Case No: HC10C00139
Neutral Citation Number: [2013] EWHC 1201 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 10/05/2013

Before :

MR JUSTICE ROTH
- - - - - - - - - - - - - - - - - - - - -
Between :

	(1)	SLOCOM TRADING LIMITED
(2)	DERBENT MANAGEMENT LIMITED	
Claimants
	
	- and -
		
	(1)	TATIK INC
(2)	SIBIR ENERGY plc
(3)	MARITIME VILLA HOLDINGS SCI	

Defendants	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -
Benjamin John (instructed by Reed Smith LLP) for the Claimants 
Simon Birt (instructed by Russell-Cooke LLP) for the 1st Defendant 
Ian Mill QC and Andrew Hunter QC (instructed by Jones Day) for the 2nd and 3rd Defendants 

Hearing date: 27 February 2013
- - - - - - - - - - - - - - - - - - - - -
JUDGMENT
Mr Justice Roth : 
1.	Judgment in this case raising many issues was handed down on 4 December 2012 (“the Judgment”).  It is an indication of the complexity of the case that the hearing of consequential matters arising from the Judgment took a further full day, supplemented by notes submitted by Counsel thereafter on certain points that they were not in a position to address at that hearing and yet further letters from some of the parties’ solicitors.  This supplementary judgment adopts the same terminology as the Judgment and deals with the following consequential matters:
i)	What is the correct judgment amount against Tatik?
ii)	What is the correct judgment amount against Sibir and Maritime, and how is that to be determined?
iii)	What is the correct order about interest (a) pre-judgment and (b) post-judgment?
iv)	Two issues in relation to the equitable mortgage: (a) the terms of the declaration pursuant to para 354(viii) of the Judgment and (b) further relief.
v)	Costs, including interest on costs, interim payment and release of security for costs.
vi)	The Defendants’ applications for permission to appeal.
vii)	The Defendants’ applications for a stay pending appeal.
2.	Before addressing those issues, it is convenient to summarise the terms governing interest under the Derbent-Tatik Loan Agreement.  Pursuant to clause 4, interest is payable on the principal loan outstanding at the annual rate of 12%.  Clause 12 provides insofar as material:
“Default Interest
If the Borrower fails to pay any sum payable under this Agreement when due, it shall pay interest on that sum from and including the due date up to and including the date of actual payment (both before and after judgement) at the rate of three percent (3%) per annum above the rate of interest as set out in Clause 4 (Interest). So long as the default continues, such interest shall be compounded monthly. Such interest will be calculated on the basis of the actual number of days elapsed and a full year, will accrue from day to day and will be payable to the Lender from time to time on demand.”
3.	Accordingly, default interest is payable under the agreement at the rate of 15%, compounded monthly.
(I)	JUDGMENT AGAINST TATIK
4.	Tatik is liable to Slocom in debt under the Derbent-Tatik Loan Agreement, pursuant to the assignment of that agreement from Derbent to Slocom.  The parties are now largely agreed as to the figures save for one important point.  During the currency of the Second Tchigirinski Loan, repayments of capital and payments of interest were made at various times by various companies controlled by Mr Tchigirinski, including Gradison.  In his calculations of the amount due set out in the Derbent-Tatik Loan Agreement of 19 December 2008, Mr Haener overlooked four payments which had been made on 1 February 2006 in the total amount of $1,237,500.  Each payment was in the amount of $309,375 made by Gradison to one of the Foundations.  This oversight was spotted later by Mr Schneebeli when he prepared the accounts, and was explained by Mr Haener in his witness statement.  
5.	The issue between the parties is whether this sum falls to be treated as a payment on account of interest (as the Claimants contend); or a repayment of capital (as the Defendants contend), thereby reducing the principal outstanding under the Loan.  The point is significant because of the rate of interest applicable on the outstanding principal sum.  It is agreed that if the Defendants are correct, then the principal amount owing under the Derbent-Tatik Loan Agreement should be €30,502,453.87, with interest accrued to the date of that agreement (i.e. 19 December 2008) of €1,300,312.77.  On the other hand, if the Claimants are correct, the principal amount outstanding is €31,548,077, with interest accrued to the date of the agreement of €549,985.17.  Since the default under the agreement occurred only on about 8 December 2009 (see para 222), the difference is increased by the continuation of interest at the contract rate of 12% for a further year on whichever sum represents the outstanding principal, and thereafter by application of the default rate of 15% to the total.
6.	The parties all relied on a spreadsheet setting out the principal loan outstanding, interest due, interest payments made and interest overdue, which had been prepared by Mr Schneebeli.  The figures in the spreadsheet, which omitted the 1 February 2006 payments, were agreed.  
7.	For the Defendants, the argument on this issue was presented by Mr Birt, for Tatik, and adopted by Sibir and Maritime.  He relied on the fact that as at 1 February 2006, when these four payments were made, there was no outstanding interest due.  Accordingly, if the payments fell to be treated as being on account of interest, they were payments in advance, which stood to the credit of the lender (at that time, Willow Tree).  The more commercial approach was therefore for the payments to be set against the principal.  Mr Birt emphasised that Mr Tchigirinski was generally reluctant to make any payments under the various loan agreements involving the Kruglov money.   It was not suggested that Mr Tchigirinski, and more particularly Mr Haener acting on his behalf, realised that there was no outstanding interest when these payments were made, but the argument was that if they had done so, then they would clearly have intended that these payments should be set towards reducing the principal.  
8.	This suggested inference as to what Mr Tchigirinski and Mr Haener’s intentions would have been regarding the payments had they appreciated the actual state of the loan account is plausible, although I think it is equally plausible that in that event these payments would not have been made in February 2006 at all.   But in my view, that hypothetical analysis is beside the point.  In my judgment, the critical point is that their actual intention at the time the payments were made was that these were payments on account of interest not capital.  Mr Haener said so in terms when dealing with this in his witness statement, and although much else that he said was challenged in an extensive cross-examination, this evidence was not.  Moreover, it is supported by the contemporary credit advice notes from Wegelin Bank, to which he there referred.  The four advice notes all describe the payment as “Loan Willow Tree Interest”, and that must have reflected the instructions of Mr Haener who was handling the transactions for both sides.  This was not accidental, since it is apparent from the other Wegelin credit advice notes in 2006 (and unsurprising) that this description was not used when a payment was on account of capital.  It is also consistent with the credit advice notes in 2005, when Mr Tchigirinski through his companies made a series of payments, which it is accepted were on account of interest, and which were so specified in the advice notes.
9.	I am reinforced in this conclusion by the fact that it is clear that interest due under the Loan was often not paid regularly, but as and when funds became available from a variety of sources.  Thus, according to the spreadsheet, in 2005 interest payments were made (and it is accepted that they are correctly so characterised) at a time when they exceeded the amount of interest due.  Indeed, given that Mr Haener knew that he could not rely on Mr Tchigirinski to provide funding promptly when interest became due, it is not irrational in a commercial sense that when funds did become available Mr Haener organised a payment on account of interest in advance, since he could not feel confident that the necessary money would be furnished on the due date.  It is notable that by the end of 2006, after bringing into account this $1,237,500, there was nonetheless a balance of interest overdue.
