Toc Investments Corporation v Beppler & Jacobson Ltd and Others

JurisdictionEngland & Wales
JudgeMr Justice Hildyard
Judgment Date08 January 2016
Neutral Citation[2016] EWHC 20 (Ch)
Date08 January 2016
CourtChancery Division
Docket NumberCase No: 3680 of 2012

[2016] EWHC 20 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

COMPANIES COURT

IN THE MATTER OF BEPPLER & JACOBSON LIMITED

AND IN THE MATTER OF THE COMPANIES ACT 2006

AND IN THE MATTER OF THE INSOLVENCY ACT 1986

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Honourable Mr Justice Hildyard

Case No: 3680 of 2012

Between:
Toc Investments Corporation
Applicant
and
(1) Beppler & Jacobson Limited
(2) Leibson Corporation
(3) Belinda Capital Limited
(4) Mr Igor Lazurenko
(5) Lawson Trading Limited
(6) Mr Sergey Scheklanov
(7) Caldero Trading Limited
(8) Mark Shaw And Malcolm Cohen
Respondents

Robin Hollington QC and Adrian Pay (instructed by Bryan Cave) for the Applicant

David Wolfson QC and Matthew Cook (instructed by Mishcon de Reya) for the Second to Sixth Respondents

Daniel Bayfield (instructed by Herbert Smith Freehills LLP) on behalf of the former Provisional Liquidators

Hearing dates: 1 and 5 May 2015

Further written submissions on 8 May, 18 May and 14 December 2015

Mr Justice Hildyard

Nature of this Application

1

By an application dated 13 November 2014 TOC Investments Corporation ("TOC") seeks declaratory relief and orders requiring the first Respondent, Beppler & Jacobson Limited ("BJUK"), to reimburse TOC in respect of amounts totalling some £2.685m advanced by TOC on account of fees, expenses, disbursements and any other costs ("the Fees") incurred by or on behalf of the Provisional Liquidators of BJUK ("the PLs") appointed by the Court on 3 May 2012.

2

TOC, a wholly owned subsidiary of TNK-BP International Limited ("TNK-BP"), advanced the Fees on the terms of a Funding Agreement dated 27 July 2012 ("the Funding Agreement") made between TOC, the Provisional Liquidators and BJUK (acting through the Provisional Liquidators).

3

BJUK emerged from provisional liquidation after the dismissal on 1 December 2014 of a petition brought for its winding-up or for relief pursuant to section 994 of the Companies Act 2006 by the seventh respondent, Caldero Trading Limited ("Caldero"). Caldero's petition ("the Petition"), brought on 3 May 2012, was substantially funded by TOC/TNK-BP. BJUK is now (further to their purchase of Caldero's 25% shareholding) owned or controlled by the second to sixth Respondents.

4

The application, which is the only remaining matter for adjudication in relation to the Petition, raises issues of contractual interpretation, subrogation, unjust enrichment and the scope and applicability in that latter context of what is habitually referred to as the principle in Ex parte James.

The points in issue: summary of opposing contentions

5

TOC appeared through Leading and Junior Counsel (Mr Robin Hollington QC and Mr Adrian Pay). Its position, in summary, is that the moneys it paid on account of the Fees were advanced by way of loan, and that under the terms of the Funding Agreement, express or implied, it is now entitled to reimbursement out of the assets of BJUK; alternatively, that it is entitled to be subrogated to the PLs' entitlement pursuant to the Insolvency Rules to be paid by BJUK; or in the further alternative, that it is entitled to be repaid under the terms of the Court Order pursuant to and in fulfilment of which the Funding Agreement was made ("the Newey Order", dated 16 July 2012, to be discussed below). TOC has also latterly contended that it should be entitled to recover by reference to the principle in Ex parte James.

6

The second to sixth Respondents (represented in this case by Mishcon de Reya, and thus "the MdR Respondents") also appeared through Leading and Junior Counsel (Mr David Wolfson QC and Mr Matthew Cook). Again in summary, their position is that TOC has no entitlement to be repaid sums which it advanced pursuant to the Funding Agreement (to which, it is to be noted, the MdR Respondents were not parties) since that agreement did not provide for repayment or reimbursement, and TOC cannot now claim a right of reimbursement. They deny that there is any scope for subrogation, on the basis that in point of fact TOC advanced the moneys to BJUK, which then used its own money to meet its liabilities to the PLs, such that TOC itself did not discharge any liability owed by BJUK to the PLs. Further, they reject the notion of any claim for unjust enrichment (which they submit is the cause of action for which subrogation is a remedy) where there is a contract regulating the rights of the parties. They dismiss the Court Order (the Newey Order) as irrelevant, since all it did was provide for BJUK to pay the fees and costs of the PLs. They have sought to dismiss TOC's recourse to the principle in Ex parte James as a misplaced afterthought.

