Alliance Bank JSC v Zhunus & Ors

On 14 November 2014 Flaux J:

gave the Claimant (“Alliance”) permission to serve a Claim Form and Particulars of Claim out of the jurisdiction (by alternative means) on the Second Defendant (“Mr Arip”); and

made a worldwide Freezing Order against Mr Arip in respect of assets up to the value of £206 million (“the Freezing Order”).

In the claims underlying these applications, Alliance contends that in 2008 the Defendants devised and executed a scheme to acquire for their own benefit valuable assets (namely the shares and assets of two Russian companies which owned and operated oilfields formerly known as Krasnoleninskneftegaz-Dobycha (“KNG-D”) and DinyelNeft LLC (“DinyelNeft”)) and in so doing to deprive Alliance of the benefit of these assets as security for borrowing facilities and lending which totalled approximately US$316 million.

The following applications fall to be determined:

An application by Alliance for a continuation of the Freezing Order made by Flaux J on 14 November 2014 until trial or further order.

Applications by Mr Arip:

To discharge the Freezing Order on the grounds that (i) Alliance does not have a good arguable case against him and (ii) there were material non-disclosures at the without notice hearing on 14 November 2014.

To set aside service of the Claim Form on the grounds that there is no serious issue to be tried and that there were material non-disclosures at the without notice hearing on 14th November 2014.

Other applications made in respect of the first and third defendants’ positions were resolved by agreement between the parties. The evidence adduced by the parties took the form of affidavits and witness statements, including in particular evidence from Mr Bolgauov, (the senior banker of the legal services division of Alliance), Mr Arip, the solicitors acting for Alliance and Mr Arip respectively and the statement of a Russian lawyer in relation to the enforceability under Russian law of pledges given by Trendall then under the control of Mr Arip.

Proceedings were commenced in this country on 22nd July 2014 with details of the claim set out as follows in the Claim Form:

The claim form went on to set out a series of actions which were said to be unlawful and to constitute wrongdoing under Kazakh law, with resultant harm to Alliance.

Under the heading of “the pledge of the KNG-D shares”, paragraphs 4-7 of the Particulars of Claim (“POC”) set out the pledge by Kausar Overseas of its 50% holding of the shares in KNG-D to Alliance as security for the obligations of Simons Holding under its loan from the bank. Under the heading “the pledge of the DinyelNeft shares” paragraphs 8-12 set out the pledge by two British Virgin Islands companies, Barnard Commercial SA and Argentan SA of their shares in DinyelNeft in respect of debts owed by them to Alliance under loan facilities. These companies were all linked to the Seisembayev brothers who at that time owned Alliance. The loans were therefore “shareholder-related loans”.

Under the heading “the scheme to free the shares of KNG-D and DinyelNeft from the pledges”, Alliance set out its case that, at or about the beginning of 2008, the defendants developed a plan to acquire for their own benefit the valuable assets represented by the shares of KNG-D and DinyelNeft and, in doing so, to deprive Alliance of the benefit of those assets as security for the borrowing of Simons Holding, Barnard and Argentan. In furtherance of that plan, it was alleged that the defendants took or procured the taking of steps set out in paragraphs 14-40 of the POC with, where necessary, the assistance of persons within Alliance, whose identity was not known to the present management of Alliance. Underlying this allegation is evidence that Mr Arip had stated that he had been in partnership with the Seisembayev brothers and that, prior to February 2009, when the structure of Alliance was changed, employees of Alliance acted at the behest of the brothers, to the detriment of the interests of Alliance.

At paragraph 16, reference was made to applications made in October 2008 by companies owned by Mr Arip for loans from Alliance. The companies in question were Bolzhal Limited LLP (“Bolzhal”), Holding Invest LLP (“Holding Invest”), Caspian Minerals LLP (“Caspian”) and Commerce Business Centre (“CBC”). Details of the loan arrangements were then spelt out, albeit not entirely accurately. For present purposes, the more critical provisions of the Loan Agreements were these:

Caspian agreed to provide security for its loan in the shape of KNG-D shares.

CBC and Bolzhal, by article 3.5 of the loan agreements agreed not to alienate assets held by them without the consent of Alliance. Those assets included, as appears from the following paragraph of this judgment, the 50% shareholding in KNG-D and the 100% shareholdings in DinyelNeft.

Security was to be provided within a period of 1 month by all the Borrowers.

On or about 24th October 2008 Caspian purchased all of the shares in Kausar Overseas, CBC purchased all of the shares in Barnard and Bolzhal purchased all of the shares in Argentan, with resultant indirect ownership by Caspian, CBC and Bolzhal of Kausar’s 50% interest in KNG-D and Barnard and Argentan’s combined 100% interest in DinyelNeft.

On the same day, 24th October 2008, Barnard, Argentan and Kausar concluded a Memorandum of Understanding or Term Sheet with the company which was later to be named Exillon Energy PLC (“Exillon”), and to be the subject of an IPO on the London Stock Exchange. The Memorandum confirmed the intention of Exillon to acquire directly or through its affiliates the 50% shareholding in KNG-D and the combined 100% holdings in DinyelNeft for the price of $4.069 million. Exillon was also to discharge the indebtedness of those companies to Argentan, Barnard and Kausar. In a supplemental document dated November 28th 2008 the parties confirmed their intention that this indebtedness should be written off.

On 3rd December 2008 Alliance made a further loan to CBC which agreed to provide a 100% shareholding in DinyelNeft as security for fulfilment of its obligations.

On 29th December 2008 Alliance made a further loan to Caspian which agreed to provide security in the form of shares in OmskGeoTEK, SibGeoTEK, SibirGeoTEK and KNG-D.

By the end of December Alliance had released the Barnard and Argentan pledges of shares in DinyelNeft, as their debt to Alliance had been discharged with the monies loaned to Holding Invest, Bolzhal, Caspian and CBC (the “Replacement Borrowers”). There was still outstanding indebtedness of Simons Holdings so that, although a request was made for release of Kausar’s pledge of shares in KNG-D, that pledge remained in being. Alliance nonetheless gave permission for the sale of the KNG-D shares owned by Kausar Overseas to Tredall “without exemption from encumbrance under obligations”. That purchase occurred on or about 30th January 2009.

