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Richardson-Ruhan v Ruhan [2017] EWHC 2739 (Fam)

Decision of Mostyn J in relation to the computation of assets in a Wife’s claim for financial remedies following divorce.

Neutral Citation Number: [2017] EWHC 2739 (Fam)
Case No: FD14D00158
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 09/11/2017

Before:

MR JUSTICE MOSTYN
Sitting in Public

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Between:

Tania Jane Richardson-Ruhan
Applicant

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Andrew Joseph Ruhan
Respondent

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Sally Harrison QC and Abigail Bennett (instructed by JMW Solicitors) for the Applicant
Martin Pointer QC and Richard Sear (instructed by Miles Preston Solicitors) for the Respondent

Hearing dates: 9-20 October 2017
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Judgment Approved

MR JUSTICE MOSTYN


This judgment was delivered in public. However, an order imposing certain reporting restrictions is in place. Specifically, in no report of the case may the names or schools of the children be published and no further details of the BAE arbitration may be given beyond that referred to in the judgment. Breach of these prohibitions will amount to a contempt of court.

Mr Justice Mostyn:
1. This is my judgment on the financial remedies claim by Tania Richardson-Ruhan ("the wife") against Andrew Ruhan ("the husband") following their divorce. I have decided that in the particular circumstances of the case this judgment should set out my findings of fact (i.e. computation) and that I should then receive further submissions before I decide how to exercise my dispositive powers (i.e. distribution). Counsel do not oppose this course. 

2. I apologise for the length of this judgment, but in view of the complexity of the matter it is unavoidable.

3. The husband is 55; the wife 49. They were married on 5 July 1997. They have a son aged 19 and a daughter aged 16. They separated on 29 September 2013, so this was a fairly long marriage.

4. It is common ground that the family enjoyed a very high standard of living. This is because the husband was a highly successful businessman and was very rich. The question that I must decide is whether he still is very rich. The husband says that he is not; indeed, he says he is insolvent to the tune of £2m. This, he says, is as a result of virtually his entire fortune, some £200m, being stolen from him in March 2014 by a convicted fraudster Dr Gerald Smith with the assistance of his (the husband's) treacherous former "front-men" Simon Cooper and Simon McNally. The wife says that this is a false presentation. She says that the husband remains vastly rich in that very large sums, or the right to receive very large sums, are held on his behalf by a nominee, Anthony Stevens. Further, should he win an arbitration against BAE very large value from the development of two BAE sites which he will be able to purchase will come his way. 

5. The abstraction was, according to the husband, a breath-taking act of self-help by Dr Smith done in the middle of proceedings commenced, effectively by him (Dr Smith), in the Commercial Court on 29 October 2012 ("the Orb litigation"). Those proceedings, which gave rise to a counter-claim by the husband, were complex, elaborate and expensive. They spawned allegations of the worst kinds of litigation misconduct. To describe them as "hard-fought" would be a serious understatement. Although they were ostensibly compromised by a consent order made by Mr Justice Popplewell on 6 May 2016, providing for a mutual dismissal of the claims ("the drop-hands agreement"), they have recently sprung back into life ("the Phoenix proceedings").

6. In order to assist navigation through what is rather dense material in this judgment (and in the judgments in the Commercial Court referred to below) I have attached to this judgment a glossary of terms. This derives from an excellent piece of work by Ms Bennett, junior counsel for the wife, for which I am grateful.

7. A key historical fact is that in the autumn of 2002 Dr Smith, who was then Chief Executive of Orb, stole approximately £35 million from Izodia plc, a company in which Orb held a 29.9% shareholding, and misapplied the bulk of those monies for Orb's benefit.  In April 2006 Dr Smith pleaded guilty to theft and false accounting and received an eight-year prison sentence. In November 2007, a confiscation order was made (by consent) in the amount of £41m, a national record, with a default sentence of a further 8 years in prison. KPMG were appointed as enforcement receivers. Modest recoveries have been made but interest has accrued so that the sum outstanding now stands at over £60m. In Mr Pointer QC's words "Smith is out to defeat [the husband] utterly. He chooses to blame [the husband] for his conviction and incarceration in 2006". Moreover, Dr Smith says (and in a recital to the confiscation order he asserts) that the husband holds realisable property belonging to Dr Smith in a sum in excess of £41m, and that he (Dr Smith) has no other assets. On his release from prison in 2010 Dr Smith (through his cohorts) intimated his claims against the husband which led to the launch of the Orb proceedings in October 2012.

8. Typing the word "Ruhan" into the search box for the Commercial Court section of Bailii returns no fewer than nine judgments.  Ignoring the seventh (Eastern European Engineering Ltd v Vijay Construction (Proprietary) Ltd [2017] EWHC 797 (Comm) where one of the other judgments was cited as a precedent) the other eight are all in, or connected to, the Orb litigation. They are:

i) Orb A.R.L. & Ors v Ruhan & Ors [2015] EWHC 262 (Comm) (11 February 2015: Cooke J)

ii) ORB a.r.l.; & Ors v Ruhan [2015] EWHC 3638 (Comm) (14 December 2015: Walker J) 

iii) ORB a.r.l.; & Ors v Fiddler [2015] EWHC 3683 (Comm) (14 December 2015: Walker J)

iv) ORB A.R.L & Anor v Fiddler & Anor [2016] EWHC 361 (Comm) (26 February 2016: Popplewell J)

v) ORB a.r.l. & Ors v Ruhan & Ors [2016] EWHC 850 (Comm) (15 April 2016: Popplewell J)

vi) Phoenix Group Foundation v Cochrane & Anor [2017] EWHC 418 (Comm) (06 March 2017: Popplewell J)

vii) Grenda Investments Ltd v Barton [2017] EWHC 2371 (Comm) (20 September 2017: Picken J)

viii) Grenda Investments Ltd v Barton [2017] EWHC 2372 (Comm) (20 September 2017: Picken J)

9. All of the judgments are interlocutory, and they by no means represent the full extent of the litigation. There have been numerous other rulings and orders, a foray to the Court of Appeal, as well as proceedings in the Isle of Man, and in the BVI and on appeal to the Eastern Caribbean Court of Appeal. The Phoenix proceedings are described in Judgment No. (vi). It can be seen that in that case there are four official parties but additional "interested parties" making claims, in different forms. All the judgments, whether before or after the revival of the proceedings, were given publicly, and most of the proceedings were held in public. It was for this main reason that I, exceptionally, ruled that the trial before me should be held in public, but subject to certain reporting restrictions. In this way, the interested parties could attend and observe the husband give oral evidence under thorough cross-examination. That has not yet happened in the Commercial Court.

10. At the pre-trial review on 1 August 2017 I was asked by the husband to adjourn the wife's claims until after the conclusion of the Phoenix proceedings. The husband is not a party to, or otherwise participating in those proceedings. I declined to do so. The wife's financial remedy claims were well advanced, and had been ongoing since January 2014. By contrast, the Phoenix proceedings only commenced in June 2016, and are in their very early stages; indeed, some of the claims by the interested parties, have not yet, even now, been expressed in issued claim forms. There was no prospect of any resolution for years.

11. However, in order to try to avoid the prospect of inconsistent judgments, and the vice of duplicative proceedings generally, I ordered that the wife's statement of case and other key document were to be served on the parties to, and the interested parties in, the Phoenix proceedings, together with a copy of my judgment on that day, and I allowed those persons and bodies so served to intervene in the proceedings before me.   In that judgment, I expressed the view that if the served persons and bodies did not intervene then my findings would not be binding on them. Plainly, cause of action estoppel could not arise as neither the parties nor the subject matter of the proceedings would be the same. Nor could issue estoppel, as the served persons and bodies would not, in the absence of their intervention, be parties to the proceedings before me. I expressed the view that it would be doubtful if the doctrine of abusive collateral attack could apply. Now, I am not so sure, although it is not for me to make the definitive ruling. We know that the hallowed pronouncement of Wigram V-C in  Henderson v Henderson (1843) 3 Hare 100, [1843] UKPC 6 underpins the entire jurisprudence concerning duplicative proceedings, whichever category is being considered: see Virgin Atlantic Airways Ltd v Premium Aircraft Interiors UK Ltd [2013] UKSC 46; [2014] AC 160 at [25] per Lord Sumption, Takhar v Gracefield Developments Ltd & Ors [2017] EWCA Civ 147 at [37] per Lord Justice Patten and Norman v Norman [2017] EWCA Civ 120 at [80] per Lady Justice King. The principle in Henderson v Henderson was clearly explained by Lord Bingham in Johnson v Gore-Wood & Co [2002] 2 AC 1 at 31 (itself a collateral attack case) in these terms:

"The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all."

