Case No. CL-2016-000553

Part 1: The Facts12.A more detailed account of the “back story” to this case can be found in the Phase 1 judgment. Given the issues for this Phase 2 trial the account below focuses on:a.The relevant assets which are very much in focus for the purpose of the account;b.The chronology against the background of which the factual issues take place.13.As part of the factual account I have also endeavoured to identify where factual issues which recur later in the judgment fit in to the overall sweep of the story.Badri and his assets14.The proceedings concern services provided to “the Family”, who as previously noted are family members of the deceased Georgian billionaire Arkadi “Badri” Patarkatsishvili, who died unexpectedly in February 2008. Badri had been a high-profile businessman and politician in Georgia. He was for quite some time close to Boris Berezovsky.15.The principal of the Claimants, Mr Jaffe and his company SCPI, were close to Badri. Indeed, SCPI was incorporated in 2001 to provide investment services to Badri (and Mr Berezovsky).16.SCPI was closely involved before Badri's death with the first asset of which mention needs to be made: New World Value Fund Limited (“NWVF”). This was incorporated in Gibraltar in 2002, to be managed by SCPI. It was funded by investments from Badri and Mr Berezovsky. It represented one of Badri’s largest investments. Its original intention was to acquire assets in the food and beverage sector in Central and Eastern Europe.17.Linked to NWVF was Value Discovery Partners LP (“VDP”). VDP was a private equity vehicle incorporated in the BVI and was managed by SCPI, which was its General Partner. NWVF’s investments were structured through VDP.18.The original term of VDP was due to end on 1 July 2008. As to extensions: a.Clauses 11.2.1 and 11.2.3 of the VDP Articles permitted a one-year extension by SCPI acting alone, and a further two years by agreement with the LP, in each case “in order to permit an orderly liquidation of the Partnership Assets.”b.If SCPI issued a notice to the LPs that it was not possible to carry out orderly liquidation of the assets by the termination date, then the GP could extend by such further time as is necessary to complete the “orderly liquidation”, with a backstop date of 4 years – so 1 July 2012 (Cl. 11.2.3).c.Further and in any event, upon the termination of the Partnership, SCPI was obliged to carry on no further business, and wind up the affairs of the partnership qua “liquidating trustee” (11.5.3). d.The Articles proscribed that such winding up was to be by (i) selling the assets “on the best terms available” or (ii) distributing them in specie (11.5.4).19.SCPI as GP had unrestricted powers to manage the partnership's business including by borrowing, investing and selling assets (Cl 4.1.1). SCPI owed fiduciary duties to the VDP investors. There was an Investment Committee (“the IC”) which was to provide non-binding advice to SCPI, and which SCPI had to consult on all major management decisions (Cl. 4.3). Mr Alexeev (from 2011) and Mr Rukhadze (from 2012) became members of the IC.20.SCPI's executives were entitled to 30% of profits and gains made on the sale of the investments (24% for general management of the assets (“Senior Carried Interest”) – payable to KBC, and a further 6% for the management of assets comprised in individual 'strategies' (“Strategy Carried Interest”) – payable to SCI).21.Another significant investment of Badri's was Teleimedi LLC (“Imedi”). He founded it as the first independently owned television station in Georgia with nationwide coverage. His ownership of Imedi and the independent stance taken by Imedi caused significant tension with the Georgian government. Imedi’s independent status is in valuation terms a key issue when the financial aspect of this case is in focus.22.A third significant investment was Fisher Island. Fisher Island is a high-end island development located off the coast of Miami. In 2004, Badri purchased various plots of land with the intention of building a luxury real estate development. The investment was subsequently placed under Badri's Valmore Trust and the land remained largely undeveloped when Badri died in 2008.23.A final asset was Rustavi Steel. It is a large metallurgical plant in Georgia. It was acquired by Badri in 2005. It was an asset which formed a key part of the Recovery Services and whose value is one of the valuation issues.24.As previously noted prior to Badri’s death, he had owned assets in various jurisdictions, which were in many instances held by structures and individuals which meant that they were not readily identifiable as property of his estate. This meant that assets were also under threat from various third parties, who acted quickly following Badri’s death to seek to control the assets. Amongst these were Mr Berezovsky himself, another well-known Russian businessman Vasily Anisimov (“Mr Anisimov”) and a relation of Badri, Mr Joseph Kay. For example, following Badri's death Mr Kay – acting with the Georgian government – annexed/expropriated Imedi and Rustavi. Mr Kay also laid claim to Fisher Island.25.The Family decided they needed assistance with identifying, protecting and recovering the estate's assets (the “Recovery Services”). Because Mr Jaffe and his company SCPI were close to Badri, they were in a prime position to seek to provide those services.The Individual Defendants26.As noted in the Phase 1 judgment the First Defendant, Mr Irakli Rukhadze, was a director of SCPI from 2004 until December 2009 and was from 2004 the head of its Georgia office. As such he had come to know and work closely with Badri and was one of the individuals trusted to be the nominal holder of assets for Badri. He was involved in the management of Imedi from its inception. He had heard conversations which gave an insight into Badri's arrangements for the holding of other assets. Mr Rukhadze knew the Family also before Badri's death and had developed a good relationship with them which was distinct from Mr Jaffe's own relationship with the Family.27.Mr Rukhadze developed his own business associations and allies. Certain of them have come to give evidence in the trial. An example dating to this early period is that Mr Rukhadze worked with Mr Frank Hunnewell, an American investment banker who was involved with Badri in a project known as Maudi. Mr Hunnewell was to become the inspiration for the name of the Defendant companies.28.In addition Mr Rukhadze had a significant Georgian background. He is a Georgian national with knowledge of the Georgian market, and a fluent Georgian speaker. His family, and perhaps particularly his mother, were well connected in Georgia and able to facilitate access for him to influential individuals.29.Mr Alexeev is a Russian native with a background in economics, who had previously worked for McKinsey & Co and had various financial investment roles in New York, Russia and Georgia. He worked in various locations around the world before joining the Recovery Services project from the start of 2009. He was involved in running NWVF, where he eventually became a member of the Investment Committee of VDP, and in the extraction of value from those assets. 30.Mr Marson had been a qualified solicitor since 2001 and previously worked for leading UK and US firms. He also has experience in the property industry having managed a real estate law firm in Spain for two years whilst on sabbatical from one of those firms. He was recruited as described further below in late 2009. Before the breakdown: 2008-201131.On 12 October 2008, the Family signed a non-binding term sheet with SCPI governing provision of the Recovery Services (“the First Term Sheet”). Mr Jaffe was very keen to ensure that any agreement contained provision for a new private equity fund for him to manage, as he had managed VDP.32.It is the Defendants’ case that this is around the time when it was first orally agreed between Mr Jaffe and Mr Rukhadze that they would share the profits of the Recovery Services as to 60% for the Pall Mall team (including Mr Jaffe) and 40% to Mr Rukhadze. The existence of such an agreement is an issue in the claim (LOI 20).33.The Claimant companies (“RP” and “Revoker”) were established by Mr Jaffe/SCPI with a view to their forming part of a structure for the agreement with the Family. Revoker was incorporated in England and Wales in 2008 with Mr Jaffe, Mr Rukhadze, Paul Blyumkin, Peter Nagle, Jamal Khan and Kira Gabbert as members. Mr Rukhadze’s membership was terminated shortly afterwards. RP was incorporated in the BVI on 3 November 2008. 34.Later, in December 2008 Mr Igor Alexeev (“Mr Alexeev”) was recruited to work on the Recovery Services. His initial remuneration was based on a package of £30,000 per month plus accommodation.35.Also in December 2008 Mr Berezovsky commenced three related Chancery Division actions against several defendants, including the Family and SCPI (“the Chancery Actions”). Mr Berezovsky claimed – amongst other things – an entitlement to 50% of Mr Patarkatsishvili’s commercial assets, including NWVF. This called into issue whether it was or was not the case that he and Badri had previously concluded an “economic divorce”. At the same time, Mr Berezovsky was pursuing an already live Commercial Court action issued in 2007 against Roman Abramovich and others (“the Abramovich action”). 36.The Individual Defendants managed the defence of Mr Berezovsky's claims in England, and also separate proceedings commenced by the Family in Gibraltar against the trustee and protector of the majority of the entities through which Badri's interest in NWVF were held.37.Mr Alexeev was admitted as a member of Revoker on 17 April 2009, whilst Mr Rukhadze was re-admitted to membership. On 5 October 2009, Mr Marson signed an employment contract with Revoker to become its chief legal counsel. His remuneration was £150,000 plus a bonus of £35,000.38.Throughout 2009 SCPI, the Claimants and the Defendants proceeded to try to recover assets for the Family (with limited success) – and also to persuade the Family to sign an agreement with them for the Recovery Services (with no success), producing a second draft term sheet. Meanwhile they were remunerated with limited management fees and loans.39.As I have noted in the Phase 1 judgment the lion’s share of the active work in this period was done by Mr Rukhadze, Mr Alexeev and Mr Marson, the Family’s office on Park Street in Mayfair. A further two employees (Ms Diana Miftakhova and Mr Filip Karadaghi) were added to the “Park Street team”. Mr Jaffe headed up the main SCPI team, also referred to as the “Pall Mall team”, SCPI’s office being located in Pall Mall.40.On 12 January 2010 Mr Rukhadze circulated Mr Jaffe’s revised term sheet, which he believed that the Family would execute (“the Second Term Sheet”). The January 2010 term sheet provided in relation to the new private equity fund that the first US$400 million of recoveries would be for the Family to use as they saw fit. The Family would then be entitled to elect between (a) using the next US$400 million of recoveries to set up a private equity fund; or (b) paying a break fee to the Principals of up to US$50 million (the precise amount would depend on the level of recovery above the initial US$400 million).41.As recorded in the Phase 1 judgment following this there were discussions with the Family and steps were taken to set up a structure on the SCPI/Revoker side. But the Family's view would not align with that of SCPI. From May 2010 relations between Mr Jaffe and the Family and Mr Jaffe and Mr Rukhadze began to sour. The Park Street team started to draw away from the Pall Mall team. There was a row over summer 2010 about the Family's attempts to reach settlements with Mr Berezovsky and Mr Anisimov at the same time – and about contact which Mr Jaffe initiated with Mr Anisimov.42.By September Mr Jaffe and Mr Rukhadze were talking about a parting of the ways, on terms whereby SCPI would withdraw from an active role, but nonetheless receive a share of any proceeds of the Recovery Services, reflective of the fact that they were a “Salford Project”.43.In September 2010, the Family agreed a settlement with Mr Anisimov, under which Mr Anisimov agreed to pay between $300 million and $500 million to settle the Family’s potential claims against him (“the $300 million Agreement”). 44.Between September 2010 to May 2011, the relationship between Mr Jaffe and both the Family and Mr Rukhadze deteriorated further. During this period, there were ongoing emails and discussions as to the future of the Recovery Services. Negotiations took place between January 2011 and May 2011 between Mr Jaffe, the Defendants and the Family in respect of the future of the Recovery Services.45.Mr Jaffe in this period sought to push the Family into an agreement, while at the same time trying to exert more control over Mr Rukhadze and Mr Alexeev, including warning them about the existence of their fiduciary duties. A letter sent on 9 April 2011 stated:“It follows that if you or any other members of the Revoker team were to seek to conclude personal arrangements with the Family, you or they would be in flagrant breach of your duties to Revoker. You would also be required to account to Revoker, as set out above, for any benefit you gained personally from any such arrangement and any other profits, or pay damages for any loss caused by any such breaches.”46.The Individual Defendants during this period made plans to set up Hunnewell and to continue to provide the Recovery Services “seamlessly” in the event of a split. “New Revoker” was very much in discussion amongst them and their intimates.47.On 13 May 2011 Salford Georgia suspended Mr Rukhadze from his duties as Managing Director of Salford Georgia and prohibited him from contacting other Salford Georgia employees. 