At this stage, Alliance had such financial problems of its own that it had to be recapitalised by the Sovereign Wealth Fund of Kazakhstan, Samruk-Kazyna by an agreement dated 2nd February 2009. The Seisembayev brothers departed together with much of Alliance’s senior management and a new management team took over in February 2009. Following this, it was discovered that very large shareholder related loans had been made on preferential terms to entities associated with the Seisembayev brothers where there was either no security or inadequate security. The former chairman of the board of directors, Margulan Seisembayev was subsequently convicted of various criminal offences in relation to Alliance’s dealings, as were other members of the management team.

On 3rd February 2009, the day after the agreement reached for the recapitalisation and reconstitution of Alliance’s management, amendments were made to the loan agreements of 24th October with the Replacement Borrowers, but with the existing management still in place. The 24th October loan agreements had provided for specific security to be given and also that, within one month, “the borrower shall provide assets for the pledge in the form of fixed assets, the value of which covers the obligations of the Borrower under this Agreement in full, unless a different value is determined by agreement between the parties” (in translation). Thus the money advanced in October was advanced on the basis of a promise of security but without any security actually being taken. Each of the loan agreements also provided for deferred payment of interest and capital, apparently representing highly preferential terms. The 3rd February amendments were even more favourable to the Replacement Borrowers. New repayment schedules further deferred repayment obligations and article 3.6 of the loan agreements was amended to read as follows:

On 12th February 2009, 2nd April 2009 and 9th April 2009, the 50% shareholding in KNG-D and the 100% holding in DinyelNeft, owned respectively by Tredall, Argentan and Barnard were acquired by subsidiaries of Exillon. It would appear that this put CBC and Bolzhal in breach of article 3.5 of the loan agreements, in which they agreed not to dispose of their assets (which included, through Barnard and Argentan, the DinyelNeft shares) without the consent of Alliance, even if Caspian and CBC were not in breach of their obligation under 24th October Loan Agreements to provide those shares as security to Alliance, by reason of the amendment of Article 3.6.

At paragraphs 32-34 of the POC, it was alleged that Mr Arip represented to the new managing director of Alliance, Mr Balgarin, that the assets of KNG-D and DinyelNeft were of no value as security for the borrowings of the Replacement Borrowers because both companies were exposed to corporate raiding and/or hostile takeovers by local governments. That took place, as alleged in the POC, in April 2009, but in subsequent evidence, the date was said to be March 2009 because it preceded the AppraisConsult valuations of the shares in the three GeoTEK companies. Either at that meeting or subsequently Mr Arip proposed that Alliance should accept a pledge of a 60% interest in each of the GeoTEK companies as the Replacement Security. Alliance contends that Mr Arip’s representation was untrue because, within a few months, the companies were capable of being used as a basis for an IPO on the London Stock Exchange. Moreover, earlier in 2008 they had been valued on a discounted cash flow basis at between $600 million and $1 billion. In reliance upon the misrepresentations, it is said that Alliance agreed to accept pledges of the Replacement Security from Tredall. There were two pledge agreements dated 15th June 2009 and one pledge agreement dated 7th July 2009 in respect of shares in the three GeoTEK companies as security for the obligations of the Replacement Borrowers. The pledge agreements were alleged to be ineffective as a matter of Russian law – all the GeoTEK companies being Russian – and Tredall and four of the Replacement Borrowers, despite demands by Alliance, never put right this defect.

Exillon was admitted onto the London Stock Exchange on 17th December 2009 following an IPO Prospectus published on 14th December 2009. The only two significant assets it owned were KNG-D and DinyelNeft. Over £100 million was raised on the flotation of Exillon and some four years later, in December 2013, Mr Arip sold a shareholding of just under 30% in Exillon for $300 million. At paragraph 41 of the POC, it was alleged that the Replacement Borrowers had no assets of value, had failed to repay the Replacement Loans and would not do so in the future.

It is common ground that the governing law of the torts alleged is that of Kazakhstan. Under article 8 of the Civil Code, the exercise of civil rights by a person must not violate the rights or lawful interest of any other person and it is a requirement to act in good faith, reasonably and justly in dealing with others, to comply with the requirements imposed by law and by moral principles of society, whilst businessmen are also required to comply with business ethics. Contractual obligations must be performed under article 272 and, under article 917, harm caused to individuals and legal entities by the wrongful act of another, including deliberate harm to another person’s rights or economic interests, is to be compensated in full by the person causing the harm. Joint and several liability is catered for in article 932. Additionally, under article 34 of the Law on Banks, a bank’s loan operations are to be executed by the bank’s credit committee in accordance with its rules of credit policy as approved by the Board of Directors whilst under article 35, a bank is not allowed to provide an unsecured loan if the proposed borrower is not reliable and does not have a high credit rating or if the amount exceeds the average net asset value of the proposed borrower in the period between the beginning of the accounting year and the date upon which the loan is made.

The essence of the claim made under article 917 of the Civil Code by Alliance is that, as a result of the allegations pleaded in paragraphs 14-40 of the POC, it has suffered harm. It is said that Alliance made the Replacement Loans to the Replacement Borrowers without obtaining enforceable valuable security and is unable to recover any of the amounts lent. Kazakh law does not recognise the tort of conspiracy but at paragraph 50 of the POC, Alliance sets out, in six sub-paragraphs, wrongful actions within the meaning of article 917 on account of the defendants’ breach of Kazakh civil legal norms.

The harm caused to Alliance by reason of the wrongful actions is then said to be the total amount of the Replacement Loans as, in the absence of the wrongful actions, those sums would not have been lent to the Replacement Borrowers at all. In those circumstances the sums lent to the Original Borrowers would have been recovered, if necessary by enforcing the security provided which included the shares pledged in KNG-D and DinyelNeft.

On the evidence of Kazakh law adduced by Alliance, it is for Alliance to show a wrongful act in violation of its rights, harm suffered by it and the causal link between the two. In its submissions, both written and oral, Alliance has gone to some lengths to state that its case is based upon the obtaining of the release of the KNG-D and DinyelNeft shares from the Original Borrowers’ pledges, the obtaining of loans for the Replacement Borrowers without giving enforceable valuable security and the harm suffered because of the irrecoverability of those loans. The claim is not a contractual claim against the Replacement Borrowers for failing to repay the loan or failing to provide the security they promised to give, nor for deceit in inducing Alliance to accept the GeoTEK shares as security for the Replacement Loans.

Nonetheless, it is clear that the harm suffered and the loss claimed are intimately connected with the absence of enforceable valuable security and the failure by the Replacement Borrowers to repay the Replacement Loans.