12. For the purposes of the case before me I have been given reams of paper from the Orb proceedings and the Phoenix proceedings. The paperwork has included the judgments mentioned above and numerous witness statements. In his opening skeleton Mr Pointer QC argued that the judgments were inadmissible under the rule in Hollington v Hewthorn [1943] KB 857. He further argued that the witness statements had questionable status as the notice requirements in FPR 23.2 had not been complied with. However, as the case proceeded over its 10-day span Mr Pointer QC made numerous references in support of his case to this material and specifically relied on those judgments which had been in the husband's favour and especially strongly on a lengthy witness statement from Mr Stevens dated 7 November 2014. By the time he came to make his final submissions he had largely abandoned his objections.   I therefore do not need to decide definitively whether the rule still survives (as Christopher Clarke LJ has held in an obiter dictum in Hoyle v Rogers & Anor [2014] EWCA Civ 257 at [39]), or whether it has been abrogated by the Civil Evidence Act 1995. In any event, the rule has been held not to apply to inquisitorial proceedings where the court is obliged by statute to take into account all the circumstances of the case (see Re H (A Minor) (Adoption: Non-patrial) [1982] Fam 121.  

13. Reference to other judgments involving the parties, or one of them, is commonplace in financial remedy proceedings, and indeed in civil proceedings generally. The fact-finder will, as with all hearsay material, give the judgments the weight that they deserve, always reminding him or herself that the decision is to be made by him or her alone.

14. The witness statements are plainly admissible under section 2(4) of the 1995 Act notwithstanding that the notice requirements in FPR 23.2 had not been complied with. Nobody seriously suggested that the fact of non-compliance with the notice requirements should of itself affect the weight to be given to those statements.

15. Before me the only witnesses who gave oral evidence were the husband and the wife, and one summoned witness, Mr Philbin.  The husband and the wife were each thoroughly cross-examined. The husband was in the witness box over four days. No stone was left unturned. I have previously explained why the scrutiny of contemporary documents in oral evidence under cross-examination is the gold standard for producing reliable evidence for the proof of facts (Carmarthenshire County Council v Y [2017] EWFC 36 at [7] – [10]). I was therefore surprised that the husband did not cause Mr Stevens to give oral evidence to support the case that he (Mr Stevens) was not, and never had been, the husband's nominee. Mr Stevens is the husband's ally and there is nothing to suggest that he would have been resistant to attend to give evidence to back up his lengthy and detailed witness statement made in the Orb proceedings. Equally I was surprised that the wife had made no attempt to secure the attendance of Dr Smith. She has had many meetings with him, and he has even tried to reward her with a £500,000 gift for the maintenance and education of the children. I refer to this at para 84 below. Dr Smith has had a representative sitting in court throughout the proceedings before me and has supplied the wife with important documentary evidence late on in the trial. He is resident in the jurisdiction.

16. I accept that it would have been well-nigh impossible for either party to have secured the attendance of Simon Cooper or Simon McNally, both being resident out of the jurisdiction.

17. What am I to make of the failure of the husband and the wife to secure the attendance respectively of Mr Stevens and Dr Smith? In Prest v Petrodel Resources Ltd & Ors [2013] UKSC 34 at [44] Lord Sumption approved and followed Lord Lowry in R v Inland Revenue Commissioners, Ex p TC Coombs & Co [1991] 2 AC 283 at 300, where he stated:   

"In our legal system generally, the silence of one party in face of the other party's evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party's failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party may be either reduced or nullified"

18. That observation was subject to an important modification in divorce cases which Lord Sumption expressed at [45] in these terms:

"The modification to which I have referred concerns the drawing of adverse inferences in claims for ancillary financial relief in matrimonial proceedings, which have some important distinctive features. There is a public interest in the proper maintenance of the wife by her former husband, especially (but not only) where the interests of the children are engaged. Partly for that reason, the proceedings although in form adversarial have a substantial inquisitorial element. The family finances will commonly have been the responsibility of the husband, so that although technically a claimant, the wife is in reality dependent on the disclosure and evidence of the husband to ascertain the extent of her proper claim. The concept of the burden of proof, which has always been one of the main factors inhibiting the drawing of adverse inferences from the absence of evidence or disclosure, cannot be applied in the same way to proceedings of this kind as it is in ordinary civil litigation. These considerations are not a licence to engage in pure speculation. But judges exercising family jurisdiction are entitled to draw on their experience and to take notice of the inherent probabilities when deciding what an uncommunicative husband is likely to be concealing. I refer to the husband because the husband is usually the economically dominant party, but of course the same applies to the economically dominant spouse whoever it is."

19. In my judgment, the failure by the husband to call Mr Stevens is highly significant. They alone know what went on between them. In drawing on my experience and the "inherent probabilities" I conclude that the reason for the absence of Mr Stevens was that the husband feared that admissions would have been extracted from him at variance with his case. Equally, the failure by the wife to call Dr Smith is unfortunate and of significance. Dr Smith would have been able to have given relevant evidence in support of the wife's case, although as a convicted fraudster his testimony would have had to have been treated with great care. 

20. My final preliminary point is this. In preparing this judgment I have, naturally, borne in mind the oft-cited words of Lord Devlin that the judicial function is not just to render a decision but is also to explain it in words which will carry the conviction of its rightness to the reasonable man. However, I have also borne in mind the wise words of Lord Justice Lewison in Fage UK Ltd & Anor v Chobani UK Ltd [2014] EWCA Civ 5 at [115], echoed by the President in Re F (Children) [2016] EWCA Civ 546 at [22] – [23], that there is no duty on a judge, in giving his reasons, to deal with every argument presented by counsel in support of his or her case, nor to deal at any length with matters that are not disputed.

21. So, I turn to the facts. At this point any neutral and uninformed reader of this judgment should pause and read the judgments referred to above. Judgments Nos. (i) – (v) describe the litigation prior to the drop-hands agreement; Judgments Nos. (vi) – (viii) describe events thereafter.

22. I now summarise the effect of the judgments, so far as they relate to the issues to be decided by me. My summaries will no doubt be imperfect – I make no pretence to completeness – and a careful reading of the judgments is thus essential.

Judgment No. (i).
23. Mr Justice Cooke, in his judgment of 11 February 2015, held:

i) At para 6: There was a serious issue to be tried as to whether on 6 May 2003 an oral profit-sharing agreement was made between Dr Smith (and his cohorts) and the husband. He thought that the existing evidence militated against such an agreement but stated "I cannot see how the court can resolve a dispute of this kind about an oral agreement without hearing the evidence of the individuals concerned, tested by cross-examination."

ii) At paras 22 to 39: On the untested evidence then before the court there was a serious issue to be tried about Mr Stevens' beneficial ownership of Cambulo Madeira and whether he was in truth a nominee for the husband. There was a specific issue whether the sum of just under £92 million paid by Sentrum Holdings Ltd to Euro Estates Ltd and as thereafter disbursed by Mr Stevens can be properly seen as a substitute asset, representing the profit from the proceeds of sale of the hotels.

iii) At paras 47 and 51: Dr Smith (and his cohorts) had already recovered by self-help more than their best prospective entitlement. Although the claimants (i.e. Dr Smith and his cohorts) may have realistic prospects of success (against Mr Stevens and his cohorts) on certain causes of action, the court should not countenance permitting service out of the jurisdiction (on Mr Stevens et al) when full recovery has already been made in respect of the claim for the profit shares alleged.  It was unacceptable ("remarkable") for Dr Smith et al to seek a proprietary remedy against third parties without revealing the extent of recoveries made already in respect of the claims made against the husband and the basis upon which those recoveries were made, by reference to all relevant documents.

iv) At para 57: This was hard fought litigation with no holds barred between parties who were at enmity with one another and where a war of attrition was being waged in the shape of this action and other litigation being waged by the claimants against the husband.

v) At para 62: The husband had realistic prospects of success on his counterclaim. The evidence of Mr Cooper and Mr McNally that they were the beneficial owners of all the assets acquired through the husband's entrepreneurial skills, whether they were in the Arena Settlement or outside it, and that there was no nominee arrangement of any kind (or other similar understanding), was implausible.

vi) At paras 80, 96 and 131: The husband had been deliberately misleading (i.e. dishonest) in his initial defence by not mentioning the nominee arrangements in order to give the impression that he had no interest of any kind in the Arena Settlement after 21st March 2012. This stance had been taken on the suggestion of Mr Cooper and Mr McNally. Notwithstanding his dishonesty the husband should be allowed to pursue his new case. His proprietary claim was not shut out because Messrs Cooper and McNally were no more than discretionary beneficiaries of the Arena Settlement.

