Kazakhstan Kagazy Plc & Ors v Baglan Abdullayevich Zhunus & Ors [2018] EWHC 369 (Comm)

“Mr Werner went on to describe how the steel had been sold since these proceedings were started, but he was insistent that he did not know how much was received for it. Mr Twigger submitted that, in the circumstances, since credit ought to be given in respect of the steel and since the best evidence as to its value is US$ 30 million, that is sufficient to dispose of the Astana 2 Claim which is, after all, valued at somewhat less, namely US$ 13.45 million. I agree with Mr Howe, however, that it is unclear how the emails which Mr Werner was asked about can really be thought to be reliable evidence of anything, in particular whether as to the quantity of steel on the Astana 2 site or its value or who supplied it. I am, accordingly, not disposed to place any reliance on those emails. The more so, in circumstances where, as Mr Howe went on to point out, on any view, their contents are not readily reconciled with the fact that GS received in net terms US$ 6.7 million, and not US$ 30 million or more.”

“There be judgment for the Claimants against the Second and Third Defendants, the quantum of which is to be determined pursuant to the findings and rulings in respect of quantification given in the Judgment of Mr Justice Picken dated 22 December 2017.”

“… although Mr Howe was concerned at one stage that Mr Twigger might seek to argue (as Mr Thompson had implied in his first report) that the 2014 Co-Operation Agreement entailed the KZT 7.232 billion by way of penalties and the KZT 2.72 billion by way of default interest being written off by Alliance Bank, that was not ultimately an argument which Mr Twigger put forward other than, perhaps, in a footnote and in something of a throwaway reference to penalties and default interest having been ‘relinquished’ pursuant to the 2014 Co-Operation Agreement. That is, however, an argument which does not work since, as Mr Howe pointed out, the clause providing for a mutual release between the KK Group and Alliance Bank, Clause 6.1, was ‘Subject to the complete performance by all relevant KK Group entities of their obligations under clauses 2.1 to 2.10 … together with complete performance by Alliance of its obligations under clauses 2.12 to 2.16 …’, and those provisions required the Claimants, ‘In the event that any one or more of the KK Claimants is awarded judgment or reaches a settlement…in respect of the PEAK Claim’ to pay over the fruits of any such judgment or settlement. Since there has to date been no judgment or settlement of the PEAK Claim, and so there has been no payment of any proceeds to Alliance Bank, it necessarily follows that there cannot have been any release pursuant to Clause 6.1.”

“2.1 In the event that any one or more of the KK Claimants is awarded judgment or reaches a settlement (or settlements in aggregate if separate settlements are reached with any of the defendants individually) in respect of the PEAK Claim the value of which exceeds KZT5.4 billion (or equivalent in another currency at the prevailing exchange rate at the time), the KK Parties shall pay to Alliance the sum of KZT5.4 billion (the ‘Court Payment’) within 14 days of receiving such judgment or settlement sum or sums. 2.2 In the event that any one or more of the KK Claimants is awarded a judgment or reaches a settlement (or settlements in aggregate if separate settlements are reached with any of the defendants individually) in respect of the PEAK Claim of between KZT2.7 billion and KTZ5.4 billion (or equivalent in another currency at the prevailing exchange rate at the time), the KK Parties shall pay to Alliance all of such sum up to a maximum of KZT5.4 billion within 14 days of receiving such judgment or settlement sum or sums.”

“KK shall provide to Alliance the consultation services in relation to locating of documents and information, described in clause 3.1 below (the ‘KK Services’). As consideration for the KK Services, Alliance shall pay to KK a ‘Service Fee’ of US$2,000,000. The Service Fee shall be paid in equal monthly instalments of US$111,111 over a period of 18 months, with the first such instalment being made within 15 (fifteen) working days from the date of this Agreement.”

“In the event that Alliance commits a breach of this clause 4, clause 2.12 to 2.16 or clause 5 (to the extent such breach of clause 4 is material and not remedied by Alliance within a reasonable time following notification by the KK Parties), the provisions of Clauses 2.1 to 2.10 of this Agreement shall cease to have effect.”

“Subject to the complete performance by all relevant KK Group entities of their obligations under clauses 2.1 to 2.10 (as the case may be) and clause 3 of this Agreement and the KZ Settlement Agreement (in respect of any claims that might be brought by Alliance), together with complete performance by Alliance of its obligations under clauses 2.12 to 2.16 and clauses 4 and 5, (in respect of any claims that might be brought by KK Group) the parties waive and release all and any rights and claims (including as to interest and costs) in respect of all causes of action, demands, liabilities and set-offs howsoever and wheresoever arising that the parties (or any company or individual associated with any one or more of them) may have now or in the future against each other, their current and former employees, agents, members, directors or officers, including former or current employees, agents, members, directors or officers, arising out of or in connection with the KK Group’s Debt and the Guarantee, whether or not such claims are known to or are within the present contemplation of the parties.”

“I now turn to set out my conclusions on these submissions. At the outset I observe that counsels' submissions conflate two issues, first, whether the court can and should review its earlier finding of fact and second, whether the result of the case would be different if the admitted fact had been stated in substitution for the fact as found. As to the first issue, it is clear that the court has jurisdiction to correct an error of material fact before the order is drawn (see for example Stewart v Engel [2000] 3 All ER 518, The Times 26 May 2000; Pittalis and others v Sherefettin [1986] 1 QB 868; [1986] 2 All ER 227; Charlesworth v Relay Roads Ltd [2000] 1 WLR 230). It inevitably happens with complex cases that from time to time a fact which is material is overlooked. But the jurisdiction to correct an error is to be exercised cautiously and sparingly, and the question of review should be raised as promptly as possible. An application to the court to vary a finding of fact is not to be encouraged as it may lead to groundless applications. In this instance, as I have said, Mr Mill's approach was not to apply to the court to review its finding of fact but rather to use it as a basis for seeking permission to appeal. In my judgment, an appeal is not the appropriate course where there are errors in judgments which can be corrected by the court which conducted the trial. To leave such matters to an appeal means further delay, uncertainty and costs, which is not in the interests of the litigants. The trial judge is in a strong position to consider the effect of the error in the context of the entire case. Moreover, since there is no doubt now that AWS intended to make the concession, in my judgment it would not be just (see Civil Procedure Rules 1998 r 1.1(1)) for me not to review the finding of fact and accordingly I propose so to do by substituting, for my finding that AWS did not sell Sonic scooters, a finding that AWS distributed and/or sold such scooters outside Italy pursuant to its standing arrangements with Aprilia. There is no evidence as to whether or not AWS made any profits from these activities.”

“I do not wish to say anything against the usefulness of the reconsideration jurisdiction, within its proper limits. I have made use of it myself. However, it is in the nature of the legal process that, once judgment has been rendered, analysis thereafter becomes clarified and refined, and citation of authority is applied to the findings made at first instance so as to illuminate that clarification and refinement of analysis of which I speak. But that is the function of the appeal process. In my judgment, to grant this application that I reconsider my judgment would subvert the appeal process itself. In doing so, it would not answer the interests of justice, but would be the antithesis of justice according to law. There are of course cases where an error of fact or law may be too clear for argument. The best test of that is perhaps – but not necessarily – where the judge himself identifies the error which concerns him. In such a case, it is better that the error is corrected without imposing on the parties the need for an appeal. But no parallel to Noga’s application has been cited to me. It is in my judgment wrong for a judge to be treated to an exposition such as would be presented to a court of appeal. If in such circumstances a judge should be tempted to open up reconsideration of his judgment, an appeal would not be avoided, it would be made inevitable. Every case would become subject to an unending process of reconsideration, followed by appeal, both on the issue of reconsideration and on the merits.”

‘Few judgments are reserved, and it would be unfortunate if once the words of a judgment were pronounced there were no locus poenitentiae.’

“My Lords, in my opinion, this question can be solved by applying the normal principles, which govern the assessment of damages in cases of tort (I shall deal with contract cases in the second appeal). These are the principles of restitutio in integrum and that of the reasonable foreseeability of the damage sustained. It appears to me that a plaintiff, who normally conducts his business through a particular currency, and who, when other currencies are immediately involved, uses his own currency to obtain those currencies, can reasonably say that the loss he sustains is to be measured not by the immediate currencies in which the loss first emerges but by the amount of his own currency, which in the normal course of operation, he uses to obtain those currencies. This is the currency in which his loss is felt, and is the currency which it is reasonably foreseeable he will have to spend.”