48.Following this, there was a meeting on 16 May 2011 and a written resolution involving all Revoker members except for Mr Rukhadze and Mr Alexeev regarding their actions in respect of the provision of Recovery Services. Consequently, Mr Rukhadze and Mr Alexeev were suspended from Revoker and the Recovery Services. 49.On 16 May 2011 Recovery Partners wrote to the Family attaching a resolution made by Revoker which prohibited Mr Rukhadze and Mr Alexeev from communicating with the Family in relation the Recovery Services or the performance thereof. Mr Marson accepted that from this point he knew of the possibility of a claim or at least a legal risk: “with the correspondence we got there was clearly a risk, yes”.50.Revoker wrote to the Family on 19 May 2011 reassuring them that the Recovery Services would continue notwithstanding Mr Rukhadze and Mr Alexeev's suspension (and the prohibition on Mr Marson from communicating with them), and whilst they could be called upon to carry out discrete tasks, the other Revoker members and employees were fully committed to continuing the Recovery Services.51.On 25 May 2011, the Family, via Olswang LLP, wrote to RPGPL to terminate their relationship with the Claimants. It is the Defendants’ case that by this date, a prevailing profit share agreement as between Mr Jaffe and Mr Rukhadze was that any future carry that may be obtained as a result of the then ongoing negotiations with the Family would be split as to 50% to the Pall Mall Team and 50% to Mr Rukhadze and Mr Alexeev. This issue underpins LOI Issue 20.52.On the same date, Mr Marson emailed Mr Jaffe and cited his frustration about his employment contract with Revoker. Mr Jaffe replied on 27 May 2011, accepting that Mr Marson’s email amounted to a repudiatory breach. Following a breakdown in relations, Mr Rukhadze and Mr Alexeev resigned from Revoker on 26 May 2011.53.There is an issue between the parties as to whether the opportunity was effectively dead from this point so that either the breaches by the Defendants were minor and not causative (LOI 25.2) or so that it might be said that the business opportunity was subsequently transformed and the benefits flowing from it lacked a sufficient connection to the breaches (LOI 15).Between the breakdown and the IRSA: May 2011 to September 201254.Following the Termination Date, the Defendants continued to provide Recovery Services to the Family initially on an ad hoc basis. The Family's needs in this respect were pressing, and it was critical that the Recovery Services continue (a point made by the Defendants in unchallenged evidence).55.Recovery Partners sent a letter to Mr Rukhadze dated 27 May 2011 (which Mr Jaffe confirmed had been written with the assistance of paid legal advice), by which the Claimants reserved their rights including to seeking an account of profits of the Recovery Services but did not direct the Defendants to cease providing the services.56.In June 2011, the Defendants - via Herbert Smith Freehills (“HSF”) – wrote denying the Claimants' allegations, seeking details of the basis for the allegations and making it clear that, whilst there was at that stage no agreement for the Defendants to provide any services, the Defendants would assist the Family as required. 57.The Claimants did not respond to this letter and so HSF wrote again on 14 June 2011 requesting proper particularisation of the allegations against the Defendants who “cannot be expected to tolerate the uncertainty that you seek to create” and further stating that, unless the allegations are withdrawn or particularised, the Defendants reserved the right to seek appropriate declaratory relief. When asked why he did not clarify his position (either by particularising the allegations, or withdrawing them), Mr Jaffe sought to characterise the HSF letter and any response as a “pure legal” matter for the lawyers, not him. 58.The Claimants responded to HSF on 16 June 2011, repeating that they reserved their right to sue the Defendants for damages or an account of profits and stated the Defendants must particularise the basis for any declaratory claim in accordance with Pre-Action Protocols. This correspondence forms part of the arguments on delay (LOI 26).59.There is clear evidence that in this period Mr Jaffe was (unsurprisingly) enraged at both the Defendants and the Family. His prospects of a golden payoff appeared to have been snatched from him by associates, some of whom at least he had liked and trusted. What he considered his considerable loyalty to the Family had been flung back in his face. He stormed via text to Mr Blyumkin: on 5 June 2011: “…I will do everything to make their [the Family's] life miserable until we get our money. All 100% of Revoker proceeds.”60.He also mulled inventive ways of bringing trouble into the Family’s life as can be seen from a series of text messages he sent to Mr Ruslan Fomichev in June 2011: (1)“RA buying Fund and Russians freezing proceeds (I am sure RA and you can get some back). To be honest, I plan to initiate the discussions on the second part. I will be merely cooperating with Russian authorities who approach me first.”(2)“Have them write a letter to Salford. / Them, who? / Those who want to freeze BB money? We will cooperate.”(3)“Our best leverage is when we get close to cash – helping Russians freeze it or … We play cool as if we will do something and they will probably prefer to settle last minute. If there is a comprehensive deal between BB and Family (if it will last) it could be a comprehensive settlement with all of us, including on Revoker. We must play cool and make sure they start panicking when well over $1bn start coming in.” (4)“Russians going after Inna will be very strong move. Now they will have a very good reason / excuse to do it. She is really afraid of it. I really wonder what is VA position.”61.At the same time Mr Jaffe pondered how best to flavour the dish of revenge -and a wait and see game was certainly part of his thinking. In a text to Mr Fomichev he said “…Family/Irakli logic today. They know they have done something really bad against Salford and are afraid of us…At stake about $150m (payable only when recovery takes place) but damages for all are far higher…”.62.In later messages to Mr Fomichev including one sent on 26 June 2011, Mr Jaffe anticipated bringing a claim “for value in 3 years, without damages and interest” worth “about $180m”. One option he was mulling therefore appeared to be playing a long game in hope of extracting maximum value for the claim. Whether a decision was taken on this deliberately, at this point, is part of the delay issue (LOI 26) between the parties. While I deal with delay separately later in the judgment it makes sense to deal with this early part of this disputed issue here.63.It seems clear and relatively undisputed on the evidence that by the end of summer 2011 Mr Jaffe had decided against suing the Defendants for the present. His evidence was that at this stage this was about commercial interests, not his finances. In essence it was because his own interests were aligned with those of the Family. The points in his mind were the outcome of the Berezovsky trial and the VDP exit. His evidence was that suing the Defendants at this stage would be acting like “an elephant in a china shop”.64.While the Defendants urged me to reject this evidence (not least because Mr Jaffe’s pleaded reason was impecuniosity) it rang true. This period appears to have been a hiatus while Mr Jaffe indulged in a lot of angry communications (such as the Fomichev texts) and, as he would put it, nursed “bad thoughts”; but while he also pondered what the best way forward was for his interests. Further it is self-evident that it was not yet clear that the Defendants would themselves achieve a deal with the Family. There was therefore a commercial side to the decision to hold fire, as the Defendants positively asserted.65.This quasi-reflective approach also feeds into his conduct in relation to Mr Berezovsky. It was not until later that Mr Jaffe aligned himself with someone whom he knew to be hostile to the Family (Mr Anisimov). In 2011 and early 2012, it would have been quite simple to align himself with Mr Berezovsky if he wanted to act in a way which was hostile to the Family; but he did not do so. As at 2011 there was no “wider reckless” conduct in relation to the VDP assets as the Defendants alleged.66.It follows that not launching proceedings at this point is something which cannot fairly be categorised as delay for the purposes of an unconscionable delay argument. The question of delay will however have to be revisited later, because in the event these proceedings were not started until late in 2016.67.Moving on, on 6 July 2011, a settlement was reached between the Family and the Georgian government to return certain expropriated assets, including the Rustavi metallurgical plant. 68.In July 2011, following unsuccessful negotiations for Mr Rukhadze to take over Salford Georgia from SCPI, Mr Jaffe sent Mr Nagle to the offices of Salford Georgia, together with some security officers, to shut it down. It is common ground that documents seized from the offices were given to the Georgian law firm, BLC, who were at the time acting for Mr Kay. The closure of Salford Georgia is one of the matters of conduct relied upon by the Defendants under LOI 28.8 as actions taken with the deliberate intent of impeding the Recovery Services, and hence as making some reduction from the account appropriate.69.Between August and September 2011, the Individual Defendants began formal discussions with the Family regarding a deal for providing the Recovery Services and the creation of the Hunnewell corporate structure. Hunnewell (UK) Ltd (the Fourth Defendant) and Hunnewell (BVI) (the Fifth Defendant) were incorporated on 26 and 27 September 2011.70.Initial proposals put forward by the Defendants were not acceptable to the Family. On 28 September 2011 Mrs Gudavadze's son in law Mr Hunyak1 wrote an email about a proposal which Hunnewell had put forward saying that it was:“necessary to explain why the suggested Hunnewell variant in [sic] inacceptable…Besides, I consider that sitting at the negotiations table with the specialists who are supposedly mistaken for the third time, with regard to one and the same contract which is constantly changed not in our favor, we, obviously, make the mistakes which encourage the opposite side to make such actions. We would not like to think that we are made a fool of, but this is how it feels.”71.This email also referred to the proposal as “one and the same contract, constantly changed not in our favour”.72.On 5 October 2011, the Family obtained a certificate of inheritance in Georgia, allowing them to be recognised as both heirs and executors of Badri's estate. 73.Also in October 2011, an outline agreement in the form of the Hunnewell Term Sheet was agreed (on a non-binding basis) between the Defendants and the Family – it was then provided to the law firm Olswang to prepare a draft agreement. This developed over the next 11 months, through negotiations which the Defendants describe as “painstaking and convoluted”, into the Investment Services Recovery Agreement (“IRSA”). Hunnewell faced severe liquidity issues during the negotiation period. The Family too continued to suffer cash shortages and were only able to pay fees and expenses to Hunnewell as ad hoc loans.74.In this period a three-month trial (October 2011 to January 2012) took place in the Abramovich litigation before Gloster J to determine some of Mr Berezovsky’s claims against – among others – the Family and Mr Abramovich. The Family and Mr Anisimov agreed on 9 November 2011, at the request of Mr Anisimov, to terminate the $300 million Agreement due to his imminent cross-examination at the joint trial. 