Judgment No. (v) 
24. In his judgment of 15 April 2016 Mr Justice Popplewell set out at [7] – [13] a most helpful summary of the background up to the commencement of the Orb proceedings on 29 October 2012, which I now reproduce:

"7. The First Claimant ("Orb") is a private limited company registered in Jersey. Following a corporate reorganisation in August 2002, it became the holding company of a group with interests in hotels, commercial and warehouse properties, transport and logistics businesses and venture and private capital. Its shares are held by a company as trustee of a Jersey settlement, of which Dr Cochrane, the former wife of the Sixth Party (Dr Smith), and their two daughters, are the sole beneficiaries. Dr Cochrane is a GP who practises full time in Jersey. Pro Vinci Ltd ("Pro Vinci"), a company of which Ms Dawna Stickler is the managing director and sole shareholder, provides family office services to Dr Cochrane's family, including investment management in respect of the investments owned by her.

8. Between August and November 2002, Dr Smith who was then Chief Executive of Orb, stole approximately £35 million from Izodia plc, a company in which Orb held a 29.9% shareholding, and misapplied the bulk of those monies for Orb's benefit. Of the total sum of £35 million stolen, only about £2.8 million was returned, leaving a balance of about £32.2 million owing to Izodia. In December 2002, the Serious Fraud Office raided Orb's offices in London and Jersey. As a result of the SFO's investigations, Dr Smith personally faced criminal sanctions. By early 2003, Izodia had also brought proceedings against Orb and Dr Smith for recovery of sums transferred from Izodia's bank account. Once Dr Smith's Izodia theft had been discovered, those in control of Orb resolved to sell a substantial proportion of Orb's assets.

9. During the early part of 2003, negotiations took place between Dr Smith on the one hand, and Mr Ruhan and Mr Campbell on the other hand, resulting in an agreement for the sale of various of Orb's assets to Mr Ruhan and companies associated with and/or controlled by him ("the Orb Assets"). At the time the Second Claimant, Mr Taylor, was the group property director of the Orb group. The Third Claimant, Mr Thomas, was a businessman with whom Dr Smith had had previous business dealings. The Orb Assets comprised:

(1) A portfolio of 37 hotels ("the Hotel Portfolio"), of which:

(a) 32 were formerly part of the Thistle group of hotels; these included three hotels, the Thistle Lancaster Gate Hotel, the Thistle Kensington Park Hotel and the Thistle Kensington Palace Hotel, (collectively "the Hyde Park Hotels") which were regarded as having valuable development potential for conversion to residential use.

(b) 5 were country house hotels, including the Cannizaro House Hotel in Wimbledon.

(2) A portfolio of development, commercial and warehouse properties and businesses ("the Orb Securities Portfolio");

(3) A minority shareholding in Izodia.

10. Although the sale of the Orb Assets was recorded in documented agreements, it is the Orb Parties' case that the documents did not fully reflect the deal agreed orally at a meeting between Dr Smith, Mr Taylor, Mr Ruhan and Mr Campbell on 6 May 2003. In particular the Orb Parties allege that it was agreed amongst other things that Mr Ruhan would redevelop, restructure, manage and/or dispose of the Hotel Portfolio and the Orb Securities Portfolio; he would pay Orb, Mr Taylor and Mr Thomas (in agreed proportions) 40% of the profits thereby generated from the Hotel Portfolio; and he would pay Orb 50% of the profits thereby generated from the Orb Securities Portfolio, with Orb retaining a 50% interest in any assets retained within the Orb Securities Portfolio. It is alleged that Mr Thomas subsequently negotiated a further 7.5% share of the profits and retained assets in respect of the Orb Securities Portfolio. Mr Ruhan denies any such oral agreement. The written agreement dated 7 May 2003 by which the Hotel Portfolio was transferred (as varied on 13, 14 and 23 May 2003) provided that Orb group should receive interest bearing loan notes in the principal sum of £35 million issued by Atlantic Hotels (UK) Ltd, which following completion would be the holding company of subsidiaries through which the Hotel Portfolio would be held, and that these should be assigned by Orb to Izodia in settlement of the claim brought by Izodia against Orb and Dr Smith, amongst others.

11. Following the acquisition, in 2004 or 2005 the Orb Assets were transferred by Mr Ruhan into a complex structure involving numerous companies ultimately owned by the trustee of an Isle of Man settlement established by deed of settlement dated 29 March 2004 known as "the Arena Settlement". The trustee was Atticus Trust Co Ltd. Between 2005 and 9 April 2014, there were over 100 companies within the Arena Settlement. It is the Orb Parties' case that Mr Ruhan, in breach of the May 2003 agreement and his fiduciary duties, sold on the Orb Assets to third parties for his personal profit and concealed such sales behind an opaque arrangement with, principally, a Mr Anthony Stevens.

12. Whilst Mr Ruhan originally denied it in his Defence, he now avers in his amended Defence and Counterclaim that he was at all material times the ultimate beneficiary of the Arena Settlement, by virtue of his former solicitors and trusted business advisors, Mr Simon Cooper and Mr Simon McNally, who were discretionary objects thereunder, holding such interest as nominee for him. He also maintains that he was in ultimate control of all of the companies within the Arena Settlement.

13. In April 2006, Dr Smith pleaded guilty to a number of charges relating to the transfer of Izodia's monies and was subsequently sentenced to eight years in prison. This was not his first conviction: in 1993 he was convicted of fraud in relation to a sum of £2 million and sentenced to 2 years' imprisonment. In 2007, a confiscation order was made against Dr Smith in the sum of approximately £41 million and enforcement receivers were appointed to recover the debt."

Mr Justice Popplewell went on to hold:

i) At paras 19 and 88: notwithstanding additional evidence and argument, it remained very likely, to put it at its lowest, that the Orb Parties had indeed recovered more than the maximum amount of their claim (inclusive of interest and costs), as Mr Justice Cooke had held, and that it was the husband who was out of the money. This was confirmed by the words used by Dr Smith on 8 January 2016 as referred to in paras 63 to 64 of Judgment No. (iv): "The money has already gone. We have recovered the money from Ruhan. This is all tidying up. He can't recover this. … What we are interested in is stopping the case. I don't want to deal with AR again – I have spent 10 years on this."

ii) At para 47: according to a later judgment of Mr Justice Cooke given on 20 March 2015 (not on Bailii) the Orb parties had seriously misled the court at the hearing in February 2015 about the safeguarding of the Arena Assets.

iii) At para 107: the court could not determine the unclean hands case against the husband summarily. The case in this regard had been expanded to include further accusations of serious litigation misconduct. That case or issue would be tried at, or shortly before, the main trial of the action. 

The rest of the judgment is concerned with the modification of the then existing freezing orders.

Judgment No. (vi)
25. In his judgment of 6 March 2017 Mr Justice Popplewell held:

i) At paras 3 and 8: The Orb proceedings had settled shortly after delivery of Judgment No. (v) of 15 April 2016. A loan note dated 29 April 2016 between Dr Smith's ex-wife Dr Cochrane and Phoenix, a creature body of Mr Stevens' was "one of the documents by which the Orb proceedings were settled".

ii) At para 10: There were other claimants to Arena assets or their derivatives which Dr Smith had placed in the name or control of his ex-wife. These were (a) the liquidators of some of the companies in the Arena structure; (b) a litigation funder of the Orb parties in the Orb proceedings who claimed to be out of pocket and (c) the Serious Fraud Office which claimed that sums under Dr Cochrane's apparent ownership or control would arguably be available to meet the confiscation order.

The balance of the judgment concerns the question whether a freezing order should be made over a sum of £2m received by Stewarts Law and is not relevant to the matters which I have to decide.

26. The fundamental question I have to decide is whether Mr Stevens has acted as the husband's nominee. There has been intense scrutiny of the transfer of £92m by Arena to Legion (a company the shares of which were transferred to Mr Stevens) on 15 November 2012 and of the creation of the loan note for £73.75m in favour of Mr Stevens on 29 April 2016. Were these transactions genuinely for Mr Stevens, or was he acting as a nominee for the husband?