“I am not convinced of this. The plaintiff has to prove his loss: if he wishes to present his claim in his own currency, the burden is on him to show to the satisfaction of the tribunal that his operations are conducted in that currency and that in fact it was his currency that was used, in a normal manner, to meet the expenditure for which he claims or that his loss can only be appropriately measured in that currency (this would apply in the case of a total loss of a vessel which cannot be dealt with by the ‘expenditure’ method). The same answer can be given to the objection that some companies, particularly large multi-national companies, maintain accounts and operate in several currencies. Here again it is for the plaintiff to satisfy the court or arbitrators that the use of the particular currency was in the course of normal operations of that company and was reasonably foreseeable.”

“But if the losses of both plaintiffs are suffered at the same time, the amounts awarded to each of them should be equivalent even if awarded in different currencies: if at different times, this might justify difference in treatment. If it happened that the currencies of the two plaintiffs relatively changed in value before the date of judgment, that would be a risk which each plaintiff would have to accept. Each would still receive, for himself, compensation for his loss.”

“I wish to make it clear that I would not approve of a hard and fast rule that in all cases where a plaintiff suffers a loss or damage in a foreign currency the right currency to take for the purpose of his claim is ‘the plaintiff’s currency.’ I should refer to the definition I have used of this expression and emphasise that it does not suggest the use of a personal currency attached, like nationality, to a plaintiff, but a currency which he is able to show is that in which he normally conducts trading operations. Use of this currency for assessment of damage may and probably will be appropriate in cases of international commerce. But even in that field, and still more outside it, cases may arise in which a plaintiff will not be able to show that in the normal course of events he would use, and be expected to use, the currency, or one of several currencies, in which he normally conducts his operations (the burden being on him to show this) and consequently the conclusion will be that the loss is felt in the currency in which it immediately arose. To say that this produces a measure of uncertainty may be true, but this is an uncertainty which arises in the nature of things from the variety of human experience. To resolve it is part of the normal process of adjudication. … .”

“Mr Boswood QC, for the department, recognised that, in cases of non-delivery of goods under a contract of carriage, the plaintiffs damages are assessed by reference to the market value of the goods at the time and place at which they ought to have been delivered. Even so, he submitted, the ‘principle of mitigation’ requires that the plaintiff will be deemed to be obliged to go out into the nearest available market and purchase replacement goods at the earliest available opportunity, and will not be able to recover by way of damages more than the price he would have to pay for those replacement goods. Here the nearest available market for replacement goods was Italy, where replacement oil would have had to be paid for in US Dollars. Accordingly, to make restitutio in integrum to the department in respect of the damages it had suffered by reason of non-delivery of its cargo, those damages should be assessed in US Dollars. I feel bound to say at once that, assuming that this argument is prima facie well-founded, nevertheless there is a short answer to it on the facts of the present case. Here it is plain on the findings of fact that, if the department had indeed bought such a replacement cargo in Italy under a contract under which the price was payable in US Dollars, nevertheless in order to obtain those dollars the department, which carried on its business in Ghanaian cedis, would have had to expend cedis in order to acquire the US Dollars from the bank of Ghana. This being so, I find it impossible to distinguish this situation from that in The Folios [1979] AC 685 , in which your Lordships' House held that the currency in which the French charterers felt their loss was not Brazilian cruzeiros, the currency in which they discharged their liability to the receivers, but French francs, the currency in which they carried on their business, and with which they purchased the necessary cruzeiros. Let it be assumed that, in the present case, the Ghanaian cedi had over the relevant period appreciated in value as against the US Dollar, I feel confident that any argument by the shipowners that the damages payable by them to the department should be assessed in US Dollars rather than in Ghanaian cedis would have been rejected on this ground.”

“I turn to the facts of the present case. There are a number of facts which point to the Ghanaian cedi as the currency in which the department felt its loss. First of all, the currency in which the department carried on business within Ghana was at the material time the cedi. Consistently with this, the department’s bank accounts were maintained in cedis, as were its books and accounts. In particular, had the cargo been delivered by the shipowners at Takoradi, the department could and would have sold it on the market there to Ghanaian companies, and would have recovered payment in cedis. Second, by virtue of Ghana's stringent exchange control legislation, no person other than the bank of Ghana (a separate entity with its own legal personality, distinct from the state of Ghana and its government departments, including the department) was or is permitted to receive or own foreign currency. Accordingly, when the department wanted to purchase crude oil from overseas for use in the refining process at its refinery, the bank would provide the necessary foreign currency for this purpose, debiting the department's account (or the account of its buying agents) with the amount in cedis equivalent to the sum in foreign currency required, and itself paying the foreign currency to the seller out of its own foreign currency holdings. Likewise, in the absence of a right of set off, the bank would provide the foreign exchange for the payment of freight in foreign currency. This procedure did not, however, apply to the fuel oil in the present case, which was the product of the department's own refinery, and was being supplied to Ghanaian companies. This sale was, as is usually the case in such circumstances, being carried out in the domestic currency in question, here the cedi.”

“Materially all of the Group’s assets, liabilities, sales and other transactions, other than those attributed to the corporate centre, arose in the Republic of Kazakhstan.”

“The Group’s principal business operations are based in the Republic of Kazakhstan. The Group’s export sales comprise less than 5% of total sales. The Group’s manufacturing facilities are based in Kazakhstan.”

“Our functional currency is the Tenge, as the majority of our operating activities are conducted in Tenge.”

“Against all that, however, Mr. Eder submits, and the Judge accepted, that due to the production of these two sets of accounts in drachmas, the plaintiff company, the shipowners, only ‘felt’ their loss in drachma. He said that it was only as and when their managing agents presented them with these accounts that the plaintiffs incurred any personal loss or liability and therefore ‘felt’ any loss. On this basis, the plaintiffs were in effect wholly indifferent to the fortunes or misfortunes of the ship, admittedly to be measured in dollars, at every single point in her history until these documents were produced by their managing agents. While I agree with Mr. Eder that the currency used by an agent, even a managing agent, is obviously not determinative of the appropriate currency in which the principal’s damages in tort are to be measured within the principals of The Despina R, I cannot accept his submissions. As pointed out by Miss Bucknall, commercially and within the principles laid down in The Despina R it is impossible and would be quite unrealistic to conclude that the plaintiffs did not ‘feel’ this loss in dollars simply because they did not manage the ship themselves, but had it managed through Grecomar. The reality is that the plaintiffs’ trading venture in the form of this ship was conducted exclusively in U.S. dollars. That is the point. It is irrelevant in what currency the resulting accounts were finally drawn up, in order to give trading picture of the vessel during a particular year, when that currency had no visible commercial significance whatever. For all we know these accounts may have been drawn up for fiscal or other purposes for authorities in Greece. As I read The Despina R, everything there said points to U.S. dollars as the appropriate currency in this case.”

“Secondly, the defendants’ contention that the loss was felt in drachmas is based exclusively on documents delivered at the end of the company’s financial year. I am not able to accept that the delivery of these documents involved the ‘feeling’ of any loss by the plaintiffs, the more so since there is no reason to suppose that the delivery was followed, either immediately or at some time during the next financial year, by settlement in on direction or another as between the plaintiffs and their agents; and still less to suppose that this settlement was made, or would, but for the casualty, have been made in the currency in which the accounts happened to be prepared.”

