Masood & Ors v Zahoor & Ors [2008] EWHC 1034 (Ch)

[2008] EWHC 1034 (Ch)

Case No HC04C01331

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 14/05/2008

Before

MR JUSTICE PETER SMITH

Between

(1) Mohammad ZahoorDefendants

(2) Metalsukraine Corporation LtdDefendant

(3) International Steel and Tube Industries LtdDefendant

(4) Azot LtdDefendant

(5) Waseem MehboobDefendant

(6) Parveen SaleemiDefendant

Mr R de Lacy QC and Mr L Harris (instructed by CJ Jones) for Claimants

Mr A Trace QC and Mr J Aldridge (instructed by Hogan & Hartson) for F irst to Fifth Defendants

Mr C Harris (instructed by Stephenson Harwood) for Sixth Defendant

Hearing Hearing dates: 12, 13, 14, 15, 18, 19, 20, 21, 22, 25, 26, 27, 28, 29 February and 4, 5, 6, 7, 11, 12 March 2008

Judgment

INTRODUCTION

[1]This judgment arises out of the trial that took place between 12th February and 12th March 2008. During that trial I heard evidence from 3 principal witnesses namely the First Claimant Sohail Masood (“SM”) the First Defendant Mohammad Zahoor (“MZ”) and the Sixth Defendant Parveen Saleemi (“PS”).

[2]In addition I heard the evidence of a number of other secondary witnesses and evidence by video link of further witnesses.

[3]In addition as the authenticity of a large number of documents was disputed I heard expert evidence from David Richard Browne a forensic document examiner on behalf of the Claimants Dr Audrey Giles on behalf of the First to Fifth Defendants and Robert W Radley a forensic handwriting and document examiner for the Sixth Defendant. Their reports developed during the process of the trial due to the late production of original documents for them to consider. However at the end of the day the experts were broadly agreed on a large number of documents as I shall set out further in this judgment.

[4]The chronological document bundles at trial extended to 11 lever arch files but that was reduced to a core bundle. In addition there were a large number of documents from other proceedings as the parties have indulged in litigation against each other around the world for many years.

ATTENDANCE OF WITNESSES

[5]There was some difficulty during the trial of securing the attendance of a number of witnesses.

[6]First there was the potential evidence of a Mr Axelrod an Oregon attorney in the firm of Schwabe, Williamson and Wyatt Attorneys of Portland Oregon. He initially acted for SM and was introduced by him to MZ and thus the ISTIL group (“ISTIL”) the Second Defendant a Delaware Company now known as Metalsukraine Corporation Limited.

[7]He provided a witness statement to the Claimant but the First to Fifth Defendants challenged his ability to give evidence because they said it referred to matters which were confidential and were subject to legal professional privilege. The First to Fifth Defendants made an unsuccessful application in Oregon before the commencement of the trial to restrain Mr Axelrod from giving evidence.

[8]The Oregon Court in refusing the application determined that the witness statements did not disclose any breach of Oregon’s Bar Association code of ethics, that the material was not confidential and that the trial Judge could decide finally whether on a line by line basis any part of the evidence should be held to be privileged.

[9]The First to Fifth Defendants intimated that if Mr Axelrod came to give evidence they might well report him to the Oregon Bar alleging that he was in breach of his ethical code of conduct. After argument on Wednesday 13th February 2008 I determined that I would grant the Claimants an injunction against a cross undertaking in damages restraining the Defendants from threatening or taking any steps in Oregon which arise out of Mr Axelrod giving evidence. It was however subject to two provisos namely that the Defendants had liberty to apply during the trial to discharge if they thought it was appropriate and at the end of the trial the question whether the injunction continued after that date should be fully ventilated. I refused the First to Fifth Defendants permission to appeal against that ruling. In the event Mr Axelrod was not prepared to give evidence despite that injunction being in place to protect him. He required in effect a determination by me that the Defendants should not be entitled to make any complaint about him to the Oregon Bar Association. I did not see how I could possibly do that but I was willing to put an injunction in place and review whether it should continue. As I set out above, that proved not to be sufficient for Mr Axelrod so he ultimately did not give evidence.

[10]The First to Fifth Defendants wished to call a Mr Knight. He is a partner in the China/Hong Kong firm of Price Waterhouse Coopers (“PWC”). His evidence was set out in a witness statement dated 26th April 2005. His predecessor firm Coopers and Lybrand (“C&L”) had been instructed in 1997 on behalf of the Third Defendant (“ISTIL Guernsey”) first for an intended listing on the London Stock Exchange (“LSE”) and second for its eventual admission to the Alternative Investment Market (“AIM”). He was the partner at C&L in charge of both assignments. The First to Fifth Defendants wished to call Mr Knight to challenge the evidence of a Mr Lindberg who gave live evidence on behalf of the Claimants. Mr Knight was initially unwilling to give evidence and the First to Fifth Defendants served a notice under the Civil Evidence Act 1995. I indicated that bearing in mind that there were large issues of credibility in this case whilst hearsay evidence would be admissible it would inevitably carry less weight when measured against live evidence to the contrary which had been tested under cross examination. In the light of that observation it was unsurprising that the First to Fifth Defendants wished to seek that Mr Knight give live evidence. He proved extremely reluctant. They were compelled to issue a witness summons. Apparently Mr Knight was unwilling even to give video evidence via Hong Kong because PWC did not wish him to give such evidence. This is a disappointing attitude from a large organisation especially given the importance of his evidence as perceived by the First to Fifth Defendants. Accordingly although Mr Knight was out of the jurisdiction I indicated that I would give the First to Fifth Defendants liberty to issue an application for his committal for failure to respond to the summons which I gave them permission to issue. Of course the application would never be effective unless Mr Knight returned within the jurisdiction but nevertheless it proved to be a sufficient concern on his part. He subsequently attended and gave evidence from Hong Kong via video link.

[11]There were similar problems over the attendance of other witnesses via video link. Video link is not the best way in which to hear live evidence. However sometimes one has to accept that is the only way such evidence can be given. The problems about it are well known. It is often not easy to see whether or not witnesses are being prompted off screen. Indeed when some of the Claimants’ witnesses gave evidence from Pakistan it was obvious that there was such prompting and I expressed a view that it should be stopped. However that unwieldy form of evidence is infinitely better than evidence comprised in a witness statement.

[12]At the end of the day ultimately the parties were able to secure the attendance of all witnesses they wished to attend either by live evidence or video link save that of Mr Axelrod.

[13]Equally although the late production of various documents caused difficulties for the Experts all parties had a full deployment of all their relevant Experts.

[14]Thus I am satisfied that all parties had full opportunity to deploy the evidence in their case. I should in that context also add that the trial overran by some two weeks. This was mostly due to the lengthy cross examination of witnesses. I do not criticise anyone for that; the estimate of the length for cross examination is notoriously difficult. However the Court was able to accommodate this overrun so that all the trial was heard in its entirety, together with a period of reflection to enable detailed closing submissions to be prepared by all parties for which I am grateful. That overrunning however impinged in what I expected to be judgment writing time which has had a knock on effect and a consequential slight delay in the production of this judgment. The writing of the judgment has also been interrupted by my sitting on Interim Applications which could not be avoided. Nevertheless the judgment has been delivered within 10 weeks of my reserving it.

THE CLAIMS

[15]This action as now constituted representing two sets of proceedings:- i) The original High Court Proceedings (action no HC04C01331) comprising claims:- a) By C1, C2 and C3 against D2 and D3 for remuneration under contracts for services rendered to D2 and D3; b) By C1 against D3 for unpaid salary; c) By C1 against D1 for damages for malicious falsehood. ii) Proceedings in the Royal Court of Guernsey pending trial in this action which include a claim by C1, C2 and C4 against D1, ISTIL Group Inc (the predecessor of D2) and D3-D6 to title to 8% of the issued share capital in D3 (“ISTIL Guernsey”) and rectification of its share register or compensation. iii) In addition related proceedings were to be heard at the same time or immediately after the action;- a) Proceedings in this Court under action number HC02C0711 in which ISTIL Group Inc and D2 were Claimants and D1 and Reventox Consulting Ltd (incorporated in Cyprus) were Defendants (“The Reventox action”). D1 is the Part 20 Claimant and obtained a joinder of C1 for the purpose of making him liable pursuant to Section 51 Supreme Court Act 1981 for about 80% of the costs unpaid to D1 and Reventox by D3. b) D3 claims against C1 a declaration under action number HC07C01878 that C1 was validly removed from the board of D3 at an EGM held on 31st March 2003 (“the EGM action”). Action for this relief was brought in Guernsey and has similarly been stayed on the basis that the proceedings should be brought by D3 in England. In the event that action was not fully developed before me. The parties agreed that there will be no determination on that aspect of the many disputes between the parties and it could be restored depending on what my findings were.

OVERVIEW

[16]The main claim revolves around C1, Sohail Masood. He owned a financial services business called Newport West Financial (“NWF”) and carried on business in the western states of the United States settling (eventually) in Portland, Oregon. D1, Mohammad Zahoor, was an old friend and school contemporary of his and in 1996 owned 49% of Metalsrussia Group Holdings Ltd (“MGHL”) which traded in steel and was venturing into manufacture.

[17]MZ’s financial backer and a majority shareholder in MGHL was a Mr Wit Viriyaprapiakit (“Mr Witt”) an important figure in the Asian steel industry whose interests were based in Thailand. In 1996 he owned 51% of the group partly through Thaiwin Asia Ltd (“Thaiwin”). MZ’s business had been founded in 1991 in Hong Kong in the form of Metalsrussia Corporation Ltd; MGHL was incorporated in the British Virgin Islands in 1993 as a holding company for the group. Part of the 51% share holding amounting to 10.2% of the issued shares were in 1996 in the hands of Ms Ng Yin Lee known as “Yinnie”. She was the managing director of MGHL and ran the Hong Kong office, the administrative centre of the group until 2000-2001 when it was closed and its records were moved to SM’s extensive house in Portland. The other directors were MZ and Win the son of Mr Witt.

[18]In 1997 an attempt was first made to obtain a listing on the Hong Kong Stock Exchange. This was aborted because of Mr Wit’s control of the group as he had previously been found to have floated a company in Hong Kong without full disclosure of his competing interest with that company. The brokers considered that would prevent admission. A second attempt was made for a full listing at the LSE and that too failed after an examination of results. The parties disputed before me as to why that attempt at listing failed. It was quite impossible for me on the limited evidence that was produced in this regard to come to any conclusion as to the reasons for the failure. Both sides blamed each other. As a result of that failure the group was listed on AIM and remained listed from October 1997 to January 1999.

[19]The AIM listing also proved to be unsuccessful. Once again both sides blamed each other and it is quite impossible for me to come to any conclusion which identifies the cause of the failure on the basis of the evidence put before me. No party suggested that I could embark on such an exercise.

SM’S CLAIM TO SHARES

[20]The primary claim of SM is in relation to promises he claims were made to him by MZ and Mr Win that he would be entitled to 5% of the shares on completion of the privatisation of the steel mill in the Ukraine called DMZ and a further 3% plus an option over 2% on the completion on a successful flotation of the group. The 8% of the shares were to come from the block of shares which were held by Thaiwin for the benefit of Yinnie up until November 1996. The option over 2% was to be (and in fact was) conferred as part of an employee share option scheme.

[21]The AIM listing as I have said proved to be unsuccessful. A decision was made to remove the group from AIM which was effected with effect from 4th January 1999. SM then included proposals that the group explored the acquisition of a tube mill in Ohio for which finance was sought. A disclosure document was prepared to assist this and issued by Needham & Co of Portland. That included a statement that SM was the owner of 4.3% of the group as at 2nd September 1999. After the withdrawal from AIM finances were obtained from the European Bank for Reconstruction and Development (“EBRD”) to complete the privatisation of the DMZ and the spin off of another part. The privatisation of DMZ involved the acquisition of 40% of DMZ giving the group 45.24% interest in it on 1st May 1998. The completion of the privatisation was effected by the end of 2000 and its operation was funded by a loan from EBRD which was completed in late 2001.

[22]In 2002 difficulties arose between Mr Win and management of the group. Once again the causes of this are disputed and it is impossible for me to come to any clear conclusion. Basically SM blamed MZ and he blamed SM. Initially they presented a common front against Mr Win. The latter demanded compensation in the form of 20% of the shares owned by MZ. By this time MZ held the shares through his Nominee the Fourth Defendant Azot Limited (“Azot”) being some 49% of the total shares. In addition Mr Win made a claim that SM should provide 5% compensation.

[23]In early 2002 there were discussions and various proposals about how Mr Win should be removed from the group as summarised in 2 agreements labelled 4A and 4B. Win had revived the function of the Audit Committee at a board meeting on 2nd March 2002 and those investigations led to a set of findings which in turn led to a decision by the board on 27th March 2002 to make SM Chairman and MZ CEO. These findings concerned self dealing by MZ and his wife in relation to immovable property in the Ukraine and Russia.

[24]However the Audit Committee later discovered what were believed to be much more serious diversions it is alleged, of corporate business opportunities exactly at the time that MZ was negotiating agreements 4A and 4B. In particular this was alleged to be a diversion of substantial commission payments in respect of military hardware from MCL to Reventox (a Cyprus company). This led to the Reventox action against MZ. In that action a worldwide freezing order was made on 27th September 2002 against MZ which required him to make a detailed disclosure including the disclosure of the true state of the contract between Reventox and Progress a Ukraine state entity which was engaging Reventox.

[25]MZ trumped the Reventox action in March 2003 by reaching an agreement with Thaiwin whereby he purchased Thaiwin’s shares leaving MZ as the owner of 85% of the shares in the ISTIL Group. In March 2003 under powers of attorney granted by Nominee shareholders MZ set in motion the process of a requisition of an EGM of ISTIL Guernsey. This is the subject matter of HC07C01878. SM was purportedly removed as a director. There is an issue (which as I set out above I am not in a position to determine in this action) as to whether or not the requisition process was carried out with adequate service of notices. It is further alleged that the purpose of the requisition on MZ’s part was not to further the interests of the company but to remove SM and to bring to an end the Reventox action. That action was effectively brought to an end by the dismissal order (made in fact by me) in March 2003. The order was made by consent (unsurprisingly) because by that time MZ was controlling the Claimant and the Defendant and there was therefore no objection on the part of the Claimant to the dismissal of this action with indemnity costs. The question for me to determine is whether or not those proceedings were improperly brought initially and that in some way SM is liable to pay under section 51 of the Supreme Court Act 1981 a part of the costs of that action as a result of his causing the Claimants to bring the proceedings whilst he was the Chairman of ISTIL Group. Such costs claim is limited to the costs of dealing with a contentious Affidavit sworn by SM.

[26]Prior to that dismissal Mr Justice Lawrence Collins as he then was had delivered a draft judgment which was severely critical of SM’s Affidavit evidence. That criticism is based on findings by him that SM had produced forged documents in support of the claim. The manner in which that judgment was reported by MZ on the ISTIL Group website forms the subject matter of the malicious falsehood claim. The full details of this claim can be found in the judgment of Lawrence Collins J in the Reventox action dated 14th February 2003.

[27]The Defendants say that SM is a serial forger in effect. They say that he produced forged documents in the Reventox action. In addition they say that he produced forged documents in a further action. This was South East Asia Metal Ltd (“SEAM”) v MZ claim number HC05C00010. In that action Miss Susan Prevezer QC sitting as a Deputy Judge in the Chancery Division delivered a judgment on 3rd April 2007. That judgment is currently under appeal. I understand that the appeal as regards the admission of fresh evidence has been heard but I do not know the result. It has no impact on this judgment. The claim was for repayment for an alleged loan of $958,000. MZ had a counterclaim whereby he alleged he lent SEAM $2,500,000. Miss Prevezer QC dismissed both claims. She was critical of the evidence of both SM and MZ.

[28]Mr Masood gave evidence on behalf of SEAM. It relied upon documents the authenticity which was extensively challenged by MZ. Having seen SM give evidence before her Miss Prevezer QC concluded (paragraph 67):- “67. As I have said, the evidence leads me to conclude that this fax [interpolation the fax that SM said he had received] and that of 17 October 1996 are simply not authentic. Not only can these faxes not be relied upon to support SEAM’s case on the Counterclaim but more fundamentally, they raise serious questions about the credibility of the evidence of Mr Asad Ali and [SM].”

[29]In paragraph 87 she commented adversely in respect of another fax produced by SM based upon an examination of the Fax Activity Report (a feature in respect to some of the documents before me). She concluded that this document was not authentic and that she found SM’s explanation of the Fax Activity Report anomaly unconvincing. However as was the case before me MZ too was attacked by SEAM as being a liar. Miss Prevezer QC referred to this in paragraph 90 of her judgment where she refers to MZ’s admission that he had “previously deliberately misled professional advisors and regulatory authorities and had admitted to lying whenever he feels attacked by people making a false case against him”. Significantly he admitted the same point before me. Accordingly his Counterclaim for repayment of the loan was similarly dismissed.

