(1) Kazakhstan Kagazy Plc v (1) Baglan Abdullayevich Zhunus (formerly Baglan Abdullayevich Zhunussov)
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Picken |
| Judgment Date | 28 February 2018 |
| Neutral Citation | [2018] EWHC 369 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2013-000683 |
| Date | 28 February 2018 |
[2018] EWHC 369 (Comm)
THE HON. Mr. Justice Picken
Case No: CL-2013-000683
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Robert Howe QC, Jonathan Miller and Daniel Saoul (instructed by Allen & Overy LLP) for the Claimants
David Foxton QC and Anna Dilnot (instructed by Cleary Gottlieb Steen & Hamilton LLP) for the Defendants
Tim Akkouh (instructed by Byrne & Partners LLP) for the Additional Party
Hearing dates: 8, 9 and 12 February 2018
Contents
| Introduction | [1]–[3] |
| Quantum | [4]–[39] |
| Rates | [5]–[12] |
| Steel | [13]–[16] |
| Penalties and Interest: the 20014 Co-Operation Agreement | [17]–[32] |
| Credit as regards settlement with Mr Zhunus | [33] |
| IFK's claim against Astana-Contract and Paragon | [34]–[35] |
| Percentage pro rata reduction: interest – the PEAK Claim | [36]–[39] |
| Currency of judgment | [40]–[69] |
| Interest | [70]–[130] |
| Pre-judgment rate | [71]–[82] |
| Liabilities incurred but not yet paid | [83]–[89] |
| Starting dates | [90]–[91] |
| Simple or compound | [92]–[124] |
| Post-judgment rate | [125]–[130] |
| Release of security for costs | [131]–[134] |
| Destination of monies paid in satisfaction of the judgment or by way of costs | [135]–[140] |
| Amendments to the Freezing Order | [141]–[187] |
| Cross-undertaking in damages | [142]–[146] |
| Fortification: release | [147]–[148] |
| KK Plc | [149]–[152] |
| Living and legal expenses and ordinary course of business exceptions | [153]–[167] |
| Disclosure of documents by Mr Arip | [168]–[183] |
| Use of material disclosed pursuant to the Freezing Order | [184]–[187] |
| Interim payment on account of damages | [188] |
| Costs | [189]–[215] |
| Standard or indemnity | [191]–[205] |
| Interim payment on account of costs | [206]–[210] |
| Interest on costs | [211]–[215] |
| Permission to appeal | [216]–[217] |
| Stay of execution | [218]–[221] |
| Conclusion | [222] |
Introduction
This judgment follows on from the substantial judgment (the ‘Judgment’) which I handed down on 22 December 2017 ( [2017] EWHC 3374 (Comm)) after the lengthy trial which took place between April and July 2017. I decided on that occasion that the Claimants were entitled to judgment against Mr Arip and Ms Dikhanbayeva as regards each of the PEAK, Astana 2 and Land Plots Claims and that what this means in financial terms would need either to be agreed or to be determined at a further hearing along with other consequential issues such as currency of judgment, interest, release of security for costs, interim payment on account of damages, costs and stay of execution. These issues and, as will appear, certain other issues were addressed at a consequentials hearing which took place over 2 1/2 days on 8, 9 and 12 February 2018.
This further judgment is itself substantial. This is because there are over thirty issues which I need to address and certain of them, specifically an issue concerning the 2014 Co-Operation Agreement (see the Judgment at [346], [351] and [352]), a question relating to appropriate currency and the topic of interest, involve disputes running to tens (if not hundreds) of millions of US Dollars (or KZT equivalent). There were, in addition, well over eighty authorities placed before me for the purposes of the consequentials hearing.
Before me at the consequentials hearing, Mr Howe QC (leading Mr Miller and Mr Saoul) continued to act for the Claimants. Mr David Foxton QC had, however, since the Judgment been instructed on behalf of Mr Arip and Ms Dikhanbayeva (leading Ms Dilnot), and Mr Tim Akkouh also appeared on behalf of the Additional Party, Harbour Fund III LPP (‘Harbour’). I shall come on to explain about Harbour's involvement later when dealing with what was ultimately agreed between the parties concerning the destination of monies paid in satisfaction of the judgment or by way of costs.
Quantum
Although in the lead-up to the consequentials hearing it appeared as though there might not be agreement between the quantity surveying experts (Mr Tapper and Mr Jackson), happily by the time of the hearing the relevant calculations had been agreed subject to a point concerning applicable rates. Notwithstanding this, a number of issues concerning quantum need to be considered.