“(i) Kazakhstan Kagazy JCS transferred to Arka-stroi LLP according to the contract dated 15.08.2005: Period of transactions: 2006 – 2007 Accounts in banks: Alliance Bank, Kazkommertsbank Transferred amount: KZT 4 165 876 391.14 Detailed transactions list: Appendix 1 (ii) Prime Estate Activities Kazakhstan LLP transferred to Arka-stroi LLP according to the Contract #001-CII dated 06.07.2006: Period of transactions: 2006 – 2007 Accounts in banks: Alliance Bank, Kazkommertsbank Transferred amount: KZT 11,592,781,240.03 Detailed transactions list: Appendix 2 (iii) Kazakhstan Kagazy JCS transferred to Arka-stroi LLP according to the Contract dated 11.01.2018 CMP: Period of transactions: 2008 – 2009 Accounts in banks: Alliance Bank, Eurasian Bank Transferred amount: KZT 2,229,648,589.00

“• KZT 4,000 million discounted floating rate bonds due 18 February 2010 bearing interest at 2.5 per cent plus inflation per annum; • KZT 3,500 million discounted floating rate bonds due 7 April 2011 bearing interest at 1.5 per cent plus inflation per annum; • KZT 3,400 million discounted floating rate bonds due 22 August 2013 bearing interest at 1.5 per cent plus inflation per annum; • US$10 million subordinated loan facility from EBRD and approximately US$42 million in loans and leases provided under a Kazkommertsbank JSC facility; the subordinated loan has equal bullet repayments in 2014 and 2015. The interest rate for the subordinated loan is calculated by reference to the EBITDA of Kagazy Recycling LLP for the previous financial year end and is up to four per cent. of EBITDA, depending on amounts outstanding under the subordinated loan; and • total financial leasing liabilities of KZT 805.2 million due August 2013, which incur interest at 11 per cent per annum. In addition, we have credit facilities with Kazkommertsbank JSC and Alliance Bank JSC as set out below: Kazakhstan Kagazy JSC has a number of loans from Kazkommertsbank JSC: • a US$8,099,997 credit line Agreement, due at 20 August 2013, which bears interest at 11 per cent. per annum. As at 28 June 2007, US$8,202,148 had been drawn down under this facility (including capitalised interest). • a US$222,611.94 loan facility, due at 20 August 2013, bearing interest at 11 per cent. per annum. As at 28 June 2007, US$239,899 had been drawn down under this facility (including capitalised interest). • a US$2,944,196 loan facility, due at 6 August 2013, bearing interest at 11 per cent. per annum. As at 28 June 2007, US$2,520,202 had been drawn down under this facility. • a US$204,600 loan facility, due at 20 August 2013, bearing interest at 11 per cent. per annum. As at 28 June 2007, US$220,012 had been drawn down under this facility (including capitalised interest). • a US$1,029,120 loan facility, due at 12 August 2013, bearing interest at 11 per cent. per annum. As at 28 June 2007, US$1,113,434 had been drawn down under this facility (including capitalised interest). •a US$1,136,363 loan facility, due at 20 August 2013, bearing interest at 11 per cent. per annum. As at 28 June 2007, US$1,222,402 had been drawn down under this facility (including capitalised interest). • a US$159,091 loan facility, due at 8 August 2013, bearing interest at 11 per cent. per annum. As at 28 June 2007, US$172,371 had been drawn down under this facility (including capitalised interest). • a US$2,068,185 loan facility, due at 20 August 2013, bearing interest at 11 per cent. per annum. As at 28 June 2007, US$2,228,790 had been drawn down under this facility (including capitalised interest). In addition, PEAK Akzhal LLP has obtained three loans from Kazkommertsbank JSC in the amounts of US$6 million, US$12,173,000 and US$1,827,000 respectively. The loans mature on 2, 3 and 2 March 2009, respectively, and bear interest at 13 per cent. per annum. As at 28 June 2007, US$6 million, US$12,173,000, and US$1,827,000 had been drawn down under these facilities, respectively. Kagazy Recycling LLP has two leasing agreements with Kazkommertsbank JSC for KZT 649,522,221 and KZT 230,794,375, respectively. The settlement date of the facilities is 20 August 2013 and they bear interest at 11 per cent. per annum. As at 28 June 2007, KZT 593,709,276 and KZT 211,472,651 had been drawn down under these facilities, respectively. Kazakhstan Kagazy JSC has a number of loans from Alliance Bank JSC: • a KZT 1,054,081,000 loan facility, due at 1 April 2013, bearing interest at 10.8 per cent. per annum. As at 28 June 2007, KZT 913,082,494 had been drawn down under this facility. • a €220,000 letter of credit, due at 20 August 2007, bearing interest at 8.608 per cent. per annum. As at 28 June 2007, €220,000 had been drawn down under this facility. • a RUR 3,620,278 letter of credit, due at 10 March 2008, bearing interest at 10.6 per cent. per annum. As at 28 June 2007, RUR 3,620,278 had been drawn down under this facility. • a RUR 1,243,931 letter of credit, due at 20 March 2008, bearing interest at 10.6 per cent. per annum. As at 28 June 2007, RUR 1,243,931 had been drawn down under this facility. • a RUR 1,238,484 letter of credit, due at 28 April 2008, bearing interest at 10.6 per cent. per annum. As at 28 June 2007, RUR 1,238,484 had been drawn down under this facility. Kagazy Trading LLP has a US$10,592,776 loan facility with Alliance Bank JSC, due at 1 April 2013, bearing interest at 10.8 per cent. per annum. As at 28 June 2007, US$10,319,978 had been drawn down under this facility. PEAK LLP has a €29,968,323 loan facility with Alliance Bank JSC, due at 1 November 2013, bearing interest at 14 per cent. per annum. As at 28 June 2007, €29,968,323 had been drawn down under this facility.”

“a. The Second Claimant has paid Arka-Stroy a total of KZT 7.9057 billion. The Second Claimant will give credit in the total sum of KZT 1.8587 billion, returned by Arka-Stroy to the Second Claimant. The net sum of which the Second Claimant believes it has been defrauded is KZT 6.0470 billion (approximately US $46.8 million). b. The Third Claimant has paid Arka-Stroy a total of KZT 12.3479 billion. The Third Claimant will give credit in the total sum of KZT 5.9953 billion, returned by Arka-Stroy to the Third Claimant. The net sum of which the Third Claimant believes it has been defrauded is KZT 6.3526 billion (approximately US $49.2 million). c. The Fourth Claimant has paid Arka-Stroy a total of KZT 1.6866 billion. The net sum of which the Fourth Claimant believes it has been defrauded is KZT 1.6866 billion (approximately US $13.1 million).”

“… Mr Howe drew attention to the fact that the investigation into the Land Plots Claim arose out of a Grant Thornton report dated 11 November 2014 which had been commissioned in order to investigate the movement and destination of funds raised in KK Plc’s IPO, including funds which were distributed to KK JSC which received, in all, some US$ 154.6 million in various tranches distributed between 28 July 2007 and 27 June 2008. Accordingly, part of Grant Thornton’s work was to look into what happened to those monies, in particular to identify so-called “Secondary Recipients”

“The guidance to be derived from these cases includes the following: (1) Interest is awarded to compensate claimants for being kept out of money which ought to have been paid to them rather than as compensation for damage done or to deprive defendants of profit they may have made from the use of the money. (2) This is a question to be approached broadly. The court will consider the position of persons with the claimants’ general attributes, but will not have regard to claimants’ particular attributes or any special position in which they may have been. (3) In relation to commercial claimants the general presumption will be that they would have borrowed less and so the court will have regard to the rate at which persons with the general attributes of the claimant could have borrowed. This is likely to be a percentage over base rate and may be higher for small businesses than for first class borrowers. (4) In relation to personal injury claimants the general presumption will be that the appropriate rate of interest is the investment rate. (5) Many claimants will not fall clearly into a category of those who would have borrowed or those who would have put money on deposit and a fair rate for them may often fall somewhere between those two rates.”

“A ‘broad brush’ is taken to determine what rate of interest is just and appropriate: it would be neither practical nor proportionate (even in a case involving as large sums as these) to attempt a minute assessment of what will precisely compensate the recipient. In particular, the courts do not have regard to the rate at which a particular recipient of compensation might have borrowed funds. This policy is adopted in order to control the extent of the inquiry to ascertain an appropriate rate: see the Banque Keyser Ullman case (cit sup). The court will, however, consider the general characteristics of the recipient in order to decide whether to assess interest at a rate that is higher or lower than is conventional. So, for example, in Jaura v Ahmed, [2002] EWCA Civ 210 , Rix LJ awarded interest at base rate plus 3% to reflect that ‘small businessmen’ had been kept out of their money and in recognition of the ‘real cost of borrowing incurred by such a class of businessman’. Thus, the court will examine what has been called ‘a question of categorisation of the plaintiff in an objective sense’ (see the Banque Keyser Ullman case, cit sup), recognise relevant characteristics of the party who is awarded interest and reflect them when determining the fair and appropriate rate.”

“The proper approach is to identify, in accordance with established principle, the appropriate currency in which the award of damages is to be made, and to award an appropriate sum by way of damages in that currency, and also of interest in that currency to compensate for the delay between the date of breach and the date of judgment.”

