Slocom Trading Ltd and Another v Tatik Inc. and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Roth |
| Judgment Date | 10 May 2013 |
| Neutral Citation | [2013] EWHC 1201 (Ch) |
| Date | 10 May 2013 |
| Court | Chancery Division |
| Docket Number | Case No: HC10C00139 |
[2013] EWHC 1201 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Roth
Case No: HC10C00139
Benjamin John (instructed by Reed Smith LLP) for the Claimants
Simon Birt (instructed by Russell-Cooke LLP) for the 1 st Defendant
Ian Mill QC and Andrew Hunter QC (instructed by Jones Day) for the 2 ndand 3 rd Defendants
Hearing date: 27 February 2013
Judgment in this case raising many issues was handed down on 4 December 2012 ("the Judgment"). It is an indication of the complexity of the case that the hearing of consequential matters arising from the Judgment took a further full day, supplemented by notes submitted by Counsel thereafter on certain points that they were not in a position to address at that hearing and yet further letters from some of the parties' solicitors. This supplementary judgment adopts the same terminology as the Judgment and deals with the following consequential matters:
i) What is the correct judgment amount against Tatik?
ii) What is the correct judgment amount against Sibir and Maritime, and how is that to be determined?
iii) What is the correct order about interest (a) pre-judgment and (b) post-judgment?
iv) Two issues in relation to the equitable mortgage: (a) the terms of the declaration pursuant to para 354(viii) of the Judgment 1 and (b) further relief.
v) Costs, including interest on costs, interim payment and release of security for costs.
vi) The Defendants' applications for permission to appeal.
vii) The Defendants' applications for a stay pending appeal.
Before addressing those issues, it is convenient to summarise the terms governing interest under the Derbent-Tatik Loan Agreement. Pursuant to clause 4, interest is payable on the principal loan outstanding at the annual rate of 12%. Clause 12 provides insofar as material:
"Default Interest
If the Borrower fails to pay any sum payable under this Agreement when due, it shall pay interest on that sum from and including the due date up to and including the date of actual payment (both before and after judgement) at the rate of three percent (3%) per annum above the rate of interest as set out in Clause 4 (Interest). So long as the default continues, such interest shall be compounded monthly. Such interest will be calculated on the basis of the actual number of days elapsed and a full year, will accrue from day to day and will be payable to the Lender from time to time on demand."
Accordingly, default interest is payable under the agreement at the rate of 15%, compounded monthly.
(I) JUDGMENT AGAINST TATIK
Tatik is liable to Slocom in debt under the Derbent-Tatik Loan Agreement, pursuant to the assignment of that agreement from Derbent to Slocom. The parties are now largely agreed as to the figures save for one important point. During the currency of the Second Tchigirinski Loan, repayments of capital and payments of interest were made at various times by various companies controlled by Mr Tchigirinski, including Gradison. In his calculations of the amount due set out in the Derbent-Tatik Loan Agreement of 19 December 2008, Mr Haener overlooked four payments which had been made on 1 February 2006 in the total amount of $1,237,500. Each payment was in the amount of $309,375 made by Gradison to one of the Foundations. This oversight was spotted later by Mr Schneebeli when he prepared the accounts, and was explained by Mr Haener in his witness statement.
The issue between the parties is whether this sum falls to be treated as a payment on account of interest (as the Claimants contend); or a repayment of capital (as the Defendants contend), thereby reducing the principal outstanding under the Loan. The point is significant because of the rate of interest applicable on the outstanding principal sum. It is agreed that if the Defendants are correct, then the principal amount owing under the Derbent-Tatik Loan Agreement should be €30,502,453.87, with interest accrued to the date of that agreement (i.e. 19 December 2008) of €1,300,312.77. On the other hand, if the Claimants are correct, the principal amount outstanding is €31,548,077, with interest accrued to the date of the agreement of €549,985.17. Since the default under the agreement occurred only on about 8 December 2009 (see para 222), the difference is increased by the continuation of interest at the contract rate of 12% for a further year on whichever sum represents the outstanding principal, and thereafter by application of the default rate of 15% to the total.
