Ample Speed Ltd v Grain-Trans Ltd
| Jurisdiction | British Virgin Islands |
| Judge | Wallbank, J. |
| Judgment Date | 18 May 2022 |
| Neutral Citation | VG 2022 HC 038 |
| Docket Number | CLAIM NO. BVIHCM 2019/0055 |
| Court | High Court (British Virgin Islands) |
EASTERN CARIBBEAN SUPREME COURT
BRITISH VIRGIN ISLANDS
COMMERCIAL DIVISION
CLAIM NO. BVIHCM 2019/0055
Mr. Andrew Gilliland for the Claimant
Mr. Robert Nader for the Defendant
Wallbank, J. (Ag.) This is the Court's judgment upon the trial of this claim.
The trial was unusual, in that although the Defendant's Counsel appeared, the Defendant's witnesses did not attend, and the Defendant's Counsel was left without instructions during the trial. This failure to show had not been foreshadowed by way of a prior indication to the Court, nor did the Defendant or its witnesses extend an apology or any explanation to the Court. This was to the evident embarrassment of the Defendant's Counsel, Mr. Nader, whose attempts to assist the Court in such awkward circumstances were commendable and entirely proper. The trial was interrupted to give the Defendant's legal representative opportunities to take instructions and for the Defendant's witnesses to attend. Ultimately, they did not appear and the trial proceeded without them. Nonetheless, both sides filed written closing submissions.
The Claim is for repayment of a loan and contractual interest pursuant to the terms of a loan agreement dated 6 th July 2015 between the Claimant, as lender, and the Defendant, as borrower (the ‘ Loan Agreement’). Such Loan Agreement was executed by the parties’ representatives on 6 th July 2015.
The Claimant is a company domiciled in Hong Kong SAR (‘ Hong Kong’) and at the material time operated a business trading grain internationally, with its focus of operations in the Ukraine. At the relevant time, it is the Claimant's position that it was beneficially owned by one Mr. Oleg Shchurin.
The Defendant is a company incorporated in the British Virgin Islands and is beneficially owned by one Mr. Alekszej Fedoricsev, a Hungarian national living in Monaco.
Pursuant to the terms of the Loan Agreement, the Claimant claims the sum of US$1,873,400.00 together with contractual interest at the rate of 1% per annum. The purpose of the loan as pleaded by the Claimant was to assist Mr. Fedoricsev to cover a short-term gap in cash flow affecting his grain terminals in the Ukraine. It is the Claimant's position that the request was made over several telephone calls between Mr. Fedoricsev and a Mr. Annikov on behalf of the Defendant and Mr. Shchurin on behalf of the Claimant. Mr. Annikov was, says the Claimant, responsible for financial matters within Mr. Fedoricsev's group of companies. Initially, Mr. Fedoricsev had requested prepayment for future trans-shipment services. However, Mr. Shchurin states in his witness statement that he was not prepared to do this but instead was prepared to provide a short-term loan. Mr. Shchurin said that this was accepted by Mr. Annikov on behalf of Mr. Fedoricsev.
As mentioned above, the Loan Agreement was entered into between the parties on 6 th July 2015. On the same day, the funds were transferred by the Claimant from its bank account in Riga, Latvia, to the Defendant's bank account in the same city. The Claimants case is that the loan was not repaid within the one-week term agreed under the Loan Agreement, or at all. The Claimant's case is that on or about 13 th July 2015 Mr. Annikov informed Mr. Shchurin that the Defendant was unable to repay the loan at that time, and that, at Mr. Fedoricsev's request, Mr. Shchurin had agreed to forebear temporarily from seeking repayment of the loan, which Mr. Shchurin did to preserve his commercial relationship with Mr. Fedoricsev. The Claimant issued a statutory demand for payment on 12 th June 2018, but that statutory demand was subsequently set aside. The Claim was issued on 16 th April 2019 by the Claimant to recover the principal and interest.
The Defendant has refused to pay. Its case is that the loan in question was not in fact a loan, but had been a working capital investment contribution by, ultimately, Mr. Shchurin and his business partner, a Mr. Brovdi, to a joint venture grain trading and trans-shipment project they shared with Mr. Fedoricsev, called ‘Granum-GTG-TIS Trade’. According to the Defendant, investments of working capital to the joint venture project were made in the form of loans, and refunds were effectively made by way of profit-sharing payments. The Defendant's case is that the sum advanced had in fact been settled by the Defendant as it was offset against Mr. Fedoricsev's profit share in the joint project during the period November 2014 — July 2015. The Defendant took the position that the loan agreement had been a sham agreement.