“The source for the historical corporate lending rates in Kazakhstan is the monthly loan data published by the National Bank of the Republic of Kazakhstan (‘NBRK’) for corporate borrowing. NBRK regulates the financial markets in Kazakhstan and therefore has complete information regarding all lending activities. Pages 3 to 4 of HM27 are extracted from NBRK’s website and show the monthly interest rates on loans to corporate borrowers from 1 January 2007 to31 December 2017 (as SVG’s letter states, this is the most recent data available, because of the time lag in the publication of data). As SVG also point out in their letter, NBRK calculates borrowing historical rates for foreign convertible currencies using a blended rate interest rate based on records of loans denominated in fully convertible foreign currencies including but not limited to US dollars, Sterling, euro and Japanese Yen. In other words, there is no NBRK data for US dollar loans alone. However, as SVG say in their letter at page 2 of HM27: ‘In our view, based on our experience as a financial advisory firm in Kazakhstan, we consider that USD is by far the most commonly-used currency in Kazakhstan, we use the average rate of the fully convertible currency (FCC)-denominated long-term (+5y) borrowings to the non-banking legal entities in Kazakhstan as historical market interest rates on USD-denominated long-term borrowings.’”

“On the basis of what SVG say, I therefore believe the rates SVG have used are appropriate for US dollar borrowing; furthermore, I am able to say from my own knowledge that the interest rates the KK Group has paid on its US dollar and hard currency loans are of a similar order – for example, the KK Group has borrowed US dollars at 10% from DBK and Euros at 14% from Alliance Bank, both compounded monthly.”

“As at December 31, 2007, the Group’s borrowings amounted to US$ 156.7 million. In May 2007, the European Bank for Reconstruction and Development (EBRD) approved provision of the equivalent of Euro 33 million in long-term financing to our paper production business, Kagazy Recycling LLP. In March 2007, the Group’s main paper and corrugated products manufacturer, Kagazy Recycling LLP assumed from a related company, Kagazy Gofrotara LLP, its capital leasing financing liabilities for the total of US$ 7.9 million denominated in KZT. These leasing facilities were obtained by Kagazy Gofrotara LLP from Kazkommertsbank JSC in 2005 for the purchase of corrugated packaging equipment. Current interest rate of this leasing financing is 14% per annum. In March-June 2007, Kazakhstan Kagazy obtained short-term financing in the form of letters of credit totalling to RUR 21 million at 10.6% per annum. In addition to its total debt of Euro 7.4 million, our real estate business, PEAK LLP, obtained from Alliance Bank JSC in 2007 several new loan facilities for the total amount of Euro 32.6 million, which in total thereby reached Euro 40.1 million as of December 31, 2007. These loan facilities carry annual interest rates in the range from 8.4 to 14% per annum. The total of Euro 3.3 million out [sic] these loans fall due on March 25, 2010, with the balance falling due for settlement on November 1, 2013. Funds availability totaled US$ 115.3 million at the end of 2007.”

“In my judgment the well-established practice of this court to award interest at base rate plus 1% save at least in exceptional circumstances, is in accordance both with principle and authority. It is not, I think, necessary to comment on the difference of view reflected in Nourse LJ’s judgment in Re Duckwari as to the relevance or otherwise of the general attributes of the successful party and so hypothetical borrower. The award is not and should not be a precise exercise. The losing party is unlikely to be penalised by a rate which itself assumes a reputable borrower. On the other hand I can see no justification for awarding rates which apply only to term or secured borrowing. That, I think, is to extend any examination of the financial affairs of the successful party beyond legitimate boundaries as well as to apply hindsight in the knowledge of how long it may take for the losing party to pay and what free assets may be available for security. As the period for which interest is to be awarded cannot start before the date the cause of action arose the successful party is in a real sense entitled to have the sum awarded from that date without reference to repayment or security obligations. It is also entitled to do what it wishes with the monies it recovers from insurance. As Mr Gaisman submitted, KAC was not obliged to seek replacement of any let alone all the spares which were looted. It was entitled to be paid their value up to the limit of $150m as ‘cash in the hand’. The nearest equivalent of base rate plus 1% is US Prime rate. In normal circumstances that in my judgment would be the appropriate rate and, if it be material, a rate at which KAC could have borrowed. Nor do I think the fact that for two or three years KAC might not have been able to borrow at that rate without some small percentage increase should affect that approach anymore than the possibility that sympathetic lenders might have lent at a lower rate. That again would be to look too closely into the actual status of the successful party. I see no injustice to KAC in applying the same rate over the whole period now known to be involved, nor do I think in the overall context the facts of this case are sufficiently exceptional to justify a departure from the norm. In my judgment therefore the appropriate rate of interest is US Prime without any addition.”

“When damages are assessed in pounds sterling the conventional rate of interest that is awarded in commercial cases is ‘base rate plus 1 per cent’. That is the rate that a commercial borrower of good credit will have to pay to borrow sterling in London. But when the currency of the loss and the currency of damages is U.S. dollars, then the Commercial Court will consider the cost of borrowing U.S. dollars. That is the position in this case. The cost of borrowing U.S. dollars is usually expressed by reference to the U.S. Prime Rate. That is the rate that commercial banks charge their most creditworthy customers if they are borrowing U.S. dollars. It is a short-term borrowing rate. Prime Rate includes an element of profit for a bank, so that the most creditworthy borrows can obtain loans at Prime Rate itself. Less creditworthy borrowers will have to pay Prime Rate plus one or more percentage points.”

“I have had no evidence concerning the creditworthiness of Jetoil or Moil-Coal. I think I must therefore assume that those companies would be regarded by a bank lending U.S. dollars as most creditworthy. Accordingly I must find that the likely cost to the claimants of borrowing U.S. dollars would be U.S. Prime Rate. Thus it seems to me that the proper rate of interest to award in this case must be the appropriate U.S. Prime Rate. As I have already stated, that will be fixed at monthly rests.”

“It would have been open to Cs to plead and prove claims relating to interest liabilities to other banks just as they did with Alliance. Had this been done, the issue would have been the subject of evidence, submissions and judicial findings as the pleaded interest claims were. However this was not done. In these circumstances, Cs cannot now embark on a fact-heavy exercise to achieve an equivalent outcome.”

“There is no doubt that the starting point is that generally interest is to run from the date when the loss was incurred, albeit that even this is subject to an overall discretion (see for instance Aerospace Publishing Ltd v Thames Water Utilities Ltd [2007] EWCA Civ 3).”

“I turn first to consider the period for discretionary interest against Optima. Essentially, the major part of the damages awarded relates to remedial works not yet done, such remedial works falling into two categories, the first relating to remedial works for defects which should have been put right by Optima pursuant to the ‘repairing’ covenant under the respective leases in respect of which damages in place of specific performance has been awarded. None of this cost has yet been incurred and damages awarded reflect the remedial work costs assessed as at the first quarter of 2013. The sum of £225,142.51 (representing the reasonable and currently assessed costs of this remedial work) will be paid into a trust account and will be adjusted in terms of being topped up or paid back as the case may be when the remedial works have been carried out. This loss therefore has not yet been incurred but will be in the future. I decline therefore to allow any interest on this sum for any period.”

“A similar thought process applies in relation to the future remedial works necessary to put right defects within each of the flats in relation to those Claimants who also succeeded against Optima for breach of Clause 3.1 of the various agreements between such Claimants and Optima. There is a (frankly) convoluted and illogical argument put forward by Counsel for the Claimants that interest should run from the date on which they purchased their flats because they had a cause of action then against Optima and because in some way some at least of the Claimants should benefit from interest in the money which was rightfully theirs; an argument is floated that because there has been an increase in the remedial work cost for the First, Second, Fifth and Sixth Claimants as from 2003 or 2004 this somehow justifies an award of interest. What this argument wholly fails to take on board is the fact that the Claimants should be compensated by the cost of remedial works assessed as at the first quarter of 2013, that the award of interest from 2003 or 2004 would grossly over-compensate the Claimants and that it would effectively punish Optima. There should be no interest.”

