Slocom Trading Ltd & Anor v Tatik Inc & Ors

Contractual payments are characterised according to the parties’ actual intention when made, rather than by later commercial rationalisation. Damages for breach of contract are assessed so as to provide the value of the contractual benefit lost, giving neither more nor less than that benefit. An injunction delaying a transaction may justify assessment by reference to the date when the transaction would probably have occurred without the injunction. A claimant’s obligation to account for recoveries to another does not eliminate its own loss where the defendant’s conduct leaves that obligation unsatisfied. Security held by the claimant should not reduce damages where doing so would leave it in a materially worse position than contractual performance.

This was a supplementary first-instance judgment following the court’s judgment of 4 December 2012. The court determined consequential matters arising from liability findings against Tatik, Sibir and Maritime concerning the Derbent-Tatik Loan Agreement, the sale of a villa, and an equitable mortgage.

The issues included the amount owed by Tatik, the damages payable by Sibir and Maritime, the assessment date and interest, the scope of the equitable mortgage, costs, permission to appeal and a stay pending appeal.

1. Tatik’s liability. Four payments made on 1 February 2006 were payments on account of interest, not capital. The decisive issue was the parties’ actual intention when the payments were made. The contemporaneous bank advice notes described them as loan interest payments, consistently with the evidence, and there was no justification for re-characterising them by subsequent hypothesis (paras [4]-[10]).
2. Damages against Sibir and Maritime. Their liability was in damages for breach of contract and inducing breaches of contract and tort. The appropriate assessment date was 24 April 2010, being the date on which, on the balance of probabilities, the villa sale would have occurred without the Slocom injunction. The governing principle, drawn from The Golden Victory [2007] UKHL 12, [2007] 2 AC 353, was that damages must represent the value of the contractual benefit lost, no more and no less (paras [11]-[21]).
3. The claimant suffered loss notwithstanding its obligation to account for loan proceeds to Willow Tree or the Kruglov family. An investment vehicle remains capable of recovering loss to its investment. Otherwise the loss could disappear into a legal black hole and the wrongdoer would escape liability (paras [24]-[36]).
4. The damages were not reduced by the value of the equitable mortgage. If the contractual obligations had been performed, the debt would have been paid and the mortgage discharged. Substituting a reduced cash award plus an interest in foreign land would leave the claimant in a materially worse position (paras [37]-[38]).
5. Interest. Tatik remained liable for contractual default interest before and after judgment. Against Sibir and Maritime, pre-judgment interest was awarded under section 35A of the Senior Courts Act 1981 at the European Central Bank rate plus 1%. The same rate applied post-judgment under section 44A of the Administration of Justice Act 1970. Section 44A did not confer power to award compound interest (paras [40]-[44]).
6. Equitable mortgage. Clause 3.2 secured only the principal amount of the loan. The contrast with clause 3.1, which secured all amounts owing, showed a deliberate distinction. The mortgage was therefore declared for €31,548,077 (paras [45]-[50]).
7. The claimants recovered their principal costs, subject to detailed assessment, and were awarded £850,000 on account. Permission to appeal was refused. A stay was granted for 21 days and thereafter pending determination of any renewed permission application, subject to Maritime’s undertaking not to dispose of the villa (paras [56], [65], [77]-[81]).

This was a supplementary first-instance judgment dealing with consequential matters following the court’s judgment of 4 December 2012. No appellate history is stated.