Kiril Klaturov v Revetas Capital Advisors LLP
| Jurisdiction | England & Wales |
| Judge | John Kimbell |
| Judgment Date | 11 March 2024 |
| Neutral Citation | [2024] EWHC 495 (Comm) |
| Year | 2024 |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Claim No. LM-2022-0000258 |
[2024] EWHC 495 (Comm)
John Kimbell KC
(sitting as a Deputy High Court Judge)
Claim No. LM-2022-0000258
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
LONDON CIRCUIT COMMERCIAL COURT (KBD)
James Weale (instructed by Willkie Farr & Gallagher LLP) for the Claimants
Jonathan Cohen KC (instructed by Fox Williams LLP) for the Defendants
Hearing dates: 5,6,7 December 2023
Closing Submissions in writing 10 and 17 January 2024
Draft Judgment Circulated: 1 March 2024
Approved Judgment
This judgment was handed down remotely at 1pm on 11 March 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Table of Contents
| Section | Heading | Paragraphs in Judgment |
| A | INTRODUCTION | 1 – 23 |
| B | THE PLEADED CASE | 24 – 43 |
| C | THE LEGAL CONTEXT | 44 – 59 |
| D | THE EVIDENCE | 60 – 99 |
| E | APPROACH TO THE EVIDENCE | 100 – 102 |
| F | ASSESSMENT OF THE ORAL EVIDENCE | 103 – 119 |
| G | FINDINGS OF FACT AND THE MAIN ISSUE | 120 – 157 |
| H | THE MOUs | 158 – 167 |
| I | THE WATERFALLS | 168 – 174 |
| J | THE ARGUMENT BASED ON AN IMPLIED TERM | 175 – 185 |
| K | THE EXIT NEGOTIATIONS | 186–191 |
| L | THE GUERNSEY PROCEEDINGS | 192 – 195 |
| M | THE PROFIT SHARE CLAIM | 196 – 209 |
| N | CONCLUSION | 210 |
John Kimbell KC sitting as a Deputy High Court Judge:
A. INTRODUCTION
RCA
Revetas Capital Advisors LLP (‘ RCA’) is a limited liability partnership registered in London. RCA was founded in 2012 by the Second Defendant (‘ Mr Assimakopoulos’).
RCA provides advice to private equity funds in relation to real estate projects in Central and Eastern Europe. RCA and its affiliates have offices in London, Luxembourg and Vienna.
RHL
RCA is a subsidiary of Revetas Holding Limited (‘ RHL’), a company registered in Guernsey. In June 2012 RHL entered into an investment agreement (‘ the Investment Agreement’) with a group of ‘seed investors’, including the JRJ Group (‘ JRJ’).
Under the terms of the Investment Agreement:
a. The seed investors provide funding in the form of loan notes worth £1,500,000, in exchange for interest of 8% p.a.
b. Until RHL had repaid all the loan notes, the remuneration of the management of RHL would not be increased above the levels set out in a Completion Business Plan.
c. Once the loan notes had been repaid, the management of RHL could be remunerated in accordance with ‘market standards’.
Mr Klaturov
The First Claimant (‘ Mr Klaturov’) is a lawyer. He studied law at Sofia University, the University of Vienna and at Georgetown University, Washington DC. He was admitted to practise law both in Austria and New York.
Mr Klaturov originally joined RCA in 2012 on secondment from his then Austrian law firm, Schoenherr. He then joined RCA full time, initially as General Counsel and then subsequently as Chief Operating Officer.
From 2016, Mr Klaturov was employed as the managing director of RCA's Austrian subsidiary Revetas AM GmbH (‘ RAM’). He ceased being managing director of RAM on 17 February 2022.
KMKH
The Second Claimant (‘ KMKH’) is a company based in Bulgaria which is owned and controlled by Mr Klaturov. It also became a member of RCA in December 2019.
The 2013 LLPA
The first LLP Agreement was entered into in 2013 (‘ the 2013 LLPA’). At this time the individual members were Mr Jones and Mr Assimakopoulos.
The MOUs
In June 2015 RCA entered into three memoranda of understanding (‘ the MOUs’). There was one for each of Mr Assimakopoulos, Mr Jones and Mr Klaturov. At the time Mr Klaturov was not yet a member of RCA. He was an employee. The function and effect of the MOU signed by Mr Klaturov is a matter of dispute.
The 2016 LLPA
Mr Klaturov became a member of RCA in December 2016 by signing a deed of adherence to the Amended and Restated Limited Liability Partnership Agreement for RCA (‘ the 2016 LLPA’).
The 2020 LLPA
The 2016 LLPA was replaced in 2020 by a new LLP agreement when two further members joined RCA (‘ the 2020 LLPA’). The 2020 LLPA was entered into on 9 December 2020 but took effect from 6 April 2019, Mr Klaturov was not personally a member of RCA after 6 April 2019. His interest in RCA under the 2020 LLPA was via KMKH.
