly had (paragraph 21D(iv)) set up as an off shore vehicle for the purposes of tax evasion.

It is significant that:

The second justification for the proposed amendment to add the so-called “Fundamental Deception”, of bringing the claim in his own name when it in fact belonged to Aurdeley, is said to arise out of the non-disclosure in the proceedings by the Defendant of the letter of 9 February 2010, referred to in paragraph 10A of the Amended Particulars of Claim, which I have quoted in paragraph 52 above. This is a letter composed by the Defendant and sent via Aurdeley to the First Claimant (care of Mr Bekmirzaev, referred to in paragraph 50 above) at Capellen Investments, which is accepted to have been the normal post box used by the Claimants (and also used for a second letter, sent to the same address, dated 17 February 2010, which both the Claimants and the Defendant disclosed in the proceedings). The letter is a claim by Aurdeley for monies due (and only paid much later, as recounted in my judgment) under the “family contracts” entered into with Aurdeley for the provision of the services of the Defendant, referred to in paragraphs 5(vii) to (xii) above).

Using a formalistic wording by reference to the terms of the relevant Consulting Services Agreement, which described the relevant member of the Chodiev family as “Client”, Aurdeley as “Consultant” and the Defendant as “Associate”, the Consultant was complaining about sums unpaid by the Client. After setting out the sums due under the identified Agreement in full, the letter continues:

“As was made clear to the Client by the Consultant during this conversation, any agreement regarding a future working relationship must take into account amounts previously earned by the Consultant several years ago, that have still not been paid.

More specifically, the Consultant successfully performed its services in connection with securing trade financing in the amount of one billion five hundred million US dollars ($1,500,000,000) for the benefit of the Client and his partners. By prior oral agreement with the Client and his partners, the Consultant was to receive a fee for these services. To date, the Client has still not paid the balance of this fee, in an amount equal to three million US dollars ($3,000,000). Moreover, the Consultant has also successfully performed its services in connection with the Initial Public Offering of Eurasian Natural Resources Corporation. By prior oral agreement with the Client and his partners, the Consultant was also to receive a fee for performing these services. To date no amounts whatsoever have been paid to the Consultant in this regard.

It is the express wish of the Consultant to seek an amicable resolution of these issues and to agree new terms that will enable the Client and the Consultant to continue their working relationship in a mutually advantageous manner. We note, however, that very little time remains to have discussions and reach an agreement on these issues.

In the event no discussions are had and no new agreement is reached, it is the intention of the Consultant to cease its services to the Client immediately upon the expiry of the Term. The Consultant expressly reserves all of its rights to seek legal redress with respect to all moneys owed to it.”

The Claimants allege that this letter shows not only that the sums being claimed by Aurdeley under the separate Consultancy Services Agreement were due to Aurdeley, but that Aurdeley is admitting and asserting that it was the party to whom the earlier sums unpaid in respect of the Trade Finance and the IPO should also be paid. The Defendant accepts that his language was inapt; he asserts that the purpose of the letter was to make the claim under the identified Consultancy Services Agreement, while making plain that substantial sums were still due from his time with Alferon/ENRC, and that the word “Associate” rather than the word “Consultant” should have been used in respect of those earlier matters which were not the express subject matter of the claim itself being made in the letter.

This letter of 9 February 2010 was not disclosed by the Defendant in the proceedings, even though it is apparent that he was supplied with it by Abacus, together with other documents which he did disclose. Rather than its being an oversight as the Defendant says, Mr Rubin submits that it was deliberately “filleted out”, to avoid its being disclosed in the proceedings to the Claimants, so that the fact that the claim was really that of Aurdeley would not be revealed to the Claimants. This is the basis of the dishonesty alleged in the proposed amendment.

Quite apart from the question of fresh evidence, to which I shall return, this seems a very strange dishonesty:

If there were an inference to be drawn that the Defendant deliberately failed to disclose the letter of 9 February as part of an intention to conceal the entitlement of Aurdeley to sue, Mr Rubin puts forward the following as the purpose which would or could have underlain it:

I consider that this proposed amended case of Fundamental Deception does not save the proceedings, and is not arguable, but in any event it is further flawed by the fresh evidence rule, and in particular the Reasonable Diligence requirement. The Claimants could have run (did run) a case by reference to the Entire Agreement in the April Agreement, and could, if so advised, have run a case by reference to the Entire Agreement clause in the Darcon Contract, which would have been no more viable with the letter of 9 February than without it. But in any event the careful construct of this new amended case is all founded primarily upon the shaky foundation of the production of a copy of the 9 February letter in the Abacus disclosure. But the Claimants had the letter. It is not ‘fresh evidence’. The only explanation is given by Mr Shiu in paragraph 58 of his witness statement of 6 February 2015:

“58.