75.The termination of that agreement was not controversial because the Defendants and the Family by this time had acquired certain information (including via disclosure in the Chancery Actions) which suggested that the basis of that deal was not accurate and that Badri had a greater interest in Metalloinvest than Mr Anisimov had suggested. If that was right the Defendants could push for a better deal for the Family. So even as the agreement was terminated the Defendants started to work carefully through the documents with the lawyers, to try to gain a better understanding of the position before they needed to re-engage with Mr Anisimov.76.In December 2011 Mr Jaffe was looking to obtain finance to buy some or all of VDP’s assets. As set out above, SCPI was required by the VDP Articles to sell the assets prior to the end of the extended term, failing which, as liquidating trustee, it was required either to sell them “on the best terms available” or to distribute them in specie. Mr Jaffe did not want to do either of those things in 2011/2012 because he believed that the economic conditions were not right and that the assets (particularly the mineral water company Borjomi) were worth far more than could be achieved for them at that time. He considered it unfair that he should have to sell at such a time and therefore receive far less carry than he had banked on.77.Whether his actions at this time were done with the intention of disrupting the recovery of value from the assets and/or damaged the value of the assets is one of the conduct issues for trial (LOI Issue 28.1).78.Mr Jaffe proposed to Mr Fomichev that Sberbank would lend 90% of the acquisition price, and that he and Mr Fomichev would contribute 10% by way of equity. Also involved in the proposed deal was Mr Tatarchuk, the CEO of Alfa Bank, although acting in his personal capacity rather than on behalf of Alfa. The Defendants’ case is that Mr Jaffe’s actions at this point were in breach of fiduciary duty. The Defendants also say (in an unpleaded argument) that the whole rationale was that Mr Jaffe would buy as low as possible and that he thought that that he and his allies would “make a killing” from this transaction.79.A good deal of detailed discussion followed: On 9 December 2011, Mr Jaffe was sent a term sheet in relation to this proposed deal by Olga Ryzhkova, of Troika Dialog, the investment banking arm of Sberbank, for Sberbank to finance SCPI (or a company owned by it) to the tune of $255 million. The term sheet provided that the shares that were to be acquired would be pledged to Sberbank as part of the agreement, and they were described as “water assets in Russia and Ukraine”, so this clearly related to at least Borjomi. Mr Jaffe confirmed that it in fact related to all of the assets.80.In March 2012, SCPI, in hope rather than expectation, sought an extension of the VDP term from the IC. It made a further such request to NWVF in May 2012. NWVF was not obliged to grant any extension, and it did not. Mr Alexeev, who was on the IC, was opposed to any such extension. It seems that some at least of the IC (including Mr Alexeev) were alive to the fact that if the clock ran down without the assets having been sold, NWVF would be able to argue that SCPI had no right to any carried interest. Citibank (“Citi”) which had been at work on the exit process for Imlek and Borjomi since about 2006 were retained to advise VDP on the sales process.81.At the same time Mr Jaffe was corresponding with another potential purchaser, one Dima W. Again this appears to have been in pursuit of a retained interest transaction. Mr Jaffe gave Mr W details of the VDP asset valuation and an indication of a price likely to be attractive to the Family.82.At the end of April 2012, Mr Jaffe had written to the other Salford executives, in anticipation of the request for an extension to the term, expressing concern about the privacy regime in the Chancery Actions (which involved replacing the names of NWVF, VDP and all of the assets with code names) coming to an end for the purposes of the trial in October 2012. The privacy regime had hitherto been used in the proceedings to avoid any reference being publicly made to even the fact that Mr Berezovsky was claiming an interest in the fund or its assets, because any such association (the “BB taint” as it was referred to by those involved) would seriously endanger the value of the assets.83.Between February and May 2012, SCPI agreed a deal to sell Imlek a.d. and Mlekara Subotica, two of VDP’s Balkan Assets, to Royal Friesland Campina NV. The deal would have realised around $300 million for the Family after payment of minority interests. That money was much needed and the Balkan assets were subject to severe debt issues. The deal fell apart in May 2012 following a change in negotiating position on currency taken by Mr Jaffe. It is the Defendants’ case that this deal was “sabotaged” by Mr Jaffe (in support both of his own attempts to buy and his wish to disrupt the recovery process). This is another of the “conduct” allegations (LOI 28.1).84.At a May meeting of the IC many of those involved pressed for Mr Jaffe to attempt to revive the deal. He was resistant to this and the deal never came to fruition.85.By spring/summer 2012 Mr Jaffe and Mr Fomichev were falling out. Mr Jaffe believed Mr Fomichev had acted against him in regard to their VDP proposals. Mr Fomichev threatened to bring the details of their discussions to a wider audience.86.Meanwhile Mr Jaffe and Mr Anisimov drew closer. Mr Jaffe met with Mr Anisimov in May 2012 and at other times in 2012. He learnt from Mr Anisimov in May 2012 that the $300 million Agreement had fallen through and would not be re-signed. He also knew, from Mr Anisimov and Mr Emme, that the Family (on the Defendants’ advice) now believed that Mr Anisimov owed them more than the $300 million that had originally been agreed and that attempts to agree a revised figure had not succeeded.87.It is common ground that in this period Mr Jaffe also had negotiations with a number of purchasers about retained interest transactions, i.e. deals in which Mr Jaffe himself would be given an interest and/or invited to reinvest. Again Mr Jaffe's actions in this regard form a significant part of the conduct allegations under LOI 28. Retained interest transactions were discussed with Sistema, Alfa, One Equity Partners, Standard Capital Group (“SCG”) and RDIF.88.These discussions caused a good deal of discomfort in NWVF and elsewhere. On 21 May 2012, Mr Simmonds (one of NWVF's directors) wrote to say: “we withdraw our consent with immediate effect to Salford Capital Partners Inc engaging in any further discussions with or disclosing any further information to Legacy Management Limited concerning NWVF, VDP or its asset.”89.In mid-2012, there were exchanges internally at Salford and with Citi, in relation to a retained interest transaction which Mr Jaffe was contemplating entering into with SCG, a consortium backed by a Mr Palikhata. 90.SCG's initial bid had been received on 3 May 2012. It was a “bulk” offer, in the sense that it was an offer to purchase all of VDP's assets, for a total of $520 million, with $310 million of that for Borjomi. The offer provided that the current management would be retained, and offered them the chance to reinvest up to $100 million.91.On 27 May 2012, Mr Blyumkin and Mr Jaffe had a conversation about negotiations that Mr Jaffe had been having with purchasers about deals “with … strings attached”, which Mr Jaffe accepted in cross-examination was a reference to retained interest transactions. Mr Blyumkin's position as of 27 May was that, in order to find out the best price available, Mr Jaffe should have asked the various purchasers to provide their best bid without SCPI involved. 92.Mr Jaffe accepted that he had had “a number of discussions” with Mr Palikhata before receiving their offer. He claimed that he did not discuss its terms, however it is not obvious, and he did not explain, what else they would have been talking about.93.On 18 June 2012, SCG sent its revised offer, of $550 million for all of the assets, including $335 million for Borjomi. That provided for the current management team to stay and reinvest, and referred to an expectation of SCPI and the existing management committing to pay $25 million within a year. Both of these offers from SCG were made directly to Mr Jaffe, and did not copy in Citi, VDP’s official advisers. 94.Mr Mtibelishvily of Citi, when he did hear about it, was not happy, saying “I am getting increasingly uncomfortable with this situation”, and that the offer would be very difficult unless it was an all-cash deal. Mr Jaffe replied that he should not give up so easily. However Mr Mtibelishvily’s view was that there was enough interest by this point for them to run a competitive auction for Borjomi, and that this would be the best way of maximising value. He felt that granting exclusivity to SCG would have closed off this route, with very uncertain benefits given the problems with its funding arrangements.95.Moving to 25 June 2012, a loan agreement was signed pursuant to which an entity affiliated with Mr Anisimov agreed to make a loan of $2million to Mrs Olga Jaffe’s company Pumula Management Limited. The $2million was paid on 28 June 2012 and the loan written off on the same day. The Defendants place considerable emphasis on this and a later payment from Mr Anisimov in the context of the conduct issues.96.In late June 2012, Mr Jaffe travelled to Russia at short notice to meet with Mr Palikhata. The Defendants evidently believed that he was on the verge of signing a deal.97.On 28 June 2012, Mr Jaffe sent an email to the IC in which he said “if the primary objective is to achieve a quick and reasonably certain sale, Salford would propose to proceed with the grant of exclusivity to Standard Capital Group tomorrow”. However he went on not to recommend that, and instead to suggest that they implement a “structured process” (i.e. an auction) as had been suggested in a note from Citi, involving other parties who had expressed an interest. 98.One such party mentioned in the email chain was called Sistema, a large oligarch-backed Russian group which was acting jointly with Elbrus Capital, a London-based investment group represented by a Mr Savin, a manager of a different investment fund and an acquaintance of Mr Jaffe.99.Mr Alexeev replied in his capacity as an IC member, objecting to giving SCG exclusivity, and saying it was not correct that NWVF wanted effectively a fire sale. Mr Simmonds also replied on behalf of the IC, to the same effect. On 29 June 2012, NWVF wrote formally to SCPI to express its concern about the conflict that had arisen in relation to the sale to SCG. 100.Mr Jaffe responded by email the same day, saying that SCPI was alive to the conflict, and had been reviewing it in conjunction with its advisors, and would decide how best to proceed in view of the conflict issues. SCG were ultimately an unsuccessful bidder via the auction process.101.On 29 June 2012, following a summons for interrogation by Russian Prosecutors, Mr Jaffe gave evidence as part of the criminal case against Mr Berezovsky. Mr Jaffe did not make any specific disclosure of this event to NWVF or the IC. Whether this evidence was given under compulsion, or the summons was staged, and whether the evidence was causative of problems to the Recovery Services is reflected in Issue 28.3. On 18 July 2012, an Investigative Committee led by Mr Lomovtsev (who had conducted Mr Jaffe’s interview) issued a ruling on conduct of a preliminary investigation. 102.In mid-July 2012, while the parties were waiting for the judgment of Gloster J in the Abramovich Action, attempts were made to see if the Chancery Actions could be settled before the judgment was published. This led to a mediation over 2 days, which was unsuccessful. 103.There were then meetings between Mr Anisimov and Mr Berezovsky, which were unsuccessful. Mr Jaffe’s role in these meetings is another of the conduct issues (Issue 28.7). The Defendants’ case is that Mr Jaffe suggested that there could be a settlement between Mr Berezovsky and Mr Anisimov on terms that the latter would acquire the former's interest in NWVF and that Mr Jaffe’s motivation in so doing was to put pressure on the Family by preventing them from selling VDP's assets and thereby starving them of funds.104.VDP’s term expired on 1 July 2012 and SCPI began to act as a liquidating trustee under Art.11.5.3 of the VDP Articles. It was no longer permitted to carry out or conduct any business, and its mandate was now to sell the assets at the best terms available or to distribute the assets to NWVF in specie. Mr Jaffe accepted that the requirement to sell on the best terms available meant within a “short period of time”, rather than at some stage in the future (because otherwise SCPI would have been required to continue to trade in the meantime, which as liquidating trustee it was prohibited from doing).105.In July 2012, an auction formally began for VDP’s most valuable asset, IDS Borjomi. Meanwhile, the Sixth to Ninth Defendants were incorporated on 11 July 2012.106.Mr Jaffe wrote further to NWVF on 9 July 2012, to say that SCPI had been giving careful consideration to the conflicts position with its advisers. Mr Jaffe confirmed that this meant Macfarlanes, Linklaters and Citi, and that this represented their advice. The Proposal was that a committee be formed with oversight of the sales process, which would be constituted of at least three members, one of whom would be Mr Jaffe himself, which would make decisions by majority vote. There was no suggestion that SCPI would cease to be the GP. 107.A note of advice from Macfarlanes dated 26 August 2012 shows that Macfarlanes had advised to somewhat different effect, namely that, (i) a subcommittee should be created to handle and make decisions in the sales process; (ii) ideally that would be an entirely independent committee; (iii) given the amount of involvement that Mr Jaffe had already had with the prospective purchasers, i.e. that he was the face of the negotiations as far as they were concerned, SCPI could seek the consent of NWVF to a sub-committee which included Mr Jaffe, but that if NWVF did not agree he would have to allow Citi, or independent members of the committee, to take over the process entirely. 