10.	Accordingly, I find that the payments made on 1 February 2006 are to be treated as, on the evidence, they were intended at the time.  There is no justification for re-characterising them on the basis of some ex post facto rationalisation which, moreover, was never put to Mr Haener.
(II)  JUDGMENT AGAINST SIBIR AND MARITIME
11.	By contrast with Tatik on whom the primary liability is in debt, the liability of Sibir and Maritime lies in damages.  Those damages are for breach of contract and in tort for inducing breaches of contract by Tatik and Mr Tchigirinski: see the Judgment.  The parties agreed that there is no difference here as between the measure of damages in contract and in tort.
12.	 The essence of the breaches committed by Sibir and Maritime may be summarised as arranging for the sale of the Villa to be carried out in such a way that the debt of Tatik under the Derbent-Tatik Loan Agreement was not discharged out of the proceeds; or as it was conveniently expressed, to arrange a “non-compliant sale”.  Those arrangements were made by the various agreements dated 13 January 2010.  However, although those agreements may be regarded as giving rise to anticipatory breaches of the obligations to Slocom under the relevant provisions of the April 2009 Agreements, those breaches were not accepted by Slocom and the Villa was not sold on 13 January 2010.  The contract entered into between Tatik and Maritime on that date was only a “Promissory Sale Agreement” (Promesse de Vente), which gave Maritime an option to purchase the Villa at the price of €70 million.  The option was exercisable up to 30 June 2010, but only once various conditions precedent had been fulfilled, including the discharge of provision of a consent to the sale under the terms of three world-wide freezing orders of the English High Court which had been made on the application of different claimants on, respectively, 25 March, 20 April and 18 May 2009.
13.	It was only once a sale actually took place, without any monies being remitted to Slocom, that any damage to Slocom occurred.   The sale was completed on 13 May 2010.  Slocom submitted that the damages against Sibir and Maritime should be assessed as at the date of the Judgment, and thus correspond to the amount of the debt for which Tatik is liable, on the basis that only payment of such damages will discharge that debt.  However, this would not correspond to the loss occasioned by Sibir and Maritime’s breaches.  They were not continuing guarantors of Tatik’s liability.  I consider that there is no basis on which to assess the damages for which they are liable at any date later than 13 May 2010.
14.	However, Sibir and Maritime argue for an earlier date.  They emphasise that the sale was only delayed until 13 May 2010 because of the interim injunction obtained by Slocom on 18 January 2010 against Tatik and Sibir (and extended on 21 January to Maritime), whereby they were restrained from selling or completing any transfer of the Villa without Slocom’s consent (“the Slocom injunction”).  The Slocom injunction was discharged by this Court on 5 May 2010, on the grounds of material non-disclosure.  Sibir and Maritime therefore submit that damages should be assessed as at the date when the sale would have taken place but for the Slocom injunction.   In their Counsel’s written argument, that was specified as 13 January 2010, but in the hearing they accepted that this could not be right, since the agreement of that date was only an option to purchase and, moreover, permission to sell was required under the terms of the freezing orders that were nothing to do with Slocom.  
15.	By a supplementary submission following the hearing, set out in a letter to the Court from their solicitors dated 4 March 2013, Sibir and Maritime contended that the sale would have been achieved on or about 1 March 2010 “and in any event not later than 16 April 2010.”   That was on the basis that consent was given under one of the freezing orders on 23 February 2010 and the terms of variation of another of the orders was “substantially” agreed that same day, although a formal consent order to discharge that injunction so as to permit the sale was not made until 5 May 2010.  Sibir and Maritime contend that the latter was only delayed because no steps could be taken until the Slocom injunction was discharged; as soon as that happened the consent order was immediately agreed.   As regards the third freezing order, that was in respect of a claim by Sibir, Caraline and OJSC Magma Oil Company (“OJSC Magma”) against Mr Tchigirinski.  It is not altogether clear from Jones Day’s letter when written agreement on behalf of Sibir, Caraline and OJSC Magma authorising the sale, as required by the condition precedent in the Promissory Sale Agreement, was provided.  However, the letter states:
“…, discussions between Mr Tchigirinski's creditors continued into April 2010, with a "global settlement" being reached on 16 April 2010. Without waiver of any privilege or confidentiality in those arrangements, these provided that the release of the Slocom Injunction was a condition precedent to their effectiveness. The timing of the negotiations was therefore, to a significant extent, driven by the fact that no steps could be taken before the Slocom return hearing. Again, had it not been for the Slocom Injunction, it is very likely that agreement would have been reached very much earlier.” 
16.	As Jones Day’s letter rightly acknowledges, “[i]t is impossible to state definitively when the sale would have occurred ‘but for’ the Slocom injunction.”  On the information before the Court, it is also not possible to look into the circumstances that delayed the global settlement with Mr Tchigirinski until 16 April 2010.  On the basis of the supplementary information in Jones Day’s letter, I consider it is appropriate, on the balance of probabilities, to take 16 April 2010 as the date when arrangements would have been made for a sale.  I note that after the Slocom injunction was discharged on 5 May, it took a further 8 days to put in place the documentation to effect a sale and I see no reason why the same period would not have been required to effect a sale after 16 April.  Accordingly, I conclude that in the absence of the Slocom injunction, a sale of the Villa to Maritime would probably have taken place on 24 April 2010.
17.	The date of sale is relevant because of the default interest term under the Derbent-Tatik Loan Agreement.  The obligation to pay Slocom out of the proceeds of sale was in discharge of the “Slocom Debt”, defined in the Power of Attorney as comprising the total amount owing under the Derbent-Tatik Loan Agreement, including all accrued interest.  Thus, the later the date on which damages fall to be assessed, the greater the amount of contractual default interest that would be included in the computation.
18.	Sibir and Maritime contended that an earlier date than the actual date of sale should be used on the basis that if 13 May 2010 was applied, Slocom would be gaining a benefit from its injunction to which it had been held not to have been entitled.  Alternatively, Mr Mill submitted that if 13 May 2010 was used, then Sibir and Maritime could apply against Slocom for an order for damages pursuant to its cross-undertaking, corresponding to the extra amount of damages which they have to pay under this judgment.  On the other hand, Mr John, for Slocom, argued that if an earlier date was applied, Sibir and Maritime would in effect have the damages they are liable to pay for their breaches reduced on the basis that, but for the injunction, they would have committed those breaches earlier than they did.   
19.	In the light of the further submission regarding the relevant date, and my findings above, the issue has become much less significant since the difference is only as between 24 April and 13 May.  Nonetheless, it is necessary for me to resolve the point.  