One of the odd features arising out of the history of events is the question of enforceability or unenforceability of pledges over the 60% shareholdings in the GeoTEK companies. In the POC, Alliance said that Tredall had agreed, by three agreements dated 15th June 2009, to pledge the GeoTEK shares as security for the obligations of the Replacement Borrowers. “The pledges were executed but because they were not executed before a Russian notary, were ineffective as a matter of Russian law. Alliance repeatedly demanded that Tredall and/or the Replacement Borrowers corrected this defect but they never did so.” In his evidence before Flaux J, Mr Bolgauov stated that there were two pledge agreements dated 15th June 2009 and one agreement dated 7th July 2009, which he exhibited. The same words which I have already quoted, which appear in the POC, appear in paragraph 48 of his first affidavit.

In her evidence in response, Ms Solomakhina, a qualified Russian lawyer, referred to the mandatory requirement that pledge agreements regarding shares in Russian limited liability companies should be executed in front of a notary and stated that this was introduced by the amendment to Article 22 of the Russian Federal Law on Limited Liability Companies dated 30th December 2008, which came into force on 1st July 2009. She went on to say that, until 1st July 2009 when the amendment came into force, nothing in Russian law required that pledge agreements regarding shares in Russian LLCs be notarised. Pledge agreements regarding shares in Russian LLCs that were otherwise validly executed before 1st July 2009 were effective as a matter of Russian law without notarisation, as the amendment to the Russian LLC law had no retro-active application. That was confirmed by the Presidium of the Supreme Arbitrazh Court of the Russian Federation in clause 19 of its Information Letter dated 30th March 2010. As the pledge agreements in question all related to pledges of shares in Russian LLCs, the Russian LLC Law governed the formalities of granting share pledges in relation to shareholdings in those companies.

In consequence, she stated that the two pledge agreements dated 15th June 2009 (which related to the SibGeoTEK shares and the SibirGeoTEK shares, with much greater attributed value than the OmskGeoTEK shares) did not need to be executed before a notary in order to be effective as a matter of Russian law. The OmskGeoTEK pledge however, if signed on 7th July would be ineffective in the absence of notarisation and would not create enforceable security over the shares in that company. This evidence is uncontroverted.

In Mr Bolgauov’s affidavit in response, he stated that the pledge documents were prepared by Alliance in respect of the GeoTEK companies, but that he did not know when they were actually executed, although the printed dates on them are 15th June 2009 and 7th July 2009. He said that after they had been prepared Ms Dikhanbayeva on behalf of the Replacement Borrowers recommended that Alliance use a law firm based in Russia, MZSP, so as to ensure that there was compliance with all of the relevant formalities. Pursuant to this recommendation, a three-way agreement was then concluded in September 2009 between Tredall, Alliance and MZSP. An engagement letter dated 18th September 2009 between those three entities has been produced. Alliance is described as “the client” whilst Tredall was to be responsible for MZSP’s fees. Clause 1.1 of the terms of engagement reads thus:

It can be seen that pledge forms were provided by Alliance to MZSP for its advice, in relation to the shareholdings in the GeoTEK companies. Nothing in the clause indicates whether or not such pledge agreements had already been executed.

By a letter dated 17th September 2009 (therefore a day before the engagement letter) MZSP wrote to Ms Bagitova, who was the in-house lawyer of Exillon with the subject matter stated as “legal regulation of pledge of shares and notarisation of the pledge agreement of shares in limited liability company”. The letter appears to be framed in entirely general terms without reference to the GeoTEK companies as such. The English translation (which includes definite and indefinite articles) refers to the amendment to Article 22 from July 1st 2009 and its requirement for notarisation of share pledge agreements under its provisions. The letter states that the amendment to Article 22 obliges the notary to carry out various functions within time limits thereafter and that an amendment to the law on LLCs dated 19th July 2009, sets out the need for registration of the share pledge agreement on the joint application of the pledgor and pledgee. In order to notarise the transaction, it was necessary for a series of documents to be provided to the notary, as set out in a list.

At no point does the letter express an opinion that pledges that post-date July 1st are unenforceable (nor that pledges pre-dating it are invalidated). The letter however included the following paragraph (in translation):

In my judgment, what is being said in relation to pledges which exist at 1st July is that in order to secure registration of them, it would be best to go through the notarisation procedure with a new share pledge.

Mr Bolgauov’s evidence in his third affidavit was that it was understood by Alliance and indicated by Ms Dikhanbayeva that all of the pledges given in relation to the GeoTEK companies were affected by the change in the legislation and that, in order to be effective, all of them needed to be notarised and registered. In the light of the advice received from MZSP, Alliance therefore requested various further documents from the Replacement Borrowers for the notarisation procedure. Those documents were not however forthcoming.

Correspondence between MZSP and Ms Dikhanbayeva in September and October 2009 shows the lawyers seeking documentation from her to enable the notary to certify the security and pledge agreement. Ms Dikhanbayeva asked if there was any news from the bank’s lawyers who reviewed the security and pledge agreements in the light of comments from MZSP. In October it appears that documents had been sent to the notary for approval and, in relation to the OmskGeoTEK pledge, there were inconsistencies in the documents supplied and a requirement that the priority of the various pledges be set out. More than this does not appear from that correspondence.

On 18th November 2009, in a letter, Alliance requested various further documents from Ms Dikhanbayeva “on behalf of the Replacement Borrowers”. It requested that these be provided by 20th November 2009 “in order to register three pledge agreements at the notary and at the authorised bodies in accordance with the current legislation of the RF”. The letter drew attention to the fact that there was no security in place and that the process of registration of the pledges was necessary.

Mr Bolgauov went on to say that none of those documents were provided by the Replacement Borrowers and in consequence a meeting took place with Ms Dikhanbayeva on 15th December 2009. The agenda for the meeting refers to three items. First is the provision of the pledges of the GeoTEK shares and the current position on registration of them. The second item for discussion was the Holding Invest group’s plans for repayment of the debt and the third item related to the question of investment in its projects, which was necessary for development of the oil licences granted to the GeoTEK companies. In the body of the document, Ms Dikhanbayeva is recorded as accepting the indebtedness of the Replacement Borrowers to Alliance and the need for repayment, together with the absence of any security. The translation of the minutes states that she “clarified that Pledge Agreement signed at present between the bank and GK [GeoTEK] should be executed again in front of the notary in RF, due to amendments introduced in the Russian legislation, hence the current agreement is deemed not to be duly executed”. The minutes referred to the form of the pledge agreement as agreed with MZSP which was to register the pledge agreement. She said that issues arose in that context because of the need for the provision of original incorporation documents of the GeoTEK companies. Tredall owned only 60% of those companies and the original documents were held by the other shareholders from whom it would be necessary to obtain such documents. Ms Dikhanbayeva stated that the position would be clarified by 15th January and the agreements would be duly signed and registered. She also stated that the Replacement Borrowers were carrying out no business at all and the only source of repayment of the debt would be the income from the GeoTEK companies which required $60 million worth of investment for construction of the infrastructure and for commencement of production. Attempts were being made to obtain financing which should be completed by May/July 2010.

