GML International Ltd & Ors v Harfield

This case is a dispute about sums of money paid by the Claimants to the Defendant between December 2008 and April 2014. The precise sums are a matter of dispute but total approximately £850,000 excluding interest. There is no dispute between the parties that most of the monies were paid in the amounts claimed and on the dates claimed, rather the dispute concerns the nature and legal effect of the payments. The Claimants contend that each of the payments were by way of loans to the Defendant for which they now seek repayment. The Defendant disputes this. He accepts that he received the payments but contends that they were not loans at all but rather payments made to him in part performance of a compensation agreement he alleges he entered into with the Second Claimant in May 2006.

The claim has some unusual evidential features, including allegations of involvement of the Bulgarian mafia, criminality at Russian banks, arguments about the dress code that would have applied to a disputed meeting at the Ritz Hotel and the engagement of a firm of investigators staffed by former members of the Israeli intelligence services. For all of that, this case remains a simple claim for monies said to be owed under contract which falls to be resolved by applying trite principles of contract law and employing a well settled analytical framework to disputed evidence.

The First Claimant is a financial services company. The Second Claimant, Mr Pinter, is a director and underlying beneficial owner of the First Claimant. The Third Claimant is Trustee of an Isle of Man Trust which is a revocable family trust set up by the Second Claimant. In almost all respects relevant to the claims the Defendant’s dealings with the three Claimants was with the Second Claimant, Mr Pinter.

The Defendant, Mr Harfield, is a Chartered Accountant. Much of his relevant experience is set out in the body of this judgment. He is currently employed as a director of E-Pay International Limited, a company registered in England & Wales.

The issues for me to decide are as follows:

Although the Defence raised issues of limitation and estoppel, these were not pursued at trial. The overwhelming focus of the parties at trial was the first issue, namely the nature and effect of the payments made by the Claimants to the Defendant, which revolved around the decidedly binary dispute as to whether they were loans or compensation.

I received witness statements and heard oral evidence from the following witnesses of fact:

The Second Claimant and the Defendant were subjected to over a day of cross examination each. In addition, I received into evidence, on behalf of the Claimants, the agreed witness statement of Mr Shah, a partner in the First Claimant’s accountants.

Two related and striking features of the claim and defence are firstly that the material events occurred many years ago, indeed the purported oral agreement relied upon by the Defendant is said to have been made in May 2006, almost fourteen years ago. Secondly, neither that purported agreement nor any of the purported loans were ever reduced into written documents. Their existence and terms are sought to be inferred by the recollection of witnesses and ancillary documentation. The witness statements of the parties and their witnesses were all signed in 2019 many years after the relevant events giving rise to the claim and a considerable amount of evidence, particularly that of the Defendant, was premised upon recollection of numerous meetings and telephone calls that took place many years ago. In addition to the recollection of witnesses, the parties produced four lever arch volumes containing over 1,500 pages of contemporaneous documentation. Unsurprisingly in these circumstances, a focus of argument was the comparative weight that should be given by a Court to contemporaneous documentary evidence as opposed to the recollection of witnesses, not least in the context of a case in which some of the key events were as far back as 2006. This is a subject to which I return below.

The events arise out of the purchase by an investment fund known as ‘Growth’, together with another unconnected fund (‘Hillside’), of a 20% share in a Bulgarian Bank called the First Investment Bank (‘FIB’). Growth was a fund managed by the First Claimant and the Second Claimant was also a director of it. Hillside was managed by an investment management company, ‘Thames River’, which was an entirely separate entity to any of the companies connected to the First or Second Claimant save that they had previously worked collaboratively on investment opportunities. I shall refer to them collectively as the ‘Minority Shareholders’.

At the time of this purchase the Defendant was the Chief Executive Director of FIB, a post he had held since July 2002. He had known the Second Claimant on a professional basis since 2003 when Mr Pinter had commenced discussions which led to the First Claimant arranging a number of subordinated loans by Growth, Hillside and others to FIB.

The purchase of the minority stake in FIB by Growth and Hillside took place in August 2005 albeit it did not complete until the end of that year. The shares were purchased equally by the two funds from the European Bank for Reconstruction and Development (‘EBRD’) for the sum of 13 million Euros. A further sum of 7 million Euros was also jointly paid by Growth and Hillside to the majority shareholders, two Bulgarian nationals, Mr Minev and Mr Mutafchiev (the ‘Majority Shareholders’), in consideration of them entering into a shareholders agreement (the Shareholders Agreement).

The relationship between the Majority and Minority Shareholders went sour quickly. In the spring of 2006, Growth and Hillside were approached by an independent member of FIB’s Supervisory Board, Mr David Mathew, and were told about concerns that he and the Defendant shared that the Majority Shareholders were causing FIB to issue improper loans for their ultimate benefit and those of entities closely connected to them not least in the Bulgarian energy sector. Later, the Defendant expressed these concerns directly to the Second Claimant and also raised suspicions that the Majority Shareholders might have connections with organised criminal gangs (Footnote: ¹).

In late March 2006, the Second Claimant, in accordance with rights enjoyed under the Shareholders Agreement, was appointed as the Minority Shareholders’ representative for the Supervisory Board of FIB. The Second Claimant used the opportunity provided by attendance at his first Supervisory Board meeting in April 2006 to raise some of the concerns brought to his attention by Mr Mathew and the Defendant which were increasingly shared by the Second Claimant and the Minority Shareholders.

The concerns expressed at the meeting by the Second Claimant were not welcomed by the Majority Shareholders. During what was described as an acrimonious meeting, Mr Mutafchiev (who was not present at the Supervisory Board itself) came to find the Second Claimant and asked him to step outside. He is said to have told the Second Claimant that he should not interfere with FIB’s business and if he was not prepared to comply with this demand then the two investment funds were not welcome as shareholders.

The Defendant alleges that at this point in the timeline he entered into a compensation agreement with the Second Claimant (‘the Ritz Agreement’).

The Defendant’s evidence is that on 11 May 2006 having returned to Sofia from a Florentine holiday resolved to leave FIB. He stated that he spoke on the telephone to the Second Claimant on that day to inform him of the decision that he was intending to leave FIB. The Defendant describes the Second Claimant’s response as appearing ‘frantic’ and that he expressed deep concern about the impact that the proposed departure would have on the FIB’s liquidity. It is said by the Defendant that in light of the Second Claimant’s gratitude for the role played by the Defendant he made plain that (in addition to being welcome to work for the First Claimant) he and the Minority Shareholders would not see him suffer any detriment by staying at FIB. The Defendant’s evidence is that the Second Claimant “gave a clear commitment that I would be properly rewarded for my contribution to a successful outcome of the Minority Shareholders’ cause if I were to lose my job or my position were to become untenable (i.e. if I were forced to resign)”

The Defendant alleges that as a result of that discussion he agreed not to resign immediately but to discuss matters further with the Second Claimant at a face to face meeting when he was next in London.