20.	The question of the date for the assessment of damages for breach of contract was considered by the House of Lords in The Golden Victory [2007] UKHL 12, [2007] 2 AC 353.  In the leading opinion for the majority, Lord Scott (with whom Lords Carswell and Brown agreed) said at [31]:
“The underlying principle is that the victim of a breach of contract is entitled to damages representing the value of the contractual benefit to which he was entitled but of which he has been deprived. He is entitled to be put in the same position, so far as money can do it, as if the contract had been performed. The assessment at the date of breach rule can usually achieve that result.  But not always. In Miliangos v George Frank (Textiles) Ltd [1976] AC 443, 468–469 Lord Wilberforce referred to “the general rule” that damages for breach of contract are assessed as at the date of breach but went on to observe that 
“It is for the courts, or for arbitrators, to work out a solution in each case best adapted to giving the injured plaintiff that amount in damages which will most fairly compensate him for the wrong which he has suffered”
and, when considering the date at which a foreign money obligation should be converted into sterling, chose the date that “gets nearest to securing to the creditor exactly what he bargained for”. If a money award of damages for breach of contract provides to the creditor a lesser or a greater benefit than the creditor bargained for, the award fails, in either case, to provide a just result.”
And at [36] he stated:
“The lodestar is that the damages should represent the value of the contractual benefits of which the claimant had been deprived by the breach of contract, no less but also no more.”
21.	It is trite to observe that the assessment of damages is designed to compensate the claimant not to punish the defendant.  The bargain underlying the April 2009 Agreements was that Tatik could sell the Villa, provided that the Slocom debt was satisfied out of the proceeds.  The application for the Slocom injunction was occasioned by the fact that it became apparent that Tatik, with the aid of Sibir, was not intending to keep that bargain, but if Tatik, Sibir and Maritime had conducted themselves as they should have done, the sale would probably have taken place, and Slocom received its payment, on about 24 April 2010.  In my judgment, that is accordingly the appropriate date on which the damages fall to be assessed.
22.	However, Sibir and Maritime sought to advance two arguments fundamental to the measure of those damages.  They contended that:
i)	Slocom suffered no loss at all, since it was liable to pay over the monies received to the Kruglov family; alternatively
ii)	the damages should be reduced by the value of the equitable mortgage held by Slocom in the Villa.
23.	Both these arguments constitute a fundamental response to the claim: they are not consequential points regarding the calculation of damages for the purpose of the order following judgment.  It is striking that neither of these contentions is pleaded in the Amended Defence of Sibir and Maritime, nor were they raised at any time in the extensive written and oral arguments during the trial.  This was not a case of a split trial, where the initial trial concerned only liability.  I have no doubt that if Sibir and Maritime wished to raise these points, they should have done so at the very latest in the trial, and not for the first time when addressing the form of order consequential on the judgment.   The arguments bear all the hallmarks of an afterthought seeking to avoid the consequences of an adverse judgment.  Nonetheless, I permitted Mr Mill to advance submissions on these two grounds, which I now address. 
(i)  Did Slocom suffer a loss?
24.	The foundation of Mr Mill’s argument was para 296 of the Judgment where, in the context of considering the assignment of the Derbent-Tatik Loan Agreement by Derbent to Slocom, I stated:
“… the reality is that Derbent, since it became the lender to Mr Tchigirinski in place of Willow Tree, was under a liability to pay over the proceeds of the loan (repayments of principal and interest) either to Willow Tree or, if not, to the Kruglov family directly.  The loan was never an asset of which Derbent could retain the benefit for itself.”
Further, I held that when Slocom became the assignee of the rights of Derbent under the Derbent-Tatik Loan Agreement, Slocom came under an equivalent obligation to pay over the proceeds: para 299.
25.	On that basis, Mr Mill sought to argue that if Slocom did not receive any money due under the agreement, it suffered no loss since it would never have kept those monies for itself but would have been liable to pay the monies over to Willow Tree or the Kruglov family.  
26.	If the argument were valid, it would similarly apply to Derbent in the absence of any assignment, and for the purpose of analysis it is simpler to consider it in that context.  In my view, it is fundamentally misconceived.
27.	It is necessary to recall how Derbent came into the picture.  Originally, the lending of the Kruglov money was made by Willow Tree, a BVI company incorporated by ATU.  The four Liechtenstein foundations (“the Foundations”) established for the benefit of the various Kruglov family members transferred the Kruglov money for investment to Willow Tree.  The role of Willow Tree was explained in the unchallenged evidence of Mr Frick, quoted at para 50 but which for convenience I repeat:
“Willow Tree acted as an intermediary between the Foundations and any third party.  This arrangement was not recorded in any fiduciary agreement but it was accepted by ATU and Mr Haener that Willow Tree was a ‘face company’ which would be used to provide a level of discretion to the Foundations.”
28.	Whether as a matter of law Willow Tree was a trustee for the Foundations, in which the beneficial interest was held by the relevant members of the Kruglov family, was not explored at trial and is unnecessary to consider.  In late 2005, Mr Kruglov decided to close the Foundations and establish a new vehicle for investment of the Kruglov money: para 87.  This new vehicle was Derbent, incorporated in Cyprus on 9 November 2005.    The money held by the Foundations in the bank was transferred to Derbent and the Foundations were closed in April 2006: para 90.  The understanding of Mr Frick and Mr Haener at the time, as explained in their evidence, is summarised at paras 92-93:
“Mr Frick said that his understanding at the time was that once the Foundations were closed, Willow Tree would drop out of the picture so far as the loans were concerned.  He explained that his understanding was that Derbent would be used as the vehicle for the Kruglov money in place of Willow Tree, and that the outstanding loans, including accruing interest, would be “taken over” either directly by the Kruglov family or by Derbent as their “interposed” company.  Further, with the dissolution of the Foundations, the beneficiaries of the Foundations effectively stepped into their place.  He therefore took no further interest in the servicing of the Second Tchigirinski Loan (i.e. whether interest was duly paid) or the loan’s repayment.
However, Mr Haener told him that he wished to continue to keep Willow Tree active.  Mr Haener for his part said that no steps were taken by him to wind up Willow Tree because it was the entity that was legally entitled to the repayment from Mr Tchigirinski of the outstanding loan.  He said that although the monies had come from the Foundations, now that they were being closed Willow Tree would be under an obligation to account for the proceeds of repayment to Mr Kruglov and his family, as the beneficiaries of the former Foundations.”
29.	Although Mr Frick said that that was his understanding in around April 2006, he also said that when Mr Haener came to see him in December 2009, he accepted that on Derbent taking over the loan to Mr Tchigirinski, the formal position was that Derbent on receipt of the repayment would have to pay the money back to Willow Tree, which remained under an obligation to ensure that the money went back to the Kruglov family: para 225.
