(1) Phytos Stavrinides v (1) Cyprus Popular Bank Public Company Ltd (t/a Laiki Bank UK)
| Jurisdiction | England & Wales |
| Judge | Master Bowles |
| Judgment Date | 01 March 2018 |
| Neutral Citation | [2018] EWHC 313 (Ch) |
| Court | Chancery Division |
| Date | 01 March 2018 |
| Docket Number | Case No: HC-2014-00426 |
[2018] EWHC 313 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, London EC4A 1NL
Master Bowles
Case No: HC-2014-00426
Laurence Page (instructed by Eldons Berkeley Ltd) for the Claimants
Dan McCourt Fritz (instructed by Stephenson Harwood) for the First Defendant
Clara Benn (instructed by Sidley Austin LLP) for the Second Defendant
Hearing date: 17 th January 2018
Judgment Approved
By application notices dated 25 th August 2017 the Defendants, Cyprus Popular Bank Public Company Ltd, (Cyprus) and Bank of Cyprus Public Company Ltd (Bank of Cyprus) applied for substantial security for their costs against each of the three claimants. Following the hearing of those applications, on 17 th January 2018, the Claimants, have however, agreed confidential terms of settlement with Cyprus, such that the only application now pursued is that pertaining to Bank of Cyprus. This judgment is, therefore, limited to that application.
The three Claimants are Phytos Stavrinides (Mr Stavrinides), Stovaco Holdings Ltd (Stovaco) and Bellerive Corporation (Bellerive). Stovaco is a Cyprus based corporation. Bellerive is a Seychellois company. The shares in Stovaco are said to be held by Mr Stavrinides' brother, Yiannakis, with 25% of those shares being held by Yiannakis for Mr Stavrinides and 50% for his sister, Chrysoula At an earlier date it is said that the shares were held by nominee companies on behalf of Mr Stavrinides. The shares in Bellerive are held, apparently, by Nevis companies. Mr Stavrinides accepts however that he is the beneficial owner, via those entities, of Bellerive.
The grounds, or gateways, pursuant to CPR 25, whereby it is said that security can be ordered are, as against Mr Stavranides, that he has taken steps in relation to his assets that would make the enforcement of a costs order difficult; as against Stovaco, that there is reason to believe that it would be unable to pay the Defendant's (now Bank of Cyprus') costs if ordered to do so; as against Bellerive, that it is a company resident outside the jurisdiction and not in a Brussels, Lugano or Regulation state and, further, that, like Stovaco there is reason to believe that it would be unable to pay the Defendant's costs if ordered to do so. In respect of each Claimant it is said to be just to make an order. Although one of the gateways in respect of Bellerive derives from its status as an offshore company, not resident in a Brussels Lugano or Regulation state, it is not suggested, given that the additional gateway of what I will loosely call impecuniosity is relied upon, that the security jurisdiction is limited to the additional costs which might fall to be incurred should it be necessary to enforce a costs order in the Seychelles.
At the hearing of these applications there was also before me an application that the claims of the two corporate Claimants be struck out, or alternatively, be subjected to an unless order. The basis of the application was that each of the two companies had, as it had emerged, been dissolved and that no sufficient evidence was available to establish their reinstatement. It is, of course, the case that a dissolved company is a nullity and cannot bring suit. I was, however, satisfied that steps were being taken to reinstate the companies and, in those circumstances and the Defendants not pressing to strike out, I took the view that the better course rather than striking out, was to require the relevant Claimants to establish reinstatement to the satisfaction of the court, to give directions to that effect and to treat the two Claimant companies as having legal existence for purposes of the applications for security. This judgment therefore proceeds upon that footing.
The claims brought by the Claimants against the Defendants and now pursued only against the Bank of Cyprus are, in principle, very straightforward.
Mr Stavrinides is a property developer and Stovaco and Bellerive are both special purpose vehicles established to develop particular properties in North London. Stovaco is the registered proprietor of a property at 315 Mount Pleasant Road, London N17. Bellerive is the registered proprietor of a property at 7–8 Bruce Grove, London N17.