“All that said, the judge did not make his award of interest as a matter of, or in connection with, a claim for debt, breach of contract or damages for tort. He made it as part of a restitutionary award of compensation for breach of fiduciary duty. Such a claim made on the basis of trusteeship and available to the claimants in the circumstances of the case, is by its origin and nature an equitable proprietary claim moulded and used for the purpose of achieving restitution by a person called to account by equity on the basis of a defaulting trustee. Since there is no jurisdiction in the court to award compound interest at common law or by statute, it was indeed the only basis on which the judge could make an award of compound interest. The jurisdiction which he exercised is that which Lord Brandon stated in the La Pintada case at p.116 is confined to situations ‘where money had been obtained and retained by fraud, or where it had been withheld or misapplied by a trustee or anyone else in a fiduciary position’ and which the majority of the House of Lords declined to expand further in the Westdeutsche Bank case (see per Lord Browne-Wilkinson at 717F, Lord Slynn of Hadleigh at 718f-719b and Lord Lloyd of Berwick at 739b-741a).”

“In such a case, the award of compound interest is made on the basis that a trustee misapplying monies for his own benefit, and a person obtaining or retaining money by fraud who is to be similarly treated, should be obliged either to account in full for the benefit he has unjustly derived or, in lieu of such account, to pay compound interest when the circumstances justify an award on that basis. The rationale is historically and essentially that of restitution i.e. that a fiduciary should not be permitted to make a profit from his trust. As explained by Lord Denning MR in Wallersteiner v Moir (No.2) at page 388, it is also a means of ensuring full compensation where the wrongdoer deprives a person or company of monies employed in trading operations. It is noteworthy that the judgments of Buckley LJ and Scarman LJ did not refer to that aspect as constituting the basis for a compound award. It is nonetheless an element which usually plays a part in the reasoning of the court when considering whether or not to make such an award in modern conditions.”

“Further the First, Second and Third Defendants are liable to pay interest on all sums found due and owing in equity or pursuant to section 35A of the Senior Courts Act 1981 at such rate and for such period as the court sees fit, including as appropriate the interest rates applicable in Kazakhstan at the material times to the extent that the use of such rates is necessary adequately to compensate the Claimants; and including compound interest as damages.”

“It is denied that any sums are due to the Claimants as alleged and the claims to interest made in paragraphs 53 and 54 is accordingly denied.”

“It seems to us that the court’s power in such circumstances to award compound interest (although discretionary in the sense that it will be exercised in accordance with established equitable principles) is not only distinct, but different in character, from its broad powers under s.35A, being a necessary adjunct of the claimant’s substantive right to restitution. An award of compound interest upon that basis is thus itself substantive rather than merely procedural in nature. Accordingly, whilst we would differ from the reasoning of the judge in that last respect, that difference is not one which leads to any different result so far as the award of interest in this case is concerned, in the light of the provisions of Article 267 of the Kuwait Civil Code.”

“In these circumstances, the judge’s finding that interest was recoverable by way of compensation under the restitutionary provisions of Article 267 represented a finding that there was under Kuwaiti law a provision of substantive law which closely corresponded to the award in England of compound interest against a person whom English law would regard as a trustee or constructive trustee in respect of monies stolen or appropriated by fraud. Accordingly, if the judge was wrong to regard his award of compound interest as a matter of procedural law for the lex fori, he was nonetheless justified in making the award he did, given that it ‘harmonise[d] with the right according to its nature and extent as fixed by the foreign law’ (see Phrantzes –v- Argenti [1960] 2 QB 19 at 35 and Dicey & Morris (13th ed.) at page 171) and was thus the remedy appropriate in English law to give effect to the substantive right contained in Article 267. That being so, it is strictly unnecessary to decide the question, hitherto devoid of authority, as to whether an award of interest against a person in the position of a trustee or constructive trustee is better regarded as substantive or procedural in character so far as English law is concerned. What does seem clear to us, however, is that (although the judge held it to be so) the answer is not necessarily the same as that in respect of an award under s.35A of the Supreme Court Act 1981 (which prohibits awards of compound interest).”

“Does the Kazakh law provide for interest to be payable on the amounts claimed by a claimant and found by the court to be due to a claimant? What is the likely rate of interest and the period over which such interest would be payable?”

“In the absence of satisfactory evidence of foreign law, the court will apply English law to such a case.”

“The principle that, in an English court, foreign law is a matter of fact has long been well established: it must be pleaded, and it must be proved: these requirements are examined in detail below. It follows that a representation of foreign law is a representation of fact for the purposes of the law of misrepresentation, and a finding upon foreign law made by arbitrators is a finding of fact which may not form the basis of an appeal on a point of law under s.69 of the Arbitration Act 1996. It is also said to follow that it the parties elect not to prove the content of foreign law, a case will be decided by the application of English domestic law as though the case were a wholly domestic one, and this is generally true. But in recent years there have been increasing signs that this cannot invariably follow, and in cases where it would be wholly artificial to apply rules of English law to an issue governed by foreign law, a court may simply regard a party who has pleaded but who has failed to prove foreign law with sufficient specificity as will allow an English court simply to apply it, as having failed to establish his case without regard to the corresponding principle of English domestic law.”

“The burden of proving foreign law lies on the party who bases his claim or defence on it. If that party adduces no evidence, or insufficient evidence, of the foreign law, the court applies English law. This principle is sometimes expressed in the form that foreign law is presumed to be the same as English law until the contrary is proved. But this mode of expression has given rise to uneasiness in certain cases. Thus in one case the court refused to apply the presumption of similarity where the foreign law was not based on the common law, and in others it has been doubted whether the court was entitled to presume that the foreign law was the same as the statute law of the forum. In view of these difficulties it is better to abandon the terminology of presumption, and simply to say that where foreign law is not proved, the court applies English law.”

“Even so, there will still be cases in which the application of English law, whether because the party seeking to have foreign law applied has pleaded foreign law but has failed to prove its content to the satisfaction of the court, or because the parties have tacitly agreed not to seek to prove the content of foreign law and have the lex fori applied by default, will be just too strained or artificial to be appropriate. … .”

“in a case in which foreign law was pleaded and proved, but one point overlooked and not proved, the court refused to allow the gap in the case to be filled by applying English law.”

“(1) Where a judgment is given for a sum expressed in a currency other than sterling and the judgment debt is one to which section 17 of the Judgments Act 1838 applies, the court may order that the interest rate applicable to the debt shall be such rate as the court thinks fit. (2) Where the court makes such an order, section 17 of the Judgments Act 1838 shall have effect in relation to the judgment debt as if the rate specified in the order were substituted for the rate specified in that section.”

“The Claimants hereby irrevocably direct that all Proceeds received pursuant to the Proceedings should be paid to the client account of Allen & Overy LLP and disbursed pursuant to the terms of the Investment Agreement.”

“A successful party to an action who seeks a freezing order may be required to give a cross-undertaking in damages where the trial judge gives the unsuccessful party permission to appeal. In Gwembe Valley Development Co Ltd v Koshy, The Times, February 28, 2002 (Rimer J.) an undertaking was required in circumstances where the substantive issue on which the injunction had been granted, and upon which permission to appeal was given, was a point of some difficulty upon which the Court of Appeal might take a different view. In that case the judge, though requiring an undertaking, expressed the opinion that it was not ‘the usual practice’ to do so for freezing orders given after judgment. This opinion was doubted in Nomihold Securities Inc v Mobile Telesystems Finance SA [2011] EWHC 337 (Comm), February 18, 2011, unrep. (Burton J.) where, in continuing a freezing order granted ex parte to an applicant given leave under the Arbitration Act 1996 s.66 to enforce an arbitral award, the judge ruled that, in the circumstances, the applicant should be required to give an undertaking (albeit unfortified). It is important that undertakings given are complied with and, if they are not, that there is a good explanation as to why. The fact that there was a failure is a potentially serious matter that might justify the injunction being discharged (Flightwise Travel Service Ltd v Gill ; [2003] EWHC 3082 (Ch) The Times, December 5, 2003 (Neuberger J.)).”

“I happen to believe that it is always appropriate to give a cross-undertaking in damages but that it would be most unusual to have to fortify such cross-undertaking, however poor or unwell-heeled the Claimant is, where it is owed a substantial sum of money under the judgment. … .”