Without waiving privilege, I understand from the Claimants’ representatives that Capellen is a company within the Chodiev family companies, that it has no assets and carries on no commercial activity and that its principal function is to act as a post room for the Chodiev family and its companies. The Claimants’ representatives have been able to confirm that the [9] February 2010 Letter was received by Capellen. I am instructed that the Claimants do not recall locating or identifying the [9] February 2010 Letter in the course of their disclosure searches in the Original Proceedings. I further understand from King & Wood Mallesons LLP, the Claimants’ solicitors in the Original Proceedings, that they have checked their files and confirmed that they were not provided with a copy of the [9] February 2010 Letter in the course of the disclosure exercise or otherwise. I understand that a search of Capellen’s documents repositories is currently under way.”

This limited explanation does not even say whether, given that the letter, like its successor of 17 February which made express reference to it, reached the regular post-box of the Claimants it (or either of them) was read by the Claimants or anyone on their behalf. No evidence to that effect is given by any of the Claimants or on their behalf. Whether or not it was read, the material which is now said to justify the Fundamental Deception case was available to them at the time. There was also no explanation given which would begin to satisfy the test of reasonable diligence as to why that letter, unlike its successor of 17 February, was not disclosed to, and thus considered by, the Claimants representatives.

I am satisfied that on the basis of none of the ways in which Mr Rubin puts his case on behalf of the Claimants is there any proper basis for challenge to my judgment and no arguable case for it to be set aside as obtained by fraud or perjury.

I awarded interest on the judgment sum, which was in part a debt, carrying interest under the Late Payment of Commercial Debts (Interest) Act 1998 (“the 1998 Act”), and in part damages, and also on the costs. There were two hearings, and consequently two judgments, when I dealt with these matters, because, at the instance of the Claimants, some issues were adjourned from what was otherwise the usual post-judgment consequentials hearing on 16 April 2014. On that occasion I adjudicated on some matters of principle, including the issue arising out of the Part 36 offer made by the Defendant in July 2013, to which the Claimants had failed to make any response at all. After hearing argument, including argument by reference to CPR 36.14(4) relating to the circumstances in which the specified consequences under Part 36 should not follow in whole or in part, I concluded that for the period since 21 August 2013 I should award indemnity costs, by reference to Part 36, in favour of the Defendant, and I also, in terms to which I have referred in paragraph 8 above, awarded indemnity costs in respect of 35% of the costs of the Defendant from 1 January to 20 August 2013, but otherwise costs on the standard basis.

On 1 October 2014 I dealt with the matters which had been adjourned on the earlier occasion: further fresh counsel, Mr Wolfson QC, was now instructed for the Claimants. There were three issues. The first related to the applicability of the statutory interest (under the 1998 Act) on the debt claim, to which I have referred above; the second related to interest on the damages; and the third to the rate of interest on the debt, damages and costs. In respect of the statutory interest on the debt, that led to an interest rate of 8.5% which, after argument, I awarded in respect of the entire period until it was increased by virtue of the impact of Part 36 as from 21 August 2013 to 10.5% from then onwards. As for the damages, there was some argument about the appropriateness of 4% over US prime rate, which in the event I concluded was appropriate, amounting to a rate of 7.5% with regard to the period prior to 21 August 2013, and the Part 36 rate of 10.5% thereafter. The interest on the costs followed the same course, namely, 7.5% prior to 20 August 2013 (paragraph 8 of my Order) and 10.5% thereafter pursuant, to CPR Rule 36.14(3)(c).

In their proposed Amended Particulars of Claim, the Claimants bring forward a new case, which is expressly clarified by paragraph 75, namely “whether or not Mr Stein’s dishonesty is sufficient to justify setting aside the judgment itself, the interest award stands as a distinct award induced by fraud which should be set aside even if the claimed bonus award is not.”