It was Mr Bolgauov’s evidence that the Russian minority shareholders in the GeoTEK companies had never been asked to register the pledges or to provide original documents. This they had said to the Russian prosecutor, but Alliance itself had never had any direct discussions with them.

It appears that the Replacement Borrowers and Tredall, with the GeoTEK companies, were sold by Mr Arip to Serco Solutions Ltd and Mr Igilikov (one of the individuals who owned Serco) on 24th December 2009 and 20th January 2010. It also appears that, by that stage, the Russian authorities were serving notices asserting breaches of requirements of the various licences which could result in forfeiture of them.

On 6th January 2010 Alliance wrote to Ms Dikhanbayeva seeking information about the assets of the each of the Replacement Borrowers but no answer was received and, in further correspondence in January and February, letters were written to her relating to the Replacement Borrowers’ failures to provide the pledges but as, by this time, Mr Arip’s interest in those companies had ceased, he was not responsible for any absence of reply.

At all events, although subsequently, in the spring of 2010, the new owners of the Replacement Borrowers offered to transfer a 60% shareholding in SibGeoTEK to Alliance in satisfaction of the indebtedness, none of the pledges ever appears to have been notarised or registered and both Alliance and Ms Dikhanbayeva appear to have proceeded on the basis that they were unenforceable. If the licences have expired or been forfeited, as appears to be the case now, the 60% shareholdings in GeoTEK companies are probably, as Alliance has pleaded, valueless. What the position would have been in the second half of 2009 remains uncertain but Alliance had its own security valuation from earlier in the year which it saw as sufficient to cover the indebtedness of the Replacement Borrowers. It has on its own evidence never sought to enforce the pledges because it regards them as unenforceable.

I am prepared to proceed on the basis that Alliance can show that it has realistic prospects of success in pursuing its claims under article 917 of the Kazakh Civil Code, subject to the issue of limitation. There is material before the court to support the allegations made in the particulars of claim by reference to the highly unusual features of the loans of 24th October 2008 and the amendments to them dated 3rd February 2009. The advancement of money without security of any kind, albeit with a commitment to provide security which was initially to be done within a period of one month and then extended for a further eight months, is contrary to normal commercial banking practice and calls for explanation. The other preferential terms of the loans also support Alliance’s case that these were seen as “shareholder related” loans concluded by bank operatives under the influence of the Seisembayev brothers without due and proper regard for Alliance’s best commercial interest.

The Original Borrowers had received an additional $98 million in 2008 and on Mr Sturt’s evidence were not short of cash. There was therefore no reason for any replacement financing and no commercial reason for Mr Arip’s involvement, as an alleged partner of Mr Seisembayev, nor his involvement of a complex of new companies in taking over the loan. On the self-same day as the loan agreements were made, 24th October 2008, the Memorandum of Understanding was concluded between Mr Arip’s IPO vehicle and the owners of the KNG-D/DinyelNeft shares which had been valued earlier in the year at $600 million - $1 billion for a price of $4.069 million.

The KNG-D/DinyelNeft shares were then disposed of to other Arip companies in breach of article 3.5 of the loan agreements in February and April 2009, prior to any agreement by Alliance to accept the GeoTEK shares as substitute security.

There is also evidence in support of the misrepresentation by Mr Arip to Mr Balgarin in March 2009 as to the relative values of KNG-D’s/DinyelNeft’s shares and the GeoTEK shares.

I am prepared to assume for the purposes of this hearing that Alliance has a good arguable case and has raised serious issues to be tried, subject to the issue of limitation. Limitation, however, in my judgment, represents an insuperable barrier for Alliance – a matter which has become clear by reason of disclosure of documents which were not shown to the judge on the ex parte application but which have been produced as a result of demands by the defendants’ solicitors.

The undisputed evidence is that there is a three year limitation period for a claim under article 917 of the Civil Code. The limitation period begins to run from the point when the claimant learns or should have learned that it had suffered harm from an unlawful violation of its rights. As there is no tort of conspiracy in Kazakh law and an agreement between the defendants is only relevant to show joint and several liability of each of them, the focus must be on the individual unlawful acts which are said to give rise to the harm in question. The relevant knowledge is that of the Management Board or Board of Directors, although if an employee or official accountable to the management bodies were to discover the circumstances of the violation of Alliance’s rights, the “should have learned” criterion of article 180.1 of the Civil Code would apply and the limitation period would begin to run from the time of that discovery.

It is virtually self-evident that, if resort has to be made to the “should have learned” criterion, issues of fact are likely to arise which would make it impossible for a court to determine the position without conducting a mini-trial which is not appropriate in the context of issues relating to service out of the jurisdiction or freezing orders. It is however Mr Arip’s case that the documents disclosed clearly show actual full and sufficient knowledge on the part of Alliance of the alleged unlawful acts said to cause harm to it well before 23rd July 2011 in circumstances where the claim form was issued on 22nd July 2014.

The question then arises as to what the relevant knowledge is in the light of the cause of action alleged and the harm allegedly caused. It is clear, on the claimant’s own case, that it was aware that Mr Arip owned the Replacement Borrowers as he told Mr Balgarin that at the meeting which took place in March 2009. Mr Bolgauov’s evidence of what Mr Balgarin told him about the meeting is important. At paragraph 35 of his third affidavit Mr Bolgauov recites what Mr Balgarin told him about the meeting with Mr Arip in 2009, correcting the earlier date given of April 2009 to March, since AppraisConsult was only employed after that conversation, which seems logical enough. Mr Balgarin, the managing director from February 2009 said that:

By the time of the meeting he had formed the view that the loans to Replacement Borrowers were “shareholder transactions” because of the absence of any security, because the transactions were not in the interests of Alliance and because Alliance had not taken any measures to demand repayment of the loans.

