Patokh Chodiev and Others v Kirill Ace Stein
| Jurisdiction | England & Wales |
| Judge | Mr Justice Burton |
| Judgment Date | 20 May 2015 |
| Neutral Citation | [2015] EWHC 1428 (Comm) |
| Docket Number | Case No: 2014 FOLIO 1242 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 20 May 2015 |
[2015] EWHC 1428 (Comm)
Mr Justice Burton
Case No: 2014 FOLIO 1242
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Stephen Rubin QC and Caley Wright (instructed by Hogan Lovells International LLP) for the Claimants
Daniel Oudkerk QC and Robert Weekes (instructed by Eversheds LLP) for the Defendant
Hearing dates: 21, 22, 23 and 24 April 2015
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Stein, the Defendant, is a US qualified lawyer, banker and corporate financier. He brought proceedings in the Commercial Court against the three Claimants, who are very substantial businessmen, primarily based in Kazakhstan and colloquially called "the Trio", who have held business interests together for over 20 years, and together run various successful businesses, operating in mining and in the processing and marketing of the products of those mines. In particular they founded a business which became ENRC Plc, a natural resources company which was listed in the London Stock Exchange on 12 December 2007 as a result of an Initial Public Offering ("IPO") of its shares, which raised for them as shareholders, holding approximately 20% of the shares, the sum of US$3.1 billion between them. In those proceedings the Defendant claimed sums due pursuant to an oral agreement with them in January 2006 ("the January Agreement") in respect of an entitlement to a success fee of 0.5% of monies raised by him for the Claimants, resulting first from a syndicated finance facility ("Trade Finance"), which produced between February and April 2007 US$1.48 billion, mostly used in order to fund the payment of dividends to the shareholders, primarily the Trio, and thereafter the US$3.1 billion from the IPO.
After a hotly contested trial before me, which lasted 11 days in February and March 2014, the Defendant obtained judgment on 16 April 2014 against the Claimants in the sum of US$2.9 million in debt in respect of the balance of his entitlement with regard to the Trade Finance and the sum of US$15.5 million damages in respect of the Claimants' repudiatory breach of their obligation to pay him in respect of the IPO, together with interest and costs, of which a substantial proportion were on the indemnity basis.
Save for a small proportion of those costs which the Claimants were required to pay as a condition of a stay while they made an unsuccessful application for permission to appeal to the Court of Appeal (which, after refusal on paper, was refused at an oral hearing on 24 July 2014), no sum has been paid by the Claimants to the Defendant. Instead they issued on 14 October 2014 these proceedings, seeking to set aside my judgment in favour of the Defendant on the ground that it was obtained by fraud: they were subsequently required by an Order of Hamblen J on 27 October 2014 to pay the sums of US$30,495,673.60 and £1,459,739.69 into their solicitors' client account as a condition of the stay of the judgment against them. The Defendant has issued an Application Notice on 9 December 2014 applying to strike out the Claimants' Particulars of Claim, and/or seeking summary judgment against the Claimants pursuant to Part 24, and this has been the hearing of that application. By application of 27 February 2015 the Claimants have applied to amend the Particulars of Claim by adding additional pleas and matters and they have also applied to put in some additional documents, and it has been common ground that the contents of that proposed amendment (and those additional documents) should be considered before me, on the basis that if their contents can "save" the proceedings, then I should not strike out the claim (subject to any impact of costs); and I can thus consider the nature and strength of the Claimants' claim by reference to the proposed amendment as well as the existing claim.
My judgment, of 47 pages and 105 paragraphs ( [2014] EWHC 1201 (Comm)), was not challenged on appeal save in one respect, to which I shall return, and even as to that permission was refused by the Court of Appeal, as described above. It is that judgment which is now sought to be set aside, and in that context its contents must be fully considered. Of course I do not set that judgment out in full, but refer the reader to it, though it will be necessary to summarise and in part quote from it.
At the outset of that judgment (paragraphs 3 to 20) I set out the history on the basis of what was either common ground or not challenged, and I summarise it as follows:
(i) In July 2005 the First Claimant, his daughter ("Mounissa") and the Defendant discussed the appointment of the Defendant as a consultant, on terms of remuneration on the basis of a retainer and a success fee: after which the Defendant was to and did seek further information about the Claimants' business, and there were further meetings and discussions with the First Claimant and Mounissa.