The Second Claimant does not recall a specific conversation with the Defendant at this time (although does not dispute that he might have spoken to him) but is adamant that he never gave any such promises.

The Defendant says that he then met with the Second Claimant at the lounge outside the Rivoli Bar at the Ritz Hotel in Piccadilly on 24 May 2006. The conversation is said to have again revolved around the Second Claimant’s desire that the Defendant remain at the helm at FIB. The Defendant says that the Second Claimant clearly stated that if he remained at FIB but subsequently lost his job (including if his position became untenable or he was forced to resign) then both he and the Minority Shareholders (in his words):

“would compensate me for any financial loss or detriment I suffered as a result of continuing in my role; and

pay me 5% of any gain made by the Minority Shareholders on their investment on the sale of the minority shareholding.”

The Defendant also says that the Second Claimant insisted that this agreement would need to be confidential because of unexplained internal reasons in his company. The

Whether these discussions occurred at all, and whether, even if they did, an agreement of the type alleged was struck, is a central issue in these claims and I will return to it in more detail later in this judgment.

On 30 May 2006, Growth and Hillside received notice that the Majority Shareholders intended to call an Extraordinary General Meeting of shareholders. One of the items on the agenda was to remove the requirement for unanimity of decisions of the Supervisory Board, thereby depriving the Minority Shareholders of the veto they effectively exercised. Another item sought the dismissal of an independent member of the Supervisory Board, Mr Mathew.

The following day, the Second Claimant telephoned Mr Mutafchiev to express his concerns at both of these proposals. In a follow-on email the next day the Second Claimant, seeking to summarise the contents of their call, reiterated his concerns and requested that both of the two contested items be removed from the agenda.

On 2 June 2006 the Second Claimant wrote to his counterpart at Hillside setting out a spreadsheet analysis of possible improper lending by FIB to entities related to the Majority Shareholders. The Defendant was copied into this email and he is referred to in it as a source of some of that information.

On 14 June 2006, the Second Claimant wrote in his capacity as a member of the

This letter in turn led to a meeting on 22 June 2006 between the Majority and the Minority Shareholders in London in which the latter’s concerns about lending practices were again expressed. The Majority Shareholders responded by offering to buy Growth and Hillside’s stake in FIB. No agreement was reached but one of the two Majority Shareholders threatened that it was within their powers to unilaterally float FIB on the Sofia stock exchange and thereby invalidate the shareholder agreement.

That threat appeared to have been actioned when in around mid-July 2006 Growth and Hillside received notice to attend an EGM of shareholders of FIB to be held in Sofia that August. The stated agenda included a resolution permitting a public listing of its shares. Appreciating that this amounted to a serious threat to their investment both Growth and Hillside determined to stop it.

Thus, on 1 August 2006, proceedings were commenced in this Court by the Minority Shareholders seeking injunctive relief to prevent the adoption of the proposed resolutions (the Shareholders Agreement contained a clause that disputes be subjected to the exclusive jurisdiction of the Courts of England & Wales). This application led

The imposition of the permanent injunction appears to have been a catalyst for an increased offer from the Majority Shareholders to Growth and Hillside. In December 2006 negotiations led to an offer of 61 million Euros which on any view amounted to an excellent return on the 20 million Euros investment made the previous year. As the Second Claimant volunteered in cross examination, this was the best investment the business had ever made.

The sale was completed and the monies transferred to Growth and Hillside in February 2007.

In the period between the grant of the injunction and the sale of the Minority Shareholders’ interests the Defendant left FIB. In the last week of November 2006 he announced to the Supervisory Board that he was resigning following what he describes as a furious interaction with Mr Mutafchiev and two incidents of physical intimidation on the streets of Sofia. On 4 December Mr Mutafchiev asked him to leave as soon as possible which he did over the weekend of 9 to 10 December 2006.

The Defendant secured a position as the CEO of Ocean Bank in Moscow in December 2006. At a meeting the following month he was able to offer the Second Claimant a non-Executive role on the Board.

The Defendant describes his experience at Ocean Bank as disastrous and in February 2008 he left. His evidence as to his time at Ocean Bank also contains a number of serious allegations against the Second Claimant to the effect that he conspired with the owners of Ocean Bank together with the Majority Shareholders of FIB to create a sham transaction. The alleged purpose of this supposed transaction was to create a ‘stealth dividend’ whereby sums could be paid by the Second Claimant to the Majority Shareholders of FIB. This in turn is said to have been necessary because the sale price for the minority shares was deliberately overstated. I deal with this allegation briefly later in this judgment but record here that there was no evidence at all to corroborate the Defendant’s very serious allegations.

In the same month, the Defendant was offered a job by the Second Claimant in a Ukrainian bank ‘BKR’ in which Growth had a significant minority stake. That fell through but the following month, March 2008, he was offered a job by the Second Claimant at GML Capital which he took up in April 2008.

In either November or December 2008 (there is a dispute about the precise dates which I do not consider to be material) the Defendant asked to speak privately with the Second Claimant. There is a very real dispute about what was said at this meeting but it is agreed that the Defendant explained to the Second Claimant how the previous year, in January 2007, he had discovered that his life savings held in FIB Cyprus accounts had been stolen by the Majority Shareholders. The Defendant stated that Mr

Shortly after a December meeting between the Second Claimant and the Defendant, on 22 December 2008, the First Claimant made a payment to the Defendant of the sum of £275,000. There is no dispute that this payment was made by the First Claimant and received by the Defendant. What is very much in dispute was the nature and purpose of that payment. This was the only payment made by the First Claimant. Save for two payments six years later to third parties made by GML Capital (and reimbursed by the Second Claimant), thereafter all payments were by either the Second Claimant from his own funds or by the Third Claimant at the request of the Second Claimant.

The parties produced a very helpful schedule setting out the date on which each payment was made, the amount and the identification of the relevant documentation contained in the trial bundles. A copy of that schedule is appended to this Judgment and reference to payment numbers are to those set out in its first column.

The Defendant remained at GML Capital until August 2009. He left, with the full support of the Second Claimant, to take up a post at a Saudi finance company, Deutsche Gulf Finance (‘DGF’). Unfortunately, this did not prove to be a successful career move and his contract was terminated in May 2010. In May 2010 the Defendant received a payment of £25,000 this time from the Second Claimant personally (Payment 2). It is accepted that this was repaid by the Defendant.

