Avonwick Holdings Ltd v Azitio Holdings Ltd & Ors

A court determines contractual formation objectively from the parties’ words, conduct and negotiations. Informal dealings, draft memoranda and anticipatory payments do not establish a contract where essential terms remain uncertain and the conduct is equally consistent with an expectation of future agreements.

