Tawney Assets Ltd Appellant v [1] East Pine Management Ltd [2] Guildron Trading Ltd [3] Si Capital Partners Ltd [4] Rudy Amirkhanian [5] Elena Lokteva Respondents

• Jurisdiction: British Virgin Islands
• Court: Court of Appeal (British Virgin Islands)
• Judge: Mitchell JA [AG.],Don Mitchell,Justice of Appeal [Ag.]
• Judgment Date: 17 September 2012
• Judgment citation (vLex): [2012] ECSC J0917-4
• Docket Number: HCVAP 2012/007
• Date: 17 September 2012

[2012] ECSC J0917-4

EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Before:

The Hon. Mr. Don Mitchell Justice Of Appeal [Ag.]

HCVAP 2012/007

(On appeal from the Commercial Division)

Between:

Tawney Assets Limited

Appellant

and

[1] East Pine Management Limited

[2] Guildron Trading Limited

[3] Si Capital Partners Limited

[4] Rudy Amirkhanian

[5] Elena Lokteva

Respondents

On written submissions:

Mr. James Ayliffe, QC, Ms. Keisha M. Durham with him, for the Appellant

Mr. Christopher R. Parker, QC, of Maitland Chambers, for the 1st and 3rd Respondents

Civil interlocutory appeal - Case management powers of a judge - Striking out substantial part of statement of claim - Claim found to be unsustainable - Test in Baldwin Spencer v Attorney-General- Exercise of judicial discretion by a trial judge - Function of an appellate body –Test in Ian Peters v Robert Spencer- Test in Michel Dufour v Helen Air

Tawney Assets and East Pine entered into a joint venture agreement for the merger of two agricultural machinery businesses formerly carried on by them separately in the Russian Federation. Tawney Assets' business was a Russian company, Agrosnab, through its wholly owned Cypriot subsidiary, Plancroft. East Pine's business was Mercury, held through a wholly owned Cypriot subsidiary called Oldril.

East Pine is owned or controlled by Strategic Initiatives of which Rudy Amirkhanian and Elena Lokteva are alleged to be senior executives. SI Capital is the corporate persona in the BVI of Strategic Initiatives. Tawney Assets is owned or controlled by Dimitry Korntsvit.

They entered into a further agreement dated 29 ^th September 2010 for the supply by Mercury to Agrosnab of 8 tractors for a price of RR65.5 million (over US$2 million). Some RR40.4 million of that sum has been paid, leaving some RR25 million outstanding.

In November 2010, the parties transferred their shares in Plancroft and Oldril to Guildron in exchange for equal shareholding in the BVI company, Guildron. East Pine was to make a balancing payment of US$4 million to Tawney Assets, of which only $2 million was paid. The result was that Tawney Assets and East Pine indirectly held the two Russian businesses through Guildron's ownership of their respective Cypriot parents. On 24 ^th November 2010, Tawney Assets and East Pine entered into a Shareholders Agreement to regulate the conduct of the affairs of Guildron. Under this agreement, the shareholders had agreed to adopt all decisions of any shareholders' or directors' meeting and to exercise their voting rights at shareholders' and directors' meetings in a manner consistent with their obligations under the Shareholders Agreement.

On 1 ^st December 2010, Mercury lent Agrosnab RR13 million repayable on 21 ^st December, which loan was not repaid. Mercury subsequently lent further sums to Agrosnab totalling more than RR24 million, which were not repaid. In mid-December 2010, Mercury's Russian personnel moved into Agrosnab's Moscow offices and the two businesses were operated together under the name MAST. The combined businesses were managed by a management board created for that purpose.

A dispute arose over the balancing payment and the management of Mercury and its employees who were working in the Agrosnab offices left, never to return or further cooperate with Agrosnab. Following the walk-out by Mercury, Tawney Assets could have convened a meeting as contemplated by the Shareholders Agreement at which East Pine would have been obliged to vote as required by that agreement. However, Tawney Assets never called on East Pine to attend any such meeting.

Tawney Assets then issued a claim based on contract, tort, and section 1841 of the BVI Business Companies Act, 2004. SI Capital applied for an order that the appropriate forum is the courts of the Russian Federation. East Pine next applied for an order that the amended statement of claim be struck out pursuant to rule 26.3(1) of Civil Procedure Rules 2000 ("CPR") as disclosing no cause of action or as being prolix and failing to comply with the requirements of CPR 10.

On the strike out application, the learned trial judge, after analysing the terms of the Shareholders Agreement, and considering the submissions made to him, concluded that the terms pleaded did not arise either as a matter of construction of the Shareholders' Agreement or by implication. He concluded that the claim for breach of the Shareholders Agreement must be struck out.