Mr Rubin’s submissions were helpfully addressed separately as between the interest on the judgment and the interest on the costs, and both are centred upon my judgment and Order of 1 October 2014. There has been no appeal against, nor is there any challenge even in the amended pleadings to, my judgment and Order of 16 April 2014. Consequently my conclusions with regard to the Part 36 offer and to the appropriateness of indemnity costs by virtue of the Claimants’ conduct stand unchallenged. Although in written submissions subsequent to the hearing Mr Rubin for the first time referred to CPR 36, by reference to a decision of Briggs J in Lilleyman v Lilleyman (No.2) [2012] 1 WLR 2801, though without referring to a subsequent decision of Briggs J in Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch), to which Mr Oudkerk subsequently referred me, I am satisfied that there is neither a pleaded nor arguable basis for my revisiting my decision on the impact of the Part 36 consequences as to indemnity costs, and as to the increased rate for interest on debt, damages and costs. In any event Mr Oudkerk referred me to the words of Briggs J in Smith at paragraph 13(d) when he said that “the court does not have an unfettered discretion to depart from the ordinary costs consequences set out in Part 36.14. The burden on a claimant who has failed to beat the defendant’s Part 36 offer to show injustice is a formidable obstacle to the obtaining of a different costs order. If that were not so, then the salutary purpose of the Part 36, in promoting compromise on the avoidance of unnecessary expenditure of costs and court time, would be undermined.”

I turn first to deal with the interest on the judgment sums.

This arises in the way I describe in my judgment of 1 October 2014, namely as follows. As previously, I shall change the nomenclature to reflect the present position:

“12.

The greater argument that was put forward before me related to the fact that [the Defendant] gave evidence in the course of the hearing that he had reached an agreement, when he went independent, effectively, as a consultant, that he would account to Aurdeley Enterprises Limited 60/40 in their favour in respect of any success fees that he earned. And when he was [paid] the 4 million, which was the only time during the course of this relevant dispute that the [Claimants] paid him anything, he did in fact account to Aurdeley Enterprises as to 100 per cent of that sum.

13.

He gave evidence by the end of the trial that he regarded himself as obliged to pay Aurdeley, although not under any contractual obligation to do so. Perfectly understandably, Mr Wolfson raised, through Mr Shiu's witness statement, the question as to whether the fact that the [Defendant] had said at the outset that he had a contractual obligation to pay to Aurdeley 60 per cent of any success fee affected his entitlement to interest.

14.

A number of authorities were looked at, but effectively, the nub of Mr Wolfson's argument was that, whereas he would have perhaps argued that, if the interest was payable to Aurdeley Enterprises, it might perhaps have been at a different rate by virtue perhaps of some greater borrowing power on the part of Aurdeley, that was not an argument he pursued.

15.

But what might be the case would be if there was an obligation to pay Aurdeley Enterprises the capital but not to pay any interest. That would have led to a windfall by Mr Stein, and Mr Wolfson submitted that the [Defendant] should in those circumstances only become entitled to 40 per cent of the sum otherwise recoverable against his client.

16.

Mr Oudkerk QC took a strong position in relation to this. First of all, he said this was simply a continuation of a failed argument at the hearing, indeed only at the end of the hearing, and in the Court of Appeal, which rejected it, that Aurdeley Enterprises, rather than the [Defendant], ought to have been making the claim.

17.

Mr Wolfson made plain that that was not the case, and I accept that it is not the case, by virtue of his submission, to which I have referred, that he accepted that if in fact there was the contractual obligation to Aurdeley, he would not be pursuing this argument.

18.

His argument depended upon there being a contractual obligation to Aurdeley, but not a contractual obligation to pay the interest.

19.

Mr Oudkerk's second submission was that this was nihil ad rem as between the [Defendant] and the [Claimants], and just as the Court is not interested in how in fact a judgment creditor has financed himself, whether he had had to borrow money or not, whether he had had the funds or not, but, nevertheless, the appropriate rate of interest was judged on the basis of how he could have borrowed, so here it was not of any interest, and should not be of any interest to the [Claimants], whatever his arrangement was with Aurdeley.

20.