[30]As I said that judgment is the subject matter of an appeal. Before Miss Prevezer QC MZ invited her to infer that a number of faxes had been forged by SM. No expert evidence as to the authenticity of the faxes was called. Dr Giles has however produced an expert report for the purposes of that appeal that deals with that. It was initially produced to the Claimants in this action in a redacted form (which excluded parts of her report in relation to the use of automated signature devices). I was concerned by this redaction but as things developed nothing turns on it.

APPROACH TO THE EARLIER JUDGMENTS

[31]It seems to me that I should not accept the conclusions of the Judges in respect of the facts of the cases before them as founding any issue estoppel as against SM. In neither case was he a party to the proceedings. MZ was of course but equally I do not think it appropriate given the fact that those judgments do not bind SM that any adverse findings as against MZ should have any binding nature either.

[32]They are not admissible in evidence before me as to the facts: see Secretary of State for Trade and Industry v Bairstow

[2003] 3 WLR 841

[33]Nevertheless they are in my view relevant for the purposes of credit. It might be the case (and this is the way the Defendants put it) that if SM is shown successfully by MZ to have been a forger in a number of cases then that is relevant when assessing his evidence when the same allegation is made against him yet again in a third set of proceedings. However if he challenges those findings (and he did) then his answers are final save in relation to bias or evidence or reputation for untruthfulness: see Phipson “Evidence” para 11-37 to 11-38.

[34]I do not find any assistance from these judgments in determining the issues in this case. The reasons for that are twofold. First the findings are not accepted and therefore would have to be revisited if any party wished me to do that. The allegations in the SEAM action were not seriously revisited before me but the forgery allegations in the Lawrence Collins J judgment were. This led to revisiting the documents which Lawrence Collins J found to be forged and the circumstances in which SM omitted to disclose (on behalf of ISTIL) other documents which had been obtained. This is something that I need to determine in respect of the claim against SM for some of the costs of the Reventox action and I will revert to it in that part of the judgment.

PARTICULAR CLAIMS IN DETAIL

[35]There are a number of different claims. CONTRACTUAL CLAIMS

[36]The structure and relationship of the various Corporate Defendants needs to be set out. D2 (“Metalsukraine”) is a BVI company and a wholly owned subsidiary of D3 ISTIL Guernsey. It (D3) had been incorporated under the name of Metalsrussia Group Ltd but changed its name to International Steel and Tube Industries Ltd on 16th July 1999 and thereafter succeeded Metalsrussia Group Holding Ltd (“MGHL”) and is now the holding company of a group of commonly controlled companies (“the ISTIL Group”) involved in the manufacture and export of steel products. Metalsukraine became subject to all the liabilities of the ISTIL Group Inc and MGHL by operation of Delaware and BVI law. With effect from 31st December 2005 ISTIL Group Inc merged with Metalsukraine and it became liable for all the liabilities of ISTIL Group including the obligations of MGHL.

[37]The Fourth Defendant Azot Ltd is a BVI company under control by MZ’s family trust and was initially managed by a Guernsey trustee company Guinness Flight & Calder SARL (now managed by Investec Trust (Guernsey) Ltd).

[38]The Fifth Defendant (“Mr Mehboob”) is a resident in the Ukraine and an employee of the Group headed by ISTIL Guernsey. The Sixth Defendant Mrs Parveen Saleemi (“PS”) is a resident of Washington United States and the only surviving sister of SM.

[39]The contractual claim arises under Consultancy Agreements.

[40]As I have set out earlier in this judgment MGHL’s shares were initially held as to 49% by MZ and 51% Thaiwin. On 8th November 1996 MZ transferred his 49% shareholding in MGHL to Azot. From 1993 to around November 1996 MGHL’s directors were Yinnie and MZ.

[41]The Group’s manufacturing venture was primarily the acquisition after privatisation of the steel works at Donetsk in Ukraine called in the documents DMZ. In 1996 it was the property of the government of the Ukraine.

[42]The Claimants contend that SM was engaged by MZ to provide financial services with:- i) A public offering of the shares in Metalsrussia ii) The sale of an Electric Arc Furnace at the time part of DMZ to be spun off from DMZ.

[43]The basic relations are set out in two documents dated 1st April 1996. The first of those is an agreement on Newport West Financial paper whereby it provides consultancy services for a period of 24 months from 1st April 1996. It is entitled to compensation (clause 4) the sum of $10,000 per month and a 1-3% performance fee plus an equity in the company “such performance rewards to be negotiated in advance of each project”. This Agreement throughout the litigation has been called “the General Consultancy Agreement”.

[44]The second agreement of the same date known as the “Donetsk Consultancy Agreement” provided for the provision of consultancy services again by Newport West Financial. Compensation in this case is $75,000 per month with the same cash and equity benefits to be negotiated in the future.

[45]Both of these Consultancy Agreements have addenda known respectively as the “IPO Addendum” and the “Donetsk Addendum”. The former of those provides for a performance fee payable on flotation of 5% of the capital raised; the latter provided for 5% of the capital raised from the EAF facility being the facilities that might be raised for the acquisition for the Electric Arc Furnace.

[46]These documents bear a date of April 1st 1996. The Defendants accept that such terms were agreed but not until November 1996 and are attached to the minutes of the board meeting 9/10 November 1996. The Defendants say those minutes approved those arrangements which were as attachments to the minutes. Nevertheless they maintain that the documents were not executed on 1st April 1996 and to that extent they are forgeries.

[47]By way of contrast the Claimants contend that those documents were entered into as addenda to the original consultancy agreements on the same day namely 1st April 1996. They contend that two further arrangements were made to the Consultancy Agreement by two letters both dated 10th November 1996 (respectively the “IPO Letter” and the “Donetsk Letter”) under the former of those the Claimants contend that is upon successful completion of initial public offering “SM/Newport West Financial” will be entitled to 3% outstanding shares before dilution for $1 and 2% of outstanding shares in the form of options at the time of initial public offering. Clause 2 provided for SM/Newport West to obtain a minimum cash bonus of $1,000,000 as a success fee for listing the group on the London Stock Exchange.

[48]The second 10th November 1996 amendment in relation to the Donetsk Agreement provided that upon completion of the privatisation of the DMZ plant SM/Newport West would be entitled to 5% of the outstanding shares of the group.

[49]Accordingly the Claimants contend if the terms of the two amendments dated 10th November 1996 were satisfied they would be entitled to 8% of shares in the group.

[50]The Defendants response is that the documents are forgeries and that they never agreed to them. Somewhat unusually as an alternative they contend that if the Agreements did bind them the Claimants were nevertheless not entitled to any sums under the same because either the entitlement was given up in 1997 or alternatively the condition (as regards the IPO Letter) namely quotation on the London Stock Exchange was not fulfilled.

DISPOSITION OF YINNIE SHARES

[51]As set out above Yinnie held (10.2% of the shares) indirectly through Thaiwin. These were agreed to be sold in late 1996 and the sale was completed in early 1997. They were acquired by four persons (“The Nominees”) namely Mrs Khatoon Shahood (SM’s and PS’s mother) (“KS”) (2.3%), Mr Mehboob (2.7%), Mr Khalid Hussain (2.9%) and Mr Mohammad Iqbal (2.3%). Only Mr Mehboob gave evidence.

[52]SM’s case is that pursuant to his entitlement to 8% of the shares on 31st December 1996 (document C2/205) he recorded an agreement that some of the Nominee shares would come to him and that on 2nd February 1997 he, MZ and Mr Wit agreed that KS and Mr Mehboob would hold their 5% of the shares on trust for SM. He suggests that this is further evidenced in the document dated 3rd December 1996. The purport of the letter dated 31st December 1996 from SM to MZ is to pass on concerns expressed by Thaiwin concerning the loss of control of the ISTIL Group. With the disposal of Yinnie’s shares Thaiwin would lose its 51% control. The letter purports to set out an assurance that MZ would not use the Yinnie shares (plus MZ’s existing 49%) as a basis for asserting control. The letter then purported to say that SM gave Thaiwin two assurances:- i) Azot and MZ would only control the 49% of the shares and would not induce outside shareholders to vote against Thaiwin nor at anytime claim these shares as part of Azot or MZ. ii) “the 10.1% (sic) shares are purchased by the shareholders dividend, therefore in the years to come when these shares are going to be sold, other than ones given to Newport West Financial/[SM] for compensation. The rest of the shares will be sold to outsiders and the cash will be distributed 51% to Thaiwin and 49% to Azot.

[53]In this document SM purports to set out two things. First that the Yinnie shares are to be used to satisfy the Claimants’ claim for compensation under the addenda to the Consultancy Agreements. Second it purports also to negative any suggestion that MZ/Azot have any interest in those shares. The Defendants contend that this is a self serving forgery. It is purportedly signed by both SM and MZ. If there is no entitlement to compensation by December 1996 the document must be a forgery.

[54]MZ (as appears below) claims the entirety of these shares belong to him beneficially and that the Nominees are Nominees for him.

SUBSEQUENT CORRESPONDENCE CONCERNING COMPENSATION BONUS

[55]On 15th May 1997 MZ wrote to SM on Metalsrussia Group Holdings Ltd notepaper confirming an agreement that Newport West Financial should be paid a fee of $1,000,000 on completion of the public flotation of the group on the London Stock Exchange. The second sentence provided:- “This sum represents full payment of the services of Newport West Financial, but does not include reimbursement of the out of pocket expenditure”.

[56]The next letter is dated 4th June 1997 (the first 4th June 1997 letter) this refers to an entitlement of $1,000,000 fee on completion of the Donetsk project. The final paragraph provided:- “You agree on behalf of NWF [i.e. C2 and C3] that in substitution for any earlier arrangement in relation to fees and remuneration (whether in cash or kind) which existed between Metalsrussia and NWF in respect of the Project the above terms shall apply”.

[57]This too is accepted by all parties as being a genuine document.

[58]On the same day another letter (the second 4th June 1997 letter) provided for the payment of $1,000,000 to SM on behalf of Newport West Holding and then provided confirmation that the letters of 15th May 1997 and the first 4th June 1997 set out all the fee and remuneration arrangements agreed between all Metalsrussia Companies and NWF in relation to:- i) The proposed floatation of Metalsrussia Group Ltd; and ii) In relation to the privatisation of the Donetsk Metalurgical Plant Open Stock Company (“DMZ”) the demerger of DMZ’s Electric Arc Furnace assets into Metalsukraine Ltd (“MUK”) from DMZ and Metalsrussia Corporation Ltd and the acquisition of its interest in MUK. iii) And that such letters superseded any previous written or oral agreements with respect to fees and remuneration (whether in cash or kind) between any Metalsrussia Company and NWF.

[59]SM’s case is that under the terms of 10th November 1996 letters he was entitled to 8% shares and $1,000,000 and that these letters merely gave him the additional $1,000,000 and did not have any impact on the previous arrangements.

[60]Putting aside the Defendants’ primary case that the two 10th November 1996 letters were forgeries their contention is that the 15th May 1997 and first 4th June 1997 letters replaced the terms of the IPO addendum which had been agreed in November 1996 with a single payment of $1,000,000 and to replace the Donetsk addendum which had been agreed in November 1996 with a single payment of $1,000,000. Any lingering doubt it is suggested as to the impact of those letters is reinforced by the second 4th June 1997 letter which reduced the Claimants’ entitlement to a single payment of $1,000,000.

[61]The Defendants also contend that the condition for the $1,000,000 under the terms of 15th May 1997 letter was never satisfied because the Group was never floated on the LSE or anywhere. It was listed on AIM but never issued any shares or raised any capital. AIM Listing is not sufficient for the purposes of the entitlement to the bonus it is submitted by MZ.

[62]The Defendants also contend that if there is a claim due on the $1,000,000 as a result of the listing on AIM any claim in respect of those is statute barred because the entitlement accrued more than six years before the commencement of the proceedings.

[63]The LSE listing was a disaster. As I said earlier in the judgment the reasons for that are disputed and it is impossible for me to come to any conclusion. Accordingly it is said that in August 1997 SM agreed to give up any claim to the $1,000,000 in any event. The Defendants contend that this is established by evidence of Mr Knight the partner in C&L who were retained first in respect of the LSE listing and second in relation to the AIM listing. As part of the attempt to obtain the LSE listing there was a pathfinder prospectus produced and in part (vi) of the Accountants Report there is reference to a fee of $1,000,000 payable to Newport West Financial on each event namely flotation and the DMZ acquisition. However he also produced a note dated 30th September 1997 which summarised the contents of a telephone message left for him by Jeremy Reid of Williams de Broe ISTIL’s brokers to the effect that the fees for Newport West are not going to be payable at all for either the admission or the DMZ transaction and he suggested that it be removed from the AIM prospectus. It accordingly was and SM approved that wording. Accordingly the Defendants contend that neither $1,000,000 fee was ever maintainable thereafter.

[64]The Claimants dispute that by virtue of the evidence of a Mr Lindberg. He was employed between October 1996 and July 2001 in various financial roles in respect of ISTIL’s activities in Donetsk, Ukraine, Hong Kong, England and Milton Pennsylvania. During 1998 he was concerned with the 1998 audit and he gave evidence to the effect (paragraph 6 of his witness statement) that MZ and SM agreed that the two bonuses were not shown as a line item in the ISTIL financial statement because one of them was considered to be part of the investment in the EAF in the Ukraine and was therefore capitalised and the bonus for the floatation on the LSE was also capitalised as part of the cost of the floatation. Both those items he said accrued on the books of ISTIL in 1997 and were systematically depreciated through standard accounting methods. Thus according to his evidence the $1,000,000 bonuses were simply as a matter of accounting expediency removed from the public documents and disappeared into the capitalisation costs of the two relevant transactions. I will deal with this evidence further in this judgment. I note at this stage that Mr de Lacy QC for the Claimants acknowledged there was no evidence which showed any such treatment of the bonuses.

[65]The battle lines between the parties in respect of the 8% bonus and the two $1,000,000 bonuses are set out above.

[66]The Claimants contend that the conditions in relation to the DMZ acquisition were fulfilled on or about December 1999 (paragraph 38 of the Re Amended Particulars of Claim). Thus the Claimants became entitled to $1,000,000 and the right to receive 5% of the ISTIL shares.

[67]The Claimants contend that the entitlement under the IPO Agreement was fulfilled by achieving a listing on the AIM of the LSE on 15th October 1997.

THE SHARES AGREEMENT

[68]This part of the claim arises out of the entitlement to the 10.2% of the Yinnie shares initially acquired by the Nominees. The circumstances of the sale and acquisition of these shares is not only hotly disputed but even now still shrouded in mystery at least as regards payment. The parties agree that Yinnie’s shares were sold by her on or around 10th March 1997 for the figure of $3,030,000. They are not in agreement as to who paid for that. What is transparently clear however in the case deployed is that none of the Nominees had any means to pay for acquisition of shares in such a large amount.

[69]The Claimants produced a Trust Account Statement from Richards Butler (Hong Kong) designated “Metalsrussia Client Account”. This purports to show various receipts totalling $3,034,000. It shows various people providing money on behalf of the Nominees and records Newport West providing $1,515,000 in tranches of $500,000 and $1,015,000. The Claimants pleaded in the Re Amended Particulars of Claim that SM and/or Newport would act as agent for the purpose of collecting the purchase price and to pay it into Richards Butler’s account. In paragraph 49 it is alleged that Newport Holdings paid the purchase price but neither MZ nor Azot indemnified it in respect of that expense. The First to Fifth Defendants deny that plea but somewhat cryptically (paragraph 49.1 of the Defence) simply say that MZ believed the purchase price paid was $3,060,000 but that is based on a reflection of the Loan Deeds. Those documents, to which I shall refer in more detail later in this judgment, are admitted by MZ not to be genuine documents. His claim now is that the Nominees hold the shares for him and that he provided the purchase monies. He has not produced any proof of that. In paragraph 126 of his witness statement SM deposed that the monies of $1,151,000 were loaned and that MZ would repay them but he has not done so. There was no cross examination on this issue. I would be reluctant without clear evidence to suggest that the Richards Butler client account statement is wrong. If that is correct then it appears that Newport West Financial provided a substantial contribution towards the cost of the acquisition of these shares and nothing the Defendants have adduced gainsays that.

[70]Surprisingly SM has never sought repayment of the loans referred to in paragraph 126 of his witness statement above nor has he raised the matter apparently with Richards Butler. It cannot be said that the entirety of the NWF monies can be attributed to the Nominee purchases as the note identifies separate funds attributable to their acquisition. However it is clear that some of the NWF monies (absent any other evidence and there is none) must have funded the Nominees acquisition either wholly or in part.

[71]MZ in his first witness statement (paragraph 81 and following) dealt with the acquisition of the Yinnie shares. He stated that he arranged for Yinnie’s shares to be purchased in the name of his two brothers, his nephew and KS (i.e. The Nominees).