30.	None of this evidence from Mr Frick, or indeed this particular aspect of Mr Haener’s evidence, was challenged.
31.	Whether in those circumstances Derbent was a trustee for Willow Tree and thus in turn for the Kruglov family members was also not explored at trial, since this whole issue was never raised.  Presumably that might involve questions of Cyprus law.  But even assuming that Derbent was not a trustee, it was clearly the investment vehicle used by the Kruglov family (whether through Willow Tree or directly does not matter).  Just as Willow Tree had received money from the Foundations to invest, which it was liable to repay with the proceeds of that investment when realised, so Derbent was liable to repay the Kruglov money it received, and the proceeds of the Second Tchigirinski Loan once it became the creditor in place of Willow Tree.  Derbent was in no different position from Willow Tree in that regard.  
32.	Accordingly (and again disregarding the assignment to Slocom), if Derbent cannot recover the debt owed by Tatik under the Derbent-Tatik Loan Agreement, then Derbent remains under a liability to the Kruglov family (or Willow Tree) which it is unable to fulfil.  Accordingly, Derbent suffers loss.  And if a third party has by its tortious conduct or breach of another contract with Derbent caused the failure of Derbent to recover the monies due under the Derbent-Tatik Loan Agreement, that third party is liable in damages to Derbent for that loss.  
33.	The position may be considered more starkly by envisaging the situation of back-to-back lending, when a series of loans are directly connected.  If A lends £1 million to B, so that B can lend £1 million to C, on terms that B will repay A both principal and the interest earned on the onward loan to C, then if D induces C to break his contract with B such that C does not repay the debt when due, B can sue D in damages.  This remedy may be significant if, for example, C subsequently goes bankrupt.  It is no answer for D to say to B: “You have suffered no loss, since any money you would have received would have been paid over to A.”  If that were correct, then although D has committed a tort, he would escape all liability on the grounds that B, who has a remedy, would be held to suffer no loss, and A, who suffered a loss, would have no remedy since D did not induce a breach of A’s contract.  As Lord Keith of Kinkel observed in GUS Property Management Ltd. v. Littlewoods Mail Order Stores Ltd. [1982] SLT 533, 538, "the claim to damages would disappear . . . into some legal black hole, so that the wrongdoer escaped scot-free."  For the reasons set out above, that is not the position: B is left with an outstanding debt to A which otherwise would have been discharged.
34.	The present case is not one of back-to-back lending.  Mr Kruglov had transferred the Kruglov money, through the Foundations, to Willow Tree, with a general discretion to invest as Mr Haener thought best, and the position was the same with Derbent.  Other than the fact that various loans were being made from time to time to third parties by Derbent, Mr Kruglov was not involved in or even aware of the nature of those loans nor did he wish to be, so long as the investment earned him a good return: para 19.  Derbent was a true investment vehicle and the suggestion that such a corporate investment vehicle cannot recover damages for loss to its investments because those assets were always for the ultimate benefit of someone else is fallacious.  The paragraph in the Judgment on which this argument was founded is not to be read as holding that the loan was not an asset of Derbent; it is only a finding that the loan was not an asset of which Derbent could retain the benefit, to do with as it pleased.
35.	The cases of Hussey v Eels [1990] 2 QB 227 and Gardner v Marsh & Parsons [1997] 1 WLR 489, on which Mr Mill sought to rely in support of this submission are wide of the mark.   They address the very different question of when the loss initially suffered by a claimant falls to be reduced by reason of action subsequently taken by the claimant or a third party, or whether that subsequent action is to be disregarded.  In Hussey v Eels, the issue was whether the loss suffered by the claimant purchaser of a house affected by subsidence which the defendant sellers had negligently misrepresented in their response to the pre-contract enquiries, fell to be reduced by the profit made on the re-sale of the property by the claimant some years later.  In Gardner, the question was whether the purchasers of a leasehold maisonette with a structural defect which their defendant surveyor had negligently failed to detect, were entitled to the normal measure of damages based on the value of the property in its defective state at the time of purchase or whether that loss was eliminated by the remedying of the defect at the claimants’ landlords’ expense some five years later.  Indeed, the real issue in the latter case may be seen as being whether the claimants would in the events which occurred be achieving double recovery: see the dissenting judgment of Peter Gibson LJ. Those decisions are of no assistance on the issue now raised in the present case.
36.	Accordingly, the submission that Slocom suffered no loss and thus can recover no damages is rejected.
(ii)  Should the financial damages be reduced by the value of the equitable mortgage? 
37.	The submission based on the value of the equitable mortgage is also misconceived.  The equitable mortgage arose by reason of the Derbent-Tatik Loan Agreement: paras 344-345.  Accordingly, prior to the breaches and tortious conduct of Sibir and Maritime, Slocom had the benefit of an equitable mortgage as security for the Tatik debt, which mortgage would be discharged when the debt was paid.  If Sibir had complied with its contractual obligations, the debt would have been repaid and the mortgage discharged.  Therefore, if Sibir now only paid by way of damages the difference between the debt and the value of the mortgage, Slocom would not be left in the same position as if Sibir had performed its contractual obligations.  On the contrary, Slocom would receive a much reduced sum of money and the right to a beneficial interest in land abroad, with all the potential complexity of enforcement.  As Mr John for the Claimants rightly submitted, that would be very different from the position for which Slocom bargained in agreeing in April 2009 to the sale of the Villa.  To award damages on that basis would not accord with the fundamental principles as emphasised in the passages from The Golden Victory set out above.  Moreover, there was force in Mr John’s observation that the fact that Sibir and Maritime were advancing this argument at all indicates that they consider that effective enforcement of the equitable mortgage may well present serious difficulty.
38.	The result is no different if analysed as regards the tortious measure of damages: i.e. to put the claimant in the position as if the tort had not been committed.  Sibir and Maritime are liable for inducing Tatik to breach the Derbent-Tatik Loan Agreement.  If they had not so acted, Slocom would have been paid the debt owed by Tatik under that agreement and the equitable mortgage would have been discharged.  If they now pay damages equivalent to that debt, this will be the result.  If their damages are reduced by the value of the equitable mortgage, it will not be, and Slocom will be in a significantly worse position.
39.	I should add for completeness that in their written argument for the post-Judgment hearing, Counsel for Sibir and Maritime advanced a further contention that the damages recoverable by Slocom should be reduced to reflect the amount that would have been due to Mr Haener from Mr Kruglov for his fees: see para 54.  That submission, which was frankly hopeless, was abandoned in the course of argument.
(III)	INTEREST
40.	In relation to the judgment against Tatik in debt, Slocom has an express right to default interest under the Derbent-Tatik Loan Agreement that has been preserved after judgment by clause 12 of the Agreement: paras 2-3 above. Accordingly, that right to contractual interest does not merge in the Judgment: Standard Chartered Bank v Ceylon Petroleum Corporation [2011] EWHC 2094 (Comm) at [12].  Slocom is therefore entitled to default interest at the contractual rate as against Tatik from the date of default until judgment; and then at the same rate thereafter on the judgment debt.