The first Defendant, Cyprus, had over a number of years provided secured loan finance to Mr Stavranides and his companies, in respect of his development business. In March 2013, at the date material to these proceedings, Cyprus held charges over both the foregoing properties together with secured corporate guarantees and cross guarantees in respect of the borrowing of each company. Cyprus also had the benefit of substantial guarantees from Mr Stavrinides in respect of the borrowings of each company (£2.5 million in respect of 315 Mount Pleasant and £540,000 in respect of 7–8 Bruce Grove), those guarantees being secured by way of a second charge over Mr Stavrinides home at 64 Games Road in Barnet. That charge also secured what had been a bridging loan facility granted by Cyprus to Mr Stavranides in 2009 in the initial sum of £745,000. Cyprus had also provided secured loan finance in respect of other properties, in particular a property at and known as Bonsoir House, Victorian Grove, London N16, in which Mr Stavrinides had an interest, through a separate entity, Fitzkriston LLP (Fitzkriston).
The Claimants' case is that in or about March 2013, Cyprus entered into an agreement with the Claimants whereby upon payment to Cyprus of £1,650,000 from the sale of Bonsoir House Cyprus would release the Claimants from all their outstanding liabilities to Cyprus and discharge all charges and guarantees relating to the two companies and to Mr Stavrinides. That agreement is said to be supported by correspondence, in particular a letter from Cyprus dated 15 th March 2013 and by the evidence of a Mr Antoniou, the apparent author of that letter.
The existence of the agreement and the provenance and authenticity of the relevant correspondence is hotly contested, as is its legal effect. At the most basic level, Bank of Cyprus, which, as shortly to be explained, now stands in the shoes of Cyprus for purposes of this litigation, make the obvious point that it was, or would have been, highly unlikely that Cyprus would surrender all its security over 7–8 Bruce Grove, 315 Mount Pleasant and 64 Games Road and all its rights against the Claimants for £1,650,000 at a time when, says Bank of Cyprus, the totality of the Claimants' liabilities were in the order of £4,877,000 and when there was substantial value to be found in the three charged properties.
On the other side of the argument, it is not in debate but that, in consequence of the Cypriot financial crisis of 2012, Cyprus, itself, suspended the bulk of its operations in the Spring of 2013 and that it was shortly after the date of the alleged agreement, namely 29 th March 2013, that by a decree of the central Bank of Cyprus, many of the assets of Cyprus including the loan portfolio relating to Mr Stavrinides, Stovaco, Bellerive and Fitzkriston were transferred to the second Defendant, Bank of Cyprus. It is by reason of that transfer that Bank of Cyprus now stands in the shoes of Cyprus, for purposes of this litigation and, by its defence, seeks to assert the continued existence of the charges, guarantees and liabilities that the Claimants claim to have been discharged. What is said by the Claimants is that Cyprus's own circumstances, at the date of the alleged agreement, afford an obvious explanation for what might otherwise seem a strangely unfavourable agreement.
Be that as it may, none of the parties, while each expressing the strength of their respective cases, have ever sought to apply for a summary disposal of the claim and the claim, now continuing only against Bank of Cyprus is fixed for a lengthy trial in May 2019.
The sums sought by way of security by Bank of Cyprus are substantial, being in the order of £850,000. The sums are sought to be provided, or secured, by way of payments into court, in two stages; a first payment in a sum in excess of £300,000 within 14 days of the making of the order for security; the balance at a later date. The sums sought are said to reflect 80% of the costs likely to be incurred in bringing the case to trial. Security is sought against the Claimants and each of them jointly and severally, because, as it is said (and this is not in contest), the costs liability which would arise against the Claimants, if they are unsuccessful in these proceedings, will be a joint and several liability.
In respect of the corporate Claimants, it is rightly conceded, their only assets being the properties they respectively own and, in the case of Stovaco, a modest income stream of some £7,500 per month, which is currently utilised by Mr Stavranides, that, in the event that they are unsuccessful at trial, there is every reason to believe that they will be unable to pay Bank of Cyprus' costs if ordered to do so. The fact, if it were to be a fact, that there might be substantial equity in the properties after payment of the sums which, in the event that the Claimants' claim is unsuccessful, will be found to be due to Bank of Cyprus, would not prevent the satisfaction of what I will call the impecuniosity gateway. It is clear law that to defeat the contention that there is reason to believe that a corporate claimant will be unable to pay costs if ordered to do so it is necessary for such a claimant to be able to show that it would be in a position to pay those costs within the relatively short time within which it would be ordered to pay those...
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