[72]All of the Nominees he contends were lent money by him (100% each) to buy the shares. They all entered in to loan agreements which are all dated 13th December 1996. He asserted that the Loan Deeds were drafted by SM (which he denied) signed by him in Moscow and then SM took them to be signed by the shareholders and witnessed in Karachi probably in early 1997.

[73]This evidence is false for a number of reasons. At least 2 of the Loan Deeds bear false dates on them of 13th December 1996. His own witness statement acknowledges they were backdated. The most significant backdating is that of KS. Her document was not signed until May 2002. Yet it was still dated 13th December 1996. Further MZ procured the signature not SM. In his first witness statement in paragraph 88 he says “[the Nominees] were the beneficial owners of the ISTIL shares subject to the terms of the Loan Deeds. Waseem Mehboob gave evidence but his evidence was completely useless as he simply said that he was a student and was regularly asked by MZ to sign documents in Moscow which he did. That is of course contrary to MZ’s statement that SM obtained the signature. Neither Khalid Hussain nor Mohammad Iqbal gave evidence.

[74]In his witness statement MZ did not deal with the provision of the monies by NWF. Acknowledging his first witness statement was incorrect he deposed in a second witness statement dated 22nd January 2008 (paragraph 7-8) that Mr Mehboob’s recollection was correct and he now recalled that he himself obtained KS’s signature in May 2002. He did not change paragraph 88 which stated that any profit on any sale of the shares after repayment of the loan was due to a Nominee. Thus his evidence at that stage was that the shares belonged beneficially to the Nominees subject to the loan obligations in his favour. That is the way in which his Defence has been repeatedly pleaded.

[75]Not surprisingly he was cross examined extensively on this (T11 page 99-147).

[76]In that cross examination he repeated his assertion that SM prepared the documents. I do not believe him on that point. He was also cross examined about an agreement dated 28th February 2007 between him and PS whereby the shares which she by then held (she having acquired them from KS in September 2002) were transferred to him. That document is an extremely curious document but its relatively recent nature shows once again MZ is lying when he says he forgot about the original Loan Agreement with KS as an explanation as to why it was not disclosed until 30th November 2007. I accept what was put to him by Mr de Lacy QC (page 112 line 25) that his first witness statement was designed to give the impression that SM prepared the documents and they were executed in 1996. He was intending by that to give the impression that he had no role in obtaining the execution of the loan documents.

[77]This was reinforced by the answers he gave in cross examination on day 11. By the time he was cross examined his case was that as far as he was concerned the Nominees were truly Nominees for him and he acknowledged that the Loan Documents and the loan were bogus. By that he acknowledged that there was never any genuine loan and never any indebtedness as he believed at all times the shares belonged beneficially to him. He tried to recover that situation by suggesting that whatever the documents said he had the benefit of a residual trust of the Nominees and expected they would carry out his wishes.

[78]That is contrary to what he said for example in paragraph 88 of his witness statement dated 4th January 2008 where he stated that the Nominees were beneficial owners subject to the terms of the Loan Deeds.

[79]It is also contrary to an Affidavit KS swore on 26th December 2002 (CB 295). This Affidavit I find was mostly drafted by MZ and was designed to put forward a case that SM had no interest in the shares whatsoever. It is plain that a large amount of material (see the details as regards MZ) was not known to KS despite her traditional statement at the start of the Affidavit that the Affidavit was from her own knowledge or from sources identified. On page 4 of the Affidavit she dealt with the shareholding. First she said that MZ had approached her telling her that Yinnie was leaving the company and selling her shares very cheap he said apparently as the company was going public he could not himself buy the shares and people would not like it if he had the control shareholding of the company and that might affect the valuation. Further he apparently said that if he bought the shares he could not sell them for one or two years. He therefore said that he wanted KS and her family to make use of the opportunity to buy the shares and when the company went public the shares could then be sold and make some money. “He offered that he can lend the money. I can keep the profit but the principle has to be given back to him. He told me I had no downside and if I was not able to sell the shares with profit he would take the shares instead of cash. The repayment period was 8 years. I agreed. We signed an agreement and [MZ] told SM to buy the shares for me. On 19th December 1996 the shares were sold to me and transferred accordingly my name was entered in the shareholders register”.

[80]Further on she complains about SM seeking authority to sell the shares and to sell them cheaply.

[81]She also said that MZ forgave the loan in writing in early May 2002. In fact that was when she actually signed her copy of the Loan Deed contrary to what she therefore said. She then went on to deal with the giving of a Power of Attorney to PS on 7th September 2002 and the sale of the shares by her to PS her daughter on 28th September 2002 for R 20,000 (about £200). This was despite the fact they were worth at least $690,000.

[82]Finally she deposed to having seen a transfer dated 10th November 1997 purporting to be a transfer of her 2,007,500 shares to SM for no consideration. Her language is curious “the document bears my alleged signature and my wrong residential address. After carefully examining the document I came to the conclusion that the document was forged in the following grounds:- i) My signature is forged….. ii) Address is wrong iii) Date was specially selected to prove I was in the US at the time iv) If it was an original document why would have [SM] spend so many months asking…[indecipherable] v) …why should I give my shares [SM] without any consideration when I could sell the shares to MZ for [illegible]”

[83]This is curious because one would not expect KS to come to a conclusion about her signature being forged; she would be able in my view to have said “I did not sign this document and it is therefore a forgery”. It is another example of words being put in her mouth and I find that MZ put those words into her mouth. By this time KS had become hostile to SM. Why that occurred is a matter which is impossible for me to discover at this late period of time in the light of the inadequacy of the evidence. I will deal with this aspect of the disputes further. Nevertheless this shows to me that the MZ stance up until his cross examination that the relationship between the Nominees and him were that of Loan Agreement was false. I believe these documents were put up as a façade by him to give the impression that there was an arms length relationship and that he provided the entirety of the purchase money for all the Nominees.

[84]This has serious implications (see further the part of the judgment dealing with forgery and perjury). However it does not mean that I accept that the Nominees held shares for MZ as Nominees. For the reasons set out above I am quite satisfied that SM made a substantial contribution towards the acquisition of these shares by the monies that were transferred to Richards Butler (HK) and the Defendants have not adduced any evidence to contradict the statement set out in that note. I reject the suggestion that SM created these documents. I find that MZ created these documents to create a false barrier to rebut SM’s claim to an interest in some of these shares.

[85]That is not surprising for the reasons set out further in this judgment under the heading forgery and perjury. MZ has admitted that he is prepared to lie if it suits the advancement of his case. By the time the matter came to trial he realised that these documents had no credibility so in cross examination he invented the Nomineeship based on “trust” as opposed to legal principle in his favour to cover all shares. His evidence cannot be trusted on any of this because he has told different stories at different times when it suited.

[86]I determine that the Nominees were not intended to be beneficial owners of the shares. None of them so far as I can see had any means ever to satisfy any of the large loan liabilities and the structure of the Loan Agreements was intended in effect to prevent any of the Nominees seeking to deal with the shares. However I reject MZ’s contention that the shares were intended to be held for his benefit. In my view (and I so determine) the Nomineeship was split as SM suggests. That reflects the large unchallenged contribution that he made towards the purchase price. An arithmetical analysis of the figures shown on the Richards Butler statement and the purchase price stated in the loan documents is significant. The total shortfall between the prices purportedly paid by the Nominees and the figures shown on the Richards Butler statement is approximately $1,515,000. The total purchase price in respect of the Mehboob and KS shares is also $1,515,000 and the amount contributed by NWF is $1,515,000. This in my view is the key document to show what actually went on. Its authenticity is not challenged. Given those figures the only conclusion that can be made is that the $1,515,000 is in effect attributable to SM’s acquisition of shares by Mehboob and KS. In view of the problems (to use a mild expression) of a significant amount of the other contemporary documentation (see below under the section forgery and perjury) this is the strongest indication of where the true agreement lay.

EVENTS AFTER JUDGMENT RESERVED

[87]My clerk sent out the draft of the proposed judgment in advance of the hand down which was fixed for 14th May 2008. Without warning even to the other parties Counsel for D1-D5 sent a 9 page document headed “Submissions of [D1-D5] in relation to the draft judgment”

[88]It in effect constituted an attack on the findings I made in favour of SM in relation to the shares currently registered in the name of PS and Mr Mehboob. Subject to the MZ/PS agreement of February 2007 (which does not reflect the true position as between them) it is difficult to see what their status is in respect of these submissions. I have rejected both MZ’s and PS’s version of events. This submission can have no impact on that rejection. I was invited not to hand down judgment but adjourn it for further submissions.

[89]Such actions are to be deplored. The purpose of the release of the draft is to forewarn the parties of the judgment so they can be prepared for any consequential applications that are required. It is not to be treated as an opportunity to reargue lost causes. This is what D1-D5 are trying to do. The House of Lords have recently commented on this type of action in R v Environment Agency and others ex parte Edwards

[2008] UKHL 22

(16th April 2008) where Lord Hoffmann observed (paragraph 66):

“On 23 January 2008 the hearing in this appeal was concluded. On Friday 4 April 2008, after the members of the Appellate Committee had prepared drafts of the speeches which they proposed to deliver, the solicitors to the parties were notified that judgment would be given on 9 April. In accordance with the practice of the House, copies of the draft speeches were provided in confidence with a request that counsel check them for “error and ambiguity". On Monday 7 April the appellant’s solicitors notified the Judicial Office that they proposed to submit a memorandum pointing out errors in the judgments but that it could not be submitted until the following morning. Judgment therefore had to be postponed until 16 April. The memorandum when it arrived, consisted of 27 paragraphs of closely typed submissions referring to three directives which had not been mentioned in the appellant’s lengthy submissions to the House and repeating other arguments which had already been considered. It contains nothing which causes me to wish to change the views expressed in my draft speech. In my opinion the submission of such a memorandum is an abuse of process of the procedure of the House. The purpose of the disclosure of the draft speeches to counsel is to obtain their help in correcting misprints, inadvertent errors of fact or ambiguities of expression. It is not to enable them to reargue the case”

[90]This is in my view precisely what is being sought to be done. It is quite wrong. If any party wishes to challenge a decision, the proper course is to seek to appeal it. No doubt on such appeal in this case the parties will explain how their lack of truthfulness and the preparation of forged documents assisted me (as set out below) in determining the true facts and how in the light of such assistance the decision was wrongly made.

[91]There may of course be exceptional occasions where the Court can reconsider matters which arise after a judgment is reserved but that is likely to be very rare. An attempt to reargue the case is not one of them.

[92]PS was apparently not as troubled by the Draft judgment as D1-D5 but she availed herself of the opportunity given by my direction to respond to their application by putting in submissions supporting it. They do not add to matters save they demonstrate a desire to seek a decision against SM not on the strength or credibility of her evidence but rather that SM should pay a greater consequence of his misconduct than the Defendants. I reject that submission for the reasons set out below (heading “Legal Consequences of Forgery/Perjury” and do not intend to revisit it.

[93]In any event nothing that is said has persuaded me that I should change my judgment. I am firmly of the view that it is the correct decision and is in accordance with the pleadings although I accept I have not accepted every aspect of the parties’ pleadings on this particular issue when I came to determine the facts. Merely because I reject SM’s version of the agreement does not mean that I thus accept the Defendants’ version of events. Nor does it mean that it is not open to me on the untarnished evidence to conclude there was some kind of agreement. By “untarnished” I mean evidence made out by documents which are not forged and testimony that is supported by genuine documents as set out in this judgment. SM has alluded to it in his response to the application D1-D5 made.

[94]The way in which the parties have presented their cases i.e. by all lying and presenting forged documents to support their respective primary (and untruthful) versions of events concerning these shares has caused me great difficulty. The parties have withheld from me truthful and frank evidence about the acquisition of these shares.

[95]However it is clear that SM funded the acquisition of the KS and Mehboob shares as set out above. His money went to the Richards Butler account and has never been repaid. Looking at those facts there is enough material for me (despite the efforts of the parties to create a fraudulent and dishonest fog over the acquisition) to conclude that SM has made out the contention in paragraph 49 of the Re Amended Particulars of Claim that he made a large contribution for these shares and was never repaid. In so finding however I reject his contention that he paid for them under the terms of the agreement as pleaded by him. Equally however I reject the Defendants contentions as to the beneficial ownership of these shares

[96]Given the difficulties imposed on me by the conduct (sic) of the parties I am driven to conclude nevertheless that he made that contribution on an understanding that he was to own these shares beneficially and MZ owned the others in the names of the other Nominees.

[97]I am unable to discern the full terms of such understanding because of the lies and forgery of all parties. However I am firmly of the view that it was intended that SM was to be the beneficial owner of the shares and that the Nominees and MZ had no beneficial interest in them whatsoever. That conclusion is amply supported by such untarnished evidence as is left to me as a result of the actions of the parties. There was either an express agreement as such or there was an implied understanding to that effect.

[98]Alternatively if there was no such express or implied agreement I would conclude absent any such agreement that he is the beneficial owner by reason of his payment for the acquisition of the shares as established by the findings above in accordance with paragraph 149 of his Claim as there is no other claim that is established in respect of those shares by any other party and that PS and Mr Mehboob hold them upon trust for him. Such an alternative finding is open to me on the claim as pleaded in my view

[99]Consequently I find that the shares were held in trust for him as pleaded in that paragraph but only arising out of the finding in respect of paragraph 49.

[100]I do not consider that this is an attempt by me to devise a result that is not put before me; it arises out of my difficulties in ascertaining the truth; a difficulty on this aspect to which all parties contributed. It follows accordingly from that conclusion that SM is the beneficial owner of these shares and is entitled to the declaratory relief in respect of them in paragraph 3 of the prayer for relief. This is the only untarnished material upon which I can come to a conclusion on this aspect of the case. I will hear submissions as to the precise declaratory order and any consequential orders arising out of the primary declarations. Given the fact of payment it would be an injustice despite the lies and forgery committed by SM in the light of this judgment to deny his undoubted claim to these shares.

[101]As appears later in this judgment I am not prepared to accept any evidence of SM, MZ or PS unless it is supported by independent documents whose authenticity is not challenged or evidence of witnesses whose veracity is not challenged either.

[102]In the Guernsey proceedings MZ swore his second Affidavit in January 2007. In paragraphs 22-25 he deposed to the fact that KS sold her shares to PS on 28th September 2002. He said nothing about the Nomineeship at that time. As will be seen a month after swearing the Affidavit he purported to acquire the shares from PS himself.

[103]In the same proceedings Mr Mehboob swore an Affidavit in November 2005. In paragraph 11 he repeated his inability to recall signing any document dated 2nd November 1999 in favour of SM. He too failed to mention any Nomineeship.

[104]PS swore two Affidavits in the same proceedings dated 22nd November 2005 and 2nd October 2006. She too deposes to the Sale Agreement 28th September 2002 in her favour and makes no mention of the Nomineeship. Similarly she made no mention of an agreement dated 19th February 2002 which was actually executed in 2005.

[105]She was cross examined by Mr de Lacy QC for the Claimants on these Affidavits and I am satisfied in the light of that cross examination that she deliberately misled the Court as to her residence for the purposes of having the proceedings stayed on the basis that there were existing proceedings in Karachi where she resided. I do not accept the reason she put forward in her second Affidavit (paragraph 5) that it arose from her lack of understanding of English. Equally she plainly produced a false document purporting to be signed by Dr Greg A Tifferd when there was no such doctor (T16 page 58-66). In addition (T16 page 68) she agreed that evidence she might give might be untruthful but she was prepared to do that to see off SM’s claim.

[106]There are a number of documents which support SM’s case that he had a beneficial entitlement to shares by virtue of the Nomineeship of Mr Mehboob and KS. First in a disclosure document to the European Bank of Reconstruction Development (“EBRD”) which was prepared after the withdrawal from AIM to complete the privatisation of DMZ and the spin off of the EAF there was a disclosure of the shareholdings in the group including SM as holding 4.3%. Second a disclosure document by Needham & Co of Portland in late 1999 included a statement as at 2nd September 1999 that SM was the owner of 4.3% of the shares. MZ acknowledged both of those but said dismissively that it was a matter of giving SM status or kudos. In my view that is an untruth. It is a poor attempt to explain why SM is shown as a shareholder in public documents that are put forward.

[107]Third in early 2002 difficulties arose between Win and the Group management both in relation to MZ and SM. Win wrote a long letter of complaint on 12th February 2002.

[108]The authenticity of this document is not disputed. In heading three he sought compensation for the damage to his shareholding because of the bad management. He sought 20% compensation from the shareholders against whom he made the complaint. The first of those was MZ (through Azot) at 49%. The second was through SM stated as being owner of 5%. The figure is not precise but once again it showed that SM was regarded as having shares whereas on MZ’s case he has no entitlement. The 5% figure could be derived from looking at the KS and Mehboob shares which together amount to 5% (2.7% and 2.3% respectively). Some of the shares were subsequently sold off which would then reduce that figure to the 4.3% in the disclosure documents.