The Defendant found himself in a dispute with DGF as to his severance pay and also states that his Saudi bank account had been frozen. This dispute did not resolve until November 2010 when he achieved a settlement of approximately £268,000. During that period he received a further eight payments from the Second Claimant (Payments 3-10), the nature of which are all disputed.

In June 2010 the Second Claimant introduced the Defendant to a firm of private investigators called RISC Management Limited. The purpose of their instruction was to assist in the recovery of the sums said to have been stolen from the Defendant’s Cypriot accounts.

In November 2010, the Defendant secured a job as the Chair of a small trade finance company called Delta Trade Finance (‘DTF’). Unfortunately, DTF went into voluntary liquidation in September 2011 although the Defendant stayed on until January 2012 in order to attempt to rescue the company. During this period at least a further ten payments were made by the Second Claimant (and one by the Third Claimant) to the Defendant (Payments 12 to 21) – the nature and effect of which are all disputed.

In June 2012, the Defendant was offered a partnership with Ernst & Young (EY) in Prague. In the interim (counting up to the end of June 2012) he had received a further nine payments from the Second Claimant (Payments 22 to 30). Thereafter the Second Claimant made five further payments to the Defendant, the last on 7 April 2014 (Payments 31, 33, 36-38). In addition, the First Claimant seeks repayment of two sums said to have been paid on behalf of the Defendant (Payments 34 and 35) to a London law firm and a Cypriot law firm as part of the attempts to recover the sums that the Defendant had said were stolen from him.

Legal proceedings were in fact first intimated by the Defendant rather than the Claimants. In a Letter Before Claim of 10 July 2017, the Defendant outlined a claim against the now Second Claimant for breach of contract alleging that he failed to honour the Ritz Agreement, and a claim for fraudulent representation.

The Defendant’s letter asserted that his entitlement to damages for breach of contract amounted to approximately £4.7 million including interest, alternatively approximately £7 million for fraudulent representation. As it has transpired, no claim was ever served by the Defendant, nor any counterclaim made in these proceedings.

The Claimants served their Claim Form on 30 April 2018. A number of interlocutory orders were made including an order removing parts of the Defendant’s witness statement (per Master Cook on 7 January 2020 with a costs order against the Defendant in the sum of £29,000) and an order recording the withdrawal of the Defendant’s application for specific disclosure and his proposed application to rely on the evidence of a private investigator from the firm ‘Black Cube’ (by consent, with the Defendant ordered to pay £35,000 costs incurred in respect of the latter application).

The core dispute is whether some, or all, of the payments made by the Claimants to the Defendant were loans (the Claimants’ case) or were payments made pursuant to the compensation agreement forged at the Ritz (the Defendant’s case).

There is no dispute that the Claimants bear the burden of proof in establishing that the payments were loans. This requires they establish that each of the payments were legally binding loans. Strictly speaking there is no corresponding obligation on the Defendant to ‘prove’ the existence of the Ritz Agreement, indeed the Defendant is not required to prove anything. Thus, even if I were to find that there was no agreement reached at the Ritz it would still not relieve the Claimants of the obligation to prove that each of the payments were loans as alleged. In a case such as this however that truism only takes the Defendant so far. The nature of the dispute on the pleadings and evidence is starkly binary. If I conclude that the Ritz Agreement did not exist then (whilst not strictly relieving the burden of proving each of the loans) it would materially assist the Claimants in the forensic unlocking of the dispute. That is not least because (i) the Defendant does not (nor really could he) advance any positive alternative factual case beyond his reliance on the existence of the Ritz Agreement to counter the Claimants’ evidence that the payments were loans – for example asserting

The Second Claimant was responsible for arranging the payment on behalf of the First Claimant of £275,000. Thereafter the payments were either from his own personal accounts or, in respect of two payments, were disbursements made by the Third Claimant at his request.

The Second Claimant was clear in his evidence that he considered that each payment was a loan, and was always understood by the Defendant to be a loan. He acknowledged that on some occasions neither he nor the Defendant might have used express words about a payment being a loan but (save for some of the payments in respect of recovery of the Cyprus funds) it was always a response to a request for money and would have been well understood by both parties to have been additional loans.

The Second Claimant accepts that there were never any formal written loan agreement(s) notwithstanding the frequency of the payments and the very high cumulative sums that he paid out. His evidence was that as these started as a loan to a close colleague and thereafter were to someone he considered a close friend, he did not consider the payments required formalisation. He described during cross examination how at the time that Payment 1 was made the dynamic at the First Claimant’s offices were “...like a family firm. We all sit in one room. Mr Harfield and I sat no more than 20 feet apart during his tenure there. We travelled together to all kinds of places and Mr Stohner really liked Mr Harfield, as did I.”

Consistent with this, documents before the Court showed that at relevant times the First Claimant had made loans to another member of staff and that the Second Claimant had made personal loans to at least one other person.

His evidence was supported by his former business partner Mr Stohner. He was an impressive witness who was assiduous in making plain that he could not remember much by way of detail (which I find unsurprising in light of the passage of time). He did however have a very clear memory of the loan to the Defendant because it was the source of such friction between him and the Second Defendant that it became a contributing factor in his decision to depart the business. As well as giving evidence of specific conversations with the Defendant about repayment of the loans he also described, in his oral evidence, his growing frustration at the generosity of the Second Claimant. He said, in answer to a question put in cross-examination “This was Mr Pinter’s great personal generosity interfering in my opinion with his business judgment in certain cases. Mr Harfield’s loan was to my mind one of those cases... .... I try to keep the business and the personal separate and Mr Pinter feels the opposite way. He’s very close friends with a lot of business colleagues and is very generous to them and that can create difficulties when those colleagues are unable to repay loans.”

There were two additional factors that the Second Claimant said explained the absence of a written loan agreement(s) – firstly that he believed that repayment could be readily achieved when the Defendant recovered monies from the Cypriot accounts which he believed should be a straightforward result to achieve and secondly, he always thought that the Defendant’s requests would be the very last one to be made. As I will set out below, both these explanations are consistent with the contemporaneous documentation.

The Second Claimant categorically disputes that there was ever any agreement to compensate the Defendant whether at the May 2006 meeting at the Ritz or at all. The submission of the Claimants is that the large number of contemporaneous documents clearly show that these were all loans and not compensation payments.