41.	In relation to Sibir and Maritime, as regards pre-judgment interest the Court has a general discretion under s. 35A of the Senior Courts Act 1981 (“SCA”), save that only simple interest can be awarded.  Mr John submitted that the Court should award the default rate of 15% that would apply under the Derbent-Tatik Loan Agreement, on the basis that the breaches committed prevented Slocom obtaining what it would have got under the agreement.  However, I regard this as misconceived.  No claim for such interest as special damages, which then could include compound interest, was pleaded: cp Sempra Metals Ltd v IRC [2007] UKHL 34, [2008] AC 561.  The loss for which Sibir and Maritime were responsible was that Slocom was not paid the amount due on 24 April 2010: see para 16 above.  I consider that the interest should reflect the fact that Slocom was kept out of that money and not the contractual bargain of the Derbent-Tatik Loan Agreement.  
42.	Accordingly, a commercial rate should be applied.  At the hearing, the Defendants submitted this should be the European Central Bank (“ECB”) rate plus 1%.  By yet further written submissions some considerable time after the hearing, the Claimants’ solicitors contended that the ECB rate has been so low over the relevant period that this does not represent a commercial rate.  They pointed out that the Commercial Court as regards judgments in US dollars has often awarded the US Prime Rate, which has been about 3% above the US Federal Reserve Funds rate and submitted that the rate here should be the ECB rate plus 3%.  However, the practice for US dollar judgments is of little value for a judgment in euros.  It would be for the Claimants to put in some evidence of the borrowing rate for euros but despite the lapse of time since the Judgment they have not done so, other than to draw attention to the decline in the ECB rate.  Moreover, in the exercise of the court’s discretion as regards rates, I think it is appropriate to have regard to the fact that Slocom was not a trading entity but effectively an investment vehicle.  There is no evidence, or even any grounds on which to infer, that it borrowed money, so that by being out of its money what it lost was only the investment potential which that money could have earned.  In all these circumstances, I see no reason to award a higher rate than the ECB rate plus 1%.  As Sibir and Maritime point out, this will give Slocom an effective rate of between 2.5% and 1.75% over the relevant period.
43.	As regards post-judgment interest, since the damages are in foreign currency, s. 44A of the Administration of Justice Act 1970 (as amended) applies.  This provides as follows:
“(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.”
44.	I see no reason to adopt a different rate under this provision from that applicable pre-judgment.  Mr John contended that the court has power to award compound interest under s. 44A, on the basis that this statutory provision does not restrict the court’s power to an award of only simple interest, by contrast with s. 35A SCA.   If that were correct, this would have arisen frequently since there are innumerable cases, particularly in the Commercial Court, where the English court has awarded damages in a foreign currency.  However, Mr John could point to no authority or illustration that supported his proposition which, to be fair, he did not pursue with vigour.  I consider that the proposition is mistaken.  Section 44A does not disapply s. 17 of the Judgments Act 1838 in the case of a foreign currency judgment but merely displaces the rate applicable under that statute with a general discretion to determine the rate.  I do not think that alone is sufficient to give the court power to order that the rate be compounded: that would be a significant change which would, in my view, require clearer wording.
(IV)	THE EQUITABLE MORTGAGE
(a)  The terms of the declaration
45.	The issue here was whether the mortgage should be for the full amount owed by Tatik under the Derbent-Tatik Loan Agreement (as Slocom contended) or only for the principal owed under the Agreement (as Sibir and Maritime contended).
46.	The equitable mortgage arises pursuant to clause 3.2 of the Derbent-Tatik Loan Agreement.  It is appropriate to set out clause 3 in full:
“3.	Security 
3.1	[Mr Tchigirinski] shall agree pursuant to the Pledge Agreement that all amounts owing by [Tatik] to [Derbent] under this Agreement from time to time shall at all times be secured by way of first ranking security interest over the Tatik Shares.
3.2	[Tatik] further agrees, by way of additional security for the Loan, to execute a mortgage over the [Villa] in favour of [Derbent]. Such mortgage, in a form satisfactory to [Derbent], shall be executed by [Tatik] as soon as possible following the date of execution of this Agreement.”
47.	The contrast between sub-clauses 3.1 and 3.2 is evident: cl 3.1 creates a security interest in respect of “all amounts owing … under this Agreement”; whereas the mortgage to be created under cl. 3.2 is as security for “the Loan.”  The Agreement defines “the Loan” in cl 1.1 as “the principal amount outstanding under this Agreement from time to time” and further cross-refers as at the date of the Agreement to the amount set out in cl 2.1, which is the amount of principal, the interest being specified in cl 2.2: see para 160.  
48.	Mr John sought valiantly to argue that cl. 3.2 was ambiguous since the terms of the mortgage, referred to in the second sentence, were not specified.  On that basis, he submitted that it should be read in accordance with business common sense so as to cover the whole of the debt arising under the Agreement.
49.	I accept that that would be a sensible way to provide for a mortgage security.  However, I see no ambiguity on this score in the wording of clause 3.  It seems to reflect a deliberate decision whereby the “additional security” provided by way of the mortgage is for less than the primary security provided by the security interest in the Tatik shares under cl. 3.1.  The “terms of the mortgage” cannot enlarge on its scope.  But whatever the explanation, I see no grounds on which to interpret and apply cl 3.2 other than in accordance with what I regard as its clear meaning.  Accordingly, the equitable mortgage will be for the principal amount of the debt, determined as set out in paras 8-10 above: i.e. €31,548,077.
(b)	Further relief
50.	Slocom does not presently seek any further relief pursuant to its equitable mortgage.  It shall have permission to apply in the event that it should seek such relief in the future.  An order in those terms was not opposed.
(V)	COSTS
51.	The Claimants seek their costs against all three Defendants.  The Defendants contended that there should be a discount from those costs on the grounds that (a) Slocom did not succeed on every issue; (b) significant time was taken up with Mr Haener’s evidence due to his dishonesty and he also had to explain his earlier witness statements made on the interim injunction application; and (c) Slocom’s success was, in whole or in part, on the basis of an allegation that was not pleaded.
52.	As to (a), the point relied on was Slocom’s allegation that the sale of the Villa should be set aside under s. 423.  It is of course correct that Slocom failed on that issue: see paras 338-343.   However, that allegation played a very small part in the trial and the evidence.  This was not a case where Slocom put forward its own expert on valuation and the two sides’ experts were then cross-examined.  Had that been the position, my approach to this point may have been very different.  This was a complex case, and having regard to the very low key way in which this point was advanced I do not regard the failure on this ground as justifying any disallowance from Slocom’s costs.  
