Piraeus Financial Holdings S.A v Grand Anemi
| Jurisdiction | England & Wales |
| Judge | Mr Justice Calver |
| Judgment Date | 17 February 2021 |
| Neutral Citation | [2021] EWHC 327 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 February 2021 |
| Docket Number | Case No: CL-2019-000129 |
[2021] EWHC 327 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice,
Rolls Building
Fetter Lane,
London, EC4A 1NL
THE HONOURABLE Mr Justice Calver
Case No: CL-2019-000129
Rajesh Pillai QC (instructed by Reed Smith LLP) for the Claimant
No one in attendance for the Defendants
Hearing dates: 16 February 2021
Approved Judgment
A. INTRODUCTION
The Claimant ( the Bank) brings this action to recover US $96,272,124.04 from the First Defendant ( Grand Anemi) under a Loan Agreement dated 28 August 2009 ( Loan Agreement).
The Bank also claims that each of the Second and Third Defendants ( Grandunion and Mr Zolotas) are separately liable because they entered contracts on the same date that, properly construed, take effect as indemnities by which they have assumed a primary liability (as principal debtors) to repay the Bank ( the Grandunion and Zolotas Indemnities).
None of the Defendants have acknowledged service or filed a Defence. Until late on 9 February 2020, the Defendants had not taken any part in these proceedings. On that date, Mr Zolotas emailed the Court making various criticisms of the Bank but not raising any specific defences to this action. Despite being sent the trial bundle and the Claimant's written argument for trial, and despite the fact that Mr. Zolotas knew that the trial was fixed for a hearing on 16 February 2021 he did not attend the trial, nor did the other defendants.
The Bank relied upon a recent statement from Charles Hewetson (the partner with conduct of this matter at Reed Smith LLP) for confirmation regarding the service of the hearing materials upon, and notification of the trial date to the Defendants through the service agents identified in the relevant contracts. In all the circumstances I was satisfied that the Court should proceed with the trial in the absence of the Defendants pursuant to CPR 39.3.
The Court heard evidence from three witnesses of fact called by the Bank:
a. Ms Manolatou, who dealt with the Defendants' loan accounts and recovery actions from 2012 onwards as part of her role in the Corporate Workout Division, first at Marfin Egnatia Bank/Cyprus Popular Bank and then at the Bank.
b. Mr Kiosklidis, who worked in Ms Manolatou's department from March 2013 at Marfin Egnatia Bank/Cyprus Popular Bank and then at the Bank, where he dealt with the Defendants' loan accounts and recovery actions. He left the Bank at the end of November 2020.
c. Ms Kourkoumeli, who has worked at the Bank since 2004 and headed (as Senior Director) the Non-Performing Exposures Strategy, Planning and Monitoring team since 2014. She was aware of the background to the Bank's acquisition of various assets from Cyprus Popular Bank in March 2013 and has identified and collated the relevant documents from that time to assist the Court. She was not, however, directly involved in the relevant events.
In addition, the court received oral and written expert evidence of Greek law from Professor Gortsos, who is Professor of Public Economic Law, Director of the Public Law Department and Academic Head of the LLM Program in “Financial Regulation” at the Law School of the National and Kapodistrian University of Athens. The Court also received written expert evidence of Marshall Islands law from James McCaffrey, a practising lawyer in that jurisdiction and a former President of the Marshall Islands Law Society. He did not give oral evidence.
The case was ably presented for the Bank by Mr. Rajesh Pillai QC. Mr. Pillai was scrupulous in presenting the case fairly and thoroughly, informing the court of all points which the Defendants might have taken against the Claimant's case had they been present. In the circumstances the court can feel the same degree of assurance about the fairness of the trial as was expressed by HHJ Waksman QC in CMOC Sales & Marketing Limited v Person Unknown [2018] EWHC 2230 (Comm) at [14] as follows:
“Where the trial is not attended by one of the parties, there is still an obligation of fair presentation which is less extensive than the duty of full and frank disclosure on a without notice application. Mr Justice Cresswell in Braspetro Oil Services v FPSO Construction Inc [2007] EWHC 1359 (Comm) said as follows, that he required the claimant to draw to the attention of the court: “points, factual or legal, that might be to the benefit of [the defendant].” He noted that claims which were considered not to be sustainable were not in fact pursued. He said that the claimant brought to the attention of the court points which the defendant had taken before it decided to play no further part. He said that the claimant brought to his attention points which had never been taken by the defendant but which might have been had it decided to defend the proceedings, and it had taken all steps to bring to the attention of the defendant what has been happening here. The court had, in that case, through the eight-day hearing, carefully examined and tested the claimant's case. I adopt those observations and I consider that the injunctions of Mr Justice Cresswell have been fully followed here. I also did not regard this trial as merely an exercise of rubber-stamping but tested and considered all aspects of the case”.