The Defendant’s case is that having decided to leave FIB during his holiday in

The Defendant states that he became increasingly frustrated with the Second Claimant in the intervening years and in a number of meetings he impressed upon him orally his contractual entitlement under the Ritz Agreement which the Second Claimant acknowledged.

The Defendant’s case is that there were never any loans. The payments made to him were not loans but part performance of the obligations owed under the Ritz Agreement. His evidence is that over the following years he became increasingly adamant in his conversations with the Second Claimant (albeit in person, not writing) that the obligations required payment. He alleges that Second Claimant was adamant that the terms of the Ritz Agreement be kept not only from the Second Claimant’s business partners but that no reference to it could ever be made in writing. He accepts that he made some payments back to the Second Claimant but these were not (save in one instance) repayments of loans but rather transactions made to assist with the Second Claimant’s finances which were themselves quickly reimbursed to the Defendant in cash.

The Defendant provided two lengthy witness statements describing his transactions with the Second Claimant and setting out his explanations for the contents of the documents, and why his version of events is to be believed. This was expanded upon during the course of his extensive cross examination. I will address the points that he raised when I turn to my conclusions on the evidence.

There was no dispute between the parties as to the legal test governing whether or not a legally binding contract was entered into at the time of each loan. The basic requirements for proving the existence of the contract were summarised by Leggatt J (as he then was) in Blue v Ashley [2017] EWHC 1928 Comm at §48:

“Generally speaking, it is possible under English law to make a contract without any formality, simply by word of mouth. Of course, the absence of a written record may make the existence and terms of a contract harder to prove. Furthermore, because the value of a written record is understood by anyone with business experience, its absence may – depending on the circumstances – tend to suggest that no contract was in fact concluded. But those are matters of proof: they are not legal requirements. The basic requirements of a contract are that: (i) the parties have reached an agreement, which (ii) is intended to be legally binding, (iii) is supported by consideration, and (iv) is sufficiently certain and complete to be enforceable: see e.g. Burrows, " A Restatement of the English Law of Contract " (2016)”

One striking feature of this case, stemming from an agreement said to have been brokered in 2006 and payments first made in 2008, is the lack of either written loan agreements or a compensation agreement.

Another striking feature of this case is that all four witnesses who gave evidence before me, not least the two central protagonists, superficially, presented as credible. Both the Second Claimant and the Defendant are educated, sophisticated people with long experience at a relatively high level in international finance. Their backgrounds, sophistication and experience was reflected in the manner in which they gave their evidence. Although plainly different personalities, their tone and presentation in the witness box was generally measured and to a large degree hewed closely to their written statements. Furthermore, to an outside observer, their accounts of what occurred, although mutually exclusive, are broadly credible – either loans to a valued colleague and friend, or a compensation agreement to stay in a job that was on any view very challenging, for the considerable financial benefit of the other party. Neither version of events, of themselves, is outlandish or illogical.

If this had been a case based purely on the competing recollections of the witnesses it would have been very difficult indeed to determine where truth lay, or at least which version of events was the more probable. This though is decidedly not such a case. To the contrary, the Court was provided with over 1,500 pages of relevant documentation created contemporaneously with the events giving rise to the claims. This includes not least a significant amount email correspondence between the Second Claimant and the Defendant over the course of a number of years. The documents are relevant both for what they reference and also for what they do not. Thus, whilst this is not a case in which the purported legal transactions themselves have been formally embodied in writing it is a case in which relevant interactions between the parties have left a well-defined electronic footprint.

The importance of contemporaneous documentation to judicial fact finding was considered by Leggatt J in the case of Gestmin v Credit Suisse UK & Another [2013] EWHC 3560 (Comm) which has become a touchstone for the correct approach to evidential analysis (Footnote: ²). Unsurprisingly the skeleton arguments served by both parties referred to it. The relevant passages, which I set out below, observe the fallibility of human memory and the concomitant importance of contemporaneous documentation when a Court is called upon to assess what did, or did not, occur many years ago, particularly in commercial cases.

“Evidence based on recollection

15.

An obvious difficulty which affects allegations and oral evidence based on recollection of events which occurred several years ago is the unreliability of human memory.

16.

While everyone knows that memory is fallible, I do not believe that the legal system has sufficiently absorbed the lessons of a century of psychological research into the nature of memory and the unreliability of eyewitness testimony. One of the most important lessons of such research is that in everyday life we are not aware of the extent to which our own and other people's memories are unreliable and believe our memories to be more faithful than they are. Two common (and related) errors are to suppose: (1) that the stronger and more vivid is our feeling or experience of recollection, the more likely the recollection is to be accurate; and (2) that the more confident another person is in their recollection, the more likely their recollection is to be accurate.

17.

Underlying both these errors is a faulty model of memory as a mental record which is fixed at the time of experience of an event and then fades (more or less slowly) over time. In fact, psychological research has demonstrated that memories are fluid and malleable, being constantly rewritten whenever they are retrieved. This is true even of so-called 'flashbulb' memories, that is memories of experiencing or learning of a particularly shocking or traumatic event. (The very description 'flashbulb' memory is in fact misleading, reflecting as it does the misconception that memory operates like a camera or other device that makes a fixed record of an experience.) External information can intrude into a witness's memory, as can his or her own thoughts and beliefs, and both can cause dramatic changes in recollection. Events can come to be recalled as memories which did not happen at all or which happened to someone else (referred to in the literature as a failure of source memory).

18.

Memory is especially unreliable when it comes to recalling past beliefs. Our memories of past beliefs are revised to make them more consistent with our present beliefs. Studies have also shown that memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time.

19.

The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. This is obvious where the witness is a party or has a tie of loyalty (such as an employment relationship) to a party to the proceedings. Other, more subtle influences include allegiances created by the process of preparing a witness statement and of coming to court to give evidence for one side in the dispute. A desire to assist, or at least not to prejudice, the party who has called the witness or that party's lawyers, as well as a natural desire to give a good impression in a public forum, can be significant motivating forces.

20.

Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. A witness is asked to make a statement, often (as in the present case) when a long time has already elapsed since the relevant events. The statement is usually drafted for the witness by a lawyer who is inevitably conscious of the significance for the issues in the case of what the witness does nor does not say. The statement is made after the witness's memory has been "refreshed" by reading documents. The documents considered often include statements of case and other argumentative material as well as documents which the witness did not see at the time or which came into existence after the events which he or she is being asked to recall. The statement may go through several iterations before it is finalised. Then, usually months later, the witness will be asked to re-read his or her statement and review documents again before giving evidence in court. The effect of this process is to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be true or false, and to cause the witness's memory of events to be based increasingly on this material and later interpretations of it rather than on the original experience of the events.