[109]The final documents purportedly in support of this part of SM’s claim are the agreements with Mr Mehboob dated 2nd November 1999. (C4/459 A(1) (3)). By this document Mr Mehboob agrees to sell the shares he holds in what was then, Metalsrussia to the third party Pete’s Mountain Life Insurance Trust for $1.

[110]The Defendants say that this document is a forgery. It is purported to be executed by Pete’s Mountain Life Trust on 2nd November 1999 by Tracy Brophy a company official (who was also SM’s girlfriend at the time).

[111]The best person to say it is a forgery is of course Mr Mehboob. In his evidence in Guernsey and in the evidence before me he did not say so. The Defendants’ case is not based on any expert evidence in relation to the execution of the document. Significantly the Claimants’ expert, Mr Browne, in his report (E1.1 paragraph 43) referred to (inter alia) this document. However in paragraph 44 he stated that he was unable to make a definitive statement as to the authenticity because he had no original signatures that was never pursued. Significant however in my view is the fact that the Defendants could easily have obtained original signatures of Mr Mehboob (he is one of the Defendants). There has been no shortage of expert evidence in this case. The burden is on the Defendants to prove that the document is a forgery. In my view Mr Mehboob’s evidence (or rather lack of it) and the lack of expert evidence suggests in my view that there is no clear evidence that the document is a forgery.

[112]The Defendants in their closing submissions (paragraph 65) put forward a number of reasons why they submit that the document was a forgery. First they submit that it could only be genuine if the 10th November 1996 letters were genuine. As they were not it followed logically that this letter also was a forgery. I do not follow the logic of that. It seems to me that there is a different basis for entitlement under the terms of the letters of 10th November 1996 and an entitlement arising out of the Nomineeship where SM provided funds. A finding that the 10th November 1996 letters were forgeries does not in my view prevent SM establishing a beneficial entitlement through this other way.

[113]Second if those letters existed it is submitted any rights would be taken away by 15th May and first 4th June 1997 letters. I will deal with the impact of those letters further in this judgment but once again I reject that contention because there is not necessarily any linkage between the bonus entitlement and the Nomineeship of the shares in my view arising out of the provision of part of the purchase monies.

[114]Third Mr Mehboob did not recall signing a transfer. In my view that is not evidence of a forgery. Fourth it is suggested that SM was unable to produce the original. In an ordinary case that might be significant but large numbers of original documents have disappeared. As appears in my section on forgery and perjury the absence of original documents has bedevilled this case. I cannot draw an adverse conclusion against any party because they have failed to produce original documents. The disappearance of documents in this case is a mystery and furthermore it is by no means clear in any situation of disappeared documents whose fault it is.

[115]Next it is suggested that the document makes reference to Pete’s Mountain Life Insurance Trust and the document is said to take effect on 2nd November 1999 at which time that trust did not exist. The execution by Pete’s Mountain Trust is by Miss Brophy. I have not heard from Miss Brophy nor have I had an explanation why she was not present to give evidence. Pete’s Mountain Trust came into effect in February 2000. SM in his witness statement (paragraph 172) suggests that Pete’s Mountain Trust was not set up until February 2000. I accept that. In my view I conclude that the document was originally executed by Mr Mehboob and SM with the date that was placed on it but that it was only executed by Tracy Brophy on behalf of Pete’s Mountain Trust in February 2000 and she backdated that signature to 2nd November 1999. What is important to appreciate the crucial point is not whether or not Pete’s Mountain Trust execution is correct but whether Mr Mehboob’s signature is forged. I conclude that there is no evidence to show his signature was forged. Equally I reject the suggestion that evidence of forgery is supported by the alleged evasiveness of SM in cross examination (T4 105-110). It is true that his recollection of the date of execution of this document was not precise. But one has to be very careful about criticising somebody about the date of execution of a document when(1) there are many documents in the case and

(2) the document was executed on his case at least 8 years ago. I would not criticise a witness merely because his memory is hazy about a document executed so long ago.

[116]There are some other documents of a contemporary nature which SM contends support his case. First there is a letter he sent to MZ on 21st October 1999. This refers to the disclosure about his beneficial 4.3% share holding. The Defendants say this document is a forgery. Second there is a letter dated 1st November 1999 from SM to Tracy Brophy. This too the Defendants say is a forgery. Third there is a letter dated 6th November 1999 also from SM to Tracy Brophy. The Defendants say that is a forgery too. Fourth there is a further letter of 6th November 1999 from SM to Tracy Brophy. The Defendants say that this letter is a forgery too. The last 3 documents were not referred to in SM’s witness statement but he was cross examined on all of them and it was put to him that they were all forged.

[117]None of these documents was considered by any handwriting expert but that is not surprising because the allegation is that SM created false documents; it is hardly likely his signature would not be genuine even if he created the false documents. It was put to SM that the two letters dated 6th November 1999 were both forgeries because they were inconsistent. I do not accept that those two letters are necessarily inconsistent. SM purports to give notice that some of his prospective share entitlement is to be assigned to the Pete’s Mountain Trust and the other is (part of the NWF 3% compensation) to be assigned to the [SM] Life Insurance Trust. However in my view the first letter of 6th November 1999 is genuine and the second is a forgery.

[118]The reason is that the 6th November 1999 letter stands or falls on the 10th November 1996 letters which as I shall set out below are in my view forgeries. SM simply created another similar but nevertheless forged document.

[119]I have already accepted SM’s explanation as to the failure to execute the Pete’s Mountain Trust documents until February 2000. This letter is consistent with the Mehboob agreement of 2nd November 1999.

[120]However the second letter of 6th November 1999 is an oddity. First although it purports to be dated 6th November 1999 it is on a different note paper to that of the first 6th November 1999 letter. I cannot see why SM would send two letters to Tracy Brophy with different headed note paper. Second it refers to the compensation of 3% due under the IPO Agreement. For reasons that I have set out in this judgment I do not accept that SM was entitled to any such compensation. The reasons will appear below but I can say that I am satisfied that SM forged the documents in relation to that entitlement. I will elaborate that further in the section below on perjury and forgery. Further in any event I am satisfied that the Defendants contention as regards the 15th May and first and second 4th June 1997 documents is correct. I also accept the evidence of Mr Knight and reject that of Mr Lindberg. By 1997 SM never had any entitlement to any of the bonuses by virtue of those documents and that evidence.

[121]It follows that there can never have been a genuine letter of 6th November 1999 purporting to deal with the 3% compensation. SM has therefore forged that letter. This is why he did not refer to it in his witness statement in my view.

[122]Equally for the same reasons I am of the view that the letter of 21st October 1999 has been forged by SM for self serving purposes. Yet another address is introduced on the letter and I find that he introduced it to provide false contemporary evidence as to his bonus entitlement of shares.

[123]The final letter is a letter dated 17th November 1999. By this letter SM purported to set out an agreement that he struck with MZ. There are in fact two documents dated 17th November 1999. The handwriting experts agree that SM’s signature on both of them is genuine. They also agree (joint report paragraph 2.7) that each document bears an image of the same signature of MZ combined with associated printing. They both agree that the documents have not been signed independently by MZ but they are unable to determine if the signature block on one of the documents has been introduced to the other or if the signature block has been introduced to both of these documents from a third document.

[124]Unsurprisingly SM was cross examined about this (T4 110-135). In his original witness statement (paragraph 173) SM did not refer to there being two versions of this letter. He did say that there were two copies as MZ obtained a copy and he never saw these again until November 2002 when Yousef one of the alleged third party persons supplying documents gave him two different versions. He does not explain why there should be two copies both of which bear his original signature but which are different. The differences are wording in text both in the preamble, paragraph 1, the layout at the end of paragraph 3 and final sentence where one has the word “understood” in it and the other one is missing.

[125]In my judgment SM’s evidence at this point was comprehensively destroyed by Mr Trace QC’s cross examination (T4 110-136). The only logical conclusion in light of that cross examination and SM’s inadequate answers is that SM twice forged a document on different occasions. He provided them for disclosure in Guernsey in 2004 and in January 2007 but did not read them carefully and failed to spot that the documents were actually different. It is impossible to discern how the document came to be on the BCL depository files (3rd version (C4/463a)) but it is inherently unlikely that the document could have been passed to Mr Yousef in 2002 because MZ would then have to have forged the fax header on to it and placed it on the files either whilst at SM’s house or at BCL. I can see no logical reason why if MZ wishes to present a forged document he would simply have presented Yousef with a document with his forged signature on it. It is in my view an over elaboration and not credible. I therefore conclude that the letters of 17th November 1999 were also forged by SM. THE REVENTOX ACTION

[126]These proceedings were commenced on 20th September 2002 by ISTIL Guernsey as a result of an investigation by the Audit Committee which then included Mr Wit and SM as members. The claim was against MZ and Reventox that MZ was diverting business opportunities and profits of trading into Reventox a vehicle created by him in Cyprus. There is an issue as to the costs liability of this action which was discontinued after MZ bought Mr Win’s shares and obtained control of ISTIL. That turns on the circumstances of the presentation of false evidence before Lawrence Collins J.

MALICIOUS FALSEHOOD

[127]This arises out of the misquoting of the judgment of Lawrence Collins J on ISTIL’s website by MZ. This turns on the reporting of paragraph 107 of Lawrence Collins’ Judgment where he said “…I came to the conclusion that the account in [SM’s] Affidavit of the acquisition of the Masood appendix 1 from the same source was incomplete and misleading and also dishonest”.

[128]The website published the judgment as saying “I COME to the conclusion the account in Mr Masood’s Affidavit of the acquisition of the Masood appendix 1 from the same source was incomplete and misleading and also dishonest”.

EVIDENCE

[129]I should say something about the general principles of evidence. In my decision of EPI Environmental Technology Inc v Symphony Plastic Technology Inc

[2005] 1 WLR 3456

I set out a number of principles which are well established and self evident as to how evidence should be dealt with.

[130]Where cases turn on the credibility of witnesses it is important to consider the evidence as a whole. As I said in EPI whilst a witness’ veracity is challenged successfully by demonstrating that the witness has lied it is important to differentiate between establishing that a witness has lied in respect of a particular point as opposed to whether or not his evidence as a whole is a complete lie. Second it is essential that any allegation of lying or inconsistency in a person’s evidence is put to that witness. The reasons for that are twofold. First it gives the witness an opportunity to deal with any such allegation or inconsistency. Self evidently they cannot deal with it if points are raised in closing speeches for the first time. Second it gives the Judge an opportunity to assess the witness’ performance in response to dealing with these critical issues.

[131]As I have indicated I would not allow generally a witness to be criticised in closing speeches where he had not been challenged in that regard. Of course in a complex case like the present such an approach required careful discrimination by the advocates and the Judge. Not every point needs to be put or challenged because that makes the case unwieldy and fails to give an opportunity for assessment of the witness. One rapidly becomes buried in the thickets of a whole plethora of questions. The witness becomes confused and the Court is deprived of a good opportunity of assessing a witness.

[132]Equally it is important that where a witness’ evidence is inconsistent with documents or needs to be explained or clarified as a result of documents that too needs to be put to the witness. In many cases live testimony is often tested by contemporaneous documents which might show an inconsistency with what is then being said in the witness box possibly in a self serving way many years after the event.

[133]That exercise will of course only be successful if the purportedly contemporaneous documents themselves are genuine.

[134]Equally one has to be careful to make allowances for witnesses. Cross examination is a long and tiring process and it is essential to ensure that witnesses do not become overtired and therefore fall in to the trap of agreeing with a cross examiner at a late stage in the day. A witness does not better his case simply by manfully being cross examined over many hours when he is actually not in a full position fairly to deal with the cross examination.

[135]It is also important to appreciate that witnesses often are at great disadvantage when compared with the lawyers. The lawyers have a vast range of documents before them with which to cross examine on with copious notes written on them to assist and will have prepared a cross examination over a lengthy period of time. Witnesses are in the witness box without notes generally and do not have any assistance to their answers. It is important therefore to appreciate that sometimes answers given in cross examination are inconsistent with answers given in witness statements. That does not necessarily mean that the witness statement is wrong; it can often mean simply that given the pressures and given the period of cross examination the witness’ answer is often confused and hurried.

[136]A Court has to be alert to all of these potential difficulties in assessing the credibility of a witness especially in a case like this where each side accuses the other of extensive forgery and perjury.

FORGERY AND PERJURY

[137]Often the most important tool for a trial Judge in attempting to discover the truth of disputed evidence is to look at the contemporaneous documents.

[138]Unfortunately this case made that recourse very difficult because in my judgment both sides presented forged documents to bolster their case and also perjured themselves.

[139]By the time of closing there were 52 documents which it was alleged were forgeries. It is impossible for me as a trial Judge to come to a clear conclusion in respect of each document and I do not propose to do so. I will identify what I consider are the key documents and where they are challenged, determine whether or not those documents are forgeries and if so who forged them. The latter seems surprising but as this judgment will develop it will be seen that both sides accuse the other of forging particular documents.

LEGAL CONSEQUENCES OF FORGERY/PERJURY

[140]As I have already set out in this judgment SM has in my view forged documents. The next section of this judgment will deal with the more serious aspects of his forgery.

[141]It is also the case that MZ and PS have also forged documents. Although in the closings on behalf of MZ it was submitted in effect that his forgery was not too serious, I reject that. In my view the documents MZ and PS forged were done to create a deliberately false impression that documents were contemporaneously executed on the dates put on them. This was done to bolster their case and to deceive the Court. These documents had been put forward initially as being genuine documents. They were referred to in pleadings. For example in paragraph 45 of D1-D5’s Defence reference is made to the Loan documents as being dated 13th December 1996 but the true date of the execution is not revealed. Similarly in paragraph 124 reference is made to the Agreement dated 19th September 2002 whereby PS took over the obligations of KS under the Loan Deed. In fact this document was not executed until 2005. Likewise PS in her Amended Defence whilst referring to the Loan Agreement (paragraph 12) does not identify that it was not executed until May 2002. No mention of that fact is made in the section headed “Developments in 2002” (paragraphs 18-22) either. Finally the 19th September 2002 Agreement was in the initial pleading referred to as an agreement in writing and it is only by amendment dated 18th January 2008 that it is revealed that there was an oral agreement and a later written agreement (2005) but it fails to explain why the document is dated 19th September 2002. In this context it was established in cross examination of PS and MZ that the terms set out in this document could not possibly have reflected an agreement that was struck in September orally.

[142]The relevant documents were of course given false dates in the disclosure list. Under CPR 32.19 a party is deemed to admit the authenticity of a document disclosed to him under part 31 unless he served notice that he wished the document to be proved at trial. It seems to me plain that if the true date of the creation of the document is not set out in the disclosure statement a party will not know that the document is not a genuine document i.e. it has a false date on it and was created on a different date yet he would be deemed to admit the authenticity about something which he does not know. This seems to me to be a plain breach of the obligations of disclosure and has led to a false disclosure statement.

[143]As the rest of this judgment will show the trial in this case took place with the major witnesses all having lied and therefore having delivered perjured evidence. In addition the major witnesses on both sides have sought to bolster their case by forged documents.

[144]This is deplorable. It made my task of evaluating the true facts about the dispute difficult if not impossible in some areas. All the parties have abused the process of the Court by the way in which they have presented their cases. I should say that when I say that I am not criticising any of the lawyers. Save in respect of the joinder of PS about which I shall say further in this judgment I have no criticisms of the way in which the case has been presented by the lawyers as it appears before me.

[145]It is therefore distasteful and unacceptable that I am required to determine the dispute between parties who commit such wanton acts of dishonesty.