The Court itself questioned the factual and expert witnesses to clarify points in issue that were of concern to it.
B. THE FACTUAL BACKGROUND
In the late 2000s Mr Zolotas had a number of large-scale commercial interests, from shipping to real estate and investments. He operated primarily through a company named Stamford Navigation Inc. (a Liberian company run from Greece) and, later, Newlead Holdings Ltd (a Bermuda company that was publicly listed on the NASDAQ exchange). For convenience Mr Zolotas and related entities are referred to as the Zolotas Group.
The two corporate Defendants were part of that Group. Grandunion was incorporated in the Marshall Islands by Mr Zolotas (and two others) in 2007 and he is its ultimate beneficial owner through entities known as Focus Maritime (as to 50%) and Newborn (as to 50%), both of which are wholly owned by Mr. Zolotas (or at least were at all material times). In 2009, Grandunion signed a letter of intent with Aries Maritime, a company listed on the NASDAQ, for the acquisition of the latter. The new company was named Newlead Holdings Ltd (“Newlead”), a Bermudan company. Mr Zolotas served as the founder, chief executive, and largest shareholder of Newlead, a public shipping enterprise that formally traded on the NASDAQ.
Grand Anemi was at all material times a Maltese single-ship owning entity in turn entirely owned by Grandunion. Since he owns 100% of Grand Union, it follows that Mr. Zolotas also owns Grand Anemi (indeed, as at August 2009, when he entered into the Zolotas Indemnity, Mr Zolotas was stated in that contract to be a “major beneficial owner” of the shares in Grand Anemi).
(i) Background to Mr Zolotas' business – 2005 to 2009
The Zolotas Group had interests in (primarily) the shipping industry, though it had diversified into real estate and other investments. Mr Zolotas and his companies had been customers of Marfin Bank SA in Cyprus since at least 2005. In July 2007, Egnatia merged with Marfin Bank SA and Laiki Bank to become Marfin Egnatia Bank SA. The Cypriot Marfin Popular Bank Public Co. Ltd (“Marfin Popular Bank”) acquired Marfin Egnatia Bank in March 2011. Marfin Popular Bank then changed its name to Cyprus Popular Bank Public Co. Ltd (“CPB”) on 5 April 2012.
Lending to the Zolotas Group companies was usually accompanied by what Ms Manolatou describes as “ collateral packages, consisting of personal guarantees (including given by Mr Zolotas himself), corporate guarantees, share pledges, and mortgages over Group vessels and real estate holdings.” Similar arrangements were entered into in respect of the Loan Agreement and the Indemnities in this case.
(ii) The Loan Agreement and the Indemnities – August 2009
The Loan Agreement is an English law governed contract dated 28 August 2009 between Marfin Egnatia Bank, Grand Rodosi Inc ( Grand Rodosi), a Liberian company, and Grand Anemi. These companies were each single-vessel owning entities that were part of the Zolotas Group. The execution of the Grandunion and Zolotas Indemnities was a condition precedent to entry into the Loan Agreement. Under the Loan Agreement, Marfin Egnatia Bank agreed to make available a revolving credit facility of up to US$112 million for the purposes of refinancing existing indebtedness and to finance working and investment capital needs of the two companies.
Terms of the Loan Agreement
The Loan Agreement provided in particular as follows:
1. PURPOSE
A This Agreement sets out the terms and conditions on which the Lender has agreed to make available to the Borrowers as joint and several borrowers a revolving credit facility, not exceeding at any relevant time the aggregate amount of One hundred Twelve million Dollars ($112,000,000) in multiple Advances in the following amounts and for the following purposes:
(i) an Advance of up to Eighty Nine million Five hundred thousand Dollars ($89,500,000) for the purpose of refinancing in full certain outstanding indebtedness in relation to, inter alia, the Ships pursuant to the Existing Financial Agreements; and
(ii) Advances in amounts approved by the Lender for the purpose of providing the Borrowers with working and investment capital.
3. THE FACILITY – THE...
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