21.

It is not uncommon (and the present case was no exception) for witnesses to be asked in cross-examination if they understand the difference between recollection and reconstruction or whether their evidence is a genuine recollection or a reconstruction of events. Such questions are misguided in at least two ways. First, they erroneously presuppose that there is a clear distinction between recollection and reconstruction, when all remembering of distant events involves reconstructive processes. Second, such questions disregard the fact that such processes are largely unconscious and that the strength, vividness and apparent authenticity of memories is not a reliable measure of their truth.

22.

In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”

I do not take these passages in general, nor the guidance in paragraph 22 of Gestmin in particular, to be setting down a fixed rule, or any form of irrebuttable presumption, that documentary evidence is always to be preferred to the evidence of witnesses with which it might conflict. There may for example be circumstances (and the Defendant contends that this is one) in which documents can be demonstrated to be inherently unreliable (for example because they were designed to give cover to unlawful acts), or other cases in which oral evidence can throw an entirely different light on the apparent meaning of a document. In any event, the existence of relevant documentation does not provide the court with any form of automatic shortcut or forensic heuristic by which it is relieved of its obligation to take into account all the evidence relied upon by the parties. The authority is however an important restatement of long established guidance on the judicial approach to fact finding, reflecting another classic statement, that of Robert Goff LJ in The Ocean Frost [1985] 1 Lloyd's Rep 1 at p.57:

“Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth. I have been driven to the conclusion that the Judge did not pay sufficient regard to these matters in making his findings of fact in the present case.”

Lord Goff’s formulation was recently cited by Males LJ in Simetra Global Assets & Others [2019] EWCA Civ 1413, where at paragraph 48 he said:

“In this regard I would say something about the importance of contemporary documents as a means of getting at the truth, not only of what was going on, but also as to the motivation and state of mind of those concerned. That applies to documents passing between the parties, but with even greater force to a party's internal documents including emails and instant messaging. Those tend to be the documents where a witness's guard is down and their true thoughts are plain to see. Indeed, it has become a commonplace of judgments in commercial cases where there is often extensive disclosure to emphasise the importance of the contemporary documents. Although this cannot be regarded as a rule of law, those documents are generally regarded as far more reliable than the oral evidence of witnesses, still less their demeanour while giving evidence.”

In this case the parties frequently communicated by email and their contents reveal not only their personal relationship at the relevant time but also something of the nature of the requests for payments. The documents undoubtedly provide an extremely important source of evidence both in and of themselves and also as a means of testing the veracity of the irreconcilable recollections of the witnesses.

I set out below, in chronological order, some of the relevant documentation. It is not exhaustive (the trial bundle contained over 300 separate documents) but it is lengthy because I have reached the conclusion that in this particular case the documentation does very materially assist in ascertaining the real nature of the relevant transactions between the parties.

There was no response to this final email from the Defendant. Instead on 10 July 2017 the Defendant’s then solicitors sent the Second Claimant a Letter Before Claim seeking damages under the purported agreement reached at the Ritz in May 2006. This was the first time (over 11 years after the alleged agreement) that the Defendant had ever made mention in a single document of its existence. In the event the Defendant has not proceeded with his threatened claim nor has he counterclaimed in this claim.

I unhesitatingly conclude that there was no agreement to compensate the Defendant, whether forged at the Ritz in May 2006, or at all.

In setting out my reasoning I start with the probative potency of the contemporaneous documentation including placing it in the context of the witness evidence, before turning to address - and reject - the specific arguments advanced on behalf of the Defendant as to why they should not be relied upon here.

At each turn the documents, some but not all of which are highlighted above, provide powerful evidence of payments being made at the request of the Defendant in terms in which his appreciation and understanding of indebtedness are clear and largely unequivocal. In particular:

The documentation stands not only as evidence in itself but also as a forensic tool that is a helpful means of assessing the veracity of witness evidence.

The documentation is obviously consistent with the Second Claimant’s written and oral evidence. The Second Claimant’s description of the basis on which he gave money and his relationship with the Defendant ring true when assessed against the documents. It is true to observe that he could not give an explanation for some of the contents of his emails on which he was cross-examined but so many years after the event I would have found it somewhat suspicious if he could. I found him to be a credible witness.

The Second Claimant’s case was also supported by his former business partner Mr Stohner. As I have already mentioned, I found Mr Stohner to be an impressive witness not least because he was at pains to point out that his memory was limited and at various points frankly conceded in answer to a question that he simply could not recall – that is an entirely credible response in a case of this vintage.

Where his memory was clear, and credibly so, was his recollection of the growing frustration he felt with the Second Claimant at what he perceived to be the excessive generosity and forbearance shown to the Defendant. There is an obvious reason why this would have stuck in his memory because the friction it generated was a contributing factor in his decision to leave the partnership. One other aspect on which he was clear was his specific recollection of discussions with the Defendant about his obligations to repay the loans and the clear acknowledgement that the Defendant conveyed about his responsibility to do so.

The Defendant’s case was not based on documentation. His case was premised on purported recollection, taken with an impeachment of the Claimants’ case, and an explanation as to why the documentation could not be taken as reflecting the real relationship between the parties. The Defendant claimed an astonishing recollection of the material events of the past fourteen years, from dates and contents of unrecorded meetings, some occurring over a decade ago, to where he was at the time he typed emails, even what the Second Claimant was said to be wearing at the meeting at the Ritz in May 2006 (Footnote: ⁵). There was very little on his account that he could not recall. In any case a Court should be cautious about the evidence of a witness who claims to recall minute details about multiple interactions occurring many years ago – in some of those cases such concerns can be allayed because those memories are corroborated by documentation (not least they might have acted as memory prompts) but this was decidedly not the case here.

The Defendant did call a witness to support his case. Mr Boyarkin was the

In so far as Mr Boyarkin gave evidence of being told contemporaneously by the Defendant of the existence of the Ritz Agreement I reject that evidence as being insufficiently reliable to adequately corroborate the Defendant’s own account. The possibility of Mr Boyarkin being confused about when such conversations took place (and their contents) is highly likely to be contaminated by the passage of so many years and what may have been multiple conversations with the Defendant. There is nothing to suggest that he ever recorded his recollection prior to being asked to give evidence in this claim which would in any event simply be evidence of what the Defendant elected to tell him about his arrangements rather than directly proving the existence of any legally binding agreement with the Second Claimant.