The Claimant rejected this explanation. It averred that Mr. Brovdi only became a partner with Mr. Shchurin in respect of the Claimant afterwards, in April 2016. The Claimant also contended that it was never involved in any joint project as alleged by the Defendant, and that the investments into that joint project in fact took place after the loan presently in issue was made.
In support of its case the Claimant relied on the evidence of Mr. Shchurin and Ms. Flordeliza Duller, the sole director of the Claimant. Mr. Shchurin and Ms. Duller both signed witness statements on 3 rd September 2021 and appeared via video link to give oral evidence at the trial of the matter.
The Claimant relied on Mr. Shchurin's witness statement as his evidence in chief, and in particular relies on the following points which were amplified by Mr. Shchurin during the course of his oral testimony: -
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(1) He was the sole beneficial owner of the Claimant at the time that the Claimant entered into the Loan Agreement, having purchased the Claimant company on 1 st July 2015 as a trading company for the international grain market. Since then, on 24 th October 2017, Mr. Shchurin divested himself entirely of interests in the Claimant company;
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(2) In the first half of July 2015, he received telephone calls from both Mr. Fedoricsev and Mr. Annikov requesting pre-payment of future trans-shipment services that would be provided to him in the future at Mr. Fedoricsev's grain terminals in Ukraine, with the funds being required to assist Mr. Fedoricsev with a short-term cash flow difficulty;
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(3) He was not prepared to agree to a pre-payment but was prepared to offer a short-term loan agreement to assist Mr. Fedoricsev with his cash flow issues;
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(4) Mr. Annikov confirmed to him that the loan was satisfactory to Mr. Fedoricsev;
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(5) The Loan Agreement was entered into on 6 th July 2015 for a period of one week with Mr. Annikov signing the Loan Agreement document on behalf of the Defendant and the Claimant's authorised signatory, Mr. Shevchenko, signing on behalf of the Claimant;
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(6) The loan was never repaid;
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(7) At the time Mr. Fedoricsev requested that Mr. Shchurin not press for repayment of the loan. Mr. Shchurin was prepared to do this at the time as the use of Mr. Fedoricsev's terminals was critical to the Claimant's business;
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(8) In addition, Mr. Shchurin's written and oral evidence was that the Loan Agreement was not part of a joint venture entered into between Mr Shchurin and Mr. Brovdi on the one hand and Mr. Fedoricsev on the other as claimed in the Defence.
Under cross-examination, Mr. Shchurin remained steadfast in his evidence that the Loan Agreement was completely independent from the joint venture agreement. In addition, Mr. Shchurin made it clear that Mr. Fedoricsev owned the only deep-water terminals in the Ukraine and that it would be impossible to operate out of the Ukraine without using the terminals owned by Mr. Fedoricsev and this was why the loan was not recalled at the time.
Mr. Shchurin's evidence was that there had indeed been a joint venture agreement, entered into on or about 16 th October 2014, between himself and Mr. Brovdi for the one part and Mr. Fedoricsev for the other. The purpose of this joint venture was to purchase, sell and move grain using Mr. Fedoricsev's deep water grain terminals. However, said Mr. Shchurin, no activity was carried out using the joint venture until 2015, due to the failure of the parties to provide the necessary funding. In September 2015 two cargoes were purchased by the joint venture company concerned, with these cargoes being fully paid for by the end of October 2015. The joint venture company concerned was not used after October 2015 and the joint venture itself was discontinued at the end of 2016.
Mr. Shchurin's evidence was that the Loan Agreement made no mention of the joint venture and, in any event, he had acquired the Claimant company only about a week prior to the making of the loan, whereas the joint venture had been entered into back in 2014. He further gave evidence that had the loan been made to finance the joint venture, it would not have been made to the Defendant, as a company beneficially owned by Mr. Fedoricsev, but to the joint venture company.
With regard to Ms. Duller, the Claimant particularly relied on the following points which were amplified by Ms. Duller in her oral evidence:
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(1) Mr. Shchurin was the beneficial owner of the Claimant at the time the Loan Agreement was signed;
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(2) The loan has not been repaid, remains on the Claimant's books, and is outstanding in the Claimant's accounts.
In cross examination (and re-examination) Ms. Duller confirmed that the loan remained outstanding in the Claimant's books. Ms. Duller's witness statement evidence was that she was a director of the company from around 7 th August 2015, i.e., from shortly after the loan agreement had been entered into.
Witness Statements were filed by both Mr. Fedoricsev and Mr. Annikov, both dated 3 rd September 2021. However, when called to give evidence on the second day of the trial (and after several...
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