Mr Jones
Stephen Ian Jones (‘ Mr Jones’) was the chief financial officer at RCA from February 2012 until 6 April 2019 when he ceased to be a member of RCA. The financial terms of his departure from RCA are contained in a settlement agreement dated 10 June 2020.
Mr Klaturov's resignation
In August 2021, Mr Klaturov gave notice of his intention to leave RCA. It is common ground for the purposes of his claim for unpaid compensation that KMKH ceased to be a member of RCA on 16 March 2022. Mr Klaturov and RCA have not been able to agree the financial terms of his and KMKH's departure from RCA.
The Profit Share Claim
By a claim form issued in July 2022, the Claimants claimed a total of EUR1,034,183 in “unpaid compensation for services rendered” to RCA between 1 January 2018 and 16 March 2022. By means of an amendment made in May 2023, the Claimants also now claim a share of RCA's profits under clause 8 of the 2020 LLPA (‘ the Profit Share Claim’).
The Buy Out Claim
A further claim relating to the valuation and purchase of the Claimant's interest in RCA pursuant to clause 21.4 of the 2020 LLPA (‘ the Buy Out Claim’) was also added by amendment but by an order made by Paul Stanley KC on 3 November 2023 that claim is to be tried separately at a later date.
The terms of the 2020 LLPA
In paragraph 12 of the Amended Particulars of Claim (‘ APC’), the Claimants plead that the relationship between RCA and its members is “governed by” the 2020 LLPA. This is admitted by RCA.
Part C of the APC, headed “the LLP Agreement”, makes express reference to only four clauses of the 2020 LLPA: clause 16.2 (obligation on each Member to devote substantially all of his working time, skills and expertise to the Business), clause 1.1 (which defines the business of RCA), clause 33 (Governing law and dispute resolution) and clause 21.4 (Good Leaver clause).
Clause 8 of the 2020 LLPA, which is not referred to by the Claimants in Part C of the APC, describes how and by whom profits and losses are determined as being available for distribution by RCA to the Members as follows:
Profits and Losses
“ 8.1 The Managing Member may from time to time determine that all or part of any profits of the LLP available for distribution between the Members be retained in a reserve account as a reserve against liabilities of the LLP, and any such retained amounts shall be treated as an asset of and belonging to the LLP. In the event that the Managing Member determines that the amount retained in the LLP exceeds the amount of working capital required, the excess shall be distributed to the Members in accordance with clause
Allocation of profits
8.2 The profits of the LLP reasonably determined by the LLP to be in the nature of income profits or operating profits shall be allocated:
(a) first to the Members in proportion to (but so as to not exceed) their Fixed Shares in the relevant Accounting Period as set out against their names in Schedule 1; and
(b) second profits of the LLP remaining after Members have been allocated such profits pursuant to clause 8.2(a) shall be allocated to the Members (other than a Former Member or Member who has given notice pursuant to clause 18) in proportion to their Voting Percentages.
Drawings on account of profits
8.3 On the penultimate Business Day of each month, the LLP shall pay, or cause to be paid, to the designated bank account of each Member on account of the profits to be allocated to them under clause 8.2, one twelfth of his Fixed Share (unless the relevant Member and the Managing Member agree otherwise).
8.4 If during any Accounting Period the aggregate amount paid to any Member under clause 8.3 (the “Aggregate Drawing”) exceeds the profits allocated to such Member for that Accounting Period under clause 8.2, then the Managing Member shall at its discretion be entitled to satisfy or set off such excess (the “Excess Drawing”) against any entitlement to distributions of profits (including any Fixed Share) to the Member that has received the Excess Drawing, save that the LLP may not charge any interest in respect of such receivables due to it.
Distributions of profits
8.5 To the extent that the share of profits allocated to any Member in respect of any Accounting Period pursuant to clause 8.2 exceeds the aggregate amount in respect of drawings paid to such Member by the LLP during that Accounting Period pursuant to clause 8.3, the LLP shall distribute such excess profits to the relevant Member as soon as reasonably practicable provided that:
(a) if the Managing Member determines that any profits in respect of any Accounting Period in excess of the aggregate Fixed Sharers should not be distributed, then such amounts shall be retained within the LLP; and
(b) no distribution shall be made by the LLP to its Members if, as a result of such distributions, the LLP would not have sufficient capital to meet the Regulatory Capital Requirement from time to time.
Distribution of losses
8.6 Losses shall be allocated between the Members in proportion to their Voting Percentages at the time of allocation of the losses.”
The 2020 LLPA also contained the following clauses: “ 21 Entitlements of Former Members
21.1 From his Leaving Date, a Former Member shall cease to be entitled to share in the profits of the LLP (other than as expressly specified in this Clause 21), and shall cease to be entitled to make drawings on account of profits pursuant to clause...
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