“The ‘ordinary course of business’ proviso as directed at the hearing on 18 July 2008 will continue in the receivables freezing order. It is obviously necessary in order to allow the contracts to continue to be performed in the usual manner. The freezing order in respect of the bank accounts have contained no such proviso since it was granted on 19 May 2008 and there is no evidence that that absence has caused any actual disruption to the Defendants' business. For the avoidance of doubt I do not read paragraph 27 of Mr Marina’s sixth witness statement as providing such evidence and I read paragraph 11 of Mr Nasser’s eighth affidavit as positively indicating that there has been no such disruption. In any event I am satisfied that in relation to assets such as balances in bank accounts an ‘ordinary course of business’ exception is inappropriate in the post-judgment environment. I respectfully adopt the reasoning of Colman J at page 412 of the Soinco case which I have set out above. That was of course a case concerned with a receivership order rather than a freezing order, but it seems to me that those considerations apply a fortiori to a post-judgment freezing injunction.”

“In the present case, I have had to consider the position where the defendant has, or may have, other assets from which the relevant payment may be made. I have still to apply the basic principle, i.e., that I can only permit a qualification to the injunction if the defendant satisfies the court that the money is required for a purpose which does not conflict with the policy underlying the Mareva jurisdiction. I do not consider that in normal circumstances a defendant can discharge that burden of proof simply by saying, ‘I owe somebody some money.’ I put to the defendants’ counsel, in the course of argument, the example of an English-based defendant with two bank accounts, one containing a very substantial sum which was not subject to the Mareva injunction, and the other containing a smaller sum which was. I asked counsel whether it would be sufficient for the defendant simply to say, ‘I owe somebody some money, please qualify the injunction to permit payment from the smaller account, without giving any consideration to the possibility of payment from the larger account.’ Counsel was constrained to accept that that would not be sufficient, because it would not satisfy the court that the payment out of the smaller account would not conflict with the principle underlying the Mareva jurisdiction. The whole purpose of selecting the smaller account might be to prevent the money in that account from being available to satisfy a judgment in the pending proceedings. In my judgment, a defendant has to go further than that; precisely what he has to prove will depend, no doubt, upon the circumstances of the particular case. At all events, in the present case, if the defendants making the application have other assets, freely available - and I do not know, on the evidence, whether they have or not - it would be open to counsel for the plaintiffs to submit, on the evidence, that it would be wrong for the court to vary the Mareva injunction. All I can say at present is that, on the evidence before the court the defendants have not discharged the burden of proof which rests upon them.”

“The starting point is that a freezing order has been made against the defendant. Otherwise the question of use of frozen funds to pay legal expenses could not arise. This means that the court has already concluded that, even before the claimant's claim has been established, justice requires that the defendant's freedom to dispose of its own assets as it sees fit should be restrained. However, a freezing order is not intended to provide a claimant with security for its claim but only to prevent the dissipation of assets outside of the ordinary course of business in a way which would render any future judgment unenforceable. While the disposal of assets outside of the ordinary course of business is prohibited as being contrary to the interests of justice, payments in the ordinary course of business are permitted even if the consequence will be that the defendant's assets are completely depleted before the claimant is able to obtain its judgment. This has been clear since the decision of Robert Goff J in The Angel Bell [1981] 1 QB 65 in the early days of what were then called Mareva injunctions. Moreover, so long as the payment is made in good faith, the court does not enquire as to whether it is made in order to discharge a legal obligation or whether it represents good or bad business on the defendant’s part.”

“A further principle is that a defendant is entitled to defend itself and, if necessary, to spend the frozen funds, which are after all its own money, on legal advice and representation in order to do so. This is recognised by the standard wording of the usual freezing order, although the defendant's right to spend its own money on legal advice and representation is limited to expenditure of 'a reasonable sum'.”

“Two points should be noticed here. The first is that even where the defendant has no other assets, its right to use the frozen funds is only ‘the ordinary rule’. It is therefore capable of being outweighed in an appropriate case by other considerations. Ultimately it is the interests of justice which must be decisive. The second point represents an important qualification on the defendant’s right to choose how it spends its own money. That qualification is necessary in order to strike a fair balance between the parties. It is that in order to be permitted to use the frozen funds, the defendant must demonstrate ‘that he has no other assets with which to fund the litigation’. This places an onus on the defendant to demonstrate that there are no other assets available, not frozen by the order, which he could use to pay for legal advice and representation in defence of the claim.”

“The burden on the defendant to put the facts before the court has been emphasised in further cases. It was described as ‘the burden of persuasion’ by Sir Anthony Clarke MR in Serious Fraud Office v X [2005] EWCA Civ 1564 at [35] and [43], a case concerned with a restraint order made under section 77(1) of the Criminal Justice Act 1988 to which the same principles were held to apply. It is necessary that the defendant should have this burden in part because it is the defendant, not the claimant (at any rate in the usual case), who knows the facts, but also because the court has already concluded that there is a risk of disposal of assets outside the ordinary course of business or it would not have granted the injunction in the first place. Judges are entitled in an appropriate case to have a ‘very healthy scepticism’ about unsupported assertions made by a defendant about the absence of assets, as Sir John Donaldson MR noted in Campbell Mussels v Thompson (1985) 135 NLJ 1012.”

“Thus it is relevant to consider not only the defendant’s own assets, but whether there are others who may be willing to assist the defendant to obtain legal advice and representation. In this respect the position is similar to that which obtains when the court is considering an argument that security for costs should not be ordered on the ground that it would stifle the claim (cf. Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534, where Peter Gibson LJ referred to consideration of whether a claimant ‘can raise the money needed from its directors, shareholders or other backers or interested investors’, pointing out that ‘as this is likely to be peculiarly within the knowledge of the plaintiff company, it is for the plaintiff to satisfy the court that it would be prevented by an order for security from continuing the litigation’).”

“Post-judgment, the claimant still has no legal interest in the assets of the defendant. However, unless the court grants a stay of execution pending appeal, he can take steps to enforce his judgment against those assets. The circumstances have changed and the court should consider as a matter of discretion whether or not to allow payments in the ordinary course of business in the context of the changed circumstances. Accordingly post-judgment, it is relevant to consider the position as to whether there is to be a stay of execution and whether, even if there were not a stay, enforcement of the judgment can be had against the assets in question. … Whether a stay will be granted pending appeal involves the exercise of a discretion which, on the one hand, recognises that the claimant has a judgment which prima facie he should be able to enforce and, on the other hand, seeks to avoid a position in which a defendant succeeds on appeal, but in the meantime has been irretrievably prejudiced, e.g. if he has been ruined by being made bankrupt. An appeal in itself does not operate as a stay on any order of the court of first instance and a stay must be sought either from that court or the appeal court. The general principle is that solid grounds must be shown if a stay is to be granted and the normal rule is that a stay is not granted. … In One Life Ltd v Roy, the judge at first instance (Carnworth J) gave judgment in favour of the plaintiff on tracing claims and declared that the assets belonged to the plaintiff. The judge deleted a provision from the injunction allowing for the defendant to be able to use the money for living expenses, and this was upheld by the Court of Appeal. This was because on the facts there was no good reason for the defendant to be allowed to go on using as living expenses what had been decided to be the plaintiff’s money. In Masri v Consolidated Contractors, a provision allowing payments in the ordinary course of business from a bank account was omitted after there had been judgment when the evidence showed positively that the absence of such an exception had caused no disruption to the judgment debtor’s business. It will sometimes and perhaps usually be inappropriate to include an ordinary course of business exception in a post-judgment asset freezing order when the judgment is enforceable, but its omission would not preclude an application to vary or discharge. If there was the real prospect of a judgment being satisfied, perhaps by a parent company, it may not be right to omit the exception and thus risk destruction of the defendant’s business.”