Although he did not accept that all the documents were unfavourable to the Defendant, Mr Edey QC acknowledged in his opening submissions that ‘they appear unfavourable in many instances’ and that ‘there are documents in this case that are unhelpful on the face of them’. That point having been acknowledged, Mr Edey’s case is that the Court should ‘step back’ and ‘come away from the detail and look at the big picture’.

In support of his client’s case Mr Edey, with great skill and vim, advanced a number of arguments as to why the documents could be safely rejected in favour of the ‘big picture’.

At the core of the Defendant’s attempt to explain what he himself had written on multiple occasions to the Second Claimant, he repeatedly advanced two factors. Firstly, he said that it was a term of the Ritz Agreement, at the Second Claimant’s insistence, that it would remain confidential between them and furthermore its existence should never be referred to in emails. Secondly, he asserts that throughout this period he was suffering from the effect of trauma (he said PTSD) and had developed a subservient relationship with the Second Claimant which (he states) had been diagnosed by his treating psychiatrist as a form of ‘Stockholm Syndrome’ whereby he was seeking to please and appease his tormentor.

I reject both these explanations as coming anywhere close to explaining away the documents or causing me to doubt the veracity of the Claimants’ evidence.

Firstly, the emails that the Defendant was sending to the Second Claimant were predominately sent to and from private email addresses. It is obvious from the face of some of these documents that they were understood by both men to be sent and received in confidence. This is reflected not least in the fact the Defendant disclosed extremely sensitive personal information in some of the emails. The Defendant would have known that they were private and confidential (indeed at least one requested the same) and I find it inconceivable that if there was an outstanding obligation to pay the Defendant millions of pounds he would have felt compelled not simply to avoid mentioning it (even implicitly) but to have not challenged the

Secondly, there is no independent evidence at all to support the Defendant’s explanation that he was caught in a ‘Stockholm Syndrome’ type relationship with the Second Claimant whereby he felt driven to express himself as a supplicant. The sole source of evidence on which those submissions were premised namely that repeated emails thanking the Second Claimant profusely for his generosity should be read as reflecting a polar opposite state of affairs, came from the Defendant himself. At one stage in the proceedings his solicitors had indicated they were going to apply for permission to rely upon expert psychiatric evidence but no application was ever pursued. Whilst the documents do disclose that the Defendant stated contemporaneously that he was suffering from mental health problems during the relevant period there is simply no evidence at all to substantiate a medical case that the plain face of the documents can be properly explained away on the basis of a psychiatric illness, let alone that the tenor and tone of the documents was governed by the existence of a ‘Stockholm Syndrome’. The documents suggest that the Defendant was certainly exceedingly grateful for the monies he was receiving and that on occasion he was profusely apologetic for asking for additional sums. I do not read the documents nor the evidence as a whole as suggesting an alternative explanation (let alone a compelling one) sufficient to disregard their plain meaning.

I turn more briefly to explain why I dismiss the other arguments advanced by the Defendant in support of the existence of the Ritz Agreement in the absence of documentation.

It was forcefully submitted that the Second Claimant had shown himself in business to be a man schooled in the ‘dark arts’ and was well used to ‘papering over the cracks’ – by which I understood it to be suggested that the years of email exchanges might have been a deliberate attempt by the Second Claimant to paint a false picture of loans in order to cover up the obligations under the Ritz Agreement.

The basis for these arguments was the evidence of the Defendant, who made a series of serious allegations against the Second Claimant, some of which were put to him in cross examination. It was suggested that the sale of the minority shares had been knowingly (and improperly) made to companies controlled by the Majority Shareholders, it was also alleged that there had been a nefarious scheme whereby loans owed by a Russian property developer were mysteriously forgiven in a transaction that facilitated a ‘stealth’ payment back to the FIB Majority Shareholders (it being said that the sale price paid to the Minority Shareholders was deliberately inflated). These very serious allegations were robustly rejected by the Second Claimant in his evidence.

I too reject them all. There was simply no documentation that came anywhere close to establishing the serious allegations made (Footnote: ⁶) and the fact that they were advanced with such vigour by the Defendant reflects not on the credibility of the accused but the accuser.

Mr Edey QC contends that it is simply incredible that if a whole series of loans were paid they were not recorded into loan agreements. The First Claimant is a financial services company and the first payment was for a very large sum and thereafter the Second Claimant, an experienced financier, made repeated payments of tens of thousands of pounds over a number of years without any significant repayments.

If these payments had been made by a commercial organisation in the business of granting loans to unconnected third parties and/or there had been no body of relevant contemporaneous documentation, this would have been powerful, very probably, decisive point. This is however not such a case.

It is certainly unfortunate that no loan agreements were made – it would no doubt have avoided the need for this trial, but I am not prepared to accept that their absence demonstrates that the payments were not loans let alone that it is probative of the existence of the compensation agreement contended for by the Defendant.

In respect of the loan by the First Claimant I accept the evidence (which I have generally found to be credible for the reasons given above) of the Second Claimant that it was not felt necessary to formalise because he was a colleague in a small firm with a ‘family’ spirit notwithstanding the more prudent approach of Mr Stohner. Thereafter I accept his evidence that he did not record loans because he considered each to be the last that would be requested by someone he considered a close friend and also because he believed the recovery of the Cypriot funds was just around the corner. This evidence was consistent with the content and tone of the documentation taken as a whole.

Indeed, the absence of written agreements only takes the Defendant so far in which on his own case he did not record his Ritz Agreement at any stage, not least when (on his account) it was becoming increasingly apparent that the Second Claimant might not honour it and he might be millions of pounds out of pocket.

I conclude that at worst, in not formalising loan agreements, the Second Claimant could be accused of letting his generosity and kindness spill over into naiveté about the Defendant.

As set out above, one of the points advanced by the Claimants was that some repayments had been made by the Defendant over the course of the years. The Defendant argued that this was in fact a scheme concocted by the Second Claimant and that immediately after the repayments by him, he would receive cash in return. Indeed the Defendant relied upon the cash payments made to him as being proof of part compliance with the Ritz Agreement.

The Defendant sought to prove the existence of the ‘circular scheme’ of payments of cash from the Second Claimant, following his own repayments, by reference to deposits into his bank accounts shown on statements disclosed late in the day. The statements did not prove what he claimed they did. In respect of one alleged transaction (i.e. purported repayment of a loan by him followed by cash from the Second Claimant) there is no corresponding bank entry at all. The Defendant sought to explain this by stating the Second Defendant told him (for entirely inexplicable reasons which I do not find credible) not to bank the cash. In respect of the remaining payments, there are entries in the statements showing that individual cash deposits were made but neither the amounts nor their timings fit with the narrative the Defendant urges I accept.