The transfer of £92m on 15 November 2012
27. I refer to the background to the Orb proceedings as described by Mr Justice Popplewell set out above. Having considered all the evidence, written and oral, carefully I am quite sure that there was no oral agreement made on 6 May 2003 as alleged by the Orb parties (i.e. Dr Smith). I make this finding without the benefit of hearing from Dr Smith, but he had every opportunity to intervene in these proceedings to seek to prove this alleged fact, which he did not take. 

28. There was an additional agreement, but it was not an oral one made on 6 May 2013 as described. Rather it was the call-option described as the Headstay agreement, which was initially made orally but then reduced to writing and signed on 29 May 2003. Mr Justice Cooke in Judgment No. (i) at para 6 stated:

"The formal contracts executed in the form of the Sale and Purchase Agreement (the SPA) and the Headstay Agreement militate against the existence of such oral agreement by reason of their general contents, leaving aside the entire agreement clause which is said by the claimants not to apply to an agreement with Mr Ruhan personally. Dr Smith has given inconsistent evidence about the oral agreement in criminal proceedings and gives no evidence about it in the context of these proceedings. No evidence appears from Mr Taylor and the evidence of Mr Campbell and Dr Cochrane is both limited and open to question. In particular Mr Campbell's evidence is open to the interpretation that the Headstay Agreement did document the oral agreement allegedly made."

29. The Headstay agreement gave Dr Smith an option to acquire a 25% interest in the Hotel portfolio (via Headstay Ltd, which he would acquire). The Orb particulars of claim asserts that the option was exercised on the day it was signed by Dr Smith handing over £500 in cash to the husband at a dinner. The husband in his evidence denied this, or anything like this, absolutely. I accept the husband's evidence, which Dr Smith has not sought to challenge before me. I am satisfied that Dr Smith did not acquire or retain an interest in the relevant assets and that the entire Orb proceedings were based on a lie. However, from the time that the enforcement receivers were appointed the husband was aware that Dr Smith was making this claim, and the question is whether he took protective measures, using Mr Stevens as his nominee, in relation to his subsequent disposal of the assets. 

30. In Judgment No. (i) at [16] – [21] and [28] – [33] Mr Justice Cooke set out the essential facts, which are, as he says, largely undisputed.   He stated:

"16. Mr Stevens was originally the named 100% beneficial owner of Euro Estates which in turn owned Cambulo Madeira which entered into a Business Sale Agreement (BSA) of 1st March 2005 under which the three hotels, the Thistle Lancaster Gate, the Thistle Kensington Park and the Thistle Kensington Palace were to be purchased by it from HPII (at prices which resulted in no profit to Atlantic in which Mr Ruhan had, at the time a one third interest, the proceeds being used to pay off the Morgan Stanley loans inherited under the SPA). At a later stage, 20% of the shares in Cambulo Madeira were transferred to Wellard, a company owned by Mr Stevens' brother. It is the claimants' case that these shareholdings in Cambulo Madeira are held as nominees for Mr Ruhan so that profits received by that company are subject to the alleged profit-sharing oral agreement.

17. Cambulo Madeira's rights under the BSA with regard to the Thistle Lancaster Gate Hotel were novated to its subsidiary Cambulo Lancaster Gate which borrowed about £58.5 million from Investec and completed the purchase of the hotel in March 2006. Cambulo Madeira agreed to sell its shareholding in Cambulo Lancaster Gate to independent third parties for £67.5 million (as compared with the £56 million it had agreed to pay under the BSA). Completion did not take place until August 2006 at a gross profit of £11.5 million to Cambulo Madeira, as pleaded by the claimants, but £7.76 million on a net basis, according to Mr Stevens.

18. Cambulo Madeira's rights under the BSA with regard to the other two hotels were novated to two further subsidiaries, Cambulo Kensington Palace and Cambulo Kensington Park and in April 2006 completion of the purchase of the long leasehold interest in the Thistle Kensington Palace and of the freehold interest in the Thistle Kensington Park took place for a total consideration of £69 million.

19. The Candy brothers entered into a joint venture with the Cambulo companies through the incorporation of Cambulo Property Holdings Ltd (CPHL), a company in which the Candy brothers had directly or indirectly a 50% interest and Cambulo Madeira the other 50%. CPHL, through the Candy brothers' contacts, obtained funding from the Bank of Scotland for £75 million to fund the purchase. It was a term of the Debenture over the assets that they should not be used as security for any other transaction without the Bank's consent. The freehold of the Thistle Kensington Palace was purchased as was the freehold of 8 De Vere Gardens, which adjoined it, as part of a scheme of development, so that the hotels could be refurbished and sold as residential accommodation.

20. In March 2008, the Thistle Kensington Palace and the Thistle Kensington Park were sold by CPHL for a total of £320 million to third parties following the obtaining of planning permission and development by CPHL. The claimants allege that profit of approximately £250 million was thereby made on that sale but have failed to take into account the Candy brothers' interest of 50%, about which there is in reality no dispute.

21. On the evidence which has emerged from Mr Stevens, there is in fact little real doubt about the figures, a matter to which I will revert later. The profit to Cambulo on the Lancaster Gate Hotel amounted to £7.76 million net after deduction of expenses from the sale price of £67.5 million, as compared with the purchase price of £56 million. So far as the Kensington Park and Kensington Palace Hotels were concerned, additional expenditure was involved in relation to the purchase of other land and the development of social housing in order to fulfil the terms of a section 106 agreement with the local authority which was necessary in order to obtain planning permission. There is no reason to doubt Mr Stevens' evidence that the total profit on the Kensington Hotels for Cambulo Madeira amounted to £114.6 million, as its half share of the net profit.
….
28. On the evidence produced to the Court, which is in reality undisputed, the profit from the sales of the two Kensington hotels did not become available to Euro Estates until March 2008. By this time, Mr Ruhan, using companies outside the Arena Settlement, namely Bridge Towers Holdings 1 Ltd, Bridge Towers Holdings 2 Ltd and six subsidiary Bridge Towers companies, was involved in property development in Qatar in two separate projects. In pursuing this, Bridge Tower Holdings 1 obtained a loan of $143 million from Investec, secured on the Qatar assets themselves, and on the Sentrum assets also (rather than vice-versa). Investec was however looking for additional security and Mr Stevens' evidence is that, for a fee and a small profit participation, he was prepared to assist Mr Ruhan in this respect. On 21 December 2007, although the Kensington Hotels had not yet been sold, profits were expected when they did sell and Mr Stevens allowed Euro Estates 80% shareholding in Cambulo Madeira to be used as collateral in respect of the Investec loan to Bridge Tower Holdings 1, it being a term required by Investec that, if there was a relevant sale of the Kensington Hotels which preceded the realisation of the proceeds of the Qatar development or other refinancing, the proceeds from such disposal would be used to repay the outstanding Investec loan facility.

29. When the Kensington Hotels were sold in March 2008, the proceeds were then used to discharge the Investec loan with Euro Estates concluding a direct facility agreement with Bridge Tower Holdings 1 on virtually identical terms as the facility agreement previously in place with Investec. There was no room therefore for Euro Estates to make the Kensington Hotel profits or its shareholding in Cambulo Madeira available for Sentrum's business.

30. A further £19.9 million was then made available by Euro Estates which could be taken up either by Bridge Towers Holdings 1 or Bridge Towers Holdings 2 in respect of the two distinct Qatar development projects. No evidence is before the court as to where that sum went, as to which company took up the money and in which development it was utilised.

31. Following the financial crisis in late 2008, the Qatar development "turned into something of a disaster" on Mr Stevens' evidence. The Euro Estates loans fell into default in 2009 and 2011 respectively and the Bridge Tower companies were engaged in litigation in Qatar without cash or immediately realisable assets which could give rise to recovery by Euro Estates on the loans.

32. It was in November 2012 that Euro Estates entered into a Termination and Settlement Agreement ["TSA"] under which just short of £92 million, representing the loan capital advanced by Euro Estates was to be paid to it on behalf of the borrowers, together with 10% of the recoveries to be made by those companies from the investments in Qatar. The £92 million approximately was paid to Legion Management Corporation, a company outside the Arena Settlement but administered by Messrs Cooper and McNally in the same way as the Bridge Tower companies (as nominees for Mr Ruhan, on the claimants' case). The shares of Legion Management Corporation were then transferred to Mr Stevens.

33. The sum of £92 million approximately, which was paid to Euro Estates as a compromise sum in respect of the debt owed to it by Bridge Tower Holdings 1, derived from the £160 million which was part of the profits on the sale of Sentrum to Digital."  