“In Masri v Consolidated Contractors [2008] EWHC 2492 (Comm) I was persuaded to omit an ordinary course of business exception in relation to a freezing order in respect of sums in various of the judgment debtor’s bank accounts. The evidence showed positively that the absence of such an exception had caused no disruption to the judgment debtor's business. I referred at paragraphs 24 and 35 of my judgment to a passage from the judgment of Colman J in Soinco v Novokuznetsk Aluminium Plant [1998] QB 406. That case was concerned with the appointment of a receiver by way of equitable execution. At page 421 (not 412 as recorded in paragraph 35 of my judgment) Colman J said this: ‘As to bringing the business of the judgment debtor to a standstill by cutting off payment otherwise available to it, I am not persuaded that this is a relevant consideration in the context of a remedy designed to effect execution and not designed merely to conserve assets pending determination of an unresolved claim. This is not the environment of a Mareva injunction prior to trial, but of execution of a pre-existing judgment. Whereas the effect of an injunction on the defendant's ability to conduct his business in the ordinary course may be relevant where his liability is yet to be determined, it cannot possibly be a relevant consideration where his liability has already been determined. Impact on the judgment debtor's business is not a consideration material to the availability of legal process of execution and there is no reason in principle why it should be introduced as material to the availability of equitable execution.’ On further reflection, I am not sure that those observations do apply a fortiori to a post-judgment freezing injunction, as I said in paragraph 35 of my judgment in Masri. As I have already noted, a post-judgment freezing order is granted in aid of execution but it is not part of the process of execution itself. In that same paragraph I said: ‘In any event I am satisfied that in relation to assets such as balances in bank accounts an "ordinary course of business" exception is inappropriate in the post-judgment environment.’ Again, on further reflection, it may be that that is too sweeping a statement, although I am sure that the ordinary course of business exception was inappropriate in relation to balances in bank accounts in the circumstances of that case. I am satisfied that it will sometimes and perhaps usually be inappropriate to include an ordinary course of business exception in a post-judgment asset freezing order. Of course, its omission would not preclude an application to vary or discharge.”

“The Grigorishin Respondents will almost certainly incur legal costs in complying with the disclosure obligations regarding their assets. I do not know what their resources are, though they are presumably able to pay Hogan Lovells and their counsel. I consider that the legal expenses exception should be included but the Claimants may have liberty to vary the order once some disclosure of assets has been given. The picture may be clearer at that stage. The exception applies only to the costs of complying with the disclosure obligation and the Grigorishin Respondents must, before spending any money in that regard, tell the Claimants where the money is to come from (in accordance with the standard form).”

“…the test is in effect whether the court is satisfied that further evidence is necessary in order to make the freezing order more effective.”

“… the court must be persuaded that there is practical utility in requiring such evidence and that it is necessary to enable the freezing order properly to be policed. It will be vigilant to prevent the abuse of seeking further evidence for some other purpose: such as to expose further inconsistencies, unduly pressurise a defendant who has already been cross-examined, yield ammunition for an application for contempt, or provide further material which might be of assistance, even if not actually deployed, in the main (foreign) proceedings.”

“an order directing a party to provide information about the location of relevant property or assets or to provide information about relevant property or assets which are or may be the subject of an application for a freezing injunction.”

“Mr Brodie’s submission is that this creates a free-standing right to order disclosure of documents irrespective of whether the applicant has sufficient material to seek a freezing injunction. He focuses in particular on the word ‘may’.”

“Looking first of all, as a matter of construction, at the language used, it seems to me that it is dealing with a situation where there is either an application for a freezing injunction on foot or one where it is at least likely that there will be such an application. In other words, the provision assumes that there is some credible material on which such an application might be based. In the present case, Mr Brodie candidly admits that he does not have the material with which to apply for a freezing injunction. He would like to have the information that he seeks and then consider the position. In my judgment, that is not the type of situation with which this provision is dealing. Otherwise anyone who is a claimant could come along and say they cannot be completely sure that they do not need a freezing injunction and would like to have every piece of information at the earliest possible stage which might be relevant to that question.”

“A beneficiary under a discretionary trust has a right to be considered as a potential recipient of benefit by the trustees. That is an interest which equity will protect. The trustees must apply some objective criterion in deciding whether or not to exercise their discretion in favour of a particular beneficiary; so that each beneficiary has more than a mere hope. But that right is not a proprietary interest in the assets held by the trustees, although it can be described as an interest of sorts: Gartside v IRC [1968] AC 553, 617-8. In some areas of the law, such as matrimonial finance, legislation is drawn widely enough to enable the court to take into account the likelihood that trustees will exercise their discretion in favour of a particular beneficiary in deciding what provision to make for a former spouse on divorce: Whaley v Whaley [2011] EWCA Civ 611. But even then the trust assets are not owned by the beneficiary spouse.”

“I would hold, therefore, that both Henderson and David Richards JJ were correct in saying that Mr Pugachev’s interests under the discretionary trusts are caught by the prohibition on dealing with assets and are also subject to the disclosure requirements of paragraph 9 of the order.”

“… that there were good grounds for thinking, as indicated above, that the underlying assets were not directly held by the trustees but were held in a corporate structure, with the trustees holding the shares in the companies at the top of those structures. The claimants did not dispute that there could be no dealings in the shares in those top companies without the knowledge of the trustees and in particular of Mr Patterson. But it is their contention that there is good reason to believe that Mr Pugachev controls the assets held by companies within the corporate structure over which the trustees themselves do not or may well not have direct control. Without knowing the corporate structure and the directors of the companies within it, it is of course not possible to be certain about this.”

“I do not consider that we are in a position to accept that, on the current state of the evidence, the trustees of the trusts simply act at the behest of Mr Pugachev. On the other hand the DIA has raised issues which call for fuller explanation. What, then, can or should the court do in such a situation? Both Mr Tregear QC and Mr Adkin QC (who appeared for the trustees) emphasised the threshold test that must be met before the court will make a freezing order against assets held by a third party. They relied particularly on the enforcement principle, which Mr Adkin described as the ‘alpha and omega’ of the jurisdiction. To return to Sir John Chadwick’s analysis, the trust assets cannot be brought within the scope of the freezing order unless the court is satisfied that there is good reason to suppose: (i) that Mr Pugachev can be compelled (through some process of enforcement) to cause the assets held by the trustees to be used for that purpose; or (ii) that there is some other process of enforcement by which the claimant can obtain recourse to the assets held by the trustees.”

“We must not lose sight of the fact that at this stage the claimants are only asking for information. An order for the provision of information is far less intrusive than an order which prevents someone from dealing with assets. Moreover the claimants are asking only for information from Mr Pugachev who is bound by the terms of the freezing order. They are not asking the trustees to do or say anything. … .”

“For convenience I would summarise the position as follows: (i) Where a plaintiff invites the court to include within the scope of a Mareva injunction assets which appear on their face to belong to a third party, e.g. a bank account in the name of a third party, the court should not accede to the invitation without good reason for supposing that the assets are in truth the assets of the defendant. (ii) Where the defendant asserts that the assets belong to a third party, the court is not obliged to accept that assertion without inquiry, but may do so depending on the circumstances. The same applies where it is the third party who makes the assertion, on an application to intervene. (iii) In deciding whether to accept the assertion of a defendant or a third party, without further inquiry, the court will be guided by what is just and convenient, not only between the plaintiff and the defendant, but also between the plaintiff, the defendant and the third party. (iv) Where the court decides not to accept the assertion without further inquiry, it may order an issue to be tried between the plaintiff and the third party in advance of the main action, or it may order that the issue await the outcome of the main action, again depending in each case on what is just and convenient. (v) On the facts of the present case the judge was in my view plainly right to hold that he could not decide the matter without further inquiry… .”

“Although both Mr Tregear and Mr Adkin relied heavily on paragraph (i) of that summary of principle, the critical point is that in our case the assets of the trusts themselves are not within the scope of the freezing order. The ‘good reason to suppose’ test in paragraph (i) supports the making of the freezing order itself. It justifies a policy of ‘shoot first and ask questions later’ but only where there is ‘good reason to suppose’. What are already within the scope of the freezing order granted by Henderson J are Mr Pugachev’s interests in the trusts, whatever those may be. The underlying trust assets are not. There appears to be a dispute between the claimants on the one hand, and Mr Pugachev and the trustees on the other, about whether in reality Mr Pugachev is in effective control of the trust assets.”

“As I have said, I do not consider that the court is in a position to reach even a provisional conclusion on the current state of the evidence. But it is here, in my judgment, that the principle of flexibility comes into play. I do not consider that if the threshold test for including an asset within the scope of a freezing order is not met, the court is powerless. The bank does not ask that the trust assets be brought within the scope of the freezing order immediately. It asks for the opportunity to test its assertion that Mr Pugachev is the effective owner of those assets against his (and the trustees’) assertion that he is not. If its assertion is correct, it may then be in a position to apply for the scope of the freezing order to be widened. If its assertion is incorrect then an application to that effect will fail. But in my judgment the court’s concern that sophisticated and wily operators should not be able to make themselves immune to the courts’ orders militates against denying the DIA that opportunity. As Robert Walker J put it in International Credit and Investment Co (Overseas) Ltd v Adham [1996] BCC 134, 136: ‘… the court will, on appropriate occasions, take drastic action and will not allow its orders to be evaded by the manipulation of shadowy offshore trusts and companies formed in jurisdictions where secrecy is highly prized and official regulation is at a low level.’”