108.NWVF were not happy with the proposed procedure or the constitution of the committee. At a meeting between NWVF and SCPI in Amsterdam on 10 July 2012, the minutes record that NWVF said the following:a.Mr Blazquez asked whether, in making value judgments, SCPI would rely on the bankers. Mr Jaffe “went on to state that to date bankers had less of a role in decision-making but when establishing value Salford would rely on their analysis and opinions; particularly in relation to any transactions where Salford or individuals associated with Salford would have a retained interest”.b.Mr Averbuch queried which of the SCPI executives were going to be asked to re-invest. It was put to Mr Jaffe that, whatever uncertainty there might have been about the precise list of individuals, it was undoubtedly going to include him personally. He appeared to accept that (“Did I know that Palikhata/Interfood wanted me? Yes.”)c.Mr Young said that he thought there was a material conflict of interest on the part of Mr Jaffe as he was responsible for negotiating and decision-making on all exits and with one of the potential buyers he and others stood to gain a personal benefit. Mr Jaffe responded that whilst no one wanted a conflict, if a buyer demanded it, it may be in everyone’s interests for it to proceed. He said that the issue could well arise again. 109.NWVF raised a dispute with SCPI on 9 August 2012 under the VDP Articles, arguing inter alia that SCPI was required to distribute all of VDP’s assets to NWVF in specie (the “Dispute Letter”). That letter was leaked to various bidders on or around 24 August 2012. 110.In particular, it was leaked to Friesland Campina the night before a meeting reviving negotiations over Imlek was due to take place. The leak dealt a huge blow to SCPI’s ability to sell the assets. The suggestion that that leak originated with the Defendants appears likely given the stone wall which was then put up to suggestions that the leak be investigated: NWVF did not respond to SCPI’s correspondence asking it to help coordinate an investigation and to disseminate a letter of comfort to bidders to prevent further damage to the sales process. Further when NWVF eventually provided a draft letter of comfort, it was couched in inappropriate language that would not have addressed bidders’ concerns.111.In August Mr Marson held a meeting with Mr Nagle, who still owed duties to SCPI. It appears that the Defendants were interested in Mr Jaffe's financial problems. At about the same time the Russian prosecutor issued an application to freeze assets against Mr Berezovsky.112.Meanwhile from August to October 2012, the Family and the Individual Defendants were involved in discussions regarding the auction sale of Borjomi focussing on the possibility of a sale to Alfa Bank. It appears that this was prompted at least in part by unhappiness about the Sistema bid and Mr Jaffe’s part in it. Mr Fomichev, who had by this stage fallen out with Mr Jaffe, was the initial vector for the contact being made. At the same time Sistema made its first formal bid on 23 August 2012, for $390 million. It provided that Sistema intended to retain the current management of the Borjomi Group. Other bids in the picture emanated from TPG, Klever and Interfood. There is some evidence that the Defendants were involved in communications with some of these bidders (in particular Klever) in terms which would not assist SCPI's authority.113.On 31 August 2012, Gloster J handed down judgment following the joint trial of Mr Berezovsky’s claims against Mr Abramovich and the Family – Mr Berezovsky was unsuccessful and his credibility was undermined. As Mr Cotlick (who was formerly Mr Berezovsky’s adviser) said, he was damaged by the judgment. The Family was correspondingly benefitted by the judgment.114.A global settlement was reached by the Family in their dispute with Mr Berezovsky on 9 September 2012 for $150million. The settlement included the terms on which the Chancery Actions would be discontinued as between them; those claims had in large measure been dependent on Mr Berezovsky’s oral evidence about the “economic divorce”.The IRSA115.After the settlement it appears that the Defendants put their collective foot down and insisted on the negotiations for the IRSA being drawn to a conclusion. 116.The IRSA was entered into by the Defendants and the Family on 30 September 2012. A management deed was agreed between Hunnewell (“BVI”) and Park Street (“GP”) Ltd, pursuant to which BVI was given responsibility for performing services under the IRSA. It is essentially the date of this agreement that the Defendants contend marks the cut-off point after which profits made by them were no longer causally connected to the Defendants’ breaches of fiduciary duty. 117.The IRSA is a far from straightforward document. It reflects no great credit on its drafters; unless those drafters were actually seeking to confuse readers. Mr Rukhadze described it as a “cumbersome document”. In essence:a.The Defendants were contractually bound for an indefinite period to complete certain “Mandatory Tasks” set out in the IRSA. In the event, these were not complete until 2015. b.The IRSA contained an Overriding Objective, namely to maximise the aggregate value of Proceeds, i.e. net distributions to the Family after payment of all costs and liabilities. The purpose of this was to free the Family from the unwanted burden and risk of having to manage assets, i.e. to turn them to the extent possible into cash. c.The IRSA contained broad management obligations in respect of assets that were not sold. There was no guarantee the Defendants would be able to secure separate remuneration for this, which required negotiation of individual Management Deeds with the Family. d.In order to earn carried interest (of 15%) the Defendants had to achieve a threshold of $500 million in Proceeds which required distribution of cash to the Family net of liabilities (“the Carry Threshold”). This was no mean feat, not least as the Family had very significant liabilities including (but not limited to): (1) the Mr Berezovsky settlement payment ($150 million); (2) the settlement payment to David and Olga – Mr Patarkatsishvili’s other wife in Russia and her son ($103.6 million); and (3) repayment of loans from third parties (e.g. loans totalling $298.5 million from Mr Abramovich).e.The Defendants had no right to terminate the IRSA.118.The IRSA and the Term Sheet which Mr Jaffe had advocated pre-breach were rather different. In summary: the financial package was totally different; the structure, operation and success threshold for a fund was different, as well as the management of assets that were to be recovered; the existence of a hurdle rate was substantially different – before which the Defendants could not receive any carry; and the risks placed upon the Defendants were extreme and indeterminate. The IRSA was a less beneficial deal than the Term Sheet; it gave the Defendants the right to receive sums of money, but only when the Family had received “Proceeds” exceeding the $500m (net) carried interest threshold as set out in the IRSA. In other words it incentivised substantial success.119.The IRSA envisaged that Management Deeds would be agreed for Rustavi, Fisher Island, MagtiCom and Benahavis. The Management Deeds were the subject of lengthy negotiation between the Defendants and the Family and were not signed until July 2013, when the Family were willing to do so only for Rustavi, Fisher and Borjomi. Under the Management Deeds for Fisher and Rustavi the Defendants had to achieve an increase in agreed base valuations in order to earn any carry. In addition the Defendants agreed to accept a flat management fee in respect of Borjomi “rather than the market standard carried interest”, thereby “giving up potentially many tens of millions of dollars”.120.The Family were not willing to enter Management Deeds for MagtiCom, Benahavis or VDP's Balkan assets, which the Defendants therefore had to manage under their general management obligations in the IRSA (and for no additional fee). 121.There is an issue between the parties as to the extent to which the IRSA deal was a “step down” from the SCPI Term Sheet. On one level it was not, in that the Family were never prepared to agree a binding deal before the IRSA; the IRSA was the bird in the hand, with the SCPI Term Sheets as birds in the bush. However, it did illustrate the Defendants losing out in the negotiations with the Family; as they accepted the terms agreed were, “compared to what they sought”, to the Family's benefit and the Defendants' detriment; there then arises a question as to whether the less beneficial terms agreed reflected on the Defendants’ skill (LOI 21-22).The Recovery Services post the IRSA: October 2012-December 2017122.In broad terms it is common ground that the Defendants did a huge amount of detailed work on the Recovery Services. There is an issue which will be considered below (LOI 21-22) as to whether the Defendants exercised particular skill or underwent particular risk in so doing. Nobody doubts however that they worked extremely hard.123.Two freezing orders were made in relation to VDP’s assets in Russia and Ukraine on 2 October 2012. These form part of the conduct allegations against Mr Jaffe (LOI 28).124.On 4 October 2012 a Term Sheet between Alfa Bank and the Family was circulated regarding the acquisition of Borjomi. By this Term Sheet the Family and Alfa Bank agreed to “cooperate […] to effect the joint acquisition” of Borjomi for $460 million. The Defendants encouraged Alfa Bank to pretend that it remained interested in the SCPI/Citi auction process by pursuing due diligence.125.Early October 2012 saw the end of the bidding process for Borjomi via the auction organised by Citi on 1 October 2012. The top bid, that of Sistema, was for $515 million (ie it was US$65 million higher than the Alfa bid). That offer provided, at §1(b), that Sistema intended to offer “senior management of the Borjomi Group the right to acquire up to 20% of the shares in the Company at the price paid by us for the Borjomi Group”.126.On 8 October 2012, Mr Jaffe emailed the IC to say that Sistema had won the Borjomi auction. That email attached a draft term sheet and exclusivity letter for the deal with Borjomi. That led to an exchange of emails with the IC – in particular Mr Alexeev – about, inter alia, the retained interest provision, in which Mr Jaffe reassured them that no discussions had taken place about it – the bidders had been told that that would be discussed with them if and when their bid was successful. 127.NWVF wrote to SCPI on 9 October 2012 setting out their concerns with the Sistema bid, which were discussed at a meeting on 10 October 2012. SCPI then wrote to NWVF the same day. In that letter SCPI maintained that it was acting in NWVF's best interests. 128.Alfa Bank was offered the opportunity to increase its bid further but refused to offer more than the $460m it had already agreed with the Family. 129.The terms of the exclusivity arrangements that were negotiated with Sistema were explained on a call between the IC and Mr Mtibelishvily on 9 October 2012. The final term sheet included provision for a $25m convertible loan, associated drag-along and tag-along rights, and “Transaction Delay Events” which would extend the five-week exclusivity period by up to one month. That term sheet was entered into on 23 October 2012.130.On 10 October 2012, Mr Jaffe had an exchange with Barbara Ericson-Peichl, a representative of Raiffeisen Bank, who he had evidently asked whether they would be interested in financing Sistema's bid.131.Also on 10 October, following a without prejudice meeting in Paris, NWVF offered to pay SCPI carry in the sum of $120 million, if it would agree to a distribution in specie. That offer was calculated by reference to the carry to which SCPI would be entitled based on the best offers made for each asset, plus a 20% premium. Mr Jaffe rejected that offer on 11 October 2012. Not all of the SCPI executives agreed with this decision. Consequently on 12 and 16 October 2012, letters were written respectively by SCI and KBC (in essence Mr Nagle and Mr Blyumkin and the other SCPI executives), urging Mr Jaffe to accept NWVF's offer. 132.On 12 October 2012 Mr Jaffe gave NWVF three days' notice of his intention to sign the Sistema term sheet. On 14 October 2012 NWVF wrote to say that in light of the death of Mr Jaffe's father, they were willing to delay filing an arbitration if SCPI would also delay entering into the term sheet. It was agreed that there would be a three-day armistice.133.On 19 October 2012, NWVF made its final offer, of $130 million, adding a further $10 million to the $120 million offer. The Defendants say that there was no rational basis on which the offer could be refused, given that it exceeded the best possible return that Mr Jaffe could have hoped to achieve by virtue of the sales for which he was at that point campaigning. 