The latter argument by Mr Oudkerk is an interesting one, and I raised in the course of argument what the position would be if a claimant had, and it was known that he had had, an interest-free loan which he then was in a position to repay out of judgment proceeds. Would such a person be prevented from recovering against a defendant interest which he in fact had no obligation to pay to the person who had put him in funds?

21.

It seems to me Mr Oudkerk had a powerful case that that would indeed be nihil ad rem, but, not least because this was a point that effectively only came up in the course of argument, he had no authorities at his hand to deal with the point.

22.

It seemed to me that the sensible course, given that the [Defendant] himself was at court, that this should be put beyond doubt by a witness statement from him. And it has been put beyond doubt, namely that he is under an obligation to pay to Aurdeley Enterprises, after receiving credit for the $4 million which he has already paid over to them in full, 60 per cent of the net proceeds and including 60 per cent of the interest. In those circumstances, the point falls away. I conclude that it is appropriate to award the interest at 4 per cent over prime rate on the full amount of the damages.”

The Defendant’s witness statement to which I make reference in paragraph 22 was his fifth witness statement. The authorities to whose absence I referred in paragraph 21 have now been provided by Mr Oudkerk for argument on this application, and, as will be seen, they do indeed support his proposition, namely Fattal v Walbrook Trustees (Jersey) Ltd [2009] 4 Costs LR 591 and Simcoe v Jacuzzi UK Group Plc [2012] 1WLR 2393.

Mr Rubin runs effectively in tandem two assaults on the Order for interest, based upon the Defendant’s evidence as to the 60/40 split with Aurdeley:

Before I consider the impact of those arguments, I must address the following:

I address first the proposition that the Defendant is in fact the owner of Aurdeley, which, it must be emphasised, is of course the Claimants’ main case, as discussed above. I have found this to be arguable, though dismissing it as a ground for setting aside my judgment of 16 April, for the reasons I have given: it is also the backcloth to the doubts which the Claimants express as to whether the Declaration of Trust was signed in June, or whether it was backdated, perhaps after the October hearing. The suggestion therefore is that the Defendant is in fact free to dispose of his assets as between himself and Aurdeley as he wishes. If that is so, then the argument for the Claimants on this point falls away completely. There was no reason why he should not have interest on the sums he has received because he has chosen to deal with them in a certain way as between himself and Aurdeley, and any lies he may have told do not constitute ground for punishment by denying him interest on his award: or more accurately interest on that part of the award as has not in any event been dealt with by virtue of the statutory interest on the debt and the penal interest on the costs under CPR 36.14, to which alone the Claimants’ challenge can relate.

If on the other hand Aurdeley does not belong to him, but he has made the arrangement with Mr Zakharov described above, then it seems to me that the matter is fully resolved by the Cooperation Agreement, quite irrespective of the Declaration of Trust. Given that, as between them, he is in my judgment obliged to account to Aurdeley for their share of the sums received, the provisions of clause 7.3 are apt to cover both principal and interest received:

“In order to further the progress of each Project, Mr Stein is permitted to be employed by the Client or engage as a consultant or member of the board provided that Mr. Stein accounts to Aurdeley for any funds received in compensation for such employment or consultation (excluding reimbursement of personal expenses) as part of the fees received from the Client pursuant to clause 5.5(b)”

Because it forms an important part of the Claimants’ case that the Defendant is the beneficial owner of Aurdeley, they understandably continue to rely on the unanswered questions to which I refer in paragraph 34 above about the Declaration of Trust. However, even in the absence of the Declaration of Trust, the Cooperation Agreement remains, and there is in any event the powerful effect of the two authorities to which I have referred, which suggest that, even without an obligation to account to a related funder for interest, interest would still be payable to the judgment creditor. Without the Cooperation Agreement, and certainly prior to its execution, the Defendant would either have been liable to account to Aurdeley or, if he did so voluntarily, would or could have done so with or without interest, without impact upon the question as to whether the Claimants were liable to pay interest to him.

The Claimants put their case in this regard as follows in the Amended Particulars of Claim:

“73.4

There was no evidence apart from Mr Stein’s that there was any genuine obligation to pay interest over to Aurdeley. Hence, the Fifth Witness statement was not a proper basis for making the award of interest. The court could not have been satisfied that any obligation to pay the principal sum to Aurdeley also carried with it an obligation to pay over interest also.

74.