53.	As to (b), Mr Haener was purely a witness, albeit a very important one: he was not the claimant.  His dishonesty, which was as much if not more in the service of Mr Tchigirinski, the owner of Tatik, as of Mr Kruglov and the Claimants, was part of the story that had to be explored.  I do not see that the way Mr Haener conducted himself can be attributed to the Claimants, nor can the Claimants be criticised for calling him.   Mr Haener’s first two witness statements were made on the interim injunction application, in respect of which the Defendants have been awarded their costs when it was discharged.  I do not see that on the basis of CPR 44.3(4) there is good reason to disallow any of the Claimants’ costs on this ground.
54.	As to (c), this forms a key basis of the Defendants’ application for permission to appeal and I consider it in that context below.  As there explained, I consider it misconceived and thus it provides no basis for a disallowance from costs.  In any event, in this hard fought litigation, concerning an involved story of financial dealings where a plethora of factual points were disputed, the fact that the account put forward by the Claimants of the so-called August 2008 “Agreement”, on the basis of Mr Haener’s evidence, was in part rejected is not, in my judgment, a ground to disallow any part of the costs of an action in which Slocom is undoubtedly the overall winner.
55.	As regards the Claimants’ costs altogether, it is to be noted that until the first day of the trial, Slocom was the only claimant.  Until then, Derbent was a party to the action only as second defendant to the Part 20 claim brought by Sibir and Maritime (and not Tatik).  Thereafter, Derbent was also a claimant but it was joined only on the basis of the Defendants’ challenge to the assignment which proved unsuccessful.  The Defendants quite rightly did not contend that Derbent should therefore be denied its costs as a Claimant.
56.	Therefore it is appropriate that both Slocom and Derbent should recover their costs, subject to detailed assessment if not agreed.  In the case of Slocom, this covers all its costs of the action as against all Defendants; in the case of Derbent, this covers its costs as against Sibir and Maritime of defending the Part 20 claim up to 22 February, and against all Defendants of the action thereafter.  It is of course irrelevant to this order who actually may have funded those costs.
Payment on account and interest on costs paid
57.	The Claimants seek a payment on account and an order for interest on the costs actually paid.
(a)  Payment on account
58.	Sibir and Maritime raised a further ground on which they contended that Derbent may not be able to recover payment of all its costs as against them, and submitted that in the light of this there should be no payment on account as regards the proportion of the costs for which Derbent was liable.  This was on the basis that Sibir has the right to set off Derbent’s liability to Sibir arising from the Sibir fraud.  Since this point was first raised in argument at the hearing on 27 February 2013 and had not been put forward in the solicitors’ correspondence that followed the Judgment or, indeed, in Counsel’s skeleton arguments, it was the subject of further written submissions following the hearing on behalf of the Claimants and a response on behalf of Sibir and Maritime.
59.	It is not suggested that this can affect the question of a payment on account in favour of Slocom, nor that it can affect the right of recovery of costs as against Tatik.   Further, although this point was put forward on behalf of both Sibir and Maritime, there appears no basis on which Maritime itself can rely on any obligation of Derbent so as to affect Maritime’s obligation to pay costs.  The distinction may be academic, in that Maritime may have no assets apart from the Villa, but in any event the issue falls to be considered, in my view, only as between Sibir and Derbent.  In that regard, as both those parties recognise, the key document is the Derbent Settlement Agreement of 25 June 2009, which led to the consent order made by Teare J in the Sibir proceedings: see at paras 214-215.  
60.	Like almost all the many other contracts considered in this case, the Derbent Settlement Agreement is a complex document.  It is made between the parties to the Sibir proceedings, i.e. Sibir, Caraline and OJSC Magma on the one hand (“the Claimants”) and Derbent on the other.  By the Settlement Agreement, Derbent acknowledged that it held $174 million that it received from the Claimants under the Sibir fraud (“the Received Monies”) on trust for the Claimants, and the agreement also acknowledged that Sibir had received back from Derbent shares in Sibir that had been sold for a little over £52.5 million and almost £2.76 million in cash.  Derbent assigned to Sibir its rights to any proceeds of any claims or causes of action to recover the remainder of the Received Monies which had been transferred for the direct or indirect benefit of or on the instruction of Mr Tchigirinski (“the Transferred Funds”) and undertook to account to Sibir for any recoveries which it made by such claims (“the Derbent Claims”).  
61.	It is unnecessary to prolong this judgment by quoting extensively from the agreement.  All the obligations on Derbent are expressed by reference to the Transferred Funds and the Derbent Claims.  In particular, there was no general obligation on Derbent to account for the balance of the $174 million.  On the contrary, clauses 3.1-3.2 provide:
“3.1	Each of the Claimants shall use all reasonable endeavours to procure that the Sibir Proceedings against Derbent as defendant are finally determined on the basis of an order that the Received Monies were trust monies and that all remaining claims be discontinued with no order as to costs.
3.2	To the extent that the Court is prepared to grant such an order, it shall take the form set out in Exhibit A of the Settlement Agreement and the Parties shall sign and submit such an order to the court within 7 days of the date of this Settlement Deed.” 
62.	Clause 3.2 led to the application for the consent order made by Teare J.  And clause 4.1 sets out a covenant not to sue in relation to any subject matter of the Sibir proceedings or the alleged receipt of funds by Derbent for the benefit of Mr Tchigirinski.  That covenant is expressed to cover recovery “from Derbent, the Derbent Shareholder [i.e. Mr Kruglov, albeit his identity had been concealed from the Sibir Claimants at the time], or any Derbent Director [i.e. the Cyprus professional fiduciary directors of Derbent].”
63.	Counsel for Sibir submitted that the “primary intention” of the covenant not to sue was to protect the Derbent Shareholder and Derbent Director (as defined), since Derbent warranted under the agreement that it had no assets.  But the clause is clearly not so limited but expressly extends to cover Derbent as well.  It therefore applies (and objectively must have been intended to apply) in the event that Derbent should subsequently acquire some unrelated assets.  Accordingly, I accept Mr John’s submission that the only way in which Sibir could now seek to pursue a claim directly against Derbent for the unrecovered part of the Received Monies, other than as expressly provided for in the Settlement Agreement, would be if the covenant not to sue was terminated under clause 4.5 by reason of a breach by Derbent of its obligations under that agreement.  That was indeed argued by Sibir at the trial, without success: paras 349-353.  
64.	I therefore see no ground on which Sibir could assert a claim against Derbent that could apply, whether by set-off or otherwise, to the monies to which Derbent is entitled under the costs order in these proceedings.  Any obligation which might otherwise arise to restore the trust fund in the Received Monies is subject to the terms expressly agreed in the Derbent Settlement Agreement.  It follows that this provides no basis for denying Derbent an interim payment on account of its costs.