31. I adopt that background account. It is consistent with evidence I have read and heard.

32. At [22] Mr Justice Cooke stated:

"There is a serious issue to be tried about Mr Stevens' beneficial ownership of Cambulo Madeira and whether he was in truth a nominee for Mr Ruhan. Reliance is placed by the claimants on a MacDonald Partnership Attendance Note of 6th May 2006, on the first and second affidavits of Mr Thomas and the letter from Mr Hunter exhibited to it, on the evidence of Mr Trachtenberg and on a letter from Mr Ruhan to Sheikh Tamin Al Thani of 30th September 2012. Mr McNally's first affidavit also supports the proposition."

33. Having considered the matter carefully I have concluded, on the balance of probabilities, that Mr Stevens was in truth a nominee for the husband. Specifically:

i) I am not satisfied that the husband was under any serious pressure from the lenders such that he had to agree to relinquish the anticipated very large profits, which, in time, duly eventuated.

ii) The husband habitually uses nominees for his business dealings. The essence of his defence and counterclaim in the Orb proceedings is that Messrs Cooper and McNally were his nominees. His home and prized personal possessions, namely his boats, are (or were) all held by nominees. For the reasons given below I am strongly satisfied that Mr Stevens was the husband's nominee in the arrangements made for settling the Orb litigation.

iii) In 2007 the husband was an investor in an antimony mine in Newfoundland. The documents show that he did this under the mantle of Cambulo.

iv) In that same year the husband was closely involved in resisting a spurious judicial review application which had been made seeking to challenge the grant of planning consent for the joint venture with the Candy brothers.

v) On 30 September 2012, the husband wrote a letter to Sheikh Tamin, the Crown Prince of Qatar, in which he stated: "when I sold the 37 Thistle Hotels I owned in London to the Abu Dhabi Royal family, instead of investing in Abu Dhabi, I invested a substantial amount from this sale in Qatar".

vi) The transfer of the £92m from Arena to Legion took place on 15 November 2012, a week after the husband was served with the Orb proceedings on 8 November 2012.

vii) It is highly significant that Mr Stevens has not intervened in the proceedings, or at the very least appeared as a witness, in order to defend his ownership of Cambulo and Euro Estates and the authenticity of the TSA.

viii) I am satisfied that the wife has given me truthful evidence about admissions made to her by the husband concerning the nomineeship of Mr Stevens. I deal with this in more detail below.

ix) The use subsequently made of the £92m, plainly shows that it was the husband's money. I deal with this below.

34. In a note attached to her witness statement of 18 February 2015, the wife described how on an occasion a long time before the separation she was lying in bed with the husband and said to him that she didn't think he should trust Anthony Stevens, to which he replied, "well I hope we can, as he's got all our money". She affirmed this in her oral evidence under cross-examination. I accept her evidence. In my judgment, she was speaking the truth.

35. In her oral evidence, the wife described two incidents where she had seen pieces of paper which confirmed that Mr Stevens was a nominee. An agreed note of her testimony is as follows:

"Yes, and I did witness pieces of paper over the years between AES [Mr Stevens] and AJR [the husband]. There is no piece of paper that I can produce but I have seen them, 2 separate agreements. In 2006 the paper was at our home in our safe for a period of time.  It was a document between AES and AJR.  The gist was that there was an agreement between the two of them that was how he worked. It was an agreement that AES was his nominee.

The second document was on the side in our dressing room in an unsealed A4 envelope with a single piece of A4 paper printed in type. It was between AJE and AES. It was a nominee agreement. This was in 2013.

I put it in the safe; AJR came back to house in a rush looking for something and I took it out of the safe and said is this what you looking for. It was in Spring 2013."

36. I agree that this evidence should have been in writing in her witness statement and should not have emerged for the first time under cross-examination. Late arrivals such as this have the hallmarks of being inventions. I also agree with Mr Pointer QC that there are aspects to this which are surprising. However, having watched the wife very carefully give her evidence I am satisfied that she was speaking the truth.

37. The husband is a motor-racing aficionado. He won the 2011 national GP championship driving a Porsche. From 2012 to 2015 the Lotus F1 team was 90% owned by Gravity Motorsports S.a.r.l. It was then sold back to Renault for a nominal sum. Gravity is majority owned by Genii Capital, created and controlled by two Luxembourgers Gerard Lopez and Eric Lux. The husband has a 2% interest in Gravity. Until its demise he was co-chairman of it. The evidence shows that Grenda (Mr Stevens's company) lent €91m or £75m to Gravity. The husband says that this was Mr Stevens's decision, and that unfortunately it has been irretrievably lost. As against that, there is a personal guarantee in existence from Messrs Lopez and Lux in favour of Grenda for £35m.  There is no evidence that they are not good for the money. Therefore, on the evidence £40m has been lost.

38. There is no evidence at all that Mr Stevens was interested in the slightest in investing in a Formula One motor racing team. By contrast this is the husband's passion. His evidence to me was that he knew better than anyone how no one had ever made any money out of Formula One racing (with one notable exception), and that therefore it would have been the very last place in the world where he would have been placing his money. However, at that time that the sums were lent the husband was a very rich man as the appropriation of his Arena assets had not by then happened.

39. I am satisfied that the true lender of the money to Gravity was the husband.

40. The deployment of other funds, ostensibly by Mr Stevens, and which would have derived from the £92 million, either entirely or largely, was as follows:

i) $25 million (c£17m) was invested and lost in a property development in New York City at 57th Street. It is true that there is nothing particularly to connect the husband to this development, beyond the fact that at the relevant time he was himself investing in another development in New York City.

ii) Mr Stevens is said to have made an unsecured interest-free loan to the husband of £4.2 million in respect of which no demands for payment have been made whatsoever. That money has been spent.

iii) In paragraph 3 of judgment No. 7 Mr Justice Picken records how Grenda has lent to an erstwhile associate of the husband, Philip Barton, around £10 million. It must be very doubtful that it will be recovered.

iv) The evidence was that €3 million had been spent by Mr Stevens on a boat. Again, there is nothing to connect the husband specifically to this purchase.

v) Just over £1 million was paid by Mr Stevens in discharge of a loan made to him by a company within the Arena structure namely Unicorn. It is noteworthy that Mr Stevens who is portrayed as a man of substance needed to make this borrowing.

vi) £3.5 million was spent by Mr Stevens and his companies in the Orb litigation.

vii) The total, excluding Gravity, is just under £40m. Most of it was spent for the benefit of the husband.

41. Thus, it can be seen, that all but £12m of the £92m has been spent.

42. In my judgment, the husband should be treated as having that sum of £12m available to him for the purposes of the distributive award.

43. Miss Harrison QC raises the question of the balance of the Sentrum proceeds. In total, these amounted to £212m. In Judgment No. (i) at [27] Mr Justice Cooke stated:

"On 26th June 2012 Digital Stout Holdings LLC purchased the shares in Sentrum Holdings which gave rise to a figure, after repayment of the external lenders of a balance of £220 million, which was paid to Glen Moar, a company within the Arena Settlement. A dividend of £160 million was then paid by Glen Moar to its shareholders, namely the trustees of the Arena Settlement."

The documents before me show that in fact £212.4m went to Glen Moar rather than £220m. The £92m came from the dividend payment. What happened to the balance of £68m? Or for that matter the sum that was not dividended out? The husband says that they stayed in Arena, or were invested in business ventures held within Arena. And that accordingly they were the subject of the appropriation by Dr Smith in 2014. I have no reason to doubt that. There is no evidence at all that these sums are within the husband's reach save to the extent that they may form part of the settlement monies, to which I turn next in this judgment.

The settlement of the Orb proceedings in April 2016.
44. On 10 May 2016, as far as the wife was concerned, the Orb proceedings were continuing apace and heading for final trial. The husband's claim was for over £200 million in respect of assets which he stated had been stolen from him by Dr Smith. Those assets were unquestionably matrimonial property. While the wife probably did not have any direct proprietary interest in those assets, she had an inchoate discretionary claim to them which was of great value. It would have been expressed to have been for 50% of the net recovery from those proceedings. Her claim for a financial remedy had been in fact been stayed pending the outcome of the Orb proceedings.

45. The husband's duty of candour required him to keep the wife fully informed of the developments in the Orb proceedings. This was a continuing duty. It is plain that he did not do so.

46. On 10 May 2016, out of the blue, the wife's then solicitors received a one-line email from the husband's solicitors which stated: "we attach a draft consent order in the commercial litigation which is with the court for sealing". The attachment was the drop-hands order signed on 29 April 2016, which provided for a mutual dismissal of claims with no order as to costs. Nothing else was provided and no further explanation was given. That order was by no means the full story.

