Judgments in favour of Emirati sovereign wealth fund set aside on grounds of fraud by the fund

26/03/24

The High Court has granted default judgment setting aside two High Court judgments and one Court of Appeal judgment, on the grounds that they were procured by fraud. This brings to an end a very long-running saga.

The Ras Al Khaimah Investment Authority, RAKIA, is the sovereign wealth fund for Ras Al Khaimah, one of the seven of the United Arab Emirates. In September 2016, it sued Mr Farhad Azima, an American businessman, alleging that he had defrauded it and conspired with its former CEO and others to obtain commission payments. RAKIA relied on various documents forming part of some 30GB of data hacked from Mr Azima’s emails and computers and placed online on anonymously hosted websites.

Mr Azima denied the claims, alleged that RAKIA had been responsible for the hacking and counterclaimed. RAKIA strenuously denied any involvement in the hacking or knowledge of how it occurred.  Following a trial in January-February 2020, Mr Andrew Lenon KC (sitting as a Deputy High Court Judge) largely upheld RAKIA’s claims, awarding damages, costs and interest; found that Mr Azima had not proved that RAKIA was responsible for the hacking and dismissed Mr Azima’s counterclaim.  (See news item, here)

In March 2021, the Court of Appeal (Lewison, Asplin and Males LJJ) remitted the counterclaim for retrial but otherwise rejected Mr Azima’s appeal, and directed that in any remitted trial, the Deputy Judge’s findings against Mr Azima “must stand”. (See news item, here).

The remitted counterclaim was assigned to Mr Justice Michael Green.  Mr Azima was granted permission to add additional defendants: Mr Neil Gerrard (then a partner in the law firm Dechert), Dechert, Mr James Buchanan (an executive who had managed RAKIA’s activities) and an investigator, Mr Stuart Page.

As the counterclaim progressed, Mr Azima obtained a range of new evidence, including hundreds of pages of reports prepared for RAKIA, which contained masses of Mr Azima’s private and confidential data, long before any of his data had been placed online.  Mr Page provided an affidavit admitting that his evidence at the first trial had been concocted and the claim against him was discontinued. 

In June 2022, Mr Azima applied for permission to bring an additional counterclaim, alleging that RAKIA was complicit in the hacking and had falsely denied this, but also that (in view of the new evidence), the judgment on RAKIA’s own claims had been procured by RAKIA’s fraud (the ‘Set Aside Counterclaim’). 

Very shortly before that application was made, RAKIA advised the Court that it was withdrawing its instructions to its solicitors, that it was not providing a new address for service, and that it would not participate further in the proceedings.

The additional defendants (Mr Gerrard, Mr Buchanan and Dechert) opposed Mr Azima bringing the Set Aside Counterclaim, alleging that it constituted an abuse of process in view of the Court of Appeal’s ruling that the Deputy Judge’s findings on RAKIA’s claims “must stand”, and that the fraud alleged against RAKIA was not sufficiently material so as to undermine the Deputy Judge’s findings on RAKIA’s claims.  Mr Justice Michael Green rejected those arguments and granted permission to bring the Set Aside Counterclaim.  This decision was upheld by the Court of Appeal (see news items here and here). 

The two counterclaims were listed for a trial to commence in May 2024.

Mr Azima then applied for default judgment against RAKIA in respect of both his original hacking counterclaim and the Set Aside Counterclaim.  Mr Justice Michael Green granted the former application, but refused the latter on the ground that the additional defendants might be prejudiced if default judgment were granted.  (see news item here)

In January 2024 Mr Azima accepted a Part 36 offer made by Dechert and Mr Gerrard, and in March 2024 he concluded a confidential settlement with Mr Buchanan. This brought to an end the proceedings against the additional defendants. He then brought a renewed application for default judgment against RAKIA on the Set Aside Counterclaim, and an application for his remedies on the hacking counterclaim.

The Judge granted default judgment on the Set Aside Counterclaim, observing that RAKIA’s conduct was, “an egregious case”, that “has had the somewhat extraordinary consequence that they obtained judgments by fraud from both first instance and the Court of Appeal”. 

The Judge also assessed Mr Azima’s remedies against RAKIA under the hacking counterclaim, awarding £200,000 for non-pecuniary damage for emotional distress, £100,000 in exemplary damages and injunctive relief against RAKIA; and awarded Mr Azima his costs of the earlier proceedings and the Set Aside Counterclaim on the indemnity basis. 

The Judge’s Order is here.