[146]I have considered the case of Arrow Nominees Inc& anr v Blackledge

[2000] 2 BCLC 167

(C.A.) In that case there was a petition under section 459 of the Companies Act 1985 presented by two minority shareholders Nigel Tobias (“NT”) by his Nominee company Arrow Nominees Inc and Lorraine Blackledge. NT in the course of standard disclosure produced documents which he knew to be forged. An application was made for the petitions to be dismissed on the basis that a fair trial was not possible because of that forgery. The Judge dismissed the application because he was not so satisfied but he emphasised that if further evidence emerged during the trial that documents had been suppressed or fraudulently altered an application could then be renewed and is highly likely to be successful. The petitioner’s case was opened; their evidence led and they were extensively cross examined. During the course of the trial NT was found to have forged diary entries in addition to the letters which he had initially admittedly forged. Despite that the Judge did not strike out the petition as he believed there was no substantial risk that a fair trail could not be held although he acknowledged that the part of the Claimant of the petition which was based on documents could not be fairly tried. The Respondents appealed and the Court of Appeal upheld their appeal. In giving the leading judgment Chadwick LJ said this:- “The appeal against the judge's refusal to strike out on the second application 42. The acts or omissions on the part of the Blackledge respondents on which the petitioners rely as conduct of the company's affairs in a manner which is unfairly prejudicial to their interests are to be found in the amended para 8 of the petition. The paragraph is introduced by an allegation in three parts: that 'in causing or procuring matters hereunder complained of' the respondents have acted(i) contrary to the 1994 agreement,

(ii) contrary to the legitimate expectations of the parties, and

(iii) 'in any event' unfairly in the conduct of the company's affairs so as to prejudice the petitioners. It is alleged, further, that Graham and Margaret Blackledge are 'in breach of the fiduciary duty of directors'. 43. The judge held that there was a substantial risk that there could not be a fair trial in so far as the complaints of unfair conduct were based on (i) or (ii) – acting contrary to the 1994 agreement or to the petitioners' legitimate expectations. He did so on the basis that the admitted forgeries, coupled with his finding that Nigel Tobias had continued to lie on oath as to the extent of his fraudulent activity in relation to documents, made it impossible to have confidence in any documents produced by the petitioners unless those documents were corroborated by some other evidence. Further, and this is an important element in his approach, that the existence of the forged documents and the diaries was likely to have infected evidence contained in affidavits and witness statements prepared in reliance on those documents and diaries. 44. The judge's conclusion as to the extent and effect of Nigel Tobias' fraudulent conduct is challenged by a respondents' notice served by the petitioners. But, to my mind, that challenge must fail. There was ample material before the judge to justify his conclusion that Nigel Tobias had continued to lie on oath as to the extent of his fraudulent activity in relation to documents. The judge had the advantage, which this court did not have, of hearing and seeing Nigel Tobias give oral evidence at the trial under cross-examination. There is no basis on which this court could interfere with the judge's finding of fact. Nor can it be said that the judge was wrong to take the view that the existence of forged documentary material is likely to infect the oral evidence. In a case of this nature it is inevitable that documents will provide the basis for recollection. It is likely to be very difficult for a witness – even for a witness doing his or her best to tell the truth under oath – to accept that what the witness now thinks that he or she recalls from memory may, in truth, be based on a document which has been shown to be false, or in relation to which there is suspicion. The effect of forged documentary material on a trial is pernicious, because witnesses who have, at one stage in the process of preparing for trial, believed that documentary evidence to be genuine are unlikely to be able to evaluate, objectively, the effect which it has had on their recall of the events to which it relates”

[147]After reviewing the surviving allegation Chadwick LJ concluded that the Judge was wrong to allow these to survive for the reasons set out in paragraph 53 as follows:- “53. In those circumstances I take the view that it was wrong for the judge to allow the petition to proceed once he had reached the conclusion that there was a substantial risk that the allegations in relation to the disputed terms of the 1994 agreement were incapable of a fair trial. He recognised, correctly, that a claim to relief based on allegations of abuse by the Blackledge respondents of their powers as directors and shareholder after 1997 would not require an investigation into what had or had not been agreed in 1994. But, as it seems to me, he failed to appreciate that, on a true analysis, the allegations made in the petition were allegations of oppressive conduct by Blackledge plc as supplier or as lender; and were not allegations of oppressive conduct by Blackledge plc as majority shareholder. In so far as there were general allegations of breach of duty by Graham and Margaret Blackledge as directors, those allegations were not supported by any evidence which the judge identified; and are contradicted by the material which was put before this court. In my view the judge ought to have reached the conclusion that, once the allegations in respect of which there was a substantial risk that Nigel Tobias' fraudulent conduct had made a fair trial impossible were put on one side and left out of account, there was no case for relief which remained to be tried. 54. It would be open to this court to allow the appeal against the judge's refusal to strike out the petition on that ground alone. But, for my part, I would allow that appeal on a second, and additional, ground. I adopt, as a general principle, the observations of Millett J in Logicrose Ltd v Southend United Football Club Ltd (1988) Times, 5 March, that the object of the rules as to discovery is to secure the fair trial of the action in accordance with the due process of the court; and that, accordingly, a party is not to be deprived of his right to a proper trial as a penalty for disobedience of those rules, even if such disobedience amounts to contempt for or defiance of the court, if that object is ultimately secured, by (for example) the late production of a document which has been withheld. But where a litigant's conduct puts the fairness of the trial in jeopardy, where it is such that any judgment in favour of the litigant would have to be regarded as unsafe, or where it amounts to such an abuse of the process of the court as to render further proceedings unsatisfactory and to prevent the court from doing justice, the court is entitled, indeed, I would hold bound, to refuse to allow that litigant to take further part in the proceedings and (where appropriate) to determine the proceedings against him. The reason, as it seems to me, is that it is no part of the court's function to proceed to trial if to do so would give rise to a substantial risk of injustice. The function of the court is to do justice between the parties; not to allow its process to be used as a means of achieving injustice. A litigant who has demonstrated that he is determined to pursue proceedings with the object of preventing a fair trial has forfeited his right to take part in a trial. His object is inimical to the process which he purports to invoke. 55. Further, in this context, a fair trial is a trial which is conducted without an undue expenditure of time and money; and with a proper regard to the demands of other litigants upon the finite resources of the court. The court does not do justice to the other parties to the proceedings in question if it allows its process to be abused so that the real point in issue becomes subordinated to an investigation into the effect which the admittedly fraudulent conduct of one party in connection with the process of litigation has had on the fairness of the trial itself. That, as it seems to me, is what happened in the present case. The trial was 'hijacked' by the need to investigate what documents were false and what documents had been destroyed. The need to do that arose from the facts(i) that the petitioners had sought to rely on documents which Nigel Tobias had forged with the object of frustrating a fair trial and

(ii) that, as the judge found, Nigel Tobias was unwilling to make a frank disclosure of the extent of his fraudulent conduct, but persisted in his attempts to deceive. The result was that the petitioners' case occupied far more of the court's time than was necessary for the purpose of deciding the real points in issue on the petition. That was unfair to the Blackledge respondents; and it was unfair to other litigants who needed to have their disputes tried by the court. 56. In my view, having heard and disbelieved the evidence of Nigel Tobias as to the extent of his fraudulent conduct, and having reached the conclusion (as he did) that Nigel Tobias was persisting in his object of frustrating a fair trial, the judge ought to have considered whether it was fair to the respondents, and in the interests of the administration of justice generally, to allow the trial to continue. If he had considered that question, then, as it seems to me, he should have come to the conclusion that it must be answered in the negative. A decision to stop the trial in those circumstances is not based on the court's desire (or any perceived need) to punish the party concerned; rather, it is a proper and necessary response where a party has shown that his object is not to have the fair trial which it is the court's function to conduct, but to have a trial the fairness of which he has attempted (and continues to attempt) to compromise”.

[148]Ward LJ delivered a concurring judgment but in so doing he made reference to the consequences of dishonest conduct in relation to other court users as well:- “73. The attempted perversion of justice is the very antithesis of parties coming before the court on an equal footing. The matter has become hugely more expensive (to an extent we did not appreciate until we were told when application was made for a freezing order that the amount of the appellants' costs overall and on a solicitor and own client basis may be in the region of £1.5m). The judge commented at the beginning of his judgment that the hearing had run for 29 days greatly exceeding the parties' estimate. The original estimate was three weeks and we were told another week to ten days would be required to conclude the matter even on the limited basis that the judge would still permit. The judge did not, however, treat cost and time as elements of the overriding objective. He did not appear to allot to the case an appropriate share of the court's resources while taking into account the need to allot resources to other cases. In this day and age they are elements of case management which must not only be seen to have been placed in the scales but also given due and proper weight when assessing how justice is to be done to the parties and to other litigants. The balance must be struck so that the case is dealt with in a way which is proportionate to the amount of money involved in the case, its importance and complexity and the financial position of the parties. Mr Tobias stood to gain much had his fraud gone undetected. He was seeking on behalf of the minority shareholders to wrest control of the company from the majority and he persisted in that claim even to the point of his cross-appeal. He bolstered his claim by what the judge found to be a campaign of forgery and, more importantly, the judge was not satisfied with the explanation given for it. He found:

'In his evidence Nigel sought to give the impression that his forgeries came about as a result of an impulsive moment of madness flowing from his disappointment that his case was not adequately supported by the documents. In my judgment, so far from that being the case, it is apparent that the process of forgery, which Nigel admitted to, was sophisticated and must have taken some time to complete including the special manufacture of headed note paper of the defunct Tobias family company. But for the slip up with relation to the telephone number shown on the headings it would, in all probability, not have been discovered.'

Any notion that this was a petitioner coming to the Court of Equity with clean hands is utterly dispelled by the devastating conclusion in para 44: 'I am not satisfied that I have received from Nigel a truthful picture of the circumstances of the forgeries which he admits.' 74. This was, therefore, a flagrant and continuing affront to the court. Striking out is not a disproportionate remedy for such an abuse, even when the petitioners lose so much of the fruits of their labour”.

[149]It is not excessive to describe SM’s conduct in producing and relying upon forged documents to the extent that he has and the consequential perjured evidence and false disclosure of documents as being a flagrant and continuing affront to the court.

[150]If I was dealing solely with misconduct by SM I would have had no hesitation in striking out the entirety of his claims. He has not made the case impossible but he has very nearly made it so. To remove from the Judge’s tools for assessing where the truth lies all significant contemporaneous documents is a very serious act of misconduct. He has made my task virtually unmanageable.

[151]That is not however the end of the matter. In this case the Defendants themselves have also been guilty of forging documents and perjury. It is not as extensive as that of SM’s but it is equally pernicious. The difficulty I have is with the application of an appropriate sanction. With regard to a Claimant the sanction is clear; it is the dismissal of the action which it was sought to bring with the use of illegitimate material. If SM’s action is struck out then striking out the Defendants’ Defence does not achieve anything because they have no claim to meet. I could not even if I struck out the Defence prevent a Defendant from having the right to challenge a case without calling any evidence itself. That is a normal consequence when a court strikes out a Defence. The hearing has to be listed so that the Claimant can prove his case.

[152]Where as in this case all the main parties are guilty of forgery and perjury striking out the claim in effect awards victory to a wrongdoer Defendant. It would be unjust (if that is the appropriate word for a forger and a perjurer) if SM’s claim is struck out with no corresponding effective sanction applied to the Defendants. There may be cases where doing that can achieve a fairness as between misconducting parties. It is possible to think of examples where that might be effective. However in the present case the Defendants are in possession of the shares which form the primary claim. Simply putting an end to an action from both sides’ points of view leaves them in possession of the shares. These are particular assets which they have sought to maintain possession of by forgery and perjury. Now it can be said that the reason why they succeed despite their forgery and perjury is because SM fails because of his own forgery and perjury. He is therefore the victim of his own misconduct and one should not weep over it.

[153]Putting it another way if both sides have their ability to adduce evidence removed because of their misconduct one falls back on the principle that the case is decided on the basis that the party on whom the burden of proof lay has failed to satisfy that burden see Rhesa Shipping SA v Edmunds

[1985] 1WLR 948

at 951 B-D.

[154]The easy course given the parties conduct would be simply to decline to adjudicate the case and strike out all the pleadings and then leave SM with no remedy. I have come to the reluctant conclusion that that in itself would not be an appropriate action in the present case. At the end of the day everybody (however badly they perform) is entitled to have access to the courts to have disputes resolved. If they abuse their right to access then the court has sanctions. However when all abuse their access as in the present case punishing one to a greater extent than the other would itself in my view create an injustice. I have accordingly therefore come to the reluctant view that despite all my misgivings and (I have to say) the great distaste I feel about this that I must attempt to resolve all the issues doing the best I can but without a great deal of assistance from testimony of the main players and with the need to adopt an extremely cautious approach to contemporaneous documents. Ultimately if I am unable to decide an issue on the uncontaminated material that is left to me that issue will be decided on the burden on proof. The parties will then suffer the consequences of their actions. I have made clear to the parties during the course of the trial that it is extremely likely that I will take further action over their misconduct and I intend so to do.

KEY FORGED DOCUMENTS

[155]As I said earlier in this judgment over 50 documents still are challenged. I do not think it is proportionate for me to attempt to resolve each forgery issue. I will only determine the forgery issue on what I regard are the key documents that are relevant to the claims in this action.

[156]Thus for example there was a lot of evidence led with the objective of establishing whether or not KS’s passport number C303937 was forged in the sense that it was not an authentic passport. This is impossible for me to adjudicate on and I decline to do so. It has no significant impact on the result of the issues in this case.

DOCUMENTS FORGED BY SM

[157]The claim for the bonuses depends on 3 documents categorised by the Defendants in their closing submissions as “the 3 key documents collectively”. They are respectively the 10th November 1996 IPO letter, the 10th November 1996 Donetsk letter and letter dated 31st December 1996 in which SM recorded an agreement which gives rise to a claim that he is entitled to the KS and Mehboob shares.

[158]The first 2 letters relate to the bonus entitlements. The 3rd relates to supposed concerns on the part of Win about the loss of control.

[159]The experts (Mr Browne and Dr Giles) have agreed that the IPO letter (which MZ denies he agreed let alone signed) has a signature of his on it which is identical to a letter which he has agreed signing on 1st April 1996.

[160]The Donetsk letter has an identical signature image of MZ as that on a Share Sale Agreement dated 18th November 1997 and minutes of a board meeting of the directors of Metalsrussia dated 18th December 1998.

[161]The experts are agreed that the letter dated 31st December 1996 has an image of a signature of MZ on the copy letter which is identical to the original ink signature on appendix 1 of the ISTIL Service Agreement dated 1st April 2002. They were unable to determine how the image of the original signature on appendix 1 was transferred to the copy letter.

[162]The burden of expert evidence of all parties is that all of those 3 documents have been forged by someone. SM’s evidence was that they were originally all signed in ink and in person by MZ. There is no question therefore of stamps or electronic placement of copy signatures on any of these documents.

[163]The question therefore is who has an interest in creating these forged documents. In that context there is only one obvious answer. SM has to produce these documents as evidence to substantiate his claim to the bonuses. MZ does not have to produce these documents to substantiate his denial that any such arrangement was made; in fact MZ needs to produce no documents whatsoever to deny the existence of these documents.

[164]Faced with that logic SM’s case is that there were originally genuine documents which MZ destroyed. In order to destroy SM’s credibility he then created forged documents which he fed to SM via the medium of third parties.

[165]As I have said above the experts agree that the MZ signature on 10th November letters is identical to a signature on 18th November 1997 Agreement between Thaiwin and Azot for the sale of 1.06% of shares from Thaiwin to Azot.

[166]That actual document is not itself an original. However the Defendants contend that the inference is that the signature has been lifted from that document and put on the 10th November 1996 Agreement. That they say is supported by the experts. Mr de Lacy QC in his closing submissions (paragraph 59-60) submits that there is no authentic signature on the MZ document of 18th November 1997. The agreement of experts as to the signature on the letter of 10th November 1996 falls away. Now to my mind that is an important point that should have been put to the experts and it was not (T20 194). MZ was cross examined about the inherent unlikelihood of the agreement (T14 131) and he clearly did not have a clear memory about it.

[167]The difficulty with Mr de Lacy QC’s submission is that it means that MZ copied his signature from what Mr de Lacy QC contends are the genuine documents of 10th November 1996 and then transposed his own signature onto the agreement of 18th November 1997. I cannot conceive any reason why MZ would do that. The purpose of forging signatures is for a person other than the signer to have a document in his possession that he contends was signed as appears. By contrast it is in the interest of SM if there is a forgery to have a forged document of 10th November 1996 because that advances his case. There was absolutely no justification put forward as to why MZ would wish to forge his own signature on the 18th November 1997 document. All he had to do was to write his signature on it. At best the purpose of the document is to create a bogus agreement for the sale of 1.06% shares. The important point if the agreement is bogus is for MZ to have a forged signature of Taiwin on it not a forgery of his own signature. None of this makes sense.

[168]It is just as unlikely as the idea that MZ would create false documents which harm his case and plant them in various places to be found by SM or to trip SM up through delivery of these forged documents in the expectation that SM would use them and could then be shown to be a forger. All of that would only be done by MZ if he believed that SM did not have any documents and would therefore wish to feed him bogus documents to trap him when he subsequently uses them. The assumption therefore is that MZ believes SM has no documents. If that is correct then Mr Trace QC’s observation is that it makes no sense for MZ to make his case more difficult by producing documents to enable SM to bring a claim. If MZ was intent on making SM’s case impossible knowing that SM had no documents he would simply deny there was an agreement and SM would not have any documents for his case. There have been many sophisticated things in this case but I do not believe that such a sophisticated scenario is the more likely. The inevitable conclusion therefore in my view is that the letters of 10th November 1996 had been forged and that SM forged them.

[169]The same is true of the letter of 31st December 1996. Whilst it is not clear that SM would have had access to the original ink signature initially it is reasonably clear that he probably had access to them when he was chairman of the company for the purpose of the Reventox litigation. Although the experts were unable to say how the image was transferred from the contract to the copy letter they are in agreement that that is where the signature came from. Once again there is no reason why MZ would do this. It makes far more sense that he would simply deny the existence of such letters. It is true that there was one at the BCL storage facility (document CB48). However Mr de Lacy QC acknowledged that whilst MZ could have had access to the documents there (via Mr Scott the in house lawyer) it was equally possible that SM could have had access. I reject the suggestion that the documents were planted by Mr Scott in the BCL storage facility. Mr Scott is not a party to these proceedings and he has not given evidence. It would be quite wrong to condemn a person in the context of the evidence solely on the basis of a submission made as to an inference to be drawn. Once again it is a plot of incredible elaborateness to suggest that MZ goes and plants a damaging letter in the BCL facility. The reason I say that is that it would make his case even more difficult if that document emerged from that facility than simply denying the existence of any document.