(ii) Mounissa invited the Defendant to put a written proposal for his engagement to the Claimants in writing, and as a result he submitted to her a proposal dated 16 January 2006 ("the January Term Sheet"), prior to a meeting arranged between him, the First Claimant and Mounissa, at the Peninsula Hotel in New York, to discuss it. Mounissa agreed that she had received and considered that document before the Peninsula meeting and, although the First Claimant had not himself read it, she had summarised and explained it to him, so that he knew its contents.
(iii) That Term Sheet included, as part of the Defendant's proposals, in addition to a salary and a guaranteed minimum bonus, an earned bonus expressed as a percentage of the transaction value on a sliding scale, depending upon the quantum of the transaction, from 0.5% up to 1%, in respect of the successful completion of any " liquidity event" as defined, which included an IPO.
(iv) It was common ground that, after some discussion, the First Claimant indicated that the Defendant should make his proposals simpler, or less complicated, and that they should just say 0.5%. The Defendant said he would think about this, and the First Claimant said that he would speak to the Second and Third Claimants. The First Claimant told the Defendant that this must be kept confidential. The Defendant and Mounissa spoke on the telephone some days later ("the post-Peninsula telephone call") and reached agreement.
(v) Although draft agreements were prepared in respect of the Defendant's engagement (which he had commenced on 1 March 2006), none was signed, nor remuneration paid, until September 2006, when 2 service agreements were executed between two (Alferon) companies associated with the Claimants and the Defendant, relating to parts of his remuneration, and a contract was executed between Aurdeley Enterprises Limited ("Aurdeley"), described in paragraph 1 of my judgment as a " consultancy company which employs" the Defendant, and a company called Darcon Marketing Ltd ("Darcon"), which I described in paragraph 8 of my judgment as " an entity obviously emanating from the [Claimants], but whose identity neither any of the [Claimants] nor their witnesses could explain". This picked up the balance of the Defendant's unpaid retainer, and the guaranteed minimum bonus provided for in the January Term Sheet (in clause 4.2 of the "Darcon Contract"). It was common ground that there had been included in the draft, at clause 4.3, a provision recording the Defendant's entitlement to a 0.5% success fee, and that this was removed from the Darcon Contract as executed. I recorded in paragraph 9 of my judgment that:
" There is a dispute as to why this clause was removed before the agreement was executed:
(i) [Mounissa] says that it was taken out because, although such a 0.5% success fee had been agreed (albeit only in respect of Trade Finance), it was discretionary.
(ii) The [Defendant] contends that [Mounissa] insisted on the clause being taken out because, although agreed, she said that it must remain confidential, as the First [Claimant] had said at the Peninsula Hotel meeting."
(vi) By virtue of what the Claimants conceded was excellent work on the part of the Defendant in respect of the Trade Finance, a sum of $1.48 billion, considerably increased over their initial expectations, was received in March 2007, and the majority of it was used to pay out dividends to the shareholders, mostly the Trio. The Defendant was also doing preparatory work in respect of the IPO, as confirmed in an unchallenged witness statement from a Mr Lucas on the Defendant's behalf. Dr Sittard, the CEO of the Alferon companies, announced at an IPO kick-off meeting in February 2007 that the Defendant was leader of the IPO, and the Defendant addressed the meeting in that capacity. The increased amount of the Trade Finance ($1.48 billion) was signed off by the Board of ENRC at the end of March 2007 and the last tranche was to be received on 12 April 2007. On 1 April 2007 in Zurich the Defendant met with the Second Claimant and with the First Claimant's nephew Olim Chodiev. The Second Claimant announced that the Defendant would be paid a bonus in respect of the Trade Finance, calculated by reference to 0.5% of $1 billion (i.e. not the full amount of $1.48 billion), from which the Claimants proposed to deduct his guaranteed bonus and his annual retainer, thus a sum of $4 million, with additionally an offer of a bonus of $1 million for working on the IPO. It is common ground that the Claimant regarded this as unacceptable, and said that he would be leaving the Group....
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