47. The wife immediately returned to this court and obtained an order from Mr Justice Holman on 12 May 2016 lifting the stay on these proceedings and providing that new Forms E should be filed promptly. The husband's Form E is dated 27 July 2016. In it he said this about the Orb proceedings:

"To date nearly £8 million has been spent on legal costs alone, of which there remains a significant amount outstanding. As a result, the level of liabilities has significantly increased. Despite going to court on 14 separate occasions and winning each one, I have been unable to find funding for the remaining costs, which are estimated at £8 million, and therefore I reluctantly had to discontinue my case in April 2016, on the proviso that I did not have to meet costs for Orb and Mr Gerald Smith. These were estimated at £12 million and would have definitely resulted in my bankruptcy."

48. As I will show, this statement by no means tells the full story and is in a key respect deliberately untrue.

49. The case was before me on 17 October 2016 when the wife was acting in person. I ordered the husband to provide a memory stick containing all statements and affidavits in the Orb proceedings. Of course, such material would not encompass the documents by which those proceedings were settled. At that hearing the husband did not volunteer that there were other important documents, beyond the consent order, by which the proceedings were settled.

50. The wife and her team realised that there must be other relevant settlement documents after they had read the judgment of Mr Justice Popplewell dated 6 March 2017 (Judgment No. (vi)). On 25 April 2017, they applied for an order that the husband should produce the loan note and all other documents by which the proceedings were settled, and on 10 May 2017 I made an order to that effect. On 15 May 2017, the husband made a witness statement to which he attached the loan note; a confidential no-sue deed; a sale and purchase agreement concerning the share capital of Minardi Investments Ltd; a letter from Dr Cochrane to Phoenix; a deed of release between Minardi and SMA; and a liquidation inter-creditor settlement agreement. All of these documents were dated 29 April 2016. They had been received by the husband's matrimonial solicitors from his current commercial solicitors, Richard Slade & Co. Unfortunately, as a result of a glitch in the offices of the husband's matrimonial solicitors not every document in the email from the commercial solicitors to the matrimonial solicitors was printed out and attached to the husband's witness statement. This was only discovered during the hearing before me and as a result there was produced a confidential settlement deed bearing the date 28 April 2016 (but probably actually signed the following day) and a signed letter between Dr Cochrane and Phoenix dated 29 April 2016 whereby she promised to transfer 50% of the shares in Sentrum Rugby to Phoenix. These shares would have quite considerable value. Of course, I attribute no blame to the husband's matrimonial solicitors for failing to print out these additional documents, as mistakes like this happen all the time even in the most efficiently run office. But I doubt that the husband was unaware of the existence of them.

51. It is highly significant that it took over a year for the husband to produce the other settlement documents (and even then not the complete run) following his solicitor's letter of 10 May 2016. His defensiveness is very telling.

52. I refer to the contents of the husband's Form E mentioned above. He quite clearly stated in it that he was forced to discontinue because he was unable to obtain litigation funding for the Orb proceedings. On 14 September 2017, he produced a witness statement from Ms Lowry-Lee, a solicitor with his commercial solicitors, detailing the attempts to obtain litigation funding. In that statement, she referred to and relied on opinions from counsel and other documents in respect of which she purported to maintain privilege. I ordered the documents mentioned in that statement to be produced and gave an interim judgment giving my reasons. The opinion from his counsel dated 24 April 2015, updated on 13 March 2016 is indeed favourable. It estimates a 60% chance of success of defeating the claim against him and of winning his counterclaim. It predicts the quantum of the claims to approach or exceed £100 million, and perhaps to be as much as £205 million. It realistically states that enforcing an award of damages significantly in excess of £100 million would be an unknown quantity. This was the prize from which the husband says he walked away without a penny.

53. The material produced from the husband's commercial solicitors shows that in April 2016 the position with regard to funders was as follows:

i) Orchard turned down the request on 18 April 2016;

ii) Calunius turned down the request on 21 April 2016;

iii) Therium turned down the request on 25 April 2016; and

iv) SP Angel did not turn down the request at any point in April 2016; indeed they were asking for a non-disclosure agreement and additional information as late as 3 May 2016.

54. Further, although the husband told me that he had approached solicitors to act on a conditional fee basis, not one document verifying this assertion was produced by him.

55. In his oral evidence, in evidence-in-chief, on Friday, 13 October 2017 the husband told me that the 2016 drop hands agreement was negotiated in Geneva. At the meetings, he was present, as were Mr Stevens, Dr Smith and Dawna Stickler. He told me that so far as the loan agreement was concerned he was not involved in the negotiation figure in the loan note or in the preparation of the documents. The only document he signed was the confidential deed agreeing not to sue which was exhibited to his witness statement. Under cross-examination he told me that the drop hands agreement was negotiated and agreed a few days before 29 April 2016, and that right up to the day it was signed he was still on the hunt for funding. He went on to say that he had nothing to do with the preparation of the documents and that he did not know about the loan note in April. He only found out about it in August 2016 when he was told that there had been some kind of loan note in favour of Mr Stevens. He went on to say that he was given a copy of it by Mr Slade.

56. The case then took an unusual turn. I have mentioned above that throughout proceedings before me Dr Smith had a representative in my court. As a result of what this representative heard certain documents were supplied by Dr Smith to the wife's team to demonstrate that the evidence given by the husband was untrue. Obviously, it is very unsatisfactory for evidence of this nature to arise during the course of a party's oral evidence. Mr Pointer QC objected to this material being used, invoking the without prejudice privilege. By that point, of course, as I have explained above, a great deal of detail of the negotiations had already been given by the husband, some of it in his evidence-in-chief. I ruled that I could inspect the documents and having done so I further ruled that they were admissible. I gave two short judgments.

57. The first document is an email from the husband to Dr Smith dated 4 April 2016. It was headed "without prejudice" and concerned a cash schedule. That document had been previously produced by the wife, it having been handed to her by the wife of an estranged colleague of the husband, and was in the bundle before me. In his evidence-in-chief the husband told me that the document had been generated in May 2015; that Dr Smith had given him a copy at that time; and that he only had a paper version. However, the email of 4 April 2016 shows that the document in the papers was provided to the husband at that time and that he had had an earlier version with different numbers on it. The email shows the husband commenting in great detail on the figures in the schedule. Towards the end he states, "in general I think we can get to an agreement on the division as discussed but we need the additional detail to explain the very significant changes from previous schedules, particularly as it relates to the liquidators, all of which I assume as a reasonable explanation". In his final sentence he states, "let me know when you want to discuss this and how we get the additional information to get an agreement in an agreed form". When confronted with this the husband did not really have any coherent explanation for its content.

58. The next document is an email purportedly sent from Mr Stevens to the husband, and copied to Dr Smith, on 21 April 2016 which forwarded an email from Mr Stevens's solicitor at Akin Gump which attached a clean copy of the loan note instrument as at 21 April 2016. If this is a true document then it shows the husband's evidence that he had not seen the loan note before September 2016 to be untrue. When confronted with this the husband asserted that the email had been forged by Dr Smith. The husband did not go so far as to suggest that the attachment was a forgery. This showed that the loan agreement would be between Dr Cochrane and Minardi rather than with Phoenix. There were good reasons why the husband would want to take control of Minardi. That version of the loan note put the debt at £72.5 million – slightly less than the amount that was ultimately signed up to.

59. The next document is another email from Mr Stevens to the husband, again copied to Dr Smith, purportedly sent 45 minutes after the first email, this time forwarding an email from his solicitor attaching a clean copy of the third version, as at 21 April 2016, of the liquidation intercreditor settlement agreement. The husband's response to this was that it too had been forged by Dr Smith.

60. The next document is a yet further email from Mr Stevens to the husband, again copied to Dr Smith, purportedly sent one minute after the second email, which again forwarded an email from his solicitor attaching the draft settlement agreement as marked up on 21 April 2016. This is an earlier version of the document described as the confidential settlement deed which the husband's matrimonial solicitors neglected to print off and which I refer to at paragraph 50 above. Again, the husband says that this email was forged by Dr Smith.

61. In my judgment, these emails plainly were not forged. Mr Pointer QC did not give me any argument in his final submissions as to why I should find that they were.

62. In my judgment, the husband has given me a false account of his involvement in the negotiations that led to the drop-hands agreement. He was well into his negotiations with Dr Smith by 4 April 2016. All the building blocks of the overall deal were in place by 21 April 2016 and the deal had effectively been done by then. The husband was at the very centre of the negotiations. At that point two of the funders had not yet turned him down. It was completely untrue for him to say that he discontinued because he was deprived of litigation funding – he settled with Dr Smith well before he reached the end of that road.