The learned trial judge further concluded that the allegations marshalled in support of claims in conspiracy and breach of contract should not stand as allegations in support of a section 1841 claim. He found that the paragraphs would need recasting if they were to be used in relation to that claim.

He therefore ordered that paragraphs 1 to 70 of the statement of claim, together with paragraphs 1 to 3 inclusive of the prayer, be struck out. He ordered Tawney Assets to pay East Pine and SI Capital their costs of their applications and of the action to date.

Tawney Assets appealed on various grounds which included (1) that the judge incorrectly interpreted the Shareholders Agreement; (2) that it was inappropriate for him to rule out the contract claim at such an early stage having regarding to, among other things, the difficulty of the issues and the importance of the claim to Tawney Assets' case; (3) that there was a well-arguable case for an express or implied term as alleged in its statement of claim and for East Pine's conduct in causing or procuring the walkout by Mercury and Mercury's pursuit in Moscow of its litigation to constitute breaches of the Shareholders Agreement; (4) that the judge ought to have left in the factual allegations pleaded in the statement of claim because they were also relevant to and relied on by Tawney Assets in support of the surviving section 1841 claim; (5) that the learned trial judge was wrong to hold that the only appropriate respondent to the surviving section 1841 claim was East Pine; and (6) that the learned trial judge was wrong to order Tawney Assets to pay East Pine and SI Capital their costs of their applications and the action to date.

In its counter-appeal, East Pine and SI Capital urge that the judge was right to make the order he did for the reasons he gave, and for further reasons.

Held: dismissing the appeal brought by Tawney Assets and the counter appeal brought by East Pine and SI Capital; and awarding East Pine and SI Capital costs of this appeal pursuant to CPR 65.13, that:

• 1. The striking out of a party's statement of case, or most of it, is a drastic step which should only be used in clear and obvious cases, when it can clearly be seen, on the face of it, that the claim is obviously unsustainable, cannot succeed or in some other way is an abuse of the process of the court. The court must therefore be persuaded either that a party is unable to prove the allegations made against the other party; or that the statement of case is incurably bad; or that it discloses no reasonable ground for bringing or defending the case; or that it has no real prospect of succeeding at trial. In the present case, Tawney Assets never pleaded an actual breach nor an anticipatory breach of the Shareholders Agreement by East Pine. Tawney Assets had neither called upon East Pine to perform the obligations it identified in the amended statement of claim, nor had it accepted East Pine's conduct as a repudiating of the contract. Until it did one or the other, it could have no case. Tawney Assets never did call on East Pine to attend a meeting. If East Pine had refused to attend, then Tawney Assets could have pleaded an actual breach. In contract, there must be a pleaded breach that could give rise to an action in damages. This failure by Tawney Assets led to the statement of case being incurably bad. No amount of oral evidence could have saved the error made in the pleadings. Accordingly, the learned trial judge's finding, that the claims in contract were unsustainable and would not succeed, was correct. With the striking out of the contract claim the tort claims necessarily fell away.

  Baldwin Spencer v The Attorney General of Antigua and Barbuda Antigua and Barbuda High Court Civil Appeal No. 20A of 1997 (delivered 8th April 1998, unreported) followed; Ian Peters v Robert George Spencer Antigua and Barbuda High Court Civil Appeal No. 16 of 2009 (delivered 22nd December 2009, unreported) followed.

• 2. An appeal against a judgment given by a trial judge in the exercise of a judicial discretion will not be allowed unless the appellate court is satisfied (1) that in exercising his or her judicial discretion, the learned judge erred in principle either by failing to take into account or giving too little or too much weight to relevant factors and considerations or by taking into account or being influenced by irrelevant factors and considerations and (2) that as a result of the error or the degree of the error in principle, the trial judge's decision exceeded the generous ambit within which reasonable disagreement is possible and may therefore be said to be clearly or blatantly wrong. The learned trial judge exercised a judicial discretion after careful consideration of the facts and the applicable principles of law. He has not been shown to have erred in principle. There is no basis upon which the court is justified in substituting its own discretion for the discretion already exercised by the judge. As such, the appeal brought by Tawney Assets must fail.

  Michel Dufour et al v Helenair Corporation Ltd. et al (1996) 52 WIR 188 followed.

• 3. The striking out of the facts relied upon in support of the section 1841 claim was an eminently sensible case management decision which the learned trial judge was entitled to make. Thus the Court of Appeal would not disturb that decision.

• 4. While all the parties might be proper parties to a properly pleaded...