65.	The Claimants’ total invoiced costs, as set out in a witness statement from Mr Beale of their solicitors, are a little over £1.8 million to end of trial (i.e. excluding the costs of the subsequent hearing and submissions).  Slocom was ordered to pay the Defendants’ costs of the injunction and disclosure applications.  Tatik’s costs in that regard have been paid; Sibir and Maritime served a bill of costs in the total amount of £306,370, of which £135,000 has been paid.  On the basis that Sibir and Maritime might recover on taxation 75% of their billed costs, that leaves a balance owing from Slocom of £94,777.  Using round figures for this purpose leaves a figure of net costs claimed by the Claimants of just over £1.7 million.  That is a very substantial figure but I have no doubt that the total costs that would be assessed for this large-scale litigation in which most matters were in dispute will be high.  Nonetheless, it is appropriate to be cautious in determining a payment on account, in particular in circumstances where an overpayment may be hard to recover.   Pursuant to CPR rule 44.3(8), I think it is appropriate to order payment on account of 50% of this sum, i.e. £850,000.  That sum is to be paid within 21 days, subject to the stay addressed below.
(b)  Interest on costs
66.	The overwhelming proportion of the Claimants’ costs has been paid by them to their solicitors at various stages up to late November 2012.  In that regard, significant sums were paid from late 2010 onwards, so that Slocom, and latterly also Derbent, have been out of that money for a considerable period of time.  The only circumstance raised as to why it would not be appropriate to order interest on those costs was the matter of Sibir’s claim against Derbent which of course concerns only Derbent’s costs and which I have in any event rejected above.  I consider it is clearly appropriate to order that the Claimants should have interest on their costs paid prior to judgment from the dates of such payment, as sought at base rate plus 1%, to the date of the order made pursuant to this judgment.
(VI)	PERMISSION TO APPEAL
67.	Sibir and Maritime seek permission to appeal on two distinct grounds: (a) as regards the finding that in August 2008 Mr Tchigirinski and Mr Haener on behalf of Derbent agreed that Tatik should become the debtor to Derbent under the Second Tchigirinski Loan in place of Mr Tchigirinski personally; and (b) as regards the finding that there was consideration for the purpose of section 423 for the assignment dated 24 December 2008 of the Derbent-Tatik Loan Agreement from Derbent to Slocom.  Tatik seeks permission to appeal on ground (a), but submits that if Sibir and Maritime are successful in an appeal on ground (b) then the result will be that Slocom’s claim as against Tatik would fail.
68.	As regards the first ground, although eloquently expressed in various different ways in the draft Grounds of Appeal and also the written skeleton arguments, I consider that it subtly but significantly seeks to avoid the key determination in the Judgment.  The key determination was as to whether the Derbent-Tatik Loan Agreement of 19 December 2008 represented the true intention of the parties to that agreement, i.e. whether Derbent (through Mr Haener) and Tatik (through Mr Tchigirinski) intended that Tatik should be liable to Derbent for all the debts there set out, including what was originally a loan from Willow Tree to Mr Tchigirinski personally.  My finding was that this was indeed the intention of Mr Haener and Mr Tchigirinski when signing the agreement on behalf of Derbent and Tatik and that the agreement was accordingly not a sham.
69.	This was a conclusion of fact.  Like many conclusions of fact, it rests on various other facts, which insofar as not agreed involve findings made by the court.  Here, the conclusion rested in part on my findings that several months before, in about August 2008, Mr Haener, acting for Mr Tchigirinski, had received tax advice from PWC that it would be advantageous from the French tax position if Tatik were the borrower under the loan agreement rather than Mr Tchigirinski himself.  Mr Haener gave evidence to that effect.  And I found on the basis of the document drawn up by Baker & McKenzie for Mr Tchigirinski and signed by him in August 2008, purportedly on behalf of Tatik, that he wished to act on that advice.  However, the August 2008 document could not be effective as an agreement since at that time, for reasons explained in the Judgment, Mr Tchigirinski did not control Tatik.  Thus the French tax advice was relevant by way of explanation and motive; and what is referred to as the August 2008 “Agreement,” although not an effective contract, was relevant as evidence that Mr Tchigirinski and Mr Haener proceeded to act in accordance with that advice.  But it was the Derbent-Tatik Loan Agreement in December 2008 that put this into effect.
70.	It is true that Mr Haener did not give specific evidence that he discussed the PWC advice with Mr Tchigirinski and that he was not asked that question.  But since PWC were giving tax advice for Mr Tchigirinski’s benefit and Mr Haener was frequently in contact with Mr Tchigirinski, working out of his office and seeing him sometimes several times a day, I do not see how it can realistically be contended that this was not a reasonable inference, and similarly that this being the advice, Mr Tchigirinski would have wished to act upon it.  The instructions from Mr Haener to Mr Melling that led to the drafting of the August 2008 “Agreement” are quoted in full at para 120.  And as also recorded in the Judgment, Mr Haener said in evidence that the reason why he requested Mr Melling to prepare an agreement with Tatik as the borrower in place of Mr Tchigirinski was because of PWC’s tax advice: para 122.   The fact that Mr Tchigirinski and Mr Haener signed the August 2008 “Agreement” is clear evidence that they wished Tatik to be substituted as the borrower.  The French tax advice is relevant only as providing a rational explanation.
71.	The Defendants rely on the fact that Mr Haener also said that it had been agreed with Mr Tchigirinski in late March 2006 that Tatik should be the borrower in place of Mr Tchigirinski and that I rejected that evidence.  However on this, as in other respects, Mr Haener’s evidence was not consistent. But I do not see that the Defendants have any real prospect of success in contending that the determination on the facts was therefore unsupported by the evidence, or unsustainable.  Nor do I consider it reasonably arguable that it was not open to the court to make this determination on the evidence in its entirety, as it emerged at trial, just because that was not the factual finding the Claimants invited the court to make.  It is not infrequently the position that the court, after hearing all the evidence, will consider that, on the balance of probabilities, the true course of events was not in all respects as put forward by a party, but that even on what the court finds was the probable course of events that party, whether it be the claimant or the defendant, is entitled to succeed.  That is perhaps particularly the case when, as here, a party is hampered in adducing evidence because its direct involvement at the time was only through an agent who turned out to be untrustworthy.  
72.	That takes me to the pleading point, which was strongly relied on in support of this ground.  The Defendants submitted that this finding was not open to the court because it was not the way the case had been pleaded.  However, I consider that this objection is misconceived.  The Claimants’ case was simply based on the Derbent-Tatik Loan Agreement and the breaches of the subsequent agreements of April 2009: see the Amended Particulars of Claim.  The allegation that the Derbent-Tatik Loan Agreement was not a valid agreement, and in effect a sham, was made in the Defence, in particular by Sibir and Maritime.  It was in response to that allegation that the Claimants pleaded by way of Reply that the Derbent-Tatik Loan Agreement was not a sham since it evinced the true intention of the parties, and in support they contended that there had been an oral novation agreement in April 2006 that Derbent would be substituted for Willow Tree as lender and Tatik would be substituted for Mr Tchigirinski as borrower, although that could not be an agreement binding on the part of Tatik since Mr Tchigirinski did not control Tatik at that time.  Thus the April 2006 “agreement” was relied on by way of evidence of the intention of the parties to which effect was given in the Derbent-Tatik Loan Agreement; and the Claimants submitted that the August 2008 “Agreement” was in this respect corroborative of the April 2006 (or in fact, as the evidence came out, late March 2006) oral agreement.  Although I found that in late March 2006 there was agreement to substitute Derbent for Willow Tree as the lender, as noted above, I found on the basis of Mr Haener’s oral evidence and the contemporary documents that the agreement to substitute Tatik for Mr Tchigirinski as the borrower came not then but later, in August 2008, as shown by the August 2008 “Agreement”.