At the meeting, Mr Arip began by volunteering that he was no longer partners with Margulan Seisembayev, that his group was now separate from him because they had disagreed over financial issues and that Alliance should not now think that he was affiliated with the Seisembayevs.

In those circumstances Mr Arip told him that the problems with all the assets other than the GeoTEK companies were so serious that he was losing control of them, that he did not have any contact with DinyelNeft and KNG-D and it was unrealistic for Alliance to expect to take them as security. He claimed that DinyelNeft was in an early exploration stage (whereas, in fact, it was producing oil at the time, as was KNG-D which had in the first quarter of 2008 discovered further oil in a southern extension of the one of the fields where it had a licence). By contrast, the GeoTEK companies had no problems, were doing better commercially than KNG-D and DinyelNeft and could be taken as security. In his earlier affidavit, whilst there is inconsistency in what he relates as to Mr Arip’s statements about the GeoTEK companies, his evidence was that Mr Arip had said that the assets of KNG-D and DinyelNeft were of no value as security for the borrowing of the Replacement Borrowers because both companies were exposed to corporate raiding and/or hostile takeovers by the local government and had difficulties with access to the transportation infrastructure. Thereafter Mr Arip had proposed that Alliance should accept a pledge of a 60% interest in each of the GeoTEK companies where the value of that interest was said to be sufficient to cover all of the outstanding borrowings of the Replacement Borrowers and Simons Holding.

It is apparent therefore that, on Alliance’s case, in March 2009, the managing director (and the deputy chairman, Mr Adekenov who was also at the meeting) knew that the Replacement Loans had been made without taking any security, that they were “shareholder-related transactions” and that they had not been entered into with due regard for Alliance’s own interests. Both knew that the KNG-D shares and the DinyelNeft shares were not pledged as security at that stage and that Mr Arip and the Replacement Borrowers were not putting them forward as security but suggesting GeoTEK shares instead. Inspection of the 24th October 2008 Loan Agreement and the further loan agreements in December 2008 would have shown a commitment on the part of CBC and Caspian to provide the KNG-D and DinyelNeft shares as security. There is no evidence before the court as to Mr Balgarin’s and Mr Adekenov’s knowledge about this feature of those loans in March 2009.

In the ensuing months however, as appears later in this judgment in relation to the issue of non-disclosure, the Credit Committee met and made various decisions about the security to be provided in respect of the indebtedness of the Replacement Borrowers (and Simons Holdings). The documents show the decision to accept pledges of 60% of the GeoTEK shares as being of sufficient value to cover the indebtedness but to request an additional guarantee from (inter alia) DinyelNeft in respect of that indebtedness.

More importantly however for present purposes, there are a series of Internal Audit Reports in 2009 which were eventually put before Alliance’s board of directors and sent by the acting chairman of the board in February 2010 to the Investigation Group of Agency of Economic and Corruption-Related Crimes (the Financial Police). These reports are revealing and referred to Bolzhal, Holding Invest, Caspian and CBC and culminated in an Internal Investigation Report relating to all of these four companies dated 26th January 2010 or 2nd February 2010. An undated report related to Bolzhal refers to Credit Committee minutes of 24th October 2008 in relation to the loan facilities granted then, minutes of 9th December when the agreed security to be provided within sixty days was changed from shares in Basius Holding to fixed assets of DinyelNeft, minutes of 5th January 2009 referring to the amendment to clause 3.6, minutes of 8th May 2009 accepting the 60% of SibGeoTEK shares as security for the obligations of the Replacement Borrowers on the basis of the AppraisConsult report and finally the minutes of 26th June 2009 where reference is made to the engagement of a law firm to register the pledge of the 60% shares in SibGeoTEK and to the request for an additional guarantee from (inter alia) DinyelNeft. It was pointed out that there was currently no security and no pledge agreement and then a list of “notes/errors/violations” appeared with fifteen sub-paragraphs setting out breaches of the internal regulations of the bank and “the normative acts” of Kazakhstan. At paragraph 1.15 the following appeared:

There are audit reports for Holding Invest dated 17th July 2009, for Caspian dated 29th and 30th September 2009 and CBC dated 1st October 2009. These follow a similar format in referring to the minutes of Credit Committee meetings in October 2008 and January 2009 including in particular the amendment to article 3.6 of the October loan agreements and the absence of security, together with a long list of “notes/errors/violations” in relation to “the internal regulations of the Bank as well as the normative acts of the Republic of Kazakhstan”. Reference was again made to the valuation of the 60% shareholding in the relevant GeoTEK company and the absence of AppraisConsult from Alliance’s list of approved certified independent appraisal companies. Attention was drawn in each case to the lack of certainty and inconsistency in the documents relating to the ownership of the relevant GeoTEK company.

In the case of the audit report on the first loan to Caspian, reference was specifically made to the Credit Committee minutes of 24th October and the requirement that Caspian should, within 30 days, produce security in the form of pledges relating to two GeoTEK companies and KNG-D, and to the amendment to article 3.6 of the loan agreement as referred to in the minutes of 5th January 2009. Reference was then made to the minutes of 8th May and 26th June 2009 and the changes in the security sought at that stage, the ultimate requirement being for a pledge of the 60% shareholding in SibGeoTEK, the registration of pledge agreements and the request for guarantees from (inter alia) DinyelNeft. The CBC audit report dated 1st October 2009 drew attention to the minutes of 18th November 2008 and the requirement of a pledge of the share capital of DinyelNeft and the subsequent changes in January 2009, May 2009 and 26th June 2009. Specifically under the list of violations, at paragraph 1.12, the following appeared:

Internal Investigation Report No. 33 dated either 26th January 2010 or 2nd February 2010 was approved by the Executive Director of Security of Alliance on 2nd February 2010. The report referred to the conduct by Alliance of an internal investigation to determine any illegal actions by the Borrower and other persons towards the bank in relation to the Holding Invest Group of Companies. Reference was made to the loan agreements, to the Replacement Borrowers, and to the fact that the repayment schedules provided for the first repayment to take place in 2013, whilst the total of outstanding principal was $287,738,787. The report stated that, although the intention was that the relevant loans would be secured by pledges by Tredall over the 60% shareholdings in the GeoTEK companies, upon which the Pledge Security Department had, in its reports of 17th April 2009 placed a value of $660,450,112, the pledge agreements, although signed, had not been registered with the competent authorities. The terms of this document are significant in showing the state of knowledge of the Board of Directors and therefore bear extensive citation:

This led to a letter dated 4th February 2010 to the Financial Police, signed by the acting chairman of the board of Alliance and copied to the deputy chairman. It referred to “violations of internal Bank regulatory documents (Corporate Standards) and of the Law on Banks which resulted in loss to Alliance”. The letter incorporated a copy of the Internal Investigation Report of 26th January/2nd February 2010 and the internal audit reports compiled in 2009, to which I have made reference. The letter concluded in this way:

It is abundantly clear from these documents that the board of directors of Alliance was aware in February 2010 of the following:

The advancing of monies under the loan agreements of October and December 2008 without taking any security at all from the Replacement Borrowers.