If Burton J had known that what Mr Stein had said at the trial about Aurdeley was knowingly false he would not (or may not) have accepted the Fifth Witness Statement and in any event would not have made the award of interest. The award of interest was thus procured by fraud. Or Burton J would not have awarded interest to Mr Stein at the rate he did or would not have awarded interest on the Judgment sum in full.”

This puts the case firmly on the basis of the false account about Aurdeley and asserts that he was the beneficial owner of Aurdeley. I do not conclude that if I had known that, and, as I have determined, had still given judgment for the Defendant, it would have had any impact upon the order for interest (or the balance of it not covered by the 1998 Act or CPR 36.14). I do not therefore conclude that there is an arguable case, nor one with any realistic prospect of success, for the order for interest on the judgment sum to be set aside either in whole or in part.

However there is a further ground which, even if I had not come to that conclusion, would have been fatal to this application, and once again it relates to the fundamental requirement for fresh evidence for an application such as this. By the time of my judgment and Order of 1 October 2014, the Claimants had already made their application in Cyprus and obtained their order of 22 July, although it would appear, given that Ms Raouna’s affidavit was not sworn until 3 October 2014, that they had not actually received any documents. However even without those documents it is plain that they had sufficient information to be able to set out their case to the Nicosia Court on 18 July 2014 under the heading “the ownership of Aurdeley”. Insofar as it was relevant in the consideration of whether interest should be paid to the Defendant by the Claimants that there was a contractual obligation between the Defendant and Aurdeley, at least the matters then known to the Claimants, which of course in accordance with my finding in relation to the main judgment could have been obtained by reasonable diligence long before, could and should have been brought to my attention on 1 October, but the Claimants ‘elected’ to rely on a case that Aurdeley was an independent third party (not owed interest), just as it had done in pursuing their case to the Court of Appeal.

I turn finally to the question of interest on costs, which is a self-contained point. The Defendant stated in evidence, as set out in paragraph 28(v) above, that he had had to spend his life savings on the litigation. He said this again in his third witness statement made on 16 May 2014:

“29.

Whereas the First to Third [Claimants] have unlimited resources, I have been forced to use my life savings to fund my living expenses and the substantial litigation costs of pursuing the claim. . .

31.2

As a result of funding the litigation from my savings, I have been deprived of the interest which I would have been entitled to on those sums had I held them in a personal savings account where they would have accrued interest on a compound basis.”

This was, it seems, false unless he is or was accepting that Aurdeley was his company, since so far as the Defendant’s legal costs are concerned they have throughout been paid by Aurdeley, as he asserts by virtue of an (unwritten) loan agreement, at rates of interest increasing from 8% to 10%. The funding by Aurdeley of the legal fees was disclosed as a result of the Abacus order, and is consequently also in the category described in paragraph 49 above.

The Claimants seek by their amended pleading to set aside my judgment and Order of 1 October 2014 in relation to interest on costs as obtained by fraud: again it could not apply to the penal interest rate imposed on the costs since 21 August 2013 under CPR 36.14.

The Defendant’s lie, as such it appears to have been, was obviously an affront to the Court, particularly when repeated. However there are two factors which lead me to conclude that it was not a false statement which had any operative effect on the Order I made, such that there is no arguable case to set it aside:

I do not accordingly conclude that the Claimants have an arguable case, nor one with any realistic prospect of success, to set aside my Order of 1 October 2014.

In the circumstances I grant the Defendant’s application to strike out and dismiss the Claimants’ claim, and, having considered the proposed Amended Particulars of Claim and the additional documents which the Claimants apply to rely on, consider that they make no difference to the Claimants’ case, and cannot ‘save’ it, so that such applications are dismissed.

After I had written this judgment, and minutes before my clerk was to send an email to the parties distributing it, a note was received from counsel for the Claimants drawing my attention to a judgment of Newey J handed down on 6 May 2015 Takhar v Gracefield Developments Ltd [2015] EWHC 1276 (Ch), whereby he concluded that, in a fresh action to set aside an earlier judgment between the same parties as obtained by fraud, the Reasonable Diligence requirement did not have to be satisfied, contrary to my own conclusion set out in paragraphs 14 to 20 above. I have not altered my judgment in the light of Newey J’s judgment for two reasons:

I accordingly, with the benefit of overnight consideration of my draft judgment, stand by it.