Caldero Trading Ltd v Beppler & Jacobson Ltd & Ors

Where commercial parties made an unwritten agreement about funding a joint venture, the court must determine its terms from the evidence as a whole. Credibility is tested against objective facts, documents, motives and overall probabilities. Commercial plausibility is relevant, but it cannot replace findings based on the evidence or assume that a particular division of capital is inherently improbable. A party’s dishonesty on related matters may materially undermine its account, but the court must assess all the evidence. Finance may be treated as capital between the parties even where external borrowing is repayable by the company. The court found that all sums invested in acquiring and renovating the hotels were capital and were not to be deducted before calculating the minority shareholder’s share.

Caldero Trading Ltd held just over 25% of Beppler & Jacobson Ltd, which owned a wholly owned Montenegrin subsidiary operating two hotels. The parties had agreed to end the unfairly prejudicial relationship by providing for the majority shareholder to purchase Caldero’s shares at a fair value to be fixed by an expert. The expert valuation depended on whether funding provided by or on behalf of the majority shareholder had been advanced as loans or contributed as capital. The court also considered a claim concerning payment-up of Caldero’s shares and an application to debar the respondents from defending the issue.

1. Investment Issue. The court found for Caldero. The agreement between Mr Lazurenko and Mr Becirovic was that all sums provided for purchasing and renovating the Avala and Bianca hotels were to be treated as capital as between them. Those sums were therefore not to be deducted before calculating Mr Becirovic’s share.
2. The absence of a written agreement required the court to assess the competing oral accounts by reference to objective facts, documents, motives and overall probabilities, applying the guidance of The Ocean Frost [1985] 1 Lloyds Rep 1 at 57. The court found Mr Lazurenko’s evidence materially dishonest, including his original case that all funding was loan finance and his assertion that he acted for Mr Scheklanov as principal. Mr Becirovic’s evidence was also rejected on particular matters, including the date of the increase in his shareholding and an alleged 2010 agreement.
3. The commercial improbability argument did not determine the issue. Mr Becirovic’s local knowledge, continuing responsibilities and lack of remuneration made it commercially possible that his interest would extend to the capital invested. External bank loans did not establish that the parties had agreed that the relevant funding was loan finance between themselves.
4. The court declined finally to determine whether the respondents had to reimburse Caldero for sums paid to the provisional liquidators to pay up its shares, because the basis on which payment had been demanded had not been explored and no issued claim was before the court.
5. The application for a debarring order was dismissed. Untruthful evidence was a basis for rejecting the respondents’ case, not in the circumstances a ground for debarring them from participating in the trial.