The parties all relied on a spreadsheet setting out the principal loan outstanding, interest due, interest payments made and interest overdue, which had been prepared by Mr Schneebeli. The figures in the spreadsheet, which omitted the 1 February 2006 payments, were agreed.
For the Defendants, the argument on this issue was presented by Mr Birt, for Tatik, and adopted by Sibir and Maritime. He relied on the fact that as at 1 February 2006, when these four payments were made, there was no outstanding interest due. Accordingly, if the payments fell to be treated as being on account of interest, they were payments in advance, which stood to the credit of the lender (at that time, Willow Tree). The more commercial approach was therefore for the payments to be set against the principal. Mr Birt emphasised that Mr Tchigirinski was generally reluctant to make any payments under the various loan agreements involving the Kruglov money. It was not suggested that Mr Tchigirinski, and more particularly Mr Haener acting on his behalf, realised that there was no outstanding interest when these payments were made, but the argument was that if they had done so, then they would clearly have intended that these payments should be set towards reducing the principal.
This suggested inference as to what Mr Tchigirinski and Mr Haener's intentions would have been regarding the payments had they appreciated the actual state of the loan account is plausible, although I think it is equally plausible that in that event these payments would not have been made in February 2006 at all. But in my view, that hypothetical analysis is beside the point. In my judgment, the critical point is that their actual intention at the time the payments were made was that these were payments on account of interest not capital. Mr Haener said so in terms when dealing with this in his witness statement, and although much else that he said was challenged in an extensive cross-examination, this evidence was not. Moreover, it is supported by the contemporary credit advice notes from Wegelin Bank, to which he there referred. The four advice notes all describe the payment as "Loan Willow Tree Interest", and that must have reflected the instructions of Mr Haener who was handling the transactions for both sides. This was not accidental, since it is apparent from the other Wegelin credit advice notes in 2006 (and unsurprising) that this description was not used when a payment was on account of capital. It is also consistent with the credit advice notes in 2005, when Mr Tchigirinski through his companies made a series of payments, which it is accepted were on account of interest, and which were so specified in the advice notes.
I am reinforced in this conclusion by the fact that it is clear that interest due under the Loan was often not paid regularly, but as and when funds became available from a variety of sources. Thus, according to the spreadsheet, in 2005 interest payments were made (and it is accepted that they are correctly so characterised) at a time when they exceeded the amount of interest due. Indeed, given that Mr Haener knew that he could not rely on Mr Tchigirinski to provide funding promptly when interest became due, it is not irrational in a commercial sense that when funds did become available Mr Haener organised a payment on account of interest in advance, since he could not feel confident that the necessary money would be furnished on the due date. It is notable that by the end of 2006, after bringing into account this $1,237,500, there was nonetheless a balance of interest overdue.
Accordingly, I find that the payments made on 1 February 2006 are to be treated as, on the evidence, they were intended at the time. There is no justification for re-characterising them on the basis of some ex post facto rationalisation which, moreover, was never put to Mr Haener.
(II) JUDGMENT AGAINST SIBIR AND MARITIME
By contrast with Tatik on whom the primary liability is in debt, the liability of Sibir and Maritime lies in damages. Those damages are for breach of contract and in tort for inducing breaches of contract by Tatik and Mr Tchigirinski: see the Judgment. The parties agreed that there is no difference here as between the measure of damages in contract and in tort.
The essence of the breaches committed by Sibir and Maritime may be summarised as arranging for the sale of the Villa to be carried out in such a way that the debt of Tatik under the Derbent-Tatik Loan Agreement was not discharged out of the proceeds; or as it was conveniently expressed, to arrange a "non-compliant sale". Those arrangements were made by the various agreements dated 13 January 2010. However, although those agreements may be regarded as giving rise to anticipatory breaches of the obligations to Slocom under the relevant provisions of the April 2009 Agreements, those breaches were not accepted by Slocom and the Villa was not sold on 13 January 2010. The contract entered into between Tatik and Maritime on that date was only a "Promissory Sale Agreement" (Promesse de Vente), which gave Maritime an option to purchase the Villa at the...
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