The commitment on the part of two of the Replacement Borrowers to provide, within 30 days, security in the form of a pledge of the shares in KNG-D and DinyelNeft, whilst other security was promised by the other companies.

The 8 months extension of time granted for furnishing security in January 2009.

The change in the terms of the agreement by amendment of article 3.6.

The acceptance by Alliance of substitute security for the KNG-D and DinyelNeft shares in the form of a pledge over the GeoTEK companies’ shares, the value of which had been assessed by Alliance as sufficient to cover the indebtedness of the Replacement Borrowers.

The violations of internal bank procedures and of the law in entering into the loan facility agreements in October/December 2008 and amendments in early 2009.

The use of the Replacement Loans to repay the original loans.

The Replacement Borrowers’ exploitation of Alliance’s employees’ violation of procedures when issuing the loans in taking the money and using it without providing enforceable security in the form of pledges of the 60% shareholdings in the GeoTEK companies. In describing the Replacement Borrowers as embezzling and misappropriating its funds, Alliance was stating its case as to fraud on the part of the Replacement Borrowers in obtaining the replacement loans and, knowing that Mr Arip was the owner of the Replacement Borrowers, was well aware that he was the person who was responsible for the Replacement Borrowers’ activities in this regard.

When reference is made to the POC and the way in which Alliance puts its case, it can be seen that the board of directors knew everything it needed to know in February 2010 in order to bring the current proceedings against Mr Arip. Alliance had already come to the conclusion in February 2010 that the Replacement Borrowers had obtained the Replacement Loans in violation of Alliance’s rights (under article 917 and 8.4), had failed to provide security (in violation of article 272) and had persuaded Alliance to accept pledges of the GeoTEK shares as security instead of the KNG-D and DinyelNeft shares. The managing director himself, Mr Balgarin, knew what Mr Arip had told him about the respective value of these shares as security.

On its own case, the only elements of which Alliance could possibly have been unaware at this stage was that the KNG-D and DinyelNeft shares were of potentially significant value, as compared with the lesser value or worthless value of the GeoTEK shares. It is said that it was not until April 2011 that Mr Bolgauov saw the IPO prospectus of Exillon which referred to the oil fields owned by KNG-D and DinyelNeft as the basis for seeking investment but even that is outside the three year period preceding the issue of the Claim Form.

It was not however until October 2011 that Mr Bolgauov prepared organisational charts showing the structure of the various groups of companies and the assets owned by them in the context of what had been pledged by the Original Borrowers and what had been owned by the Replacement Borrowers, namely the KNG-D and DinyelNeft shares, and appreciated that these were never pledged by the Replacement Borrowers as they had been by the Original Borrowers.

On its own case, Alliance discovered that the KNG-D and DinyelNeft shares were valuable in the spring of 2011 but only appreciated that they had previously been pledged by the Original Borrowers in the autumn of that year. Nonetheless it knew from the outset of his involvement of the ability of Mr Arip to pledge such shares in respect of the Replacement Borrowers’ indebtedness.

Alliance however is not pursuing a case for misrepresentation in March 2009 in relation to the respective values of the rival shareholdings in the GeoTEK companies on the one hand and KNG-D/DinyelNeft on the other. The obvious reason for not pursuing such a case is that the minutes of the Credit Committee meetings in May and June 2009 show that Alliance accepted the GeoTEK shares (on the basis of the AppraisConsult valuations, as discounted by their own internal valuations for security purposes) as being of sufficient value to cover the indebtedness of the Replacement Borrowers. There is therefore a virtually insurmountable problem for Alliance in showing reliance and loss as a result of the alleged misrepresentation. Instead, the misrepresentation is merely relied on as an element in showing the dishonest intention of Mr Arip and the Replacement Borrowers in obtaining the loans in November/December 2008 without any intention to repay and no intention to provide security.

The inference of intention however was one which Alliance had already drawn in February 2010 by reference to the matters set out in the Internal Audit Reports, the Internal Investigation Report No. 33 and the letter to the financial police, when speaking of embezzlement and misappropriation. The harm and loss suffered, as pleaded, occurred when the Replacement Loans were made and monies were paid out under them without intention to repay, and implicitly, to provide any effective security. What happened to the KNG-D and DinyelNeft shares, after other security was accepted as sufficient, does not reflect on Mr Arip’s intention to harm. The Exillon IPO only told Alliance what had been done with the KNG-D/DinyelNeft shares which had been substituted as security by the pledge of the GeoTEK shares. The case made by Alliance would be exactly the same if no IPO had taken place at all and the profit which he made is not relevant to the question of his intent to cause harm by obtaining the Replacement Loans with no intention of repayment – with no effective security.

It is not enough to say, as Alliance does, that it needed to put all of the pieces of the jigsaw together in order to ascertain that the security which was originally offered for the Replacement Loans (pledges over the KNG-D and DinyelNeft shares) served as the basis for the London IPO in order to appreciate that it had a cause of action. Long before that, it had come to the view that Mr Arip’s actions had caused it to make the loans with no prospect of repayment, in contravention of the norms of Kazakh law.

In my judgment therefore, Alliance has no prospect of succeeding in its claims because they are time-barred as a matter of Kazakh law. In such circumstances the order for service of proceedings out of the jurisdiction upon him and the freezing order must be discharged.

I need not refer in any detail to the authorities which were cited to me in relation to the question of material non-disclosure on ex parte applications for freezing injunctions or for service out of the jurisdiction. The test of materiality of a matter not disclosed is whether it would be relevant to the exercise of the court’s discretion. A fact is material if it would have influenced the judge when deciding whether to make the order or deciding upon the terms upon which it should be made. The question of materiality is a matter for the court and not the subjective judgment of the applicant or his lawyers.

