Blue Tropic Ltd and Another v Ivane Chkhartishvili

JurisdictionEngland & Wales
JudgeThe Honourable Mr Justice Peter Smith,Peter Smith J,MR JUSTICE PETER SMITH
Judgment Date18 December 2015
Neutral Citation[2015] EWHC 3640 (Ch)
Docket NumberCase No: HC2013000296
CourtChancery Division
Date18 December 2015

[2015] EWHC 3640 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Before:

The Honourable Mr Justice Peter Smith

Case No: HC2013000296

Between:
(1) Blue Tropic Limited
(2) Coppella Ventures Limited
Claimants
and
Ivane Chkhartishvili
Defendant

Joe Smouha QC & Watson Pringle (instructed by Signature Litigation LLP) for the Claimants

Jonathan Crow QC & Stephen Midwinter & Hugo Leith (instructed by Mishcon de Reya) for the Defendant

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The Honourable Mr Justice Peter Smith Peter Smith J

INTRODUCTION

1

This judgment arises out of a trial I heard in May 2015. The Claimants are two companies incorporated in the BVI. However the Claim is in respect of real estate assets in Georgia and shares in companies incorporated in Georgia. The shares in the Claimant companies according to documentation are held by the Nile Trust, a discretionary settlement of which the intended beneficiary was Arkadi ("Badri") Patarkatsishvili. He was a Georgian billionaire who died in February 2008 and his estate (whatever it might be) belongs to his widow and his daughters ("the AP Family").

2

The Defendant Ivane ("Vano") Chkhartishvili is a Georgian businessman and a former politician who had dealings with Badri in his lifetime.

3

The Claimants granted wide ranging powers of attorney to one Giorgi Kavtaradze ("GK"). He is a Georgian lawyer known to Badri who also came to act for Vano enabling him to deal with the Claimants' assets. Vano instructed GK to use his powers of attorney to transfer the assets out of the Claimants to companies owned and/or controlled by him. The Claimants assert he provided no consideration for those transfers the majority of which were placed within a month of Badri's death. Attached to this judgment is a Dramatis Personae and a Schedule setting out he challenged transactions for each Claimant.

4

As the Claimants say in their opening their claim is relatively simple. There was no consideration and no justification for the transfer of these assets to Vano. It is alleged that Vano by instructing GK to transfer them engaged the Georgian law of delict and claim damages from him under Georgian law to compensate them for the value of the lost assets. It is to be observed that the only claim is against Vano, alleging that he is in breach of the delict obligations (tort) in Article 992 of the Civil Code of Georgia and that he is accordingly liable by reason of Article 408 (1) to compensate the Claimants for the harm caused and pay damages accordingly.

5

The trial is on liability only; any damages will be the subject matter of a further inquiry.

6

There is no claim against GK although there is an allegation that Vano caused GK to act without authority and in breach of duty in executing the documents. That is repeated in paragraphs 27 and 28 of the Re-Amended Particulars of Claim for example where it is alleged that a sale effected by GK on 10th March 2008 on instructions from Vano was at a significant undervalue and without authority on the part of GK. It is also alleged the consideration was not transferred.

7

Alternatively it is alleged (paragraph 28) that GK in causing Copella to enter into those agreements and allowing the price to go unpaid without the consent of Coppella's directors or shareholders breached his duty under Article 712 and 713 of the Georgian Civil Code namely executing documents without the Claimants' consent and failing to furnish any necessary information and keep the Claimants informed of the performance of his mandated tasks.

8

That example is in respect of a 66% shareholding Coppella had in two Georgian companies Prometko Georgia Ltd ("Prometko") and GE-ES-Co ("GSCO"). The former was incorporated in Georgia in 1998 and at all material times held long term lease agreements for berths N3, 4 and 6 of the Poti seaport which enabled it to receive payments from vessels wishing to use those berths. GSCO worked together with it as a single entity. It was a stevedore company which loaded and transported goods.

VANO'S DEFENCE

9

Vano's primary defence is that as a result of an undocumented oral agreement entered into between himself and Badri he became the beneficial owner of the shares in the Claimant companies. Alternatively he says that Badri created a sub trust in Vano's favour over his beneficial interest in those shares. Alternatively he became the beneficial owner of the assets held by the companies. Accordingly because of that entitlement he was entitled to deal with the assets as he thought fit and give GK directions.

10

Finally Vano asserts that even if the claim is established by the Claimants it is time barred under Georgian law because the director of the companies and/or GK as the companies' agent knew or ought to have known of the facts constituting the tort more than 3 years before the claim was issued (the Georgian limitation period for delict).

ASSETS SUBJECT MATTER OF COMPLAINT

11

I set out the assets held by the two Claimant companies in the next ensuing paragraphs the disposal of which is complained about by those Claimants.