[170]Initially it was thought to be unlikely that SM would have lifted it from that document (appendix 13) because it was a complex one to forge given the numerous over stampings and other marks on top of the signature. I do not accept that. First after initial doubts it is clear that the copy signature was available to SM from MZ’z first Affidavit in the Reventox proceedings which was served on 30th September 2002. This was 2 months before the 31st December 1996 was first alluded to in SM’s third Affidavit. Whilst it is accepted that the signature is not an easy one to copy given the number of crossing lines and over stampings there was no doubt that it could be done as Dr Giles thought she could do it in about half an hour. Mr Browne did not disagree with that and a graphic artist could probably do it very quickly indeed. There is the possibility that MZ might have forged a signature more easily than SM on the grounds that he might have had the documents available to him without the stamp but there would still be a large number of crossing overs. To my mind SM has picked an obscure signature to lift in the hope that it might not be spotted. That the Defendants were diligent simply arose from their suspicions for many years that SM was forging documents. Equally in my view the fact that an ESDA test showed there was a gap between the appendices and the protocol does not take the matter any further. There is no clear evidence showing how this occurred. It might have simply occurred because the appendices were prepared in escrow and other documents were placed between them and the protocol at some stage (the protocol was not attached to the appendices and vice a versa). Interesting although this analysis is I am not persuaded there is anything that can be firmly concluded from it.

[171]For the reasons set out in the Defendants closing submissions I accept that all other documents as I have said that stand or fall on 10th November 1996 (including the letter of 31st December 1996) a balance of probabilities have been forged by SM. In particular I am persuaded by the observations in paragraph 55.6 that it is extremely unlikely that SM would have been faxing documents to MZ from different points in the world at the same time.

[172]It follows therefore that I am of the view that SM has forged the key contractual documents. I ask myself why he would do that. There are two possibilities. First that it is not a genuine claim and he has just made it up and produced these and other documents to support this dishonest claim. The other possibility is that he has a genuine claim and that MZ has frustrated that by concealing or suppressing documents which substantiate that claim. It seems to me that the latter point involves a repetition of an argument that MZ has created the false documents. It is equally fallacious at this stage of the analysis. I do not accept therefore that SM has created documents to bolster a genuine claim. Having seen him give evidence and cross examined over a long period I come to the conclusion that this part of his claim is not true. I have already observed that the difficulties that I face when trying to analyse the evidence because of the large number of forged documents. There is no other documentation which supports any claim as put forward by SM and if I am wrong in that analysis I am firmly of the view that he has failed to overcome the burden of proof on him as exemplified by the House of Lords decision in Rhesa Shipping. I therefore determine that he has no contractual claim for the bonus shares as purported in the evidence by the forged letters of 10th November 1996 and referred to in the letter of 31st December 1996. It follows from that analysis that any other documents which refer to those arrangements are also self serving and forged.

KS SHARE TRANSFER 10TH NOVEMBER 1997

[173]Much time was devoted to these share transfers. There are actually two original transfers bearing the date of Nov 10 97 (documents CB164A and 164B). Both purport to have fax transmission records on the top. They purport to have an identical fax transmission time. The experts are agreed that that is impossible. The documents could not have been transmitted at the same time. Second the experts are agreed that the two stock transfer forms could not have been created from a template blank transfer which was faxed at that time and then used for the separate share transfers on different occasions. The documents are slightly different. The most significant difference is that the one at page 164A says that the transferee is “[SM] for the benifit of…” The other transfer at page 164B correctly spells the word benefit. That latter share transfer was registered by ISTIL’s company secretary on 1st November 2002 as the annotation to that effect in red on the bottom left hand corner shows. Thus one of the transfers was not registered for over 5 years.

[174]It is said by the Defendants that SM’s contention in respect of the KS shares is inconsistent with authorities that KS provided to Williams De Broe on 27th and 28th March 1998 (C11 255/254). It is submitted that if the letters of 10th November 1996 are rejected then there can be no question of SM having a beneficial interest in the shares and this is reinforced by the fact that it is KS giving the authority. I have already rejected this linkage between the 10th November 1996 letters and the funding of the acquisition of the KS and the Mehboob shares above. Therefore I do not accept the analogy. Equally I do not regard these authorities as being significant. The plain fact is that in March 1998 KS (whatever the beneficial interest behind it) was the registered shareholder. The stockholders would therefore only act on the authority of a registered shareholder. The giving of these authorities is therefore logically explicable either on the basis that SM was beneficially interested or even on the basis that MZ was beneficially interested (his case) or that KS was beneficially interested (if anyone is actually asserting that). It is therefore not a document of significance.

[175]Reverting to the transfers dated 10th November 1997 I will deal with the expert evidence on the authenticity of these documents. First I should say that I am satisfied that MZ suppressed the possession of the original of 10th November 1997 which was with his former solicitors Jackson Parton. It was not disclosed until 1st February 2008. By that date the experts (Mr Browne and Mr Radley for PS) had already produced their joint statement. It was clear that one of the difficulties they had was the fact that they did not have any original documents. The reasons put forward for the late disclosure by MZ are unacceptable. I am satisfied that he deliberately withheld the original transfer and only produced it very late in the day in the hope that there would not be any time to address it. This is reinforced by the fact that MZ had instructed Dr Giles (through Jackson Parton) on these documents as early as March 2003. At that time Dr Giles report in my view was inconclusive. She was saying that if she was pressed on the material before her she could not conclude the document was a forgery.

[176]Mr de Lacy QC in his closing submissions (paragraph 63)(1)) submits that the disclosure destroys MZ’s case that the fax copy (C3/318) cannot be a forgery. I do not accept that necessarily. MZ denies ever receiving the fax and there is no evidence showing the transmission of the fax. The only fax evidence on it is as I have said earlier namely that it and the other share transfer of the same date bear the same identical fax transmission showing it coming from MZ. He denied sending that copy out also. What is plain from the experts is that those purported fax transmissions from MZ are themselves forgeries. It is impossible for there to be two separate independent documents bearing the same fax transmission time.

[177]SM in his first witness statement (paragraph 157 et seq) deals with a share transfer. But this time he refers only to one transfer. In paragraph 157 he also refers to the fax sent to MZ purported on 12th November 1997. The relevant document is a copy of the correctly spelt “benefit” STF. SM’s expert (Mr Browne) in paragraph 23 of his first report 11th January 2008 revealed that there were 2 separate and distinct versions of an STF dated 10th November 1997. SM did not address this the two different transfers (“benifit” and “benefit”) are attached to his report.

[178]KS’s expert (Mr Radley) gave evidence that there was strong evidence to conclude that the signatures on the two versions had been traced and confirmed his view that it was most likely done by the use of transmitted light.

[179]The revelation of there being two documents dated 10th November 1997 led to the matter being further considered by Mr Browne. On 25th January 2008 SM’s solicitors wrote to say they had taken instructions on Mr Radley’s report dated 15th January 2008. The position was (as given to them by SM):- i) A template to the STF was faxed to SM from MZ’s machine at 2140 as indicated on the TT at the top of the stock form on 16th October 1997. SM instructed his secretary whose name he does not recall to make multiple copies of the same document. (The experts agree that is impossible). ii) Second it is said one of those was filled in and executed by KS and placed in a safe deposit in Oregon held in the name of Tracy Brophy on the same date. Two days later on 12th November 1997 SM required a copy of the transfer but neither he nor his secretary retained a copy. They therefore concluded it was more convenient to execute another copy rather than recover from the first original from the safe deposit box. The second document was hand written by SM’s secretary and signed again by KS. iii) This duplicated original STF was then faxed to MZ on 12th November 1997.

[180]If that is a correct analysis then the “benifit” transfer goes in the safe and the “benefit” transfer is created and faxed to MZ.

[181]Once again SM was extensively cross examined on this as he had not corrected the matter in his 2nd witness statement although it seems unlikely that he was not alert to it as that was prepared almost at the same time as the separate supplemental instructions to Mr Browne.

[182]He was extensively cross examined on this (T16/162 et seq and T17/2 et seq).

[183]First there is a stumble. It seems odd that he was faxing documents to MZ whilst he was staying with him in his house in Portland, Oregon.

[184]More significantly on being questioned as to the existence of two STF’s of the same date he was asked to identify which one was which. At page 174 he refers to the copy sent by fax to MZ on 12th November 1997 as being the second one i.e. the “benefit”. He said “the original which is 164B [i.e. “benefit” was put in the safe”. Further (page 180) he was asked which one KS signed on 10th. He said it was most likely 164B i.e. the “benefit” one. He then confirmed again that 164B was put in the safe. He was then asked whether the one that was subsequently executed was 164A “the benifit” one. He was asked again as to whether or not 164A was the one that was subsequently signed but he answered that “the document I sent to [MZ] is 165 (i.e. a copy of “benefit”)”. I then pointed out to him that he appears to be suggesting that the one that was faxed (page 165) was one that was in the safe (164B). I then suggested to him that if that is correct then 164B could not be the one faxed to MZ because it was in the safe and not used. He then acknowledged that he could not be right.

[185]I pointed out to him that in the instructions to Mr Browne of 25th January 2008 (paragraph 2) he said that the “benifit” document was put in the safe and the “benefit” was created and then faxed to MZ on 12th November 1997. However in response to my question the 164B (the “benefit”) was executed and put in the safe it cannot have been that one which was faxed. I pointed that out to him and he maintained that 164B went into the safe he acknowledged his evidence was wrong. He confirmed again in response to a question by Mr Trace QC (page 190) that 164B (i.e. “benefit”) was in the safe.

[186]Logic would dictate that if his evidence was correct the “benefit” transfer was the second one so that the “benifit” one would be the one that was in the safe. On that analysis the “benefit” one cannot be in the safe. By this time it was late in the day and I was concerned as to SM’s potential confusion on this important point. I adjourned the matter and so I said this to SM (page 192):- “Mr Justice Peter Smith: I think you ought to think very carefully about your answers that you have given this afternoon and read over the transcript. Because I don’t think you do yourself justice at the moment”

[187]The cross examination resumed the next day. He then acknowledged that his instructions given to his solicitor to pass on to Mr Browne were confusing. And he acknowledged that they were wrong (T17 page 3). So he said that 164B (i.e. “benefit”) was in the safe. He was then asked to explain document 164A (“benifit”). He then suggested that KS signed 164A first on 10th.

[188]He confirmed again that the only document that he was relying upon was 164B and that 164A had been disregarded and that he would never rely on it at all (page 23).

[189]He was then shown the witness statement of Mr Adeeb. Mr Adeeb is an accountant in Pakistan. He gave evidence by video link. In his evidence he recounted that (paragraph 16) KS met him in 1998 and provided him with copies of two share transfers. The second of those showed that KS transferred the shares for the benefit of SM. He kept a copy of it i.e. from 1998. The copy that he has produced is a copy of 164A (“benifit”). When asked to explain how Mr Adeeb comes to rely upon the discarded 164A he says that KS took that copy and gave it to him. I cannot see how that can conceivably be the case. At best SM’s evidence is that the two documents were created on the same day and the “benifit” one was disregarded. I cannot see why KS would take and give one to Mr Adeeb. If she did take a copy and give one to Mr Adeeb it would be the “benefit” one 164B.

[190]Of course he originally said to his handwriting expert that the “benifit” one was in the safe.

[191]I explored the consequence of this evidence with Mr de Lacy QC in his closing (T20.54 et seq). He acknowledged that one of the documents at least must have been forged by SM based on the expert evidence. He also acknowledged that Mr Adeeb had the wrong one (“benifit”) when that was apparently discarded on 10th November 1997.

[192]In my view the inexorable conclusion is that SM has forged both documents. I do not know why he forged both documents but the number of different stories he told over this short period demonstrated in my view that he was not telling the truth. It is plain that one document at least must be a forgery because of the agreement of the experts. This is reinforced by the fact that he failed initially in any of his evidence to deal with the fact that there were two STFs. I suspect that he failed to spot the differences between the two and when he was then caught out came up with explanations as to why there were two copies. The explanations changed from what he told his expert to what he told me in court.

[193]There was much other expert evidence concerning these transfers but consideration of those does not arise because of these fundamental difficulties facing SM. Likewise it is not necessary for me to come to a conclusion as to whether or not passport C303937 was forged by the Defendants. However in my view the Claimant’s evidence on this by Mr Browne and his fingerprint expert Mr Macleod was comprehensively destroyed in cross examination. The Claimant has failed to establish that passport was forged.

[194]The reality in my view is that SM tried to get KS to execute a share transfer in his favour in May 2002. That failed. Accordingly between May and November 2002 he forged the transfers and provided them to ISTIL’s company secretary on 1st November 2002.

[195]It follows from the above that in my judgment SM has forged a significant number of documents in this case.

[196]It follows therefore that in my view SM has told numerous lies before me in his attempts to maintain the genuineness of these documents. Although he gave his evidence in a straight forward manner and regularly demonstrated an encyclopaedic knowledge of the documents I have formed the view that this is because he was an accomplished liar and forger of documents. I remind myself of the observations set out earlier in this judgment in EPI Technology. I am driven to conclude that I cannot rely on any evidence of SM unless it is corroborated by documents the genuineness of which is incontrovertible.

[197]I turn now to consider the position of the Defendants.

FORGERY OF DOCUMENTS BY MZ

[198]I preface my observations by the fact that MZ was a man who admitted that he suborned other people to tell lies. He also admitted that he would be prepared to lie when it suited him. He justified this on the cynical basis that everybody lies. Lying to him was but one of the methods of establishing that which he wished to achieve. That might extend to presenting a false case because it suited him. He strongly believed (and I have confirmed that in this judgment) that he has been pursued by SM using forged documents. Faced with that MZ plainly decided that his counter response need not be limited to lawful and legitimate means.

[199]His demeanour was quite unpleasant. He was regularly sneering and condescending in giving evidence. And his frankness (if that is the right word) as to his willingness to lie was deplorable.

[200]I am satisfied that he lied when he said SM created the loan documents. In my judgment he created the KS loan document at some time and obtained its execution in May 2002 to use it against SM. I do not know how he procured KS’s signature to the documents. It is a matter of regret that this elderly lady appears to be pursued by her son and one of her daughters at the latter end of her life to have her execute documents in favour of their own particular contentions. This extended to SM’s visit in December 2002 with his entourage which camped tank like on the hypothetical lawn outside. PS for her part in my view also then took control of KS and she appears to have been shabbily treated for the remainder of her life to such an extent that when she died PS made no serious attempts to provide a proper mode of contact for her in the event of her mother’s demise, allowed her mother to be buried in a pauper’s grave and deliberately did not tell SM of her death. Such however is the life of bitter family disputes. None of the main players come out of it very well as regards how KS was treated in my view.

[201]MZ was therefore willing to put forward a forged document to support his case that KS held the shares beneficially for him. Although the Defendants in their closing submissions sought to downplay this mode of forgery that is not acceptable. It was put forward clearly as a document intending to show that he had a substantial interest in the shares.

[202]He also had a role in relation to the transfer of the shares to PS in September 2002. In respect of that transaction there was an odd series of events. First on 7th September 2002 KS gave PS an unlimited power of attorney to sell the shares. It should be noted that her passport C303937 was used to identify her but for the reasons I have already given I do not believe (contrary to SM’s case) that passport was a forgery.

[203]On 28th September 2002 she procured that KS transfer the shares to her for 20,000 rupees. That was a figure of approximately £200. It is fortunate that she did not use the power of attorney as I do not believe she could probably have executed that power of attorney for a transaction in her favour. That document did not of course deal with the outstanding liability allegedly due to MZ of $690,000 under the 13th December Loan Agreement.

[204]There was no disclosure of an agreement which was allegedly made on 19th September 2002 between PS and MZ. For example it was not referred to in KS’s Affidavit of 6th December 2002. This is hardly surprising because the Defendants conceded that it was not created until 2005. In paragraph 127 of the Amended Particulars of Claim it was alleged that ISTIL Guernsey received a fax from MZ enclosing a letter from KS where it was alleged the shares had been sold to her for 20,000 rupees pursuant to an agreement dated 28th September 2002. The initial response to that is that the paragraph was admitted save the word “purportedly” was denied and averred that the shares were sold to PS by KS with the permission of MZ on the terms that PS would thereafter hold the same basis as KS held them. No mention was made of the agreement of 19th September 2002 verbal or otherwise. There was then the amendment which provided that PS would hold them as a Nominee and then a further amendment which alleged that PS held them on the same basis as KS namely the Loan Deed. This was effected it was said by an agreement dated 19th September 2002. It was not said that the document was not created on that date. That pleading was served late in 2007.

