Yukos Hydrocarbons Investments Ltd v Georgiades & Anor

A fiduciary claim must be proved on the pleaded case. Where the identity of the contracting party is disputed, the claimant must establish that the fiduciary contracted personally; the court does not simply look through a corporate structure because the fiduciary controls the companies involved. A general release may encompass known and unknown liabilities where clear language and the surrounding circumstances show that this was the parties’ intention. The principle that taking such a release may amount to sharp practice is exceptional and requires deliberate withholding of a known or possible claim. A clause making a release subject to satisfactory completion of contractual terms is not necessarily a condition precedent; its construction depends on the language, commercial context and relationship between the obligations. Fraudulent misrepresentation also requires reliance, and the claimant must show that the representation induced the settlement.

The claimant, a British Virgin Islands company, sued its former director and his corporate-services company for alleged breaches of fiduciary duty, secret profits, political contributions, non-disclosure and failure to account for interest on an indemnity fund. The defendants contended that the claims had been released by a 2015 Settlement Agreement.

The principal issues were whether commissions paid by a Cypriot bank were payable under an agreement with the director personally or with his company; whether companies receiving payments were merely nominees or agents; whether the alleged political contribution and interest shortfall were established; and whether the Settlement Agreement released any liability. The court also considered sharp practice, an alleged condition precedent and fraudulent misrepresentation.

1. Introducer Agreement. The claimant failed to prove that the agreement with Piraeus was made with the director personally. The evidence of corporate-services employees, the banking compliance arrangements and the surrounding corporate structure supported the conclusion that GE Law was the contracting party. Payments to related companies for tax reasons did not establish that they were nominees or agents of the director.
2. The alternative agency case was not pleaded and could not properly be advanced in closing submissions. In any event, the evidence did not establish that the recipient companies were mere nominees or agents. The corporate structure therefore did not make the director personally accountable for payments due to GE Law.
3. Political contribution and interest. The alleged political contribution was not approved by the claimant’s board and was not shown to have been repaid through future reductions in fees. The claimant nevertheless failed on the claim against the defendants because the Settlement Agreement released liabilities relating to the 2007 professional services agreement. The claimant also failed to prove that the defendants had not fully accounted for interest on the indemnity fund. Unpleaded allegations concerning particular transactions or personal use of the fund were disregarded.
4. Settlement Agreement. Clause 9 was a general release expressly covering liabilities, present or future, known and unknown, relating to the 2007 agreement. Its language and commercial context showed that the parties intended to allocate the risk of unknown claims. The principle of sharp practice did not apply: there was no established deliberate withholding of a known or possible claim. The phrase making the release subject to satisfactory completion of all terms was not, on its proper construction, a condition precedent. It would be commercially unlikely for minor non-compliance to defeat the release.
5. Fraudulent misrepresentation. Assuming that the warranty was false and dishonest, the claimant failed to prove reliance. The evidence showed reliance on the independent investigation and the commercial objective of ending the relationship, rather than on the warranty. The claims were therefore released and the claimant obtained no relief.

Not stated in the judgment.