134.This event was key in Mr Jaffe's relationship with other remaining members of the SCPI Board. It is fair to say that some of them had been unhappy with the way that he had approached the pursuit of retained interest transactions with potential buyers, bearing in mind SCPI's fiduciary duties. And all of them were concerned to ensure that their carry, whatever it would be, was not prejudiced by failing to sell within the period. They were less sure of the benefits to be obtained by delaying a sale than was Mr Jaffe and they feared that Mr Jaffe was acting in his own interests and not in SCPI's. By this stage therefore certain of the Salford executives were in discussions with NWVF, a course of action which may well have put them in breach of their fiduciary duties to SCPI; at the same time they were concerned that Mr Jaffe was himself in breach of his duties to SCPI and that he had caused SCPI to breach its duties to KBC and SCI.135.Consequently, the SCPI board unhesitatingly voted to accept the offer. However, Mr Jaffe still did not want to accept it, so he dismissed three of the dissenting board members and rejected the offer. 136.Mr Petrovic was among those board members who voted to accept the deal, indeed after Mr Jaffe rejected it, he resigned from the board in order to try to pressurise Mr Jaffe into accepting it. He also suggested that the reason why Mr Jaffe did not want to accept the offer was not the financial amount, but rather that he did not want the Salford executives who had defected to NWVF to get any of it (despite it being their contractual entitlement). 137.Mr Nagle resigned from the IC on 20 October 2012, writing a long letter in which he detailed what he saw as Mr Jaffe's misconduct in relation to the VDP sales process – referencing in particular to concerns over the SCG and Sistema bids, and the Imlek/RFC situation. He also resigned from Salford.138.Following this, NWVF offered to pay the Salford executives their commensurate share of the carry from that offer, if they would assist them in protecting and selling the assets. That is what happened, and deals were done accordingly. As part of those deals the executives were required to agree to co-operate with the Family and NWVF in claims involving SCPI, to the extent possible under their contractual terms with SCPI. Thus in late October 2012, Mr Nagle entered into an agreement with the Family regarding his carried interest entitlement in VDP. 139.The Family made a deal with the Georgian government on 18 October 2012 to return Imedi to their ownership. This deal was made possible by the change of government in Georgia, but also involved considerable work on the part of the Defendants, in particular Mr Rukhadze.140.Mr Jaffe says in his evidence that he first contacted potential liquidators for VDP on 17 October 2012.141.On 18 October 2012 NWVF filed its request for an arbitration in relation to its request for a distribution in specie.142.Mr Jaffe appointed liquidators on 23 October 2012. They were appointed not under VDP's Articles – which made no provision for such an appointment and exclusively attributed responsibility for liquidating the assets to the “liquidating trustee”, i.e. SCPI – but rather under a provision of the BVI Limited Partnership Act. This action is another of the conduct allegations which are live under LOI 28.143.Mr Jaffe gave no advance indication to NWVF or the investors that he was going to do this. The Defendants adduced evidence from Mr Blazquez and Mr Baumann, both directors of NWVF, which the Claimants did not seek to challenge, that their view was that the appointment of liquidators would lead potential buyers to view the assets as distressed and therefore negatively impact the value of the assets, and that they believed that by this move Mr Jaffe was seeking to further his own ulterior motives rather than act in the interests of the Family. Mr Jaffe's evidence was that he took this step to facilitate the sale which he considered in NWVF's best interests.144.Also on the same day as, and immediately prior to, the appointment of liquidators, Mr Jaffe caused Rissa, Borjomi's holding company, to sign the term sheet, exclusivity letter and side letter with Sistema for the sale of Borjomi. However the deal was rescinded by Rissa’s corporate director after it found out about the liquidation.145.On 14 November 2012, writs of attachment were issued by the Russian Court in Moscow in respect of certain VDP assets in Georgia. 146.The defendants thereafter sought to find a buyer for Borjomi, agreeing a deal based on the US$460 million figure with Alfa, together with 40% shareholding for the Family and a “Texas Shoot-out” mechanism which meant that Alfa gave up the control premium. The negotiations on this sale were led by Mr Rukhadze supported by Mr Alexeev and Mr Marson. The Family, Mr Rukhadze and Mr Alexeev thereafter sat on the Borjomi Board.147.In December 2012, NWVF signed a Distribution Agreement with VDP’s liquidators whilst VDP’s majority shareholding in Borjomi was distributed to NWVF – a majority of that shareholding was sold to Alfa Bank.2013148.On 23 January 2013, the Family issued proceedings against Mr Anisimov in the Commercial Court after relations with him worsened (“the VA Claim”). The Family claimed that $600 million received following the sale of an interest in RusAl (the “RusAl Proceeds”) had belonged to Badri alone, and that Mr Anisimov had invested a significant amount of them into Metalloinvest on behalf of Badri. Mr Anisimov's defence was that Badri had agreed to gift Mr Anisimov 50% of the RusAl Proceeds (i.e. $300 million) as a result of a moral obligation arising out of Badri’s involvement in the sale of Mr Anisimov's aluminium assets at an undervalue years earlier. Based on this, Mr Anisimov argued that he had invested his own 50% of the RusAl Proceeds in Metalloinvest. This action therefore effectively reflected the previous US$300 million Agreement, which had been terminated in 2011 and which the Family no longer saw as reflecting the reality of the situation.149.22 February 2013 saw VDP’s liquidators commence proceedings regarding SCPI’s claim to an entitlement to carried interest in VDP in the BVI (the “BVI Carried Interest Proceedings”).150.11 July 2013 saw a freezing order made in respect of VDP’s assets in Serbia. 151.At this point also the Family and the Defendants entered into management deeds for Rustavi and Fisher Island (for which annual management fees of $1m each were agreed) and Borjomi (an annual management fee worth $2m was agreed). There were also further delegation agreements entered into between Hunnewell (BVI) and Park Street (GP) Ltd in respect of managing Rustavi, Fisher Island and Borjomi. 18 July 2013 saw Dioskuria LLC and Traktat Syndicate LLC and the Sixth to Ninth Defendants enter into a limited partnership agreement to form Park Street Partnership LP. The agreement was later amended to include – with retrospective effect – Pars Barking LLC.152.One aspect of the work on Rustavi involved further claims from Mr Kay, which were ongoing until 2016. Mr Birkaia’s evidence (echoed by Mr Blake) was that Mr Rukhadze was central in dealing with this threat, working closely with Mr Marson.153.A freezing order on VDP’s assets in Serbia was lifted on 14 August 2013 and the case was remitted for retrial. 154.On 1 November 2013, a company with which Mr Jaffe was associated entered into a loan agreement with a Russian businessman introduced to him by Mr Anisimov’s adviser (Mr Emme) in respect of a loan of $6m to Mr Jaffe. The loan was increased to $10m on 19 December 2012. Mr Jaffe received the $10m in instalments between 20 November 2013 and 6 January 2014. During this period, between 1 November 2013 and 5 February 2014, Mr Jaffe served three witness statements in the VA claim. The Defendants’ case is that this was done by Mr Jaffe with the deliberate intent of impeding the Recovery Services, and forms conduct Issue 28.6.2014155.On 3 March 2014, both Russian and Ukrainian freezing orders were lifted over VDP’s assets. 156.11 March 2014 saw a settlement agreed between the Family and Mr Anisimov regarding the VA claim, a result of which was that Mr Anisimov agreed to pay $750 million to the Family. This was the culmination of the Defendants’ work on re-evaluating the Family’s position vis a vis Mr Anisimov, and some hard negotiations, during the course of which Mr Shvidler, who was able to represent Mr Abramovich’s perspective and information, provided the Defendants with some assistance. The level of skill on the part of the Defendants involved in this deal was one of the issues under LOI 21 (skill) and their involvement in this improved deal is part of LOI 22 (enhancing asset values).157.On 16 April 2014, the benefit of the $10m loan to Mr Jaffe was assigned to a company associated with Mr Anisimov. 158.From mid-2014 onwards, the Defendants pursued various investment opportunities, including the acquisition of JSC Liberty Bank (“Liberty Bank”), and a joint venture in the Georgian cement industry. 2015159.An SPA was signed for the sale of VDP’s Balkan Assets on 2 February 2015. 160.On 24 July 2015, following an approach from Mr Graham Huntley of Signature Litigation to the Individual Defendants, Hunnewell (BVI) entered into the “RBS Funding Agreement”, agreeing to provide funding in connection to the RBS Rights Issue Litigation up to a total of £15.5m. The RBS Funding Agreement was amended in November 2015 to provide additional funding.161.On 19 November 2015, the Privy Council dismissed SCPI’s appeal in the BVI Carried Interest Proceedings. SCPI was therefore deemed to not be entitled to carried interest in VDP. 2016162.SCPI assigned its claims in this action to RPGPL on 1 June 2016.163.On 12 September 2016, the Claimants brought the current proceedings against the First to Fourth Defendants. The remaining Defendants were added in late 2017. One argument for the Defendants was that Mr Jaffe (and hence the Claimants) was in a position to commence the litigation earlier and that it would be unconscionable to permit the claim for an account of profits after that date as a result (Issue 26).164.According to the Defendants it was in October 2016 that the Defendants reached the threshold under the IRSA necessary to generate a carried interest entitlement. It is fair to say however that the evidence suggested that the Defendants had little oversight during the currency of the IRSA as to how the money recovered for the Family was being accounted for, or as to the robustness of the figures being used for the Family's expenses. a.For most of the period in question the figure was calculated by recording the amounts that had actually ended up being distributed to the Family (in payment of Family personal liabilities, cash or assets) after Recovery Services related expenses had been paid. These were then shown in “split table” spreadsheets that were passed periodically between the Family and the Defendants. b.It was not until February 2018 Mr Alexeev suggested to Ms. Miftakhova that they attempt to cross-check this figure by producing an analysis of total recoveries less total recovery expenses less total Family expenses. c.However, it appears that this was never done. Mr Alexeev satisfied himself, on the basis of a phone discussion involving a rough calculation that the number reached was in the correct ballpark. He also concluded that the actual process which the IRSA appeared to contemplate would be impossible due to the difficulty in tracking retrospectively all of the expenses paid, and so the idea of a full analysis was abandoned.2017165.On 21 July 2017, the Defendants completed the acquisition of a 31% interest in MagtiCom LLC (“MagtiCom”) via a 67.39% interest in Sector Telecom Georgia LLC (“STG”) and a 46% interest in International Telcell Cellular LLC (“ITC”). The total consideration was worth $92m.166.On 30 July 2017, the Management Deed entered in respect of Borjomi expired on its terms. 167.In August 2017, Hunnewell (BVI) received a payout in relation to the RBS Rights Issue litigation. That payment was £48.2m, equating to a return of 65% of its funding plus the relevant uplift under the RBS Funding Agreement. The Defendants received further returns in April 2018, March 2020 and May 2020. 