[205]PS became a party from April 2007 and she was separately represented thereafter. She served a Defence on 11th May 2007. She made no reference to the agreement with MZ dated 28th February 2007 whereby she had agreed to sell the KS shares to him. She served an Amended Defence dated 15th January 2008. PS appended the Statement of Truth to this Amended Defence.

[206]A summary of PS’s case (paragraph 6) is signal in its failure to reveal that by the time it was served PS no longer had any beneficial interest in the shares. It did not suggest that KS and thus PS held the shares as a Nominee for MZ; it merely denied SM’s beneficial interest. Significantly however it said that KS had no legal or beneficial interest in the shares on her death but this was because of the sale. That gave the clear impression that PS believed she was the beneficial owner of the shares by virtue of that transaction. This impression is reinforced by the pleading in relation to the agreement between KS and MZ which does not suggest anything otherwise than that KS was the beneficial owner. That of course mirrored her Affidavit of 6th December 2002 in which both MZ and PS had a significant role. Reference was made to an agreement in writing dated 19th September 2002 in the initial pleading. It was not changed to an oral agreement subsequently reduced into writing but dated 19th September 2002 until her Amended Defence. Thus initially PS asserted the 19th September 2002 agreement came into place on that date. She signed a statement of truth to that and thus told a lie.

[207]Further both Defences in effect assert that KS was the beneficial owner of the shares and the relationship between her and MZ was that of lender/borrower although for the purpose of his security he had an ability to restrict KS’s ability to transfer the shares whilst the loan was outstanding. MZ plainly had no genuine belief that these documents reflected the true relationship. I do not believe PS had any belief as regards that either.

[208]In my view both MZ and PS lied when they suggested that the 19th September 2002 Loan Agreement was orally agreed in September 2002. Also I do not believe them when they attempt to suggest that the ultimate owner of the shares was MZ. Although there was an attempt in the closing submissions to suggest that the Defendants as lay people would not necessarily understand what a Nomineeship meant I reject that. First MZ is plainly an extremely sophisticated person and he would well understand what that meant. He operates through Nominees regularly in his business and there is no question that he would not understand that. His attempt to suggest that the relied on the goodwill of KS is a lie. He lied in an attempt to explain how he could be involved in KS’s Affidavit of 6th December 2002 which stated in unequivocal terms that she was the beneficial owner of the shares. He also lied to invent a basis for retaining control of the shares whilst (finally and reluctantly) acknowledging at the start of the trial in effect that the loan documents as genuine documents would not stand up to scrutiny. This is part and parcel of his willingness to seek to lie his way out of things when it suits him.

[209]PS in her first witness statement dated 24th December 2007 summarised her position in paragraph 48:- “I believe that I am the owner of the shares but my ownership has always been subject to an agreement with [MZ] to act in accordance with his wishes in relation to the shares. I believe I acquired the shares from my mother on the same terms she held them there is no doubt in my mind that she always considered she held them subject to a loan agreement to act in accordance with MZ’s wishes in respect of them”.

[210]She utterly failed to explain how her mother could have deposed as she did on 6th December 2002. Further this witness statement was dated 21st December 2007. By that time she had disposed of any interest in the shares by virtue of her agreement with MZ dated 28th February 2007. The failure to refer to that document was surprising given the fact that it had been disclosed by MZ’s solicitors some four weeks earlier with the alleged Loan Deeds.

[211]Both the agreement dated 19th September 2002 and the Share Sale Agreement dated 28th February 2007 raise serious questions.

PS’S PLEADED STANCE

[212]PS’s final pleaded stance is in her Amended Defence to which she has appended a statement of truth. In that pleading her case is summarised as I have said in paragraph 6. That paragraph denied that KS transferred any shares to SM. I accept that plea for the reasons I have already set out. It also denied that KS held any shares as Nominee for SM as alleged. I have rejected that plea for the reasons set out earlier in this judgment. It then denied that SM had any interest legally or beneficially in the 2,007,500 shares owned by KS. I have rejected that plea. She then referred to the notarised Deed of Sale dated 28th September 2002 whereby KS sold the shares to PS at a price of 20,000 rupees (about £50) and took over KS’s liability to MZ for the monies provided by him to pay for the purchase of the shares in 1997. KS therefore it was pleaded had no legal or beneficial interest in the shares on her death and the same did not form part of her Estate. It must be appreciated that that contention is based on the fact that she transferred the shares to PS. It is not based on a plea that KS and then PS held the shares for MZ. That nowhere features in this pleading which is the one that PS took to trial and never amended.

[213]It is fair to say that in paragraphs 9-13 she refers to what she understood to be the initial understanding between KS and MZ but that too is completely bereft of any suggestion that the shares were held by KS for MZ as a Nominee.

[214]In paragraphs 27-30 she referred to the Loan Agreement dated 19th September 2002. It was changed to plead that it was the terms of the oral agreement that were subsequently reduced to writing in a document bearing the date on which the agreement was made. An examination of that document as reinforced by the cross examination of PS showed that that was not true. There were provisions in the Loan Agreement which were never agreed orally in September 2002. In fact in my view and I so find there was no such genuine agreement made as alleged.

[215]Finally in her pleading she summarised what was described as the “current position” namely that she held the shares and continues to hold them under an obligation to repay the loan to MZ. There is also a plea that if KS signed the share transfer dated 10th November 1997 it ought to be set aside because she signed it under false representation or as a result of undue influence exercised over her by SM. For the reasons that I have already set out in this judgment (namely that the share transfer is a forgery) none of those matters arise.

PS’S WITNESS STATEMENT

[216]In paragraphs 12 and 13 she gave evidence as to the relationship between KS and MZ. At no time did she say that KS was a Nominee. She did not address the contents of KS’s Affidavit of 26th December 2002 and in particular the assertion that KS could keep the profit on any shares (a point studiously missing from both PS’s Amended Defence and her witness statement). She repeated in the witness statement (which is dated 24th December 2007 paragraph 48) that she believes that she is the owner of the shares but her ownership is and always has been subject to her agreement with MZ to act in accordance with his wishes in relation to the shares.

[217]She produced two further witness statements but neither addressed this issue.

[218]She omitted to plead or say that she had apparently sold her shares to MZ on 28th February 2007.

MZ’S CASE

[219]In his final Re Re Amended Defence dated 20th December 2007 MZ also failed to make any reference to the Sale Agreement dated 28th February 2007. In his pleading he contended that the shares were transferred to the Nominees under the terms of the Loan Deeds (paragraph 45). In paragraph 124 he contended that the KS shares were sold to PS with his concurrence upon the same terms as to loan liabilities that KS had but subject to the agreement dated 19th September 2002 (studiously avoiding revealing that the document was actually created and executed in May 2005).

[220]In paragraph 139 the final plea (paragraph 139.1) is as follows:- “The shares held by [KS] and [Maboob] were held on the terms of the Loan Deeds referred to in paragraph 45 above and as such were not to be sold or transferred except for the consideration of $3 per share or more”. What is missing is any suggestion that KS and Mehboob held the shares subject to any kind of obligation to MZ. Indeed that plea is abandoned (as appears from the removal of the contention that KS and Mehboob sold the shares “to the direction of [MZ]”.

[221]Intriguingly in paragraph 141.4 it was pleaded that if any interest in the shares vested in KS at her death and the same passed to the estate and any heir including SM it passed subject to the terms of the Loan Deed. The time for repayment of the loan (31st December 2004) therefore expired and MZ was entitled to return of the shares from the estate of KS or any beneficiary. At the time that pleading was settled the Sale Agreement of 28th February 2007 in his favour had already been executed.

[222]In his first witness statement dated 4th January 2008 (paragraphs 81-91) he dealt with the Yinnie shareholding. In paragraph 85 he referred to the Loan Deeds and that he never formally paid the money to the shareholders but paid for the shares in the name of the shareholders. MZ has never identified any source of any money that has been provided by him to acquire these shares.

[223]He acknowledged in paragraph 87 that the Loan Deeds were disclosed 12 weeks after the disclosure lists were exchanged but suggested that they were only located when preparing the witness statement. I do not accept that. In my view and I so find he deliberately delayed producing the loan documents.

[224]Crucially in paragraph 88 he stated that the Nominees were the beneficial owners of the shares. He then referred to the Loan Agreement dated 19th September 2002 which was prepared in 2005 by Mr Scott ISTIL’s lawyer. In paragraph 97 he refers to the agreement between PS and himself dated 28th February 2007 and stated intriguingly “a transfer of shares is to be completed after the trial of this action”.

[225]He provided 3 further witness statements but in none of them did he address this issue save in his 4th witness statement (6th March 2008 paragraph 4) where he disagreed with PS as to whether or not he had provided any advances to her under the agreement of 28th February 2007.

[226]What is missing from any of the Defendants’ evidence is a suggestion that the beneficial interest in the shares (whether or not subject to the loans) belonged to MZ.

[227]This reflected what he said in his 5th Affidavit (February 2003) in the Reventox action. In paragraph 29 he deposed:- “[Nominees] ….. are the real beneficiaries of the shares. They are not holding them on trust for me, nor, as far as I am aware, for anyone else, and they are theirs to do with whatever they wish and they are at liberty to sell the shares whenever they so choose. When, or if, they sell the shares, they can retain any profit that is made upon them – all that I have asked is that they return my initial capital outlay. While they hold the shares they have given me a power of attorney which gives me voting rights”.

[228]MZ was cross examined on this Affidavit (T13 page 146-155). The Affidavit omitted a significant number of matters. First although sworn in February 2003 it failed to make any reference to the September 2002 transactions whereby KS transferred the shares to PS and PS entered into a new Loan Agreement with MZ. Of course he could not refer to a written agreement as regards the agreement of 19th September 2002 because that did not come into existence for 2 more years. He acknowledged (T13 page 153) that his present case was that the Nominees held the shares for him. He could not explain how his present case matched up to what he had said in the 2003 Affidavit and indeed what KS said in her 26th December 2002 Affidavit.

[229]In my judgment and I so find he lied both in his February 2003 Affidavit and before me. He has simply told different stories as regards the beneficial ownership of the shares. The first one namely that the Nominees were beneficial owners was a lie. The second that they were Nominees for him was equally a lie. The only truthful matter which he conceded before me was that the Loan Documents were not genuine documents intended to be relied upon and further that some of them had been backdated.

[230]PS’s evidence was equally in disarray. I have set out how the case appeared in her pleadings and her witness statements. She was first “cross examined” by Mr Trace QC (T15 page 120) as follows:- “Q. Now, strictly speaking, under the various documents we have looked at, your mother owned the shares absolutely, i.e. to do with them as she wished; but would you agree with me that this is right, that you, indeed your mother, had to do with those shares whatever [MZ] wanted. That is right, isn’t it? A. Yes Q. So is this right, that if he had said to you, “I would like you to give these shares back”, would you have done so? A. Certainly. Q. Would your mother have done so? Q. Even if he had said, “well, the shares are worth $10, but I would like them back”, for whatever reason, you would still have given them to him. That is right isn’t it? A. Yes. Q. And so would your mother? A. Yes….” A. Yes Q. Would your mother have done so?

Q. And so would your mother?

[231]Unsurprisingly she was subjected to a more vigorous cross examination by Mr de Lacy QC (T15 and T16). She persistently contended that both KS and she held the shares as Nominees for MZ. In fact the word “Nominee” seemed to spring from her lips at every opportunity. It became like a mantra which she was determined to utter at every conceivable opportunity. I found this unconvincing. She was coached to say it. I do not accept she honestly believed that she and KS were Nominees for MZ. In my view she was put up to this by MZ. I do not know the reason for that and I do not propose to speculate. Nevertheless I am firmly of the view that on this she was untruthful. As I have set out above it is contrary to her pleaded case and her written evidence. The stance was maintained in the closing submissions on her behalf that she was a Nominee for MZ. Nor do I accept that the disclosed documents show the true relationship between MZ and PS.

[232]That is contrary as I have pointed out to the Affidavit sworn by her mother on 26th December 2002. As the cross examination by Mr de Lacy QC shows she had a major role in that Affidavit, indeed she typed it. She was unable to explain how that Affidavit came to be in that form when she would have me believe now that the case was always that KS was a Nominee for MZ as indeed was she. Equally she was unable to explain why in proceedings in Karachi she verified as being truthful a written statement presented on 16th April 2003 (paragraph 9) that “…[KS] is the absolute proprietor of the shares [and] sold such shares to [PS] under her own signature”. There is no mention anywhere in the statement that either KS or PS were Nominees. Nor is there any reference of course to the 19th September 2002 agreement because in written form it did not exist at that time.

[233]In proceedings in Guernsey she also swore 2 Affidavits dated 22nd November 2005 and 2nd October 2006 respectively. I have already commented on these regarding lies about her residence for the purposes of securing a stay of those proceedings. In paragraph 10 of her first Affidavit she referred to the sale of the shares by KS to her. Once again she failed to make reference to 19th September 2002 agreement and nowhere did she say that KS was a Nominee. In fact she said the shares were sold by KS to her so they would not pass to SM when she [i.e. KS] died. A simple answer if she is to be believed in respect of her evidence before me would have been to say that KS and she were not at liberty to transfer the shares to SM because they were held as Nominees for MZ. She does not make that simple point. In her second Affidavit (paragraph 12) once again she affirmed an agreement for sale by KS to her. She said “so I own the shares outright and they are not part of my late mother’s estate. As a result Mr Masood’s inheritance claim in Guernsey has no basis”.

[234]In my view and I so find that is a lie. However that does not mean that her evidence before me that she was a Nominee for MZ was true either. That too in my view was a lie.

[235]I remind myself of the need to ask the question “why did she lie?”

[236]Having seen PS in evidence I found her to be a completely untruthful witness. At times she tried to give the impression that she did not understand what was going on but I reject that. She was clearly determined to use the word Nominee as often as possible and she was clearly able to seek to avoid answering important questions which were inconvenient for her to answer. She was in my view completely destroyed in cross examination by Mr de Lacy QC as a credible witness.

[237]I conclude that she told lies before me and in the earlier proceedings in other jurisdictions to which I have made reference simply to support MZ.

[238]Equally MZ was untruthful before me in respect of the KS shares as set out above. He was in my view also untruthful in the Guernsey proceedings. In his second Affidavit sworn in January 2007 (paragraph 22-25) he made reference to the KS shares. He deposed that the KS shares were sold to PS pursuant to the Share Sale Agreement dated 28th September 2002 (making no reference again to the 19th September 2002 Loan Agreement although it was by this time in existence). In paragraph 25 he said “as a result of the Share Agreement between [KS] and [PS] it is my understanding that there are no shares for [SM] to inherit”. He nowhere mentions his case now that these shares belonged to him beneficially. In my judgment, and I so find MZ lied in front of me in the suggestion that he had any interest in the KS and Mehboob shares. He also lied in his Affidavit in the Reventox proceedings (paragraph 29) to which I have already made reference.

[239]MZ admitted that he was willing to lie and encourage other people to lie if it advanced his case. His reasoning was that everybody lied and that SM was a liar. In MZ’s arrogant mind this gives him the right to tell all manner of lies because he believes that he is entitled to do that to advance his case. In this he is wrong.

[240]Equally PS fell into line with MZ and was willing to be his mouthpiece for his claim. She too therefore was willing to lie on this point.

PARTICIPATION IN FORGED DOCUMENTS

[241]Both MZ and PS participated in a number of forged documents. I have already referred to the Loan Documents. I have rejected the submission on behalf of MZ that this was a low level of forgery. In May 2002 he determined to procure KS’s signature to a document which was backdated to 1996. He did the same in my view with PS when they created a Loan Agreement dated 19th September 2002 in May 2005. I reject their evidence that this document reflected what was agreed orally in September 2002. As Mr de Lacy QC demonstrated in cross examination the document was far too complicated to have had that genesis. A deliberate decision was made to put a false date on it in my judgment. It is significant that there were a number of opportunities to refer to it or the arrangements (see the Affidavits in late 2002 and 2003 referred to above) but no mention was made of any oral agreement as now alleged.

[242]This is reinforced by a consideration of the documents which have a number of questionable characteristics.

AGREEMENT 19TH SEPTEMBER 2002

[243]I have already observed that this bears a false date. It was created in May 2005. In paragraph 1 headed “interpretation” the definition of loan is a complicated arrangement and the suggestion that those terms were orally agreed is incredible and I reject it.

[244]Paragraph 2 incorporated a consent and undertaking “in consideration of MZ permitting the sale by [KS] of the shares to [PS] for a nominal price of Pakistan RS 20,000 [PS] undertakes to honour the loan and to repay the balance on the loan on demand as if MZ had advanced the loan directly to the Buyer rather than to [KS]. MZ hereby undertakes not to seek to recover the loan from [KS] subject to due performance by [PS] of the terms of this Agreement”.

