Caldero Trading Limited v Beppler & Jacobson Limited

The petition concerned a s.994 Companies Act 2006 matter settled by an agreed order which required determination of whether sums invested in BJUK and its subsidiary BJM were loans or capital for the purposes of valuing the petitioner's shares. The court conducted a fact-finding exercise on the Investment Issue, focussing on credibility of the two principal witnesses and on a small number of contested documents (notably the "Bianca" spreadsheet and certain business plans and accounting tables).

The judge found that the respondent witness, Mr Lazurenko, had given deliberately false evidence on several important matters (including a previous asserted position that all funds were loans and assertions as to acting for a principal called Mr Scheklanov) and that key documents relied on by him did not establish the limited-capital/loan arrangement which he advanced. The Bianca spreadsheet was treated as, at best, a unilateral draft/proposal. On the balance of the credibility, documentary and commercial considerations the court concluded that the parties had agreed that all sums invested for the purchase and renovation of the Avala and Bianca hotels were to be treated as capital between them and not repayable in priority to the petitioner’s interest.

This first-instance trial concerned the limited question (directed under an agreed order) whether funds invested in Beppler & Jacobson Limited (BJUK) and its wholly-owned subsidiary Beppler & Jacobson Montenegro D.O.O. (BJM) by or on behalf of the majority investor were loans repayable in priority or were capital for the purposes of valuing shares under a s.994 Companies Act 2006 petition.

Background and procedural posture

• The petition by Caldero (a shareholder holding just over 25%) was presented under s.994 Companies Act 2006 and was settled by an agreed order of Newey J, which provided for a buy-out by the majority shareholder with valuation to be fixed by an expert after determination of the Investment Issue.
• The court held a trial limited to the Investment Issue; there was no written shareholders’ agreement and the matter turned on oral testimony and limited documentary material.

Factual dispute and issues

• The central factual issue was whether monies invested to buy and renovate two hotels (Avala and Bianca) were provided as capital (thus forming part of the joint venture capital) or as loans repayable in priority to the financier.
• The court framed the legal task as a credibility and documentary assessment to ascertain the true terms agreed between the two principal protagonists (Mr Becirovic for Caldero and Mr Lazurenko for the respondents).

Court’s reasoning

• The judge applied established guidance on assessing credibility in cases of conflict (objective documents, motives and overall probabilities) but observed there was very little documentary support and heavy reliance had to be placed on oral evidence.
• Mr Lazurenko was found to have given deliberately false evidence on material points: his original pleaded case that all funds were loans, his late change of position to a partly capital/partly loan position, and his repeated assertions that he acted for a principal (Mr Scheklanov) were disbelieved. The court also treated certain purported agency agreements and a shareholders’ resolution as having been produced dishonestly and (as recorded in the settlement order) void as against BJUK and BJM.
• The Bianca spreadsheet, heavily relied upon by the respondents, was treated as a unilateral draft/proposal created by Mr Lazurenko and not proved to have been agreed or communicated to Mr Becirovic.
• Bank borrowings used in the works were capable of supporting the respondents’ case but did not outweigh the credibility findings and gaps in documentary corroboration; loans were not shown to be conclusive proof that the investors had agreed funds in excess of the renovation bids would be repayable loans rather than capital contributions.
• On balance, taking witness credibility, documentary context and commercial factors together, the judge concluded that all sums provided for purchase and renovation were intended between the parties to be capital contributions and not loans repayable in priority.

Other rulings

• An application to debar the respondents from defending the Investment Issue for abuse of process (based on alleged non-disclosure by the asserted principal) was dismissed because the absence of documents could not be conclusively resolved without trial and, after trial, the judge found the asserted principal was not in fact the financier.

This first-instance court determined the Investment Issue in favour of the petitioner. The judge found that the sums invested for the purchase and renovation of the Avala and Bianca hotels were agreed between the parties to be capital contributions and not loans repayable in priority. The rationale was that documentary evidence did not support the respondents’ late change of case, key documents were at best unilateral drafts, and the primary respondent (Mr Lazurenko) was found to have given deliberately false evidence and to have invented an agent/principal relationship; on the balance of credibility and probabilities Caldero’s case was accepted. An application to debar the respondents was dismissed. The court declined to make a final determination on a separate reimbursement/discharge of paid-up shares issue and left that matter for further consideration.