7

The PLs themselves, who are joined as (together) the eighth Respondents, appeared through Counsel (Mr Daniel Bayfield). They did so, as one of them (Mr Mark Shaw) explained in his sixteenth witness statement, in case of objections to certain evidence in it on grounds of inadmissibility, and in light of TOC's alternative reliance on the principle in Ex parte James. They have sought to maintain a strictly neutral role.

Brief summary of context

8

BJUK and its Montenegrin subsidiary, Beppler & Jacobson Montenegro d.o.o. ("BJM"), own two hotels in Montenegro.

9

When it presented the Petition, Caldero was one of three then shareholders in BJUK: it owned 25% plus one share. The other shareholders were Leibson Corporation (the second Respondent, a body incorporated in the BVI, "Leibson") which owned 70% minus one share and Belinda Capital Limited (the third Respondent, a body incorporated in Nevis, "Belinda") which owned 5% of the shares.

10

The participation of TNK-BP/TOC in the Petition stems from the involvement of a Mr Igor Lazurenko, the fourth Respondent, in BJUK. Belinda is owned by Mr Lazurenko, who is also the owner (or at least the agent for an unidentified principal) of Leibson. Prior to April 2012, Mr Lazurenko was employed by TNK-BP as Director of its Logistic Department; he resigned in April 2012 amidst serious allegations made against him by TNK-BP, proceedings in relation to which were brought to the Chancery Division in August 2012 (although these were subsequently thrown out by this Court on the grounds that Russia was the proper forum for hearing such claims). Although TNK-BP/TOC were not themselves a party to the Petition, they funded Caldero's costs of such in this context.

11

The respondents to the Petition were BJUK, BJM, the MdR Respondents (including Mr Lazurenko, Leibson and Belinda), and Marcel Telser, the director of BJUK ("the Petition Respondents").

12

The PLs were appointed on the same date as the Petition was presented on the ground of a strong risk of dissipation, demonstrated by the Petition Respondents suddenly proffering accounts that purported to show that BJUK held all its assets on trust for another body, also incorporated in Nevis, called Lawson Trading Limited, thus purportedly rendering Caldero's interest worthless.

13

The order appointing the PLs ("the Birss Order") was made by HHJ Birss QC (as he then was). The Birss Order provided (by paragraph (9)) for the PLs' remuneration to be payable on application by reference to the time spent by them and their staff. It also recorded the usual undertaking (numbered (7) in the Birss Order) on behalf of Caldero as petitioner to "pay the reasonable costs of anyone other than the Respondents which have been incurred as a result of this order…". Further, given the serious and invasive nature of such relief, TOC joined Caldero in each giving a cross-undertaking in damages. That regime was extended by order of Floyd J (as he then was) on 17 May 2012.

14

On 21 May 2012 TOC's cross-undertaking was replaced by an undertaking given to Floyd J by its parent TNK-BP which included the following:

"As security for (a) the Petitioner's undertakings numbered (1) and (7) in [the Birss Order] and the undertakings numbered (1) and (3) of in the Order dated 17 May 2012 of Mr Justice Floyd, and (b) any liability that the Petitioner may incur in respect of the costs of the Provisional Liquidators appointed under the terms of those Orders, TNK-BP will comply with and satisfy any order the court may make thereafter against the Petitioner Provided always that the total liability of TNK-BP under this undertaking…shall not exceed $30 million."

15

Then on 14 June 2012 TNK-BP extended that undertaking, giving an undertaking to Morgan J in the following terms:

"As security for (a) the Petitioner's undertakings numbered (1) and (7) in [the Birss Order] and the undertakings numbered (1) and (3) of in the Order dated 17 May 2012 of Mr Justice Floyd, and (b) any liability that the Petitioner may incur in respect of (1) the costs of the Provisional Liquidators appointed under the terms of those Orders, and/or (2) any costs orders in favour of any Respondent TNK-BP will comply with and satisfy any order the court may make thereafter against the Petitioner Provided always that the total liability of TNK-BP under this undertaking…shall not exceed $30 million." (Emphasis added).

16

The expedited trial of the Petition came on for hearing on 13 July 2012. Caldero sought an immediate winding-up order on the ground that by then the Petition Respondents had admitted that the agreements which had been said to demonstrate that BJUK's assets were held on trust had been produced with the intention of defrauding Caldero and its owner.

17

In such circumstances, the Court permitted the parties to have a period to negotiate. This resulted in a partial compromise of the Petition, which was reflected in the Newey Order. The Newey Order declared the alleged...

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