“In my view, it was unfortunate that the judge used the word ‘exceptional’ to describe the circumstances that may justify an order for indemnity costs. The formulation repeatedly used by this court is ‘out of the norm’, reflecting, as Waller LJ said in Esure Services Ltd v Quarcoo [2009] EWCA Civ 595 at [25], ‘something outside the ordinary and reasonable conduct of proceedings’. Whatever the precise linguistic analysis, ‘exceptional’ is apt as a matter of ordinary usage to suggest a stricter test and is best avoided. Its use in this case gave rise to an arguable ground of appeal and while I am satisfied, particularly in the light of the submissions made to him, that the judge was not applying a stricter test, for the future it would be preferable if judges expressly used the test of ‘out of the norm’ established by this court.”

“Mr Twigger relied on several examples of what he suggested amounted to Mr Werner engaging in fabrication at the pre-trial stage, specifically when seeking injunctive relief at the outset of these proceedings. He pointed out, for example, that Mr Werner’s first affidavit contained a fabricated account of how the Arka-Stroy 1C database came to be discovered. Specifically, Mr Werner claimed in paragraph 63 of this affidavit that he had approached somebody, whom he described as ‘X’ but which was a reference to Mr Kuzmenko, in late February or early March 2013, and that after he had given assurances to X/Mr Kuzmenko about his future, X/Mr Kuzmenko told him that Mr Werner ought to dismiss ‘Y’ (a reference to Mr Khasanov). During cross-examination, Mr Werner conceded that he himself had had no such conversation with Mr Kuzmenko at all and that it was Ms Gorobtsova who had had the conversation and who had given the relevant assurances to Mr Kuzmenko. His explanation was that he wanted to protect Ms Gorobtsova and so did not wish to identify her as the person who had had the conversation which he described in paragraph 63. Although Mr Twigger was understandably critical of this as an excuse, not least because it would have been open to Mr Werner to have protected Ms Gorobtsova by describing her with another letter (almost certainly as Z), I am not persuaded that this is, in and of itself, a reason to conclude that Mr Werner is a witness in whom the Court can have no confidence. It is unlikely that it will ever be justifiable to give evidence, whether orally or in a witness statement or affidavit, which is knowingly misleading. In my view, there was no justification in the present context, but I nonetheless accept that Mr Werner’s explanation was genuine. In short, whilst I agree with Mr Twigger that this incident should make me cautious in accepting everything which Mr Werner had to say at face value, it would be a mistake to treat Mr Werner as a witness who is inherently unreliable.”

“Specifically, although it was suggested to Mr McGregor in particular, during the course of cross-examination, that he was at fault as regards the giving of a retention notice, he was not employed by the KK Group until some nine months or so after Zaiwalla had been instructed to act. In my view, when he started at the KK Group, Mr McGregor was entitled to take it that Zaiwalla had given the relevant notice. Although Mr Twigger suggested that he ought to have checked whether this was the case, I consider this an unfair criticism. I appreciate that he was the General Counsel of the KK Group, but to suggest that he should have checked whether a retention notice had been issued in circumstances where an experienced firm of solicitors were acting for the KK Group is, in my view, not realistic. As Mr Twigger reminded me, I asked Mr McGregor during the course of cross-examination why it took almost 2 years for the relevant notice to be issued. Mr McGregor’s suggestion was that there was a lot going on when he arrived in his new job at the KK Group. He explained that there had not been ‘a quiet day really and it was something that was eventually considered at the commencement of - just after Allen & Overy had come on board and we had changed law firms’. Mr McGregor likened the circumstances in which he joined the KK Group as being akin to ‘parachuting into a battle’ since he was dealing with Financial Police raids and ‘aggressive’ enforcement proceedings by various banks. I can understand why, in such circumstances, he assumed steps had already been taken before he joined the KK Group and simply gave no thought to the question of whether a retention notice had been issued.”

“Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is a good reason not to do so.”

“…It is clear that the question, at any rate now, is what is a ‘reasonable sum on account of costs’. It may be that in any given case the only amount that it is reasonable to award is the irreducible minimum. I do not, however, accept that that means that ‘irreducible minimum’ is the test. That would be to introduce a criterion (a) for which the rules do not provide (b) which is not the same as the criterion for which they do provide; and (c) which has potential drawbacks of its own, not least because it begs the question whether it means those costs which could not realistically be challenged as to item or amount or some more generous test. On one approach it admits of every objection to costs, which cannot be treated as fanciful.”

“What is a reasonable amount will depend on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and thus an element of uncertainty, the extent of which may differ widely from case to case as to what will be allowed on detailed assessment. Any sum will have to be an estimate. A reasonable sum would often be one that was an estimate of the likely level of recovery subject, as the costs claimants accept, to an appropriate margin to allow for error in the estimation. This can be done by taking the lowest figure in a likely range or making a deduction from a single estimated figure or perhaps from the lowest figure in the range if the range itself is not very broad. In determining whether to order any payment and its amount, account needs to be taken of all relevant factors including the likelihood (if it can be assessed) of the claimants being awarded the costs that they seek or a lesser and if so what proportion of them; the difficulty, if any, that may be faced in recovering those costs; the likelihood of a successful appeal; the means of the parties; the imminence of any assessment; any relevant delay and whether the paying party will have any difficulty in recovery in the case of any overpayment.”

“The power to order interest on costs, including pre-judgment interest on costs is derived from CPR 44.2 (6) (g). The equivalent rule was CPR 44.3(6)(g) before the Jackson reforms. The rule provides that the court may order ‘interest on costs from or until a certain date, including a date before judgment’. The purpose of such an award is to compensate a party who has been deprived of the use of his money, or who has had to borrow money to pay for his legal costs. The relevant principles do not materially differ from those applicable to the award of interest on damages under section 35 A of the Senior Courts Act 1981. The discretion conferred by the rule in respect of pre-judgment interest is not fettered by the statutory rate of interest, under the Judgments Act 1838, but is at large. Ultimately, the court conducts a general appraisal of the position having regard to what is reasonable for both the paying and the receiving parties. This normally involves an assessment of what is reasonable having regard to the class of litigant to which the relevant party belongs, rather than a minute assessment which it would be inconvenient and disproportionate to undertake. In commercial cases the rate of interest is usually set by reference to the short-term cost of unsecured borrowing for the relevant class of litigant, though it is always possible for a party to displace a ‘rule of thumb’ by adducing evidence, and the rate charged to a recipient who has actually borrowed money may be relevant but is not determinative. See F & C Alternative Investments Ltd v Barthelemy (No 3) CA [2013] 1 WLR at paragraphs 98, 99 and 102 to 105; Bim Kemi AB v Blackburn Chemicals Ltd [2003] EWCA Civ 889 at 18 and for example, Fiona Trust & Holding Corporation v Privalov [2011] EWHC 664 (Comm).”

“The rate may differ depending on whether the borrower is classed as a first class borrower, an SME or a private individual. Historically at least, first class borrowers, have generally recovered interest at base plus 1 per cent, unless that was unfair or inappropriate though in the light of recent interest rate developments there is no presumption that base rate plus one per cent is the appropriate measure of a commercial rate of interest: see The Commercial Court Guide at para J14.1 (page 67). SMEs and private individuals have tended to recover interest at a higher rate to reflect the real cost of borrowing to that class of litigant: see for example, Jaura v Ahmed [2002] EWCA Civ 210, F & C Alternative Investments Ltd and Attrill v Dresdner Kleinwort Ltd [2012] EWHC 146 (QB).”

“Whether the court should exercise its discretion to grant a stay will depend on all the circumstances of the case, but the essential question is whether there is a risk of injustice to one or other or both parties if it grants or refuses a stay. In particular, if a stay is refused what are the risks of the appeal being stifled? If a stay is granted and the appeal fails, what are the risks that the respondent will be unable to enforce the judgment? On the other hand, if a stay is refused and the appeal succeeds, and the judgment is enforced in the meantime, what are the risks of the appellant being able to recover any monies paid from the respondent?”