[245]Thus MZ gives an undertaking to someone who had been dead for nearly 3 years. If this agreement had been executed in September 2002 it is inevitable that KS would have been a party to it to obtain of course a release from the loan liability which was linked to her holding of the shares. None of that happened because I do not accept there was any such agreement and there is nothing to suggest that KS was a party to any of the arrangements and obtained the undertaking referred to. It is all bogus in my view.

[246]This is further reinforced by clause 5.1 further assurances:- “The vendor shall do all things reasonably requested by MZ to give full effect to this Agreement in the transaction contemplated by this Agreement”.

[247]It was suggested that vendor should have meant buyer but that is curious. If one goes back to September 2002 the natural person to give the further assurance would be KS as vendor to PS as buyer and MZ to facilitate this share transfer in favour of PS, to procure her registration as shareholder and then to enable those shares thereby registered in PS’s name to be charged to MZ as security for the loan. The difficulty of the draftsman Mr Scott of course is that he is drawing this document up in May 2005 when KS is already dead. Once again this shows that this document is not a genuine document.

[248]This then leads to the Share Sale Agreement dated 28th February 2007. By this agreement PS agrees to transfer the shares to MZ. The consideration is expressed to be “MZ undertaking to arrange and guarantee the capital loan to or for the benefit [PS]”. PS then agreed to sell the shares subject to SM’s claims and any others.

[249]The loan is defined as “the funds lent or paid to [PS] and/or payment of legal fees on behalf of PS by MZ or a third party secured by a guarantee of MZ”.

[250]In consideration for that the shares are to be sold and the consideration was stated to be certain advances made to PS by or on behalf of MZ during 2002/2003 totalling $25,000, the payment of PS’s legal fees in Karachi and Washington and Guernsey ($70,000 in total) and the liability of PS in respect of the loan advanced by MZ.

[251]The latter is just about capable of being construed as being a release of loan. PS denied that she ever received any advances totalling $25,000. MZ contended that she did. There was extensive cross examination about this document. Although MZ purported to give a guarantee there was in fact no written guarantee given by him that would satisfy the Statute of Frauds 1677 as English law is applied (clause 5.7). The funding of PS’s legal Defence was obscure. She said that she just handed the bills to MZ and he paid them. There was a suggestion that a loan had been arranged through third parties in the Cayman Islands. That appears to be a loan provided by 2 gentlemen called Lagan and Aiken (T15.127). They were plainly fronts for other people. Her solicitor’s (Mr Phillips) statement dated 11th December 2007 to the effect that PS “is in fact funded by a third party loan” does not begin to reveal the true position. I have no doubt she is in effect being funded by MZ and she gave the game away when she said she gave her bills to MZ. He too was extremely evasive when cross examined by Mr de Lacy QC.

[252]In my view and I so find the reality is that MZ was funding PS’s legal fees directly. The purpose of the Share Sale Agreement was for him to gather finally under his control the shares in the event that the SM claims were disposed of. However the fact that there was a sale once again completely negates the suggestion that these shares were held by KS and PS as Nominees for him. The whole existence of the loan liabilities and this arrangement is completely inconsistent with the Defendants’ case.

[253]In my judgment this too is an artificial transaction. Its purpose was to provide a justification for MZ funding a separate Defence by PS through intermediary parties. The purpose of that in my view was plainly to create another set of Defendants’ costs so as to pressurise SM by seeking extra security and expose him to greater liabilities. As I said in argument I remain firmly of the view that if PS genuinely believed she was merely a Nominee for MZ all she had to do was to say that and have no further role in the proceedings beyond giving evidence. There would have been no effective claim that could have been brought against her except declaratory relief in that respect. The possibility of being exposed to dividends was unlikely. To my mind this was a tactic contrived by MZ with the assistance of PS to put forward a further bogus state of affairs. It is demonstrative again of MZ’s willingness to create false documents when it suits him.

[254]All of these matters lead me to conclude regrettably that like SM I cannot accept any statement by MZ or PS as being truthful unless it is corroborated. Equally I cannot accept any document they put forward as being genuine unless there is independent evidence establishing the genuineness of those relevant documents. The machinations with KS’s shares show that both MZ and PS collectively were willing to use KS to frustrate SM’s claims.

[255]The lack of genuineness of the transactions is reflected by the modest price. Although MZ talked about the shares being worth at all material times $3 the answers PS gave to Mr Trace QC namely that if the shares were $10 the increased value would belong to him were artificial and unreal. There is evidence in the Guernsey proceedings and the Reventox proceedings which show that there is a strong possibility that the ISTIL shares are worth considerably more. I cannot say anymore than that but the whole saga of the Loan Deeds and the subsequent dealings in the shares by KS, PS and MZ are all designed to put forward documents with a false authenticity as a counter to SM’s claim. The Defendants might have believed that SM himself was putting forward forged documents (and of course they were right) but that does not justify what they did.

FORGED DOCUMENTS

[256]Both sides made extensive allegations that the other side had forged documents. Extensive handwriting expert evidence was given from 3 well known handwriting experts, Mr Browne, Dr Audrey Giles and Mr Radley.

[257]In their closing submissions the parties produced (at my instigation in fairness) a comprehensive list of challenged documents. It runs to 52 documents.

[258]I have already commented on the key contractual documents and the other documents that are consequentially forged and the purported share transfers from KS to SM dated 10th November 1997.

[259]The Browne/Giles joint expert report dated 1st February 2008 has the experts agreeing that the relevant documents are forged. Similarly the experts joint report of Browne/Radley (1st February 2008) agreed that the two STF’s dated 10th November 1997 are not genuine although there was a dispute as to whether or not KS signed them. For the reasons I have set out earlier in this judgment however that disagreement becomes insignificant in the light of SM’s evidence. I have also observed that that evidence makes Mr Adeeb’s evidence about the receipt of the STF also untrue.

[260]It is not strictly necessary therefore to come to a conclusion as between the evidence of Mr Browne as opposed to that of Mr Radley in respect of the signature on the STFs. If it becomes necessary to consider that, I have no hesitation in preferring the evidence of Mr Radley whom I found to be an extremely impressive witness (as opposed to the evidence of Mr Browne) to the effect that there is strong evidence to conclude that the two versions of the signatures were traced.

[261]Whilst there was a measure of agreement that the key documents were forged there was no clear indication as to who was the forger. This is graphically illustrated by reference to the documents SM said he received from two third party sources first “ISTIL Friend” and second Yousaf Saleem.

[262]SM allegedly obtained documents from ISTIL Friend in 2002 at the time of the Reventox proceedings. I have already adverted to this in the judgment. SM’s third Affidavit in the Reventox proceedings exhibited one copy of Appendix 1 in respect of what was called the Reventox/Progress Consultancy Agreement. ISTIL Friend had provided another copy which was believed by the lawyers then advising SM to be a forgery. A decision was made not to reveal that forged Appendix in his Affidavit. During the course of the proceedings the solicitors retained by SM on behalf of ISTIL Group Schillings gave the email address of ISTIL Friend to MZ’s then solicitors Stephenson Harwood. This led to the judgment of Mr Justice Lawrence Collins which is the subject matter of the claim for costs in the Reventox action and is also the subject matter of the malicious falsehood claim. Both sides in the trial before me accused the other of being ISTIL Friend. It is impossible for me to decide that but it would seem to me to be unlikely again that MZ would forge documents that harm his case.

[263]The same position appertains to Yousaf Saleem. In the Guernsey proceedings SM swore his eighth Affidavit in February 2007. He there called him Yousaf Jamal Salim and commented (without further elaboration) that he had died under mysterious circumstances in Donetsk Ukraine. One of these documents was a letter dated 31st December 1996. MZ had stated that it was a forgery (as I have found). At the time of the revelation of the source no handwriting expert had expressed a view on the document. Faced with the subsequent agreement of the experts that the signature was forged SM was forced (in his main witness statement in this action) to assert that there was definitely a document which he signed. His explanation (which I have rejected) was that MZ through Yousaf fed him deliberately false documents to entrap him. Thus once again both sides accused each other of being Yousaf. As to whether or not a Yousaf existed I do not know but as I have already determined on the balance of probabilities I conclude SM forged the documents.

[264]In view of the difficulties of assessing the evidence (caused by the actions of all parties) I do not propose to determine any of the wide ranging issues as to forgery beyond the key documents which I have already referred to. Thus the large amount of time devoted to leading evidence as to whether one of KS’s passports was a genuine passport or a fake adds nothing to the overall decision I have come to in my view.

[265]Equally it is impossible for me to determine what happened when the various parties visited KS and I do not propose to attempt to try and unravel all of the counter allegations in respect of that. I come to the same conclusion about the various bags of documents which SM claimed were found on different occasions (the same document apparently having been found twice) at KS’s former house. At best the evidence was confusing at worst it was false evidence to bolster SM’s case in my view.

[266]I have set out at some length above the difficulties presented with the evidence and I now go on to deal with my conclusions in respect to the various claims in the light of my partial dispelling of the fog surrounding this case.

CONTRACTUAL CLAIMS

[267]First dealing with the performance fees I have determined that there was no primary agreement for any such fees and that the documents were forged by SM that purport to confer such an entitlement.

[268]In case I am wrong I do not accept they were earned because I do not accept the AIM listing was within the contemplation of the parties as triggering an entitlement. Further in my view the rights were given up by virtue of the exchange of correspondence referred to earlier in this judgment as supported by the evidence of Mr Knight. I found Mr Lindberg to be a completely unreliable witness and in any event he was unable to produce any documents which supported his evidence as to the potential treatment of these so called performance fees.

[269]Equally I reject SM’s claim that he had a contractual right to 8% of the shares as against MZ and Win/Thaiwin. I have also rejected his claim based on the KS share transfers which in my view are forgeries.

[270]Thus all of the key documents in respect of the performance fees and the shares were in my view forged by SM. I have considered the consequences of that quite carefully but as I set out earlier in this judgment I have come to the conclusion that that does not mean he has no claims. In my view (and I so determine) he has a claim to the KS and the Mehboob shares by virtue of an understanding that he and MZ came to when the Yinnie shares were available. They were Nominees for him and the others were Nominees for MZ.

[271]The Loan Deeds were not genuine Loan Deeds and have been put forward by MZ as a smokescreen to challenge SM’s entitlement. These findings mean that KS had no right to transfer the shares to PS. I find that PS well knew that and she takes subject to SM’s claim. MZ also takes subject to his claim as he was well aware of the genuineness of the claim and the 28th February 2002 transfer does not enable MZ to suggest that he has obtained a clear title free from any claims that SM might bring. COSTS IN

THE REVENTOX ACTION

[272]I am not persuaded that MZ has made any case for seeking an order for costs (partial or otherwise) against SM in respect of the Reventox proceedings.

[273]I am no better able to determine the truth of the two Appendix 1 documents that Mr Justice Lawrence Collins was.

[274]Further in the light of the cross examination of MZ on this issue I am satisfied that there was clearly an arguable case that MZ had sought to divert himself through the medium of Reventox commissions and other opportunities which ought to have come the way of ISTIL. I emphasise that my determination is that there was an arguable case. I am making no clear finding on that because I do not have sufficient material. Nevertheless I found his answers on cross examination by Mr de Lacy QC evasive and I did not believe him.

[275]The Reventox action only ceased because MZ obtained control of ISTIL Group and caused it to stop its proceedings against him and Reventox. That in my view was a shrewd move by MZ; if the action had proceeded I think he would have had to answer some very serious questions indeed.

[276]I therefore come to the conclusion that I can see no reason why SM should be ordered to pay any of the costs for the Reventox action personally.

EMPLOYMENT CLAIMS

[277]SM’s contract was terminated summarily on 8th March 2003 when MZ obtained control of ISTIL Group.

[278]A contract for services or employment is not specifically performable. When it is terminated even wrongfully the remedy available is that of damages only. Of course if the employment continues a variation of the contract or refusal to honour an obligation of it would be a breach but that might not be repudiatory unless accepted. An employee then could maintain his employment and simultaneously sue for damages see Rigby v Ferrodo

[1987] IRLR 516

H.L.

[279]Of course exceptionally in other contractual situations where a party commits a repudiatory breach the innocent party can decline to accept that breach as discharging the contract as regards primary obligations and relegating the obligations to pay damages as a consequence of the breach. The innocent party however can only claim in debt if he is able to continue to provide his services see e.g. the well known case of White and Carter v McGregor [1962] A.E. 413. Ordinarily that would be most unlikely to be an event that would occur where an employee’s contract is terminated summarily and he is not allowed to continue to provide his duties. That is what happened in this case.

[280]However merely because his employment was terminated does not of course mean that he cannot sue for damages.

[281]The Defendants in their Re Amended Defence (paragraph 81) assert that SM failed to carry out any duties between 1st December 2002 and 8th March 2003. I have not seen any evidence to substantiate that he was required to carry out any duties during that period and failed so to do.

[282]In their closing submissions they also seek to rely upon the fact that he spent time battling against the best interests of the shareholders and concocting forgeries. Whilst I have found that forgeries were concocted they are in relation to his personal claims against the individual Defendants. I have not been able to come to a conclusion about his third Affidavit in the Reventox proceedings. Had I determined that he had a part in procuring forged documents I would have concluded that ISTIL would have been entitled to summarily to dismiss him. Further ISTIL would have been able to rely upon that ground even if they were not aware of it at the time (Boston Deep Sea Fishing v Ansel [1888] 39 Ch. D339).

[283]I do not accept any lawfuljustification has been made out for the summary dismissal for SM in March 2003. The reality is that by 2002 these former friends had fallen out. SM had a role in procuring ISTIL to pursue MZ in the Reventox proceedings. I do not think those proceedings as I have said were without justification. It is hardly surprising however that when MZ as Defendant obtained control of ISTIL the Claimant the first thing he did was terminate SM’s contract of employment. He would have seen him as his tormentor (I suspect he still does to a degree). That is not however a justification for breaking the contract.

[284]It follows therefore that ISTIL Group in my view was in breach of contract when it summarily terminated SM’s employment in accordance with the Exit Agreement. SM is entitled to damages flowing from that. He claims salary. That could not be claimed as a debt for the reasons I have already set out but it does not matter because it is not suggested by the Defendants that he has suffered any less loss than the amount of salary he claims. Further whilst SM is under a duty to mitigate his loss the burden of proving non mitigation is on the Defendants. SM is therefore entitled in my judgment to the balance of his salary as damages.

THE MALICIOUS FALSEHOOD CLAIM

[285]I can deal with this quite shortly as it did not feature prominently in the trial before me.

[286]I am firmly of the view having seen MZ give evidence that he decided when he recovered control of ISTIL Group that he would cause as much grief as possible to SM. The first thing was of course breaking his contract of employment. I have no doubt that MZ deliberately caused paragraph 107 of Lawerence Collins J’s judgment to be altered on the website by the changing of the word “came” to “come” thus giving the impression to anybody who read the website entries that SM’s Affidavit was “incomplete, misleading and also dishonest”. Of course Lawrence Collins J did not come to any such conclusion at that stage as paragraph 112 makes clear. I reject the suggestion that it was merely a typographical error.

[287]I refer to the Claimants’ closing submissions and the authorities referred to therein. All of the ingredients of the tort of malicious falsehood are in my view made out. I should say that there was no evidence led of malice but the evidence of MZ’s malice towards SM (and vice versa I have to say) was plain to see in court. MZ would do anything that might cause SM harm. The same was of course applicable to SM as regards forging documents and the like.

[288]I have no doubt therefore that MZ deliberately changed the wording of the judgment on his website with the purpose of deliberately harming SM. It was part of his war of attrition against somebody who he perceived was also out to cause him the maximum amount of harm. It seems to me that the words were calculated to cause pecuniary damage to SM or were calculated to cause pecuniary damage to him in respect of his profession, calling, trade or business. The result is that proof of special damage is not required (section 3 Defamation Act 1952). In Joyce v Sengupta

[1993] 1 WLR 337

at 346 the Court of Appeal noted that section 3 is not limited to nominal damages.

[289]Apart from a section 3 plea proof of actual damage at common law must have to have been alleged and proved for the tort to have been complete.

[290]The evidence SM relied upon was that of Miss Shinohara. She said that when conducting a due diligence exercise in respect of SM’s affairs in 2003 she discovered the circular on the ISTIL website and felt unable to continue doing business with SM. It is suggested he lost a commercial opportunity then under negotiation.

[291]Her credibility was comprehensively destroyed in cross examination in my view. First she was shown to be willing to put forward herself false documents for the benefit of SM thus demonstrating unreliability. Second ultimately she said that if SM had made proper disclosure of all relevant circumstances the business opportunity would not have in any event come to fruition (T10). SM therefore in my view fails to establish any special damage of the amount claimed. He is nevertheless entitled to some damage. However given the actions as referred to in Lawrence Collins J’s and Miss Prevezer QC’s judgments and in the light of Miss Shinohara’s answers I cannot see that he has suffered a great loss. Further of course the Defendants have established that he is a man who forges documents and perjures himself. Given all of those it seems to me that the proper award for damages for the malicious falsehood is £1 and no more.

[292]I will hear submissions from the parties when I hand this judgment down as to the consequences of it.