BLUE TROPIC

12

Blue Tropic held 92.85% shares (543,843 shares) in JSC Poti Mill a Georgian company listed on the Georgian Stock Exchange. It is alleged that GK on 5th March 2008 on the instructions of Vano put up those shares for sale at a share price of Gel 4.95. On the same day Sonata Alliance Georgia Ltd ("SAGL"), a company incorporated in Georgia purchased the shares. It is owned by Sonata Alliance Inc ("SAI") a company incorporated in the Seychelles and beneficially owned by Vano and members of his family.

13

The Claimants alleged, but the Defendant denied, that subsequently pursuant to resolutions of the Supervisory Board of Poti Mill in a series of transactions SAGL sold a total of 73,309 m 2 of land held by it to various buyers for a total of $9,457,345.

COPPELLA

14

It had purchased the building and land known as the Tbilisi Universal Store ("the Store") at 2/4 Rustaveli Avenue Tbilisi from Gedeoni Ltd and Zurab Alavidze for a price of $900,000.

15

By a further real estate purchase agreement dated 17th August 2007 executed by GK on behalf of Coppella it sold the Store to Movat Georgia for $12,275,000. Movat Georgia transferred that money to the Coppella Georgian branch bank account with JSC Bank of Georgia. Thirteen days later (on 30th August 2007) GK on the instructions of Vano paid $10m of the proceeds of sale of the Store from Coppella's account to SAI's account with Alpha Bank Cyprus Ltd.

16

On 17th January 2007 the documents show that pursuant to a Deed of Share Purchase Agreement executed by GK on behalf of Coppella it acquired 100% of the shares in the Georgian Tobacco Manufacturing Ltd ("GTML") a company registered in the BVI. The acquisition was from a Mr Avtandil Tsereteli. In late 2007 GK acting on instructions from Vano then caused Coppella to carry out a share purchase agreement where Coppella sold its shares in GTML for Gel 107,170 to SAGL and an agreement amending a loan agreement between Coppella and GTML so as to give a company called Sevaront Commercial Ltd ("Sevaront") the benefit of Coppella's right to repayment under the loan document. It is alleged that Sevaront is beneficially owned by Vano and gave no consideration.

17

On 3rd June 2008 it is alleged that SAGL sold the shares in GTML to Smart Group, a Company owned 51% by Vano and 49% by one Mikheil Chkhartishvili (his son), for a price of Gel 107,170 (the same as the purchase price) but that was (a) a significant undervalue and (b) not paid.

18

Prior to 10th March 2008 as set out above Coppella held 66% shareholding in each of Prometko and GSCO. That shareholding was sold to SAGL for Gel 66,000 each. Once again it is said that the sale was at a significant undervalue and the proceeds were not paid anyway and that GK had no authority.

19

On 30th December 2004 by a real estate purchase agreement Coppella purchased from Gedeoni Ltd and Zurab Alavidze a piece of land measuring 3577 m 2 in Lilo along with buildings covering 610.9 m 2 for $200,000 and a 138 m 2 lot located in Tbilisi for $100,000.

20

On 16th August 2006 GK executed a real estate purchase agreement on behalf of Coppella where it transferred the above real estate to Management Consulting Ltd ("MCL") a company owned by Vano which in turn sold the property to Smart Group Ltd the shares in which were owned at that time as 51% by Ms Chkhartishvili and 49% by Mikheil Chkhartishvili. On 6th March 2008 GK executed a real estate purchase agreement on behalf of Coppella by which it transferred the land and buildings in Lilo to SAGL for Gel 361,000.

21

Once again it is said that these sales were at a significant undervalue and the consideration was not paid and GK had no authority to sell. Alternatively it is alleged GK breached his duties as set out above.

22

Vano does not dispute that certain of the transactions above were made but does dispute the consequences and claims alleged by the Claimants.

MULTIPLE LITIGATION

23

These proceedings were commenced in early February 2013 when Vano was domiciled in England and Wales. Notwithstanding that he challenged the jurisdiction of the English Court on the basis that because he alleged in his Defence that the shares in the Claimants were owned by him the dispute involved BVI company issues which should be tried in BVI. The jurisdiction challenge which took 18 months to resolve failed. After losing...

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1 cases
  • Blue Tropic Ltd and Another v Ivane Chkhartishvili
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 9 December 2016
    ...full power to control or dispose of the Assets, including the power to transfer them to new holding companies: see the judgment, [2015] EWHC 3640 (Ch), at [194], [195] and 8 Apart from one asset that was sold during Mr Patarkatsishvili's lifetime, at various times from 2006 to 2008 the def......

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