168.On 15 August 2017, Cement Invest BV (“Cement Invest”) acquired a 45% interest in Caucasus Cement Holding BV (“CCH”) for around $24m in a 50/50 joint venture between the Defendants and the Georgian Co-Investment Fund (“GCF”).169.During the course of 2017 Lincoln International were engaged to investigate the possibilities for a sale of Rustavi. Lincoln screened a number of potential buyers, approaching 64 industry participants across a broad spectrum of geographies. The process generated two bids. One was from GCF of $16 million (due diligence having been carried out), and a second offer from a Russian bidder of $25 million (without due diligence). Both of those were figures for the equity. A figure of US$30 million was estimated by Rustavi executives as the best offer that might be hoped for in February 2018.170.From July to October 2017, pursuant to an SPA signed in July 2017, the Defendants – through European Financial Group BV (“EFG”), acquired 74.64% of the shares in Liberty Bank for around $42m. On 22 March 2018, EFG increased its interest in Liberty Bank to 75%. In 2019 EFG, now renamed Georgian Finance Group BV (“GFG”), increased its interest in Liberty Bank to 91.18% by acquiring further minority interests for $7.4m.171.In 2017 Mr Rukhadze started negotiating with Vano Chkhartishvili, which led to a global agreement to settle all disputes between Vano and the Family in 2018.Exiting the relationship with the Family: late 2017 onwards172.By the end of 2017 considerable points of friction had emerged between the Defendants and the Family. The Family (primarily through Mr Hunyak and Mr Ershikov) had sought to pressure the Defendants by (1) reducing the annual Recovery Services fees; and (2) terminating the Borjomi Management Deed and resisting an extension of the Fisher and Rustavi Management Deeds, despite the ongoing sales process in relation to Fisher; and (3) trying to widen the scope of the work under the IRSA. 173.The Defendants therefore faced the prospect of losing the majority of their annual fees, whilst facing protracted disputes with the Family (who were now well-resourced). They were concerned that such carried interest as was due to them would have been extinguished by the Defendants' liabilities to the Family. Further sums would only become payable following valuations, waiting for assets to be sold, and potentially lengthy litigation. 174.Ultimately, the idea of a “clean break” emerged. This would entail termination of all agreements in exchange for payment of fixed amounts by the Family. This was attractive to the Defendants as it would avoid lengthy and expensive disputes about amounts due under the IRSA and extensive, expensive, valuation processes, and alleviate the cash flow pressure caused by the reduction in annual fees. It would also allow the Defendants to devote time and funds to their other investments. 175.The Family was broadly amendable to a split but wanted to pay the Defendants with assets rather than cash, as they had no appetite to own and manage assets. 176.The negotiations that ultimately led to the Deed of Termination (“DoT”) commenced in late 2017.177.By early February 2018, the Defendants were exasperated by Mr Ershikov and Mr Hunyak and concerned that they were not acting in good faith. On 5 February 2018, the Defendants wrote formally to Mr Ershikov saying that they were giving notice that they considered that the Family had terminated the IRSA. There was much debate about whether this letter was a mistake – particularly in the light of the arguments on skill. 178.The Family’s formal response to this on 19 March 2018 said, inter alia, that they (the Family) had not terminated the IRSA, and that they were treating the Defendants letter as itself amounting to a termination. A termination by the Defendants would, under the terms of the IRSA, have had severe negative financial consequences in terms of the Defendants carry entitlement. 179.Notwithstanding this, the Family did come to the table and the DoT was negotiated. 180.On 20 April 2018, the Family and the Defendants entered into the DoT and its associated side letter. There had been some suggestion prior to the trial that the DoT was a sham (a case probably reflecting a belief by Mr Jaffe that the Defendants had made far more from the Recovery Services than was appearing to be the case). That case was not however pursued at trial.181.Under the DoT, the Family agreed to transfer ownership of certain of their assets to the Defendants, as well as an amount of cash, by way of final settlement of the dispute. The parties could not agree upon a value to be attributed to Fisher Island, and so it was agreed that a separate valuation process would take place for that asset. It was ultimately valued by Deloitte in a long and controversial process starting in April 2018.182.An Annex entitled “Calculations for IRSA Final Payment” (“the DoT Annex”) was inserted into a draft of the DoT by the Family’s lawyers. This set out the values that had been attributed to the DoT Assets during the negotiations and, therefore, how the amount of the cash portion of the deal had been calculated. The DoT Annex was included in the execution version of the DoT by mistake and the parties subsequently agreed to remove it. 183.There is a dispute between the parties as to the significance of the figures in the DoT Annex and whether they are reliable evidence of what the market values of the assets were, or what the parties believed the market values to be, at that time.After the termination184.Between 25 June and 19 July 2018, the Phase 1 trial took place before me. Judgment was handed down on 1 November 2018.185.On 19 October 2018, pursuant to the DoT, 100% of the issued and allotted share in Marbella RE Group Ltd, (“Marbella RE”) at the time the 100% beneficial owner of Tidjicka (SL) (“Tidjicka”), was transferred to Park Street Capital.186.On 3 December 2019, contrary to the express terms of the Deed of Termination, 100% of the issued and allotted share capital of Tolanius Beheer BV, a 100% subsidiary of 2B Nice Finance AG and the 100% legal and 83.3% beneficial owner of Rustavi, was transferred to Park Street Lux Sarl.187.On 20 December 2019, Marbella RE merged with PS Capital Lux Sarl, such that the Defendants’ interest in Tidjicka was held through RTK Amsterdam BV.188.On 18 November 2020, pursuant to the Deed of Termination, 100% of the issued and allotted share capital in Media Finance Group BV (“MFG”), at the time the 25% beneficial owner of Studio Maestro LLC (“Maestro”), was transferred to Stitchting Media Finance, the entity through which the Individual Defendants hold their ultimate beneficial interest in MFG. 189.On 3 August 2021, pursuant to the Deed of Termination, 100% of the issued and allotted share capital in Georgian Media Production Group Ltd (“GMPG”), at the time the 100% beneficial owner of various Georgian media companies including Imedi, was transferred to MFG. Part 2: The Issues and the TrialThe issues on the scope of the account190.As outlined above, there are a number of issues as to whether certain factors can or should lead to a limitation on the account. In particular there are issues as to:a.The degree of connection between the breaches found and the sums gained by the Defendants, both by reference to the scope or seriousness of the breach and by reference to what is said to have been a later transformation of the opportunity;b.The impact of the profit-sharing agreement or arrangement which SCPI had had with the Defendants before the breach;c.The impact of the Defendants skill, time and risk in pursuing the Recovery Services after the breaches;d.The relevance of the delay by Mr Jaffe in commencing proceedings;e.The relevance of Mr Jaffe’s conduct in a myriad of respects; andf.The relevance of Mr Marson’s contractual position.191.Once those issues are clarified it becomes necessary to apply the principles to the figures (Responsive Receipts, Responsive Expenses and Responsive Investments) at which level there are also issues.The Responsive Receipts and Responsive ExpensesCommon Ground192.The question of what were the Responsive Receipts and Responsive Expenses is one which was dealt with by the forensic accountants. 193.As regards Responsive Receipts, they achieved a good measure of agreement. In essence they agreed that:a.The Responsive Receipts could be broken down into Recovery and Management Fees, Rissa Termination Fee, Loans, Deed of Termination (“DoT”) Related Receipts and Other.b.For each there was a central agreed core as follows:(1)Recovery and Management Fees: US$29,235,000(2)Rissa Termination Fee: US$5,000,000(3)Loans:US$37,199,000(4)DOT Related Receipts: US$34,427,000(5)Other: US$3,379.194.As regards Responsive Expenses, the difference was larger. The experts agreed that at least US$11,486,000 of Responsive Expenses were incurred. However Mr Davies, for the Defendants, put forward a figure of US$38,458,000 – a gap of US$26,792,000. The difference between them was spread over a number of subheadings, but hinged on their differing approach to the evidence.The Issues195.The issues relating to the Responsive Receipts related to:a.Fees in relation to Fisher Island, Rustavi, Rissa/Borjomi and Vano. This relates to the applicable period for fees;b.Two detail points on specific loans;c.DoT Related Receipts: items relating to Vano, Fisher Island and Zurgovani LLC, a Georgian entity beneficially owned by the Family;d.Other: the differences relate to loans to Mr Marson, loan repayments to Mr Rukhadze;e. Pre-IRSA expenses, Family Expense Payments, Mr Alexeev's salary paid by Tidjicka (SL), a Spanish company controlled by Marbella RE Group Limited – a BVI company at that time beneficially owned by the Family, amounts settled directly, so-called “Annex 1 Receipts” (receipts which the Defendants say fall outside the scope of the account) and so-called “Family Schedule” receipts.196.As for the Responsive Expenses there are a miscellany of issues. The major issue however turns on whether there were qualifying agreements with certain Georgian partners and Ms Miftakhova.The Responsive Investments197.The evidence raised a number of issues concerning various investments made by the Defendants. The key investments originally in scope, and their dates were:a.Liberty Bank: October 2017;b.Magticom: July 2017;c.Cement Invest: October 2017;d.RBS Funding Agreement: July 2015 / November 2015; ande.Other litigation funding: Responsive Receipts totalling $3,125,955 were paid by Hunnewell BVI to Signature Litigation LLP between 1 March 2015 and July 2016 in order to fund a confidential arbitration proceeding involving a client of that firm. The Defendants have also (starting in March 2019) funded a further case in litigation which remains ongoing.198.Within these investments were issues about sums received by individual Defendants thus:a.Mr Rukhadze: Dioskuria LLCb.Mr Alexeev: Traktat Syndicate LLC199.Ultimately however the Claimants realistically – and possibly also strategically – did not pursue the majority of this case - as regards Liberty Bank, Cement Invest, Magticom and the non-RBS litigation projects. This was on the basis that “the connection between those investments and the Defendants’ breaches is less direct, and the valuation of those investments raises more difficult questions about where it is fair to draw the line”. The Claimants nonetheless in closing set out their submissions as to the value of those assets in case I were to consider that they should be brought into the account or that their value is relevant to the calculation of the Defendants’ net position.200.However I do not at all disagree with the Claimants’ approach; had the case on these investments been pursued I would have found that the Claimants’ case in respect of these items did not succeed. It is therefore not necessary for me to consider these items.201.The result is that the only live issue on the Responsive Investments relates to the RBS Litigation Funding investment. The value of the investment is agreed: US$54.398 million. The question is whether it falls within the account or not.The Trial202.There was a considerable echo of the Phase 1 trial in the evidence. Mr Jaffe and the Defendants gave evidence, as they had done at the first trial. Though I evaluated their evidence afresh, my impression of them was not materially different to the impression which I formed at the first trial – and the resemblance between their evidence in the two Phases was a point highlighted by both sides in closing – albeit always focussing on the other side's witnesses. 