63. I now go back to the negotiations that took place between the husband and Dr Smith in 2015. In a briefing paper supplied to Therium on 19 April 2016 it was stated "in negotiations, Dr Smith has offered and Mr Ruhan has rejected £35m by way of settlement". Why was an agreement not concluded at that time? The husband says that Dr Smith was never negotiating in good faith – those negotiations were of the nature of a filibuster and he never intended to provide any money to the husband. A different perspective is given by a document which was on the agreed reading list and which I read before the case was opened. It was an exhibit to an affidavit made by Dr Smith on 4 October 2017 in the Phoenix proceedings. It is a letter from Stewarts Law, the solicitors for the Orb parties, not expressed to be 'without prejudice', to the husband's commercial solicitors dated 4 August 2015. It announced the end of the negotiations, stating:

"Mr Ruhan's pre-condition/requirement to settlement is that it be structured in a manner that transfers the majority of any cash sum to Mr Stevens; namely that a comparatively large sum of cash be transferred to Mr Stevens against a comparatively much smaller sum of cash to Mr Ruhan. Leaving aside whether this is commercially acceptable, it is structurally unworkable and possibly illegal. Our clients have sought and received advice that a settlement on such a basis, where a payment  demanded by Mr Ruhan had to go to Mr Stevens which is not commensurate with Mr Stevens' claims, is potentially criminal."

64. Mr Pointer QC argued that this letter was covered by the 'without prejudice' privilege, but I ruled against him, not least because the letter was in the agreed reading list and had been read by me. I acceded to Mr Pointer's secondary submission that if I were to read this letter I should read those that followed it. These show that the husband's commercial solicitors trenchantly denied this characterisation and asserted that the amount payable to Mr Stevens was in discharge of bona fide liabilities of the husband to Mr Stevens. However, Stewarts Law firmly maintained their position, maintaining that the claims by Mr Stevens were either non-existent or de minimis.

65. Did the husband have genuine debts to Mr Stevens of the order of £73.75m plus the value of 50% of Sentrum Rugby? In his witness statement dated 15 September 2017 the husband stated:

"Anthony Stevens was owed interest on the said sum of £92 million. That unpaid interest has formed the basis of the loan note for £73,750,000 between Gail Cochrane and Phoenix Group Foundation dated 29 April 2016."

66. In his skeleton argument Mr Pointer QC put a very different complexion on the matter. He wrote:

"Under the 2012 settlement, Stevens was entitled to a share on any successful claim against the developer of the Qatar properties. This claim had come to fruition; and in the event was successful. Messrs Cooper & McNally were due to account to Stevens for his share of the recovery; but did not.

When in 2016 the settlement of the Orb litigation was under discussion, Cooper & McNally were insistent that their potential liability to Stevens should be included in the settlement. The deal that was forged involved Gail Cochrane (who had as Smith's ex-wife taken control of the Arena assets under the IoM Settlement) giving a promise to pay £73 millions to Phoenix, being the money due to Stevens from the Qatar compromise."

67. During the hearing, I asked the husband how this version squared with his evidence in his witness statement. He told me that the word "interest" was not a reference to money paid periodically at a certain rate for the use of borrowed money but rather was intended in its wider sense to mean that Mr Stevens retained a stake in the dispute about the Qatar development.

68. I asked to be given a breakdown of the calculation of £73.75 million. Mr Sear produced a schedule based on his client's instructions which stated that the sum was computed thus:

i) £43m being the difference between £135 million in November 2012 pursuant to loan agreements dated 2 April 2008 and 16 April 2008 and the £92 million paid pursuant to clause 3.2 of the TSA dated November 2012.

ii) £12m being a fee of £2m for each of six towers in Qatar.

iii) £15.2m being interest on the above.

iv) £3.5m being the value of extant costs orders in favour of Stevens parties in the Orb litigation.

v) Total: £73.7m

69. The problem with this approach is that it completely ignores the terms of the TSA in November 2012, and the witness statement evidence of Anthony Stevens dated 7 November 2014 (on which the husband has strongly relied – see above). The TSA purported to be an instrument of full and final settlement and provided that £92 million would be paid together with, as "further consideration" 10%, net of costs, commissions and taxes, of any recovery resulting from the actions taken in Qatar in respect of the sums invested. Paragraph 4.1 specifically released any debts existing at that time.

70. In paragraph 12.24 of his witness statement Mr Stevens said:

"The £92 million represented the sterling equivalent of the principal on the two loans that Euro Estates provided for the investments in Qatar. Euro Estates essentially forgave its right to be paid interest and penalties under its loans, in exchange for it having the right to 10% of any monies recovered by Mr Cooper, Mr McNally and another party to the TSA, Legion Recoveries Ltd, through their efforts to recoup the investments they have made in Qatar"

71. Just under £31 million was recovered from the Qatari investments: see para 142 of Judgment No. (v). Therefore, under the TSA the most that is additionally payable is just over £3 million. I have found above Mr Stevens acted as a nominee for the husband in relation to the payment of the £92 million in November 2012, so it follows that this is in fact not a genuine debt due from the husband to Mr Stevens. But that aside, even at its highest, the figure due as further consideration under the TSA is a mile away from the figure of £73.75 million which simply cannot be justified on any honest basis. And there is absolutely no rational explanation for Dr Smith gifting 50% of Sentrum Rugby to Mr Stevens. This can only be explained as being a consensual recovery by the husband of his own property.

72. As I have said, it is highly significant that Mr Stevens has not intervened in the proceedings before me or even been called as a witness by the husband to defend his supposed entitlement under the loan note.

73. Perhaps the best point made by the husband as to why I should not find that Mr Stevens is his nominee is that if he were the true principal he would never have agreed such a fundamentally stupid deal whereby his claims were dismissed, and the freezing orders all lifted, before a penny had been paid under the loan note. And, of course, nothing was paid, which has led to Phoenix commencing debt proceedings against Dr Cochrane which are being defended strongly on various grounds including illegality and the eventuation of force majeure. Freezing orders have been obtained in the Phoenix proceedings. As indicated above, certain claims have been intimated by other parties against the Arena assets.

74. It is the husband's case that whatever findings I may make I should recognise that there is no possibility of anybody making any recovery under the loan note or otherwise against the Arena assets. He says, in effect, that Dr Smith will go to the stake before handing over any money for his benefit. Rather, and this is very clear from the documents filed by Dr Smith in the Phoenix proceedings, it is strongly in his (Dr Smith's) interests that £60 million goes to the Serious Fraud Office so that he does not face the prospect of incarceration for another eight years.

75. My findings are as follows. Based on the evidence I have set out above I am satisfied on a strong balance of probability that in relation to the agreement reached on 29 April 2016 Mr Stevens acted as the husband's nominee. This is not a case where the husband's lies can be explained as being an example of a false bolstering of an otherwise truthful case, or where he has tried to cover up matters that would bring upon him shame or disgrace. The lies were told in order to conceal the truth. The other evidence which I have set out strongly supports this finding.

76. It follows that inasmuch as the documents proclaim that Mr Stevens (or his creatures) were genuine parties to the agreements then they are shams. I am satisfied that the test for a sham (which I attempted to summarise in Bhura v Bhura [2014] EWHC 727 (Fam) at para 9) is fully met. The true agreement was made between Dr Smith and the husband, as I have sought to explain. 

77. I have found above that Mr Stevens acted as the husband's nominee in receipt of the £92 million in November 2012. Therefore, there was no genuine debt due in April 2016 from the husband to Mr Stevens, not even £3 million. The agreement that was reached may have been naïve in that it allowed the proceedings to come to an end before a penny had been paid but that naïveté does not alter my fundamental conclusion. I think that at that stage a degree of trust, surprising though it may seem, had developed between the husband and Dr Smith. An aperçu into the thawing of their mutual hostility is given by two emails between them during the negotiations in April 2016. On 17 April 2016, the husband sent Dr Smith a meme. It was a picture of "a day in the life as an entrepreneur" and shows the ups and downs as the day progresses. The nadir is "I think I'm going bankrupt" and the zenith is "wait a second, my life is great". The husband's message to Dr Smith was: "Do you recognise this – I do". On 29 April 2016, the day the documents were signed, Dr Smith sent the husband an email with the subject "can I buy you a drink?" I do not have this email, but I do have the husband's reply sent at 17:37 which was "see you downstairs in 20 mins". The husband told me that in fact no drink happened and that he left for Geneva airport where he signed the no-sue confidential deed in the BA departure lounge, Dr Smith having followed him there.