I found the Defendant’s oral evidence on this point and his reliance on the documentation to be most unconvincing.

I find that there were a series of loans made by the Claimants and that there was never an agreement to compensate as alleged by the Defendant. It is not strictly necessary to address why it is, on the basis of my findings, the Defendant has advanced a case that is in so many respects untrue. There are cases in which parties can provide honest but deeply mistaken recollections about events that occurred long ago. A teaching of Gestmin is that this may reflect the frailty of human memory. Here the Defendant’s life undoubtedly spiralled downwards after his departure from FIB both in terms of finances and health, and thus his memory over time may have been mediated by his sense of injustice that others made so much money out of events that caused him only misery. It may be that over the many years of hardship these circumstances have worked to convince the Defendant not just of a moral case but to reconstruct a legal case in his own mind – albeit one that never actually existed. I make no findings in that respect but I do conclude that the Defendant’s evidence in all key respects was entirely unreliable and that rather than repay the kindness shown to him he instead (through both his intimated claim and the defence in this case) elected to seek to avoid his debts and subject the Second Claimant to deeply hostile and expensive litigation, not least exposing him to over a day of expert cross examination in which his character was repeatedly sought to be impugned and unfounded allegations of the upmost seriousness repeatedly put to him in open court.

It is not enough for the Claimants to demonstrate that the payments were not made pursuant to a compensation agreement. They must go on and demonstrate that each payment was a loan and the terms included repayment on demand.

The Defendant correctly points out that although there is no dispute that the documents demonstrate payments being made on the dates claimed, very few of them are recorded in the documentation as being loans. The burden is on the Claimants to show that they were loans as opposed say to gifts or ex gratia payments.

Having considered the relevant evidence surrounding each one of the payments (summarised in the attached schedule) I am entirely satisfied that notwithstanding the absence of documentation evidencing the precise status of each, they were all loans save for two specific payments made to third parties. In reaching this conclusion I have relied not least on:

The only payments that have given me pause for thought are two particular payments arising out of the investigations into the Cypriot funds. I am entirely satisfied that in general the payments to lawyers and investigators hired to help recover the sums were made by way of loans which is a structure wholly consistent with the terms of the Defendant’s email of 16 June 2010, some of the relevant parts of which are excerpted above. At least initially, the Defendant was expressing great enthusiasm for seeking to recover the sums said to have been stolen from his accounts and was explicit in his acknowledgement that the Second Claimant’s outlay would be repaid.

In the summer of 2013, at the urging of the Second Claimant, the firm of Sidley Austin was instructed to assist in the recovery of the Defendant’s Cypriot funds. It is clear from an email exchange on 26 June 2013 that the Second Claimant was very keen that the Defendant progress matters with Sidley Austin following preliminary advice that legal action in Cyprus was a viable option. The Second Claimant wrote that in addition to providing a means of permitting the Defendant to “repay the bailouts” to the First and Second Claimants, it would also permit him to remedy a wrong – he wrote “Don’t lose your nerve, Jonathan. This is EUR 2 million that they STOLE from you, so they have it.”

It is clear from his response, that the Defendant was expressing nervousness about proceeding because of what he described as fears of the consequences “I am asking you to be supportive but I beg you not to exert too much pressure. I would rather not continue on this planet if there is two to three years of litigious nightmare ahead. EY would not tolerate such a major distraction easily and it is likely that I would have to leave the partnership.” Indeed, the Defendant later decided not to proceed with any legal action.

Sidley Austin were retained and advice was also obtained from Cypriot Counsel. On 17 September 2013, the Second Claimant informed the relevant partner at Sidley Austin that he would cover fees (including obtaining advice from Cypriot counsel) in the event that the Defendant could not. The Defendant wrote to Sidley Austin to make plain that he was not in a financial position to incur any liabilities to the firm, as he wrote to the solicitor on 18 September 2013 “I am unable (and because unable, I am also unwilling) to have any actual contingent liability in respect of your firm’s fees in respect of the engagement letter under which you are now acting for me”. This explicit disavowal of liability for Sidley Austin’s fees is a point relied upon by the Defendant for demonstrating that there was no agreement between him and the Second Claimant to repay the latter’s outlay on lawyers’ fees.

Whilst I do not doubt the sincerity of the Second Claimant’s evidence that the payments were clearly made as loans on the same basis as all the others, I am unable to conclude that he has established this to the requisite standard. This is not because I accept the relevant parts of the evidence of the Defendant but rather because the contemporaneous documentation does not make out that a formal agreement for repayment on demand existed in respect of these specific payments. There would seem little doubt on the documentation that the Second Claimant was getting very concerned that a failure to recover the Cypriot funds was making the prospect of significant repayments look ever more remote. At the same time his business relationship with Mr Stohner was becoming ever more strained by the failure to recover the monies. It is also clear on the documentation that the Defendant was becoming increasingly reluctant to progress Cypriot proceedings (a point that the Claimants contend may reflect the fact that the theft was a deliberate concoction) and had made that plain in terms to the Second Claimant and Sidley Austin. The documentation, even taken with the course of dealing over the previous years, does not make out the Second Claimant’s case that the payments were made on the explicit understanding with the Defendant that they would be repaid, not least because of the clear terms in which the Defendant was expressing (i) in clear terms his reluctance, at this particular juncture to proceed and (ii) his clear disavowal of liabilities for fees.

Notwithstanding my findings in respect of the Sidley Austin fees I do find that the subsequent payment to KCS were once again established under the course of dealings of paying third party disbursements under the loan agreements. Consistent with the pattern established in earlier years (and in contrast to the dealings with Sidley Austin), the Defendant was once again expressing himself as keen to proceed with recovery of the Cypriot funds. The Defendant introduced KCS to the Second Claimant and in an email of 28 February 2014 stated “I am able to say to you, and under no pressure that I am now fully committed to a resolution of the matters saying (sic) back to 2006/7 and, for the first time feel we have the right support to achieve that resolution”. As it transpired the Defendant sought to use the engagement of KCS to press his moral case (which at that time had never been articulated to the Claimants) that he should be compensated by them for the events leading to his departure from FIB. I conclude that the fees were underwritten as part of the general pattern of loans.

In respect of all the loans which I have found were entered into by the parties, I conclude that the terms for repayment was on demand. I have considered whether some, or all, were contingent on the Defendant securing his monies from Cyprus. That would be inconsistent with the clear majority of most requests which were requested in order to tide the Defendant over when desperate for funds. Even in respect of the payments made more directly for the return of the Cypriot monies, I

The Defence asserted that the payments were loans governed by the Consumer Credit Act 2006, that the Claimants failed to comply with the statutory requirements governing loans and were therefore unenforceable. In fact, as the Defendant now accepts, the relevant Act is the Consumer Credit Act 1974 albeit he advances precisely the same points under it.