203.In summary the main witnesses were (again) not impressive witnesses. I was not persuaded that any of them was entirely candid and I was entirely sure that the memories of all of them had been corrupted by the prolonged processes of litigation, including the preparation for this trial and the trial of Phase 1 as well as the discussions amongst themselves both with and without reference to the documents. As a result their evidence has consequently to be treated with a considerable degree of caution. It was fortunate that as matters have transpired I regard very little of the factual evidence as critical to the issues which actually matter in this case.The main witnesses204.The Claimants' main witness was Mr Jaffe. As in the previous trial he was prone to give somewhat extensive answers though it was apparent that he was making some attempt to curb this tendency and his answers were on the whole not quite as discursive as they had been in the Phase 1 trial. He also plainly had thought carefully about the impression that some of the documents might create and had developed a “party line” on them: “I had bad thoughts (but I didn’t act on them)”. While this cut through what might otherwise have been lengthy evidence, I was not persuaded that this was a full and honest answer. I will consider the details of his evidence below mainly in the context of the conduct allegations. As will appear there, while I conclude that some of Mr Jaffe’s evidence offers the best explanation for the facts, there are other respects in which I conclude that his evidence was inaccurate – and in some respects it would seem deliberately so.205.One submission made about his evidence was that Mr Jaffe appeared to treat the Court process as a tool at his disposal. While I would tend to accept that submission, and there are a number of respects (particularly in relation to the interlocutory stages of this trial) where Mr Jaffe’s approach has been somewhat dubious, it is an attitude which is probably not uncommon among sophisticated commercial litigants. And the reality is that (i) absent Court proceedings Mr Jaffe would not be able to enforce his claim – as I have held he is entitled to do and (ii) on the pleaded case Mr Jaffe’s evidence was largely of marginal relevance at this stage of proceedings and his manifest reluctance to provide all the information sought by the Defendants was therefore understandable.206.The Defendants’ legal team submitted that each of them was to some extent “scarred” by the experience of Phase 1 and the terms of my conclusions as regards their evidence. I received no impression of any such mental scarring - at least from Mr Rukhadze and Mr Alexeev, although it was quite plain that all three individual Defendants struggled with the doublethink involved in appearing to accept a judgment whose terms they will probably never subjectively accept.207.As for Mr Rukhadze, it is fair to say that he was calm and polite and that his evidence was in some respects and at some points markedly better than it was during Phase 1. However, it remains the case that over time he tended to fall back into the habits demonstrated then.208.During the course of cross examination Ms. Fatima QC cited Gloster J’s impression of the evidence of Mr Berezovsky in the Berezovsky v Abramovich trial. That passage runs thus: “At times, the evidence which he gave was deliberately dishonest; sometimes he was clearly making his evidence up as he went along in response to the perceived difficulty in answering the questions in a manner consistent with his case; at other times, I gained the impression that he was not necessarily being deliberately dishonest, but had deluded himself into believing his own version of events.”209.It is a passage which she submitted could be said to apply to Mr Rukhadze also. My own impression of Mr Rukhadze on the second outing was that while a parallel could certainly be drawn with this bon mot it would, as regards him at least, verge on the unfair.210.One part of it provided a striking parallel. In the first trial I remarked on the fact that Mr Rukhadze provided a number of answers purporting to provide new evidence, nowhere given in his (very extensive) witness evidence and nowhere reflected in the documents. The impression given was that he was making up answers on the hoof to meet difficulties as they confronted him. There was this facet to his evidence in this trial also, though to a less marked degree. An example (of which a number could be given) is in relation to his impact on the Abramovich settlement, where the documents appeared to suggest that his role was peripheral and that most points he raised were in play already with the legal teams, but he nonetheless asserted that the lawyers only had the points because he had previously spelled it out to them.211.I was less persuaded that he was telling deliberate untruths. He was dogmatic in his evidence, and on a number of occasions his evidence demonstrably diverged from the written record; but my impression on most such occasions was that the divergence related to a combination of wish fulfilment and a less exhaustive review of the documentary record than he had performed before giving evidence the first time. However this did not render his evidence satisfactory – since I was left with the impression that what he considered to be his recollection and the facts were frequently some way apart. Further, somewhat like Mr Jaffe, he had decided on certain themes he wished to convey – the lengthy and substantially unnecessary evidence concerning his mother's position and his profound respect for her appeared contrived, possibly with a view to gaining sympathy. 212.Mr Alexeev's demeanour in this phase of the litigation was less confident and assertive than in the Phase 1 trial, and he seemed to be making an effort to avoid the problems of the past. He was very cautious in giving his evidence, on some occasions appearing to anticipate traps which were not there. However, his efforts to be more constructive did not carry over into the contents of his evidence. The litigation process appeared to have to some extent divorced him from the facts – an example being the passage in his evidence where he asserted that Mr Jaffe must have known that no carry was due to him, when this was manifestly a highly arguable point which required the minds of the Privy Council to resolve.213.Because of this process, when these points emerged, he tended to push back against the truth. A striking example was when he asserted that the term “parties” was defined in the IRSA as including the Family, such that that definition read across to the Delegation Agreements. His response to being shown the IRSA was not to accept the error but to push back:“what I’m saying is that we went into this agreement with a very clear understanding of what it was meant to reflect and we believe that it did. Now that you’re pointing to me that there are some missing paragraphs … Probably technically it does not say, but the intent and our understanding and the way we acted on it was of course the one as I’ve described…”214.I was left with the impression that Mr Alexeev's focus is on his own interests and he is perfectly ready to persuade himself of the truth of that which is necessary to sustain his position.215.Mr Marson was again a less than satisfactory witness. He was perhaps unfortunate in being scheduled first in the Defendants' line up facing cross-examination by a different QC. I did receive a strong impression that he was nervous and if not distressed, certainly diffident in the light of my previous findings. It may be that he was genuinely trying to assist, but the result was not entirely happy; it resulted in a frequently defensive approach to answering questions and an unwillingness to agree with propositions even where the answer was obvious. He was also unfortunate as having been portrayed by the rest of his team as the legal “go to” person, when his legal skills certainly did not display to advantage in the litigation sphere and this aspect of his skills had already come under fire in Phase 1 in relation to his misapprehension in relation to statements of truth. 216.However this depiction of him left him exposed in a case where the question of unique skill was a critical issue in the Defendants’ eyes. For example his failure to exhibit key material or provide evidence of propositions would strike any litigator as an obvious failing. So too was the absence of notes of key meetings – a key discipline for a lawyer, as well as, as Ms. Fatima noted, one which might be expected on basic prudential principles. Echoing the Russian proverb contributed by Ms. Gudavadze in Phase 12, she cited the Arabic proverb أعقلهاوتوكل (“trust in God, but tie up your camel”). In addition, his witness statements seemed to have been produced with little understanding of what their real role was, with extensive attempts to re-interpret my judgment and other irrelevant and inadmissible material.217.There were also a number of aspects in which his involvement in this litigation process appeared to have resulted in his rewriting his memory. Examples included occasions where his confident assertion as to what the Phase 1 judgment said on a particular matter which turned out to be demonstrably inaccurate, or the demonstrably incorrect assertion that all Hunnewell Georgia’s work was Recovery Services.218.Even more striking was his claim to have conducted a meaningful assessment of the RBS litigation funding prospect without any apparent awareness that it concerned statutory interpretation. Asked about the passage in his statement where he said “Within hours I carried out urgent research, principally online. I … began to form some views as to the potential merits of the claims against RBS in the Rights Issue Litigation …” this was the outcome:“Q. Yes, so what did you do? Did you look at the statute?A. The statute?Q. Yes, it was all about a statute. A. Sorry, I don't understand what you mean by “statute”….Q. Did you look at the statutory provision? A. I did not, no. … My initial thought was just to find out the background, where it had gotten to, what had been happening in the trial so far, what the claim was about. A lot of that was available online.”219.However there was ultimately some force in the submission made by the Defendants that it was artificial to focus on Mr Marson’s abilities as a lawyer. As I noted in the Phase 1 judgment, Mr Marson was never a litigator; he was a transactional lawyer and he appears to have moved the centre of gravity of his operations into the business world at a relatively early stage in his career.220.I would accept that what he brought to the table was not so much his own technical legal ability but rather his ability to act as a facilitator in terms of bridging the divide between lawyers and business people and his ability to act as a day to day manager. This was particularly in relation to the numerous teams of external lawyers and other professionals in multiple cases (and the consequent deluge of information involved) but also appears to have extended to a willingness to engage in keeping track of and following up on various matters concerning assets across multiple jurisdictions. He was also able to act as a liaison between the various teams and the Family, as well as filling in the gaps when Mr Alexeev and Mr Rukhadze were not able to do so. He acted in a sense as a junior officer.The other witnesses221.Mr Mtibelishvily of Citigroup (“Citi”) gave evidence on behalf of Mr Jaffe in relation to the VDP sales process, in relation to which Citi had close involvement in 2012. The Defendants submitted that he was argumentative, aggressive, and disrespectful while the Claimants saw him as clear and concise, only responding emotionally to attacks on his professionalism and motives. My impression of him was that he was indeed somewhat argumentative, particularly when treated with what he considered to be a lack of respect due to himself. He at points spent as much time critiquing the questions as he did answering them. He was however firm and clear in his answers. He certainly gave the impression of being a person unlikely to be ridden over roughshod by Mr Jaffe.222.Mr Petrovic’s evidence was not critical on anyone’s analysis, which was perhaps regrettable since he was a polite clear witness who appeared to be doing his best to assist the Court, and upon whose evidence both parties relied for certain points. The Defendants suggested that his recollection of certain meetings was incorrect – as to the detail of meetings that he and others had with them shortly before his departure from SCPI. I have broadly accepted his evidence.223.Mr Baumann, who gave evidence by video-link was a clear and straightforward witness who was plainly doing his best to assist the Court.224.Mr Blazquez likewise gave evidence by video-link. He was in many ways an impressive witness with a telling turn of phrase (“even when I make a bid, I leave myself so many holes to get out that, you know, it's more akin to a Swiss cheese than an offer”). I was generally satisfied that he was trying to assist the Court, although he was plainly close to Mr Rukhadze and not enamoured of Mr Jaffe, and on occasion (e.g. in relation to the effects of the freezing orders) his evidence was pitched a little higher than the rest of the evidence suggested was justified. He also tended to be somewhat instinctively defensive of his written evidence.225.Mr Kabanovsky gave evidence by video-link. His focus was very much on Alfa Bank’s involvement and as such he seemed to be more or less neutral.226.Mr Cotlick gave evidence live. He was a quiet and careful witness and was scrupulous to make clear what he could and could not remember. His evidence was however largely peripheral.227.Mr Skelton gave evidence live. A good deal of his evidence was not challenged. In his oral evidence he was clear and helpful. He was also candid about the extent to which his recollection had eroded over time.228.Mr Vepkhvadze's video-link evidence was not entirely satisfactory. The Claimants suggested that he was highly partisan and that the problems with his evidence were down to this. My own impression was that he was somewhat partisan and unwilling, but that the difficult experience of giving evidence was (as the Defendants submitted) affected by both technical and linguistic issues and that at points he was not clear on what he was being asked. Owing to this combination of factors I did not receive much assistance from his evidence. 