78. The monies in the Arena settlement in March 2014, immediately prior to the appropriation by Dr Smith were, in my judgment, unquestionably beneficially owned by the husband, albeit held on his behalf by Mr Cooper and Mr McNally. For the reasons I have explained above I am completely satisfied that Dr Smith did not have a claim against any of those monies, and that the Orb proceedings launched by him were spurious and abusive. Dr Smith had the opportunity to intervene in the proceedings before me to argue that the monies appropriated by him were in fact his, or to be treated as his; but he did not do so and in my opinion it would be an abuse were he (or his cohorts) to be allowed in later proceedings to assert this.

79. The effect of the agreement concluded on 29 April 2016 was that the husband ceded everything in Arena to Dr Smith in exchange for a payment, via Dr Smith's compliant ex-wife Dr Cochrane, for £73.75 million plus 50% of Sentrum Rugby. In my judgment, no one has any valid claim against the husband, apart from the wife, to those assets. The other parties may well wish to fight over what is left in Arena – and I am thinking particularly of the SFO – but I am clear, having considered the evidence very carefully, that those assets represent the consensual recovery achieved by the husband of his own money following the appropriation by Dr Smith.

80. Whether the husband, acting through Mr Stevens in the Phoenix debt claim, makes any meaningful recovery remains to be seen, and this judgment does not seek to trespass on the future of that case before Mr Justice Popplewell. There are obvious obstacles lying ahead, not least the fact that Dr Cochrane has been declared bankrupt in Jersey. It will depend on the effectiveness of the freezing orders that have been obtained.

Minardi
81. I have referred to Minardi Investments Ltd above. This was incorporated and registered in the BVI in May 2007. From incorporation to August 2014 Mr Barton, a long-standing associate of the husband, was the beneficial owner of Minardi. In September 2014, Mr Barton sold the entire issued share capital to GAC Holding Limited. GAC is the corporate vehicle of Dr Cochrane, who I have described as the compliant ex-wife of Dr Smith. On 22 May 2015 Allan Rankin became the majority shareholder following an issue of new shares. Mr Rankin is an associate of Drs Smith and Cochrane.

82. The Qatar Project was a joint venture with Minardi. Minardi was a party to the settlement of the dispute with the Al-Arrab Construction Company in June 2015, whereby £31m was recovered (see para 71 above). The previous month Minardi lent the husband £2.5m (to help him with his legal costs at a time when settlement discussions in relation to the Orb proceedings were taking place) which in turn had been lent to it by SMA. Mr Justice Popplewell observed that this may well have been in breach of undertakings. When the 2015 negotiations failed Minardi (i.e. Dr Smith) sued the husband on the loan. According to the husband Mr Barton felt sorry for the husband and arranged in November 2015 for the right to pursue two debts owed by Minardi to respectively Mr Barton and Mr Pelz for $181m and $4.6m to be assigned to the husband for him to use as a shield in the £2.5m debt claim. That debt claim was later settled after a sum of £2m owed to the husband by Harry Harvey was somehow set-off against the £2.5m debt. This however left the husband with the right to pursue the Barton and Pelz loans.

83. In the April 2016 settlement Minardi was "purchased" by Mr Stevens. The consideration was the waiver of costs awarded to, or incurred by, Phoenix in the Orb proceedings. None of this makes any sense unless Mr Stevens was a nominee for the husband. A clean break settlement with the husband would clear up issues of costs and would hand over the hornet's nest that was Minardi for him to deal with Mr Barton and Mr Pelz. In fact, now that Mr Barton realises that the husband owns Minardi, as well as the right to pursue his debt against it, there is no chance of that debt being pursued, and it has not been. Mr Barton is very annoyed, to say the least.

The £500,000 gift
84. I have referred at para 15 above to the £500,000 "gift" from Dr Cochrane to the wife for the maintenance and education of the children.  This is a strange story which I do not believe I need to get to the bottom of for the purposes of my primary decisions. At a meeting attended by the wife's then solicitor, Dr Smith, his femme d'affaires Dawna Stickler, and the Orb solicitor Mr Upson, held on 9 September 2014, Mr Upson stated: "today is the start of a conversation about how we can help each other". Dr Smith went on to say: "Gail [Cochrane] wants to settle an independent trust for the children to get them through to university education and there are no strings attached and we will do that on terms at your behest". Dawna Stickler added: "that is a genuine family concern from one mum to another. There is a sum Gail has in mind and it is between £400k – £500k and is not be misinterpreted as anything other than a gesture from one mum to another". The wife told me that there was a meeting the following month at the matrimonial home attended by Dr Cochrane and Mr Philbin, a friend who happened to be a solicitor. She went into the dining room alone with Dr Cochrane where the sum was offered. According to Mr Philbin, who was a manifestly honest witness, the wife then returned and stated that she did not want anything to do with it. Nevertheless, on 4 November 2014 the money was sent to Mr Philbin's client account by Dr Cochrane and her email of that day stated that it should be released to the wife directly or to a company that she owns beneficially and totally. That same day Mr Philbin replied that he was establishing a trust for the children (this is quite difficult to square with the wife's statement that she did not want anything to do with it). Dr Cochrane confirmed later that day that she was content for the £500,000 to be credited to a trust for the children. Bizarrely, a year later Dr Cochrane (that is to say, in real life, Dr Smith) changed her mind and sued Mr Philbin for the money back. He defended the proceedings. They have been concluded although the money remains virtually untouched in an investment held by the trustees. He does not know what to do with it. It is an absurd state of affairs but does shine a light on the modus operandi of Dr Smith. I do not believe that the wife has given me false evidence about this episode but I am doubtful that she has told me the whole truth.

The BAE arbitation
85. Finally, I refer to the BAE arbitration. In this regard, there is no dispute between the parties. If the arbitration succeeds and the contract is reinstated then the husband will have opportunity to buy these sites and to develop them, hopefully for a significant profit. To do so he will need to borrow very large sums, and in this respect Miss Harrison QC is right to say that when seeking credit he certainly will not be presenting himself as actually insolvent, reliant on the largesse of friends.

Other assets
86. In this judgment, I have only dealt with matters in issue between the parties. I have not dealt, and do not need to deal, with assets and liabilities about which there is no dispute, and on which I received no evidence or submissions. They are set out in the composite schedule of assets.

Next steps
87. In the light of this judgment I require the wife to formulate what distribution she seeks in her favour and for the husband to respond to that claim. I leave the parties to agree the necessary directions for this process; if there is a dispute I will, naturally, rule on it. The matter should be re-fixed, with a time estimate of three days. I anticipate that no more than one and a half days will be needed in court; the balance of the time will be used for further judicial reading and judgment writing.

88. That concludes this judgment.
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GLOSSARY

 

ENTITY/INDIVIDUAL

EXPLANATION

Ainos Shipping

Limited company registered in Malta and owned by the husband

Owns Lady K

Owned Pegasus Court

Akin Gump Strauss Hauer & Feld LLP

Solicitors acting for AS in Orb proceedings

Alan Campbell ['AC']

Associate of the husband who introduced him to Qatar project along with PB

Anthony Edwards Stevens ['AS']

Business associate of the husband and alleged by applicant and Orb claimants to be a nominee for the husband

Holds following positions:

  • Owner Legion Asset Management

  • Owner Euro Estates Holdings

  • Director of Grenda Investments

  • Corporate member of Foundation Council for Phoenix

  • Bluestone Securities

Arena Holding Companies

Include:

  1. Glen Moar Properties Limited

  2. Sulby Investment Holdings Limited

  3. Ballugh Holdings Limited

  4. Unicorn Worldwide Holdings Limited

  5. Lezayre Holdings

  6. Unicorn Management Limited

  7. Seafield Logistics Limited

  8. Bridgehouse (Cannizaro House) Limited

Arena Managers

Simon McNally

Simon Cooper

The Arena Settlement ['Arena']

Discretionary trust known as The Arena Settlement created on 29 March 2004 by Cooper and McNally who are named as discretionary beneficiaries

The husband added as a discretionary beneficiary between November 2994 and 19 March 2012 when his name was removed by a deed of exclusion dated 21 March 2012

Arena Trustees

Atticus Trustees

Arthur Becker

Former CEO of Navisite

Business associate of the husband in respect of NYC property development deals

Atlantic Hotels (UK) Limited

H appointed Director in May 2003

Atlantic purchased a 29.9% shareholding in Izodia and 37 hotels from Orb