Rates
As to that (rates) point, what Mr Howe described as “a question of clarification” or “a question of principle” arises. This stems from the fact that, in reaching conclusions concerning the appropriate rates to be used in assessing the value of work which was carried out and for which credit should be given by the Claimants in arriving at the appropriate level of damages due to them from Mr Arip and Ms Dikhanbayeva, the Court rejected the approach to rates which was adopted by Mr Jackson, Mr Arip's and Ms Dikhanbayeva's expert, in favour of the approach adopted by Mr Tapper, the Claimants' expert, but in certain respects with adjustments as described in the Judgment.
Specifically, as helpfully pointed out by Mr Foxton: the Court adopted Mr Tapper's “services/utilities” figure which was higher than Mr Jackson's (see the Judgment at [259]); the Court took the middle figure for foundations ([261]); the Court adopted Mr Tapper's figure for the warehouses on the basis that he was right to proceed on the basis that the Loging contract included some of the “ add-ons” which Mr Jackson had identified but without the deduction Mr Tapper had made ([263]–[264]) and with certain “ add-ons” ([265]); the Court adjusted both expert's evidence on “other buildings” ([266]); on “earthworks” the Court used Mr Tapper's estimate for transportation distance but rejected Mr Tapper's evidence on labour rates ([272]), his plant rates ([274]) and as to Akzhal-2 ([277]–[278]); the Court held that Mr Jackson's comparables were not reliable ([275]); the Court accepted Mr Jackson's evidence as to the height of the Akzhal-2 embankment ([277]) but not at Aksenger ([293]); the Court accepted Mr Jackson's evidence as to what drainage he saw at Akzhal-2 and works to the Aksai river but arrived at its own valuations ([280]–[281]); the Court accepted Mr Tapper's 17% overhead/profit rather than Mr Jackson's 15%, and also accepted Mr Jackson's 5.7% contingency ([282]); the Court did not accept Mr Jackson's evidence of the extent of earthworks at Aksenger ([290]) and adopted Mr Tapper's valuation approach but required a revision of rates ([291]); and the Court noted Mr Jackson's correction of his evidence regarding the road and drainage at Aksenger ([295–297]) and rejected his evidence on a centralised locking system ([298]) but upheld his evidence on other railway work ([300]).
The Court's intention was that Mr Tapper would re-calculate in line with the adjustments identified and that, hopefully, Mr Jackson would then be in a position to agree the revised figures. Mr Tapper's carrying out of this exercise has, however, led to a somewhat unexpected result, in that in certain cases Mr Tapper's approach (with the adjustments required by the Court) has led to higher valuations than Mr Jackson had himself put forward at trial. As Mr Howe put it, “having turned the crank and done the calculations”, this is the consequence. It is the Claimants' position that, in these circumstances, Mr Jackson's valuations ought nonetheless to be adopted. As Mr Foxton put it, the Claimants invite the Court to treat Mr Jackson's valuations as representing “some form of forensic cap on the value” which should be used for credit calculation purposes.
In order to illustrate the point, Mr Tapper prepared revised calculations of the value of the construction work done at each of the PEAK sites and at the Astana site on two bases. Position 1 comprised the valuations arrived at without having regard to any ‘Jackson cap’, whilst Position 2 gave valuations which in certain respects (where Mr Tapper's adjusted valuation is higher than Mr Jackson's valuations) used Mr Jackson's valuations rather than Mr Tapper's adjusted valuations. The difference between Positions 1 and 2 is a little over US$ 3 million. In context, therefore, the dispute on this issue is not vast, although it is hardly insignificant.
It was Mr Howe's submission that Mr Tapper's Position 2 valuations should be preferred. He submitted that it was unlikely that the Court intended that Mr Tapper's adjusted rates would lead to higher valuations than those put forward by Mr Jackson, whose approach regarding rates was rejected in the Judgment. He submitted, indeed, that it would be perverse for the result of the recalculation exercise to be even more favourable to Mr Arip and Ms Dikhanbayeva than the position which they advanced at trial in reliance on Mr Jackson's evidence. Mr Howe highlighted, in this respect, how in the Judgment at [268] I stated I was “left in the position which Mr Twigger contemplated I might find myself in, which is that …the right rates lie ‘somewhere in between the Jackson and Tapper rates’”. Mr Howe suggested that it cannot have been the Court's intention that the ultimate outcome would be to lift any particular set of rates above those which Mr Jackson had put forward.
I cannot agree with Mr Howe about this. As I put to him during the course of his submissions, having rejected Mr Jackson's approach, I regard it as wrong in principle to allow Mr Jackson's valuations to...
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