229.Lord Edward Spencer Churchill gave evidence live. He was a clear and careful witness. It was plain that he was close to and thought highly of Mr Rukhadze personally; this essentially reflected his position as a joint venturer with the Defendants in STG and as someone whose position is “very much aligned” with those of Mr Rukhadze. It was also apparent that he thought less well of Mr Jaffe. He appeared to be doing his best to assist the Court, but in the event the areas where his evidence was principally directed ceased to be in issue. I therefore gained little from his evidence for the purposes of the live issues.230.Mr Bachiashvili was examined remotely. He was a straightforward witness, described by the Claimants as “even-handed”. Like Lord Edward Spencer-Churchill his evidence related largely to one of the Responsive Investments which ceased to be in issue. Accordingly his evidence is of no great moment in practical terms, save in that it contributed to the picture of Mr Rukhadze as a successful businessman, who is held in considerable regard by his business associates.231.Mr Nagle gave evidence live. There was an interesting backdrop to his evidence. He was previously a senior associate of Mr Jaffe, but has since fallen out with him badly, with litigation between them resulting. He was contractually prohibited by an agreement with Mr Jaffe from giving evidence in the Defendants’ favour without a release. His evidence was not very satisfactory. The impression which emerged was that he had an axe to grind. His emphatic claim to have perfect recall of conversations a number of years ago was frankly incredible, particularly given the fact that contemporaneous documents contradicted him on more than one occasion. I was not persuaded that he was telling the truth when he gave such evidence. My conclusion that his evidence was not to be relied upon was only reinforced when Mr Rukhadze said of him: “much of this is not true, and I’d much rather trust my partners on this issue than Mr Nagle”. I concluded that where his evidence was not supported by contemporaneous documents it should not be accepted.232.As with Phase 1, there was one “stand out” witness, whose evidence I was persuaded was entirely straightforward and not driven or subliminally coloured by any affection, disaffection, interest or agenda. In Phase 1, it was the late Mr Hauf. In this trial it was Mr Eugene Shvidler. Mr Shvidler is a man of (to put it mildly) considerable wealth; operating, as the Defendants put it, “at a different hierarchical level to the players in this case”. He is a close associate of Mr Roman Abramovich. He has no interest in the outcome of these proceedings. He was called primarily in relation to the Berezovsky litigation and the Defendants' role in compromising it. He gave evidence live. He was a lively, considered and clear witness, with a telling turn of phrase. I gained the impression that he was happy to be completely plain with the Court in giving his evidence. I accepted his evidence without reservation.233.The Claimants also asked me to note what they said were striking absences from the witness box, in the form of representatives of the Family, and also Mr Voisin, whose evidence was withdrawn on Day 15 and Ms Miftakhova who was the person with most day to day involvement with the calculations of the Defendants' IRSA entitlements as well as with the process of dealing with expenses and distributions under the IRSA. However it was not suggested that I should draw any specific adverse inferences from these absences and I do not do so.The experts234.All of the experts were plainly sensible professional people doing their best to assist the court. Naturally I have to prefer the evidence of some of them over the evidence of others, for the reasons which I will give in relation to the issues where there was a conflict. However I must note my gratitude to the experts generally for the way in which they had co-operated to produce clear and helpful joint expert statements which have been essential to me in navigating the evidence and understanding the differences between the parties.235.The Claimants called the following experts:a.Mr Travis Taylor was the Claimants’ expert on valuation. Mr Taylor was a sensible, composed and resilient witness who stood up to the demands of a lengthy and focussed cross-examination well. He was scrupulous to express himself with clarity in an area which is not necessarily instinctive to the judicial mind. He took challenges firmly but in very good part conceding ground where he thought it appropriate to do so. In large measure he was an impressive witness. There was a challenge to his evidence in one important respect. That related to his adoption of the evidence of Mr Whittingham of Duff and Phelps (“D&P”) in relation to the valuation of Benahavis (a development on the Costa del Sol). This raised an interesting question as to the increasing practice of expert witnesses adopting the work of others as part of their expert reports.b.Mr Daniel Barton was the Claimants’ expert on forensic accountancy. Mr Barton has twenty-five years of experience, and while it was his first appearance as an expert witness in the English Courts, he has previously given factual evidence in this country and both factual and expert evidence in other jurisdictions. Mr Barton was a genuine down to earth witness, and on the whole impressive; though Mr Cogley QC’s skilled (and at times combative) cross-examination revealed he had tended to overstate his expertise. Perhaps in part because of the combative nature of the questioning he defended his position with considerable vigour – bordering on intransigence - and gave the impression he was not willing to give ground. Mr Cogley made a fairly determined attempt to portray him as partisan and with a background in fraud investigation as excessively minded to look for any possible hole in the evidence. Although much play was made of Mr Barton’s previous foray into the courts in the case known as “the Three Amigos”3, it did not provide any real basis for impugning Mr Barton’s expertise or impartiality. 236.The Defendants called:a.Ms Victoria Seal of Savills on the valuation of the Benahavis development. Ms. Seal was a decisive and conversational witness.b.Mr David Mitchell the Head of the UK Valuations Team at BDO, on the value of the majority of the other assets. Mr Mitchell was (unsurprisingly) a very knowledgeable witness who gave his evidence in a refreshingly down to earth and straightforward way acknowledging agreement clearly where he considered it appropriate to do so.c.Mr Chris West of Grant Thornton is a partner in their UK Forensic and Investigation Services department, leading contentious valuation activities. He covered valuations of Magticom, Imedi and Maestro. Mr West gave his evidence clearly and was, despite some resistance, often prepared to make reasonable concessions. During the course of evidence my attention was drawn to the judgment of Asplin J in Destiny Investments v TH Holdings in which the judge made some criticisms of Mr West. Unlike her I did not find him prone to deliver speeches and argument. I am persuaded that he was trying to assist the court, although ultimately I do conclude that he did not have sufficient material to form a reliable expert view/or that that material he had was right on the borderline of feasibility and it would have been helpful had he made more clear the rather marginal nature of the materials which he had.d.Mr Will Davies, a partner at Grant Thornton LLP, gave evidence on forensic accountancy issues. He was a careful and quietly spoken witness who gave me the impression that he was doing his best to assist the court within the constraints upon him in terms of the instructions he was given and the materials available – a point to which I shall revert below. Mr Davies was responsible for preparing a very helpful document “the BTA” which recorded and reconciled about 30,000 transactions over a 10 year period, which was a key document for the purposes of the experts’ engagement with the issues. Ultimately however there was a limit to the assistance which I could get from Mr Davies’ evidence given that he was proceeding on the basis of the assumptions which he was given, and without fully acknowledging the nuances which were inherent in that evidence. Mr Davies was also responsible for one of the bons mots of the trial, noting that when it comes to documentation forensic accountants are like wedding photographers – they can never have enough.Part 3: The Legal Issues237.Despite the five weeks of evidence in this case, the centre of gravity for the dispute is in my view very firmly within the legal issues. In particular, much of the factual evidence and a very large proportion of the Defendants' written closing related to matters which are of great importance if I form the view that in the event that Mr Jaffe delayed in bringing his claim, or interfered in the Recovery Services, it would be open to me or appropriate to disallow or limit the recoveries. However, the answer to those prior questions are legal ones. 238.In relation to the legal issues the Defendants also urged a fairly broad approach to weighing the various factors which were identified. Their reasons for doing so are entirely comprehensible – this is a case where the situation is complicated and for the reasons set out in this section I come to the conclusion that once the question of ascertaining the appropriate degree of connection between the default and the loss is concluded, it is in broad terms not appropriate to limit the recovery. That is subject to two further riders which then need to be followed through in the facts in Section 3. Those riders are:a.The date for the taking of the account. b.The question of the impact of any prior agreement as to the proceeds.Legal issues: backdrop239.There is a considerable amount of common ground between the parties on the law which forms the backdrop to the points at which they part company. There is consensus that:a.An account of profits and equitable compensation are alternative, inconsistent remedies, and a claimant must elect between them; Willis Ltd v Jardine Lloyd Thompson Group [2016] EWHC 723 (QB), at [19], per Soole J;b.The ordering of an account is an equitable remedy. It is granted or withheld on the basis of equitable principles: Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638(Ch) [1579];c.There is a fundamental rule that a fiduciary must not be allowed to make an unauthorised profit: out of his fiduciary position Ultraframe [1588(i)];d.The remedy of an account of profits is not penal; equitable principles do not compel a fiduciary to disgorge more than he has received/earned by reason of his breach: Vyse v Foster (1872) LR 8 Ch App 309, at 333;e.The profits for which an account is ordered must bear a reasonable relationship to the breach of duty proved;f.The fashioning of an account should not be allowed to operate as the unjust enrichment of the claimant: Ultraframe [1588(ii)];g.Identification of what has been acquired is key: Ultraframe [1588(iv)] CMS Dolphin v Simonet [2002] BCC 600 [97];h.So too may be identification of the breach of duty: Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6, at [513] (Australian Federal Court);i.The burden of establishing that part of the profit does not fall within the account is on the fiduciary: Warman International v Dwyer (1995) 182 CLR 544 at 561.240.The authorities also indicate the types of limits which may be imposed by the Court in fashioning the account. They include:a.A temporal limit;b.A limit by reference to particular assets or particular customers;c.A capital payment instead of or in addition to an account of profits; andd.An allowance for the fiduciary's skill, labour and assumption of business risk.The deterrent dimension241.An area which was broadly common ground, but upon which the parties placed very different degrees of emphasis, was what might broadly be called the deterrent dimension vis a vis the accounting party.242.Here it is clear that because of the nature of the fiduciary relationship the courts have historically regarded it as important that the remedy ensures disgorgement effectively, lest a failure to do so encourages other fiduciaries to breach their duties. This can be seen in a number of places. The classical example is found in Regal (Hastings) Ltd v Gulliver [1967] 2 AC 46:“[t]he rule of equity which insists on those, who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of bona fides; or upon such questions or considerations as whether the profit would or should otherwise have gone to the plaintiff, or whether the profiteer was under a duty to obtain the source of the profit for the plaintiff, or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the plaintiff has in fact been damaged or benefited by his action. The liability arises from the mere fact of a profit having, in the stated circumstances, been made. The profiteer, however honest and well-intentioned,