Caldero Trading Ltd v Leibson Corporation Ltd & Ors

This appeal concerned an unfair prejudice petition under section 994 of the Companies Act 2006 and a discrete factual issue (the "Investment Issue") whether sums invested in BJUK and/or its Montenegrin subsidiary BJM were provided as loans or as capital. The judge at first instance (David Richards J) preferred the respondent's account that all investments were capital contributions and made detailed credibility findings, including that key appellant witness Mr Lazurenko gave evidence that was dishonest in material respects.

The Court of Appeal rejected the appellants' challenge to those findings. The court held that the judge had been entitled to assess the commercial probability of the asserted oral arrangement, to evaluate documentary material (notably the so-called "Bianca spreadsheet" and certain bank loan agreements), and to conclude that those documents did not outweigh the witness credibility findings. The appeal was therefore dismissed.

This case arose from a section 994 Companies Act 2006 petition brought by Caldero Trading Limited, a minority shareholder in Beppler & Jacobson Limited (BJUK). The petition was resolved by an order providing for winding up and a buy-out of the minority at a value to be fixed by an expert, subject to a prior determination of the Investment Issue: whether investments in BJUK and/or its Montenegrin subsidiary BJM were loans or capital.

The factual matrix involved two principal witnesses and quasi-partners, Mr Igor Lazurenko (majority side) and Mr Zoran Becirovic (minority side). There was no written agreement and limited documentary evidence. The trial judge heard 13 days of oral evidence and concluded that all relevant sums were invested as capital between the parties. Key subsidiary findings included that Mr Lazurenko's original case (that all sums were loans) had been deliberately false, that he had advanced other dishonest assertions (for example as to agency and principals), and that key documents relied on by the appellants (notably the Bianca spreadsheet and certain bank loan agreements) did not compel a different conclusion.

The appeal to the Court of Appeal attacked the judge's acceptance of Caldero's factual account on two main grounds: (i) that the judge was wrong to regard the arrangement as commercially plausible, and (ii) that the judge failed to give proper weight to documentary material. The Court of Appeal reviewed the judge's reasoning on credibility, the limited documentary record, the relevance and weight of the Bianca spreadsheet and the 2007 bank loans, and the judge's approach to commercial probabilities. The court held that (i) the judge was entitled to find the arrangement plausible in context given the parties' respective contributions and the flexibility of funding arrangements, and (ii) the judge had properly evaluated the documentary material and was entitled to the conclusions he reached. The appellate court therefore dismissed the appeal.

Nature of relief sought: a remedy under section 994 CA 2006, culminating in a buy-out and valuation of the minority's shares; the discrete relief depended on resolution of the Investment Issue. Issues framed by the court: whether investments were loans or capital; credibility of principal witnesses; weight to be given to contemporaneous documents; proper approach to commercial probability in resolving conflicting oral accounts. Reasoning: the judge's careful credibility findings, the paucity of documentary support for the appellants' account, and the limited probative value of the key documents meant his conclusion that investments were capital was open to him and could not be impugned on appeal.

Appeal dismissed. The Court of Appeal upheld the trial judge's factual findings that the investments were capital contributions. The judge had properly weighed witness credibility, commercial probabilities, and the limited documentary evidence (including the Bianca spreadsheet and bank loan papers), and was entitled to prefer Caldero's account and to reject the alternate case advanced by Mr Lazurenko.

Appeal to the Court of Appeal (Civil Division) from the judgment and order of Mr Justice David Richards in the High Court (Chancery Division, Companies Court), cited [2013] EWHC 2191 (Ch). Permission to appeal was granted (reference in the judgment to permission by Gloster LJ).