The key issue between the parties is whether or not the loans were non-commercial agreements and thus exempted from the statutory formalities of the Act by s.74(1). Non-commercial agreements are defined in s.189(2) as:

“a consumer credit agreement or a consumer hire agreement not made by the creditor or owner in the course of a business carried out by him.”

The test for considering whether the loans were made ‘in the course of a business’ carried out by the Claimants is a broad test that requires the court to look at the transactions between the parties and discern whether taken as a whole they are consistent, or inconsistent, with payment being made in the course of business^, see for example, Wilson LJ (as he then was) in Al-Tamini v Khodari [2009] EWCA Civ 1109 at §§33-38 (Footnote: ⁷). That case concerned whether cash payments made by the Claimant to the Defendant to cover the purchase of chips from the Les Ambassadeurs Club Casino were loans regulated by the 1974 Act. Of course any consideration of whether particular loans are, or are not, governed by the Act will turn on their own particular facts but it is instructive to reflect on the factors that Wilson LJ considered relevant:

“35.

So the features of the transactions between the parties must be weighed in order to discern whether, taken as a whole, they entitled the judge to conclude that they were not made in the course of a business carried on by the claimant. In my view the balance sheet reads as follows.

36.

Indicative of a business are the following features:

(a)

the claimant made numerous loans to the defendant;

(b)

they were made over a period of almost five years;

(c)

they totalled in the region of £7,000,000; and

(d)

a substantial profit, reflected in the 10% fee, accrued to the claimant by virtue of them.

37.

Contra-indicative of a business are the following features:

(a)

although occasionally he made loans to two others, almost all the claimant's loans were made to only one person, namely the defendant;

(b)

the loans were made ad hoc, in response to the defendant's sudden requests for immediate, temporary assistance;

(c)

the claimant acceded to the requests because he wanted to foster the goodwill of the defendant as an important client of his bank;

(d)

there is nothing to indicate that the claimant would have made loans to persons with whom he was unacquainted;

(e)

neither the loans nor the repayments were recorded in writing between the parties;

(f)

security for repayment was neither tendered nor sought;

(g)

the time for repayment of each loan was never identified;

(h)

the 10% fee was not related to the time for which each loan remained outstanding; and

(i)

the claimant had no business premises, kept no paraphernalia apt to a business and neither advertised nor otherwise published terms upon which he was prepared to make loans.

38.

In my view a weighing of the rival features, in particular the necessary attribution of substantial weight to the informality surrounding the loans between the parties, fully entitled the judge to infer that the claimant did not make loans in the course of a business. The defence under s.40(1) of the Act of 1974 was rightly rejected.”

Although the regularity and overall amounts of the loans can be said to be consistent with a commercial agreement, it is in my view abundantly clear from the evidence that they were no such thing. I find that the first loan was given by the First Claimant out of concern and kindness for a partner in their group of companies, consistent with the evidence of the ‘family firm’ ethos of the business and the generosity of spirit of the Second Claimant. The same points can be made in respect of the repeated payments made by the Second Claimant and (through him) the Third Claimant. These were payments motivated in large measure because of concerns for the predicament of a close friend. The loans were made on an ad hoc basis in response to requests for urgent assistance, they were not recorded in formal documents, security was not sought nor was a rate of interest agreed, nor was the time for repayment ever recorded. It is abundantly clear that these were not loans made in the course of a business.

I have concluded that it was an implied term of the loans that they became repayable on demand. As noted, the parties have agreed that the appropriate rate of interest under the Senior Courts Act 1981 is 2% above base. They have also agreed (subject to liability) that the earliest period from which interest should run is 23 February 2018. That is the date at which the obligation to repay accrued, i.e. the date one month after the Claimants’ Letter Before Action.

Although this was the earliest date agreed to be appropriate it is the one that I consider should apply here. On my assessment of the evidence the Claimants showed considerable forbearance in pursuing their right to recover their loans and indeed did

For the reasons set out above I have concluded that the Claimants are entitled to recover the sums sought (save for Payments 34 and 35) plus interest under the Senior Courts Act. The relevant sums and interest payments are contained in the Order attached to this Judgment.

A draft of this judgment was circulated to the parties and their legal representatives on 1 April 2020. Subsequently, on 7 April 2020 I received further submissions on the issues of (i) costs, (ii) time for payment and (iii) interim payment on account of costs. In light of the Covid-19 emergency it is sensible that I set out my decisions on these issues within the body of the judgment in order to reduce the administrative burden on the court system.

Unsurprisingly the parties are agreed that the Claimants should receive their costs. There is however a dispute as to whether the costs should be assessed on the standard basis or on the indemnity basis.

The parties are agreed that the Court enjoys a broad discretion on questions of costs under the regime provided by CPR 44.2 and 44.3. Indemnity costs can be awarded where the conduct of a party takes the case ‘out of the norm’. The parties do not agree whether the findings I have reached in respect of the Defendant’s conduct take this case ‘out of the norm’.

I conclude that it is appropriate to award indemnity costs. I have set out in detail in the body of this judgment repeated findings about not simply the unsatisfactory nature of the Defendant’s evidence but also the manner in which he conducted this litigation. As I have found, he was a wholly unsatisfactory witness, in very large measure untruthful and mendacious. Taking into account all the circumstances of the case I conclude that these takes the claim ‘out of the norm’.

In reaching this conclusion I have not, as promoted by the Claimants, taken into account the Defendant’s decision to employ the firm ‘Black Cube’ to secretly record the Second Claimant. This evidence was excluded by separate order (and cost sanction) prior to the commencement of trial and I was therefore (rightly) not given much evidence or information about it.

Payment shall be made within 14 days of this judgment. This is the standard term (CPR 40.11) and I see no reason to depart from it here. I accept that the Covid-19 emergency may make it more difficult for the Defendant to make the necessary arrangements to discharge his debt but (i) he would have had the advantage of a

This litigation has been subjected to the cost budgeting regime albeit the Claimants have indicated that they will seek to argue on assessment that their recovery should exceed the budgeted levels.

The existence of the budget does give the Court some reassurance that amounts sought by way of interim costs order do not exceed the amount ultimately found to be payable.

I order that the Defendant pay the sum of £250,000 by way of interim payment on account of costs which represents approximately 85% of their budgeted costs.

PAYMENTS FROM MR HARFIELD TO THE CLAIMANTS