73.	I do not see that there is a real prospect of contending that that finding was precluded by the pleading.  The two authorities cited by the Defendants concern a very different position.  Al-Medenni v Mars UK Ltd [2005] EWCA Civ 1041 was a personal injuries action in which the trial judge held that the defendant was negligent on a basis that was inconsistent with the allegation of negligence advanced at the trial.  The claimant was injured in the course of her employment when a heavy roll of wrapping foil fell on her after being placed insecurely on a machine close to where she was working.  The critical particulars of negligence in her Particulars of Claim alleged that an identified employee who had been working on the machine was responsible for placing the roll there in this way, and the defendant’s evidence at trial was directed to that question (including calling that individual to give evidence).  The judge found that this individual had not placed the roll there, but proceeded to hold nonetheless that the defendant was negligent on the basis that the roll had been put there in an insecure manner by another, unidentified employee (referred to as a “third man”).  In those circumstances, it is hardly surprising that the Court of Appeal found that the judge had stepped beyond the confines of the adversarial system.
74.	The other authority relied on, Massod v Zahoor [2009] EWCA Civ 650, [2010] 1 WLR 746, is even further removed from the present case.  There, the judge held in favour of the claimant on the basis of a cause of action that had never been advanced: he rejected the claim that the claimant was entitled to ownership of shares pursuant to a written agreement, finding that the agreement was forged; but he then proceeded to find that the claimant was so entitled on the basis of a resulting or constructive trust, a claim which the claimant had never put forward: see the judgment of the Court of Appeal at [82]-[84].
75.	As regards the second ground, the question of consideration for the Derbent-Slocom assignment is addressed at paras 295 to 302.  This also concerns what are essentially findings of fact: i.e. that Derbent had been under a liability to pay over the proceeds of the Derbent-Tatik Loan Agreement, when received, to Willow Tree (or the Kruglov family); and that the intention of the parties at the time of the assignment was that Slocom assumed that obligation.  On that basis, Slocom’s assumption of what had previously been Derbent’s liability constituted consideration.  
76.	The grounds of appeal put forward seek to challenge the first of those findings, although it is notably the finding also relied on by Sibir and Maritime as the foundation of their argument that the Claimants suffered no loss: paras 24-26 above.  However, I consider it follows ineluctably from the finding earlier in the Judgment that Derbent was introduced as the investment vehicle for the Kruglov money in place of the Foundations: see at paras 87 to 93.  That evidence concerning the introduction and role of Derbent was not challenged at trial.  Sibir and Maritime rely on Mr Frick’s evidence that the duty of Derbent was owed to the Kruglov family not to Willow Tree.  However, Sibir and Maritime do not by their draft grounds of appeal dispute that after the assignment Slocom owed a duty to account for the proceeds of the loan to Mr Kruglov but argue that it arises from the beneficial ownership of Slocom by Mr Kruglov.  However, whatever the legal foundation of Slocom’s duty to account, it clearly did not owe a duty to account to Derbent.  It is the relief of Derbent from its duty to account to Willow Tree or the Kruglov family that constituted the consideration.  That was reflected in the accounting treatment of these transactions by Mr Schneebeli, which was not challenged at trial as being incorrect: see at para 196.  The attempt to derive support for this ground of appeal from Pan Ocean Shipping Ltd v Creditcorp Ltd (The Trident Beauty) [1994] 1 WLR 161, which was not cited in the argument at trial, is misplaced, since Slocom was not a third party independent of Mr Kruglov but a company  which he beneficially owned.  Accordingly, I do not see that this ground has any real prospect of success. 
77.	Permission to appeal is therefore refused.
(VII)	  STAY PENDING APPEAL
78.	The Defendants all seek a stay of execution of the Judgment pending a renewed application for permission to appeal.  The Claimants point out that a stay is exceptional: see the notes in the White Book to CPR 52.7.  However, if permission to appeal were to be granted by the Court of Appeal and an appeal proved successful, once this very significant sum of money had been paid over to Slocom the Defendants may face serious practical difficulties in recovering the money.  Slocom is a Cypriot company, and the money would almost certainly be paid out to Mr Kruglov and his family.  They are resident in Russia with no assets in this jurisdiction and, as is clear from the Judgment, they seek to hold their assets in a discreet and confidential manner.  In my view, this is just the kind of exceptional circumstance that justifies a stay.
79.	Slocom submitted that it might itself be prejudiced if execution is delayed since Sibir and Maritime may not then have assets with which to satisfy the Judgment.  However, as regards Sibir, it is an English company and a subsidiary of the large Russian conglomerate, Gazprom-Neft, which is effectively owned by the Russian government.  Sibir has produced its audited accounts for the year ended 31 December 2011 showing net assets of over $1 billion.  As regards Maritime, its only asset is the Villa and I accept that without more Slocom would face the risk that the Villa would be disposed of and the proceeds paid out elsewhere.  However, as a condition for a stay Maritime undertook that it would not take steps to dispose of the Villa without the consent of Slocom or permission of the court.  On that basis, I have no doubt that the balance of risk of injustice clearly supports the imposition of a stay.
80.	Accordingly, on the above undertaking by Maritime there will be a stay for 21 days from the handing down of this judgment, and thereafter if an application for permission to appeal is lodged in the Court of Appeal until that application is determined.  The stay covers also the order for a payment on account of the Claimants’ costs.
81.	Finally, the Claimants had provided over £400,000 as security for the Defendants’ costs and they sought the return of this money.   However, justification for that security continues to apply if there should be an appeal, as covering the Defendants’ potential costs in the event of the appeal being successful.  Accordingly, release of the security will be stayed on the same terms as the stay on execution of the Judgment.
COSTS OF THE POST-JUDGMENT HEARING AND SUBMISSIONS
82.	The decision on costs set out above covers the costs up to Judgment.  The range and extent of submissions made post-Judgment justifies separate consideration on the question of costs.  On the basis of this judgment, the Claimants were successful in part, but not on all the consequential issues argued.  I consider that it would be disproportionate to hold a further hearing purely concerning those costs.  My provisional view is that, having regard to the issues on which they and the Defendants respectively were successful, the Claimants should recover as against all the Defendants 70% of their costs of the post-Judgment hearing and subsequent submissions, such costs to be subject to detailed assessment.  If any party wishes to contend for a different order, it should make submissions in writing within 7 days of the handing down of this judgment.