There is a high duty on the applicant which can be summarised as follows, by reference to CPR 25.3.5 and authorities there referred to:

I take into account the comments made in Brinks Mat v Elcombe [1988] 1 WLR 1350 at paragraphs 6 and 7 of the judgment of Ralph Gibson LJ and at pages 1358C-G and 1359C-E in the judgments of the other Lords Justices in the context of the consequences which should be visited or not visited upon the applicant who fails in his duties. The authorities show that the interests of justice must be paramount and that a due sense of proportion is required in relation to the assessment of the seriousness of the breach. Moreover, caution must be observed when the non-disclosure in question depends on proof of facts which are in issue in the action and the court must not conduct a mini-trial.

Having due regard to the principles and admonitions set out in the authorities, I have come to the clear conclusion that there was material non-disclosure on the part of Alliance in the presentation of its application to Flaux J.

The matters which should have been disclosed, but which were not, were matters which were relevant both to the merits of Alliance’s claim and matters which affected limitation. They were material to the judge’s consideration on the without notice application and would, in my view, have influenced his decision, particularly in relation to the latter point, where I have held that Alliance’s case does not cross the threshold of a serious issue to be tried, let alone a good arguable case.

Documents included in the exhibits before Flaux J but not referred to in the presentation to him led Mr Arip’s solicitors to complain of the failure to disclose the AppraisConsult valuations of the GeoTEK companies in April 2009, Alliance’s own security valuations based upon that, the approval of Alliance’s loan committee of the GeoTEK shares as security and the February 2010 complaint to the financial police and the police response. Mr Arip was however able to exhibit the AppraisConsult valuations of the GeoTEK companies and the report from the financial police in his responsive evidence. Alliance’s reply evidence exhibited the Credit Committee minutes for Bolzhal alone, the complaint to the financial police and material relating to the unenforceability of the pledges, to which I have largely referred. At the end of February Alliance disclosed loan and Credit Committee minutes in relation to the Replacement Loans, the internal valuation of the GeoTEK companies effected by Ms Kabidoldanova and the internal audit reports which had been provided to the financial police, together with the Internal Investigation Report No. 33.

Although the complaints on disclosure covered other areas as well, the three critical areas, in my judgment, where Alliance fell short in its duties, relate to the due diligence and credit approval processes applied by Alliance when deciding to take security over the GeoTEK companies’ shares, (the Credit Committee Minutes for the Replacement Borrowers), the Internal Audit Reports and the Internal Investigation Report No. 33 in relation to the Replacement Borrowers’ wrongdoings, and documents relating to the financial police investigation in 2010, both in the context of the complaint made and the police report.

As I have already said, the essential nature of the case made by Alliance is that Mr Arip committed unlawful acts violating the rights of Alliance which caused it harm inasmuch as his companies obtained monies from Alliance when he had no intention of repaying nor of providing effective security. The case is not predicated on the failure of the Replacement Borrowers to provide security, nor on Mr Arip’s deceit of Alliance when persuading it to accept the GeoTEK security instead of the KNG-D/DinyelNeft security. Documents which militated against any intention on the part of Mr Arip and the Replacement Borrowers not to repay the Replacement Loans were therefore material to be disclosed. Furthermore, documents which militated against Alliance’s argument as to causation of harm fell to be considered. If Alliance had sought and obtained security in the form of pledges over the GeoTEK shares, which it had valued as sufficient to cover the Replacement Borrowers’ obligations, this not only impacted on the question of Mr Arip’s intent when taking the Replacement Loans but also on the question whether harm was caused and loss was caused by Mr Arip’s acts, as alleged in the POC, or by a failure to enforce valuable security over the GeoTEK shares, or a subsequent inability to enforce that security by reasons of problems in notarisation or registration of the pledge agreements, both those pre-dating and post-dating 1st July 2009. The internal audit reports and the Internal Investigation Report No. 33 were highly material to Alliance’s state of knowledge of the wrongs allegedly done and the limitation defence which was available to Mr Arip.

I have already referred to the Credit Committee minutes in the context of the Internal Audit Reports but it is necessary to note their contents inasmuch as they reveal the decision making processes of Alliance to accept the GeoTEK shares as security, as opposed to the KNG-D/DinyelNeft shares. If, in accordance with Alliance’s case, the decisions of the Credit Committee prior to March 2009 are all suspect as being subject to the influence of the Seisembayev brothers and in particular Ms Abylkasyova who was first deputy chairman of the board at that stage, the unusual nature of the loan agreements and the advancement of money without security against a promise to provide it within, initially one month, extended to nine months, is readily explicable. These were “shareholder-related loans on preferential terms” and the amendments made in January/early February fit with Alliance’s case.

Following the meeting in March 2009 between Mr Arip and Mr Balgarin to which Mr Bolgauov refers in his evidence, when Alliance was under new management, valuation reports on the market value of the shares in the three GeoTEK companies were obtained from AppraisConsult. Despite aspersions now cast on these reports by Mr Bolgauov, the reports referred to the valuation exercise as being carried out in accordance with the requirements of International Valuation Standards on the discounted cash flow method “for the purpose of financial planning and development of future business strategies … as well as with the intention to facilitate a transaction with the chosen financial institution”. It is not suggested that any other type of valuation than an income-based approach on a discounted cash flow method would be appropriate. The valuation sought to determine the price at which a 100% shareholding equity interest in the relevant company could be sold, assuming the existence of a market with a willing buyer and a willing seller in an arms-length transaction with the proper market research. The value implied that the hypothetical buyer was a financial buyer who would invest in it with the expectation of obtaining a return on the investment corresponding to the commercial risk. Because the GeoTEK companies held licences for the development and extraction of oil where there were proven global oil reserves but no oil had as yet been extracted, significant investment was required and a “high number of assumptions” had to be made in using the discounted cash flow method which did “not guarantee accurate reflection of the situation due to the limited nature of the sources of information used in the valuation”.

As appears from the Internal Investigation Report No. 33, from which I have already quoted extensively, Ms Kabidoldanova of Alliance made her own assessment of the value of the GeoTEK shares by reference to the AppraisConsult valuations. She assessed the value of the shares for security purposes at 50% of the AppraisConsult valuations for SibGeoTEK and SibirGeoTEK, disagreed with the AppraisConsult valuation of OmskGeoTEK, reducing it by 39% and then assessing the security value as 50% of that lesser figure.

On 8th May, the Credit Committee considered the position relating to Bolzhal, Caspian and Holding Invest and essentially followed the credit manager’s proposals to accept the 60% shareholdings in the various GeoTEK companies as security for the indebtedness of the Replacement Borrowers whilst stating that there should be reconsideration in two months time of what other collateral might be sought. The amounts determined by Ms Kabidoldanova were to be used as the basis of the Pledge Agreements. The necessary agreements were to be drawn up and the terms of the resolution brought to the attention of the borrowers.

Share pledge agreements were drawn up with printed dates, in the case of the SibGeoTEK shares and the SibirGeoTEK shares of June 15th 2009 whilst the pledge of the OmskGeoTEK shares was dated 7th July 2009. Tredall Ltd, in the person of Ms Dikhanbayeva executed the pledge agreements as pledgor and each of the Replacement Borrowers was also a party. Reference was made to the outstanding loans to each of the Replacement Borrowers and a value on the subject of the pledge specified, as mutually agreed between the parties, at $324 million approximately for the SibGeoTEK shares and $278 million approximately for the SibirGeoTEK shares, whilst the OmskGeoTEK shares were assessed at $58 million approximately. These reflected Ms Kabidoldanova’s assessments. The Pledges, as valued, were more than sufficient to cover the obligations of the borrowers under the amended form of article 3.6 of the October loan agreements.

On 24th June 2009 the risk management department submitted a memorandum to the Credit Committee which was to meet on 26th June. The document referred to the income of Tredall Ltd as coming from its related companies KNG-D and DinyelNeft (97.6%) and then referred to the GeoTEK companies and the eleven licences held for production and extraction of oil, of which ten were due to expire in 2011-2012, when it was envisaged that extension would occur. Whilst DinyelNeft and KNG-D are referred to as being “problematic”, it was considered that the 60% shareholdings in the GeoTEK companies covered all the Replacement Borrowers’ obligations with something to spare. The report suggested nonetheless obtaining additional collateral from KNG-D.

On 26th June 2009, the Credit Committee met again and considered the position of Simons Holding and the Replacement Borrowers. The 60% shareholdings in the GeoTEK companies were accepted as sufficient security in respect of the indebtedness with action to be taken to engage a law firm to register the pledge agreements and to request a guarantee from DinyelNeft. There is no evidence that any such request was ever made. The series of internal audit reports then emerged during the course of the rest of the year whilst attempts were made to notarise/register the three pledge agreements.

It is thus clear that the Credit Committee took a deliberate decision to accept the GeoTEK shares as security on the basis of Alliance’s assessment of their value. Whether or not there was any deception as to the value of the KNG-D/DinyelNeft shares (and there are documents which could be said to support Alliance’s position in this regard) the Credit Committee accepted the GeoTEK shares as security in place of earlier promises in 2008 to provide the KNG-D/DinyelNeft shares as security, albeit that the obligation to provide the latter had apparently been superseded by the amendment to article 3.1.6 in January/February 2009.

The offer of the GeoTEK shares as security and the circumstances in which it was accepted with Alliance’s valuations of the assets as sufficient to cover the indebtedness, strongly militates against the allegation that Mr Arip intended to injure Alliance by accepting loans without any intent to pay or to give effective security. Alliance fought shy, in argument, of saying that Mr Arip must have appreciated at the time of offering this security that Russian law would be changed to require notarisation which he could stymie. It was suggested in argument that Mr Arip was opportunistic in taking advantage of the change in Russian law in failing to do what was required to achieve notarisation/registration in the second half of 2009. The materiality of the circumstances in which the pledges over the GeoTEK shares were accepted and the valuations put upon them is self-evident in the context of liability for the alleged wrongdoing.

It is also highly material to the question of causation of harm. If the GeoTEK shares had the value accepted by Alliance, the recoverability of the loans could be said not to have resulted from the obtaining of the loans without security but from the failure of the security offered and accepted, whether by reason of lack of registration/notarisation or otherwise. It was Mr Arip’s case at the hearing that the pledges of the SibGeoTEK shares and the SibirGeoTEK shares could certainly have been enforced and that no attempt had been made to do so. Reference was also made to the offer of the SibGeoTEK shares in satisfaction of the loans in 2010. These matters which were not disclosed were material to the question of causation of harm and loss.

Alliance’s complaint to the financial police and the internal audit reports and Internal Investigation Report attached to it were, for the reasons I have given already in relation to limitation, highly material to that issue. So also was the response of the Financial Police to Alliance’s complaint. On 1st September 2010 the Financial Police gave notice of their refusal to institute criminal proceedings on the application of Alliance with respect to the Holding Invest group of companies in connection with a “malicious failure to repay credit debit on banking loans” (in translation). The police report of that date set out the history of loans made to Holding Invest, Bolzhal, CBC and Caspian and specifically referred to the loan agreements of 24th October 2008 and the CBC agreement of 3rd December 2008 in which there had been agreement to provide security over the KNG-D and DinyelNeft shares. Reference was made to the Credit Committee decisions of 8th May and the substituted collateral in the GeoTEK companies which was accepted, and the history of valuation of those companies. Investigations had also been made with Serco Solutions Ltd which now owned the Replacement Borrowers and the offer of the SibGeoTEK shares in satisfaction of the indebtedness. The report included the following paragraphs in translation:

The materiality of the absence of any finding of fraud on the part of the police in relation to the taking out of the new loans is self-evident.

No explanation for the failure to disclose this material has been advanced save that some of it was considered irrelevant because of the view that the pledges were unenforceable. That is not an adequate reason for failing to disclose the valuations, the Credit Committee minutes, the audit reports and the Investigation Report, nor the complaint to the Financial Police and the Police response, which were material to Mr Arip’s intent, the causation of harm and the loss suffered. These failures were in my judgment significant, however they may have come about. The information contained in these documents was highly material to the judge’s decision making process on the without notice hearing when determining the applications made.

In these circumstances, both because Alliance has no realistic prospect of success on the limitation issue and because of the non-disclosure on the without notice hearing before Flaux J, the order for service out of the jurisdiction upon Mr Arip and the Freezing Order must both be discharged. Any new application would fall foul of the limitation defence and there is therefore no basis for it, quite apart from the seriousness of the non-disclosures relating both to the merits of the claim and the limitation defence.

It appears to me that costs must follow the event and, subject to any submissions I would be minded to make an order for an interim payment on account of costs. If the form of the order can be agreed between the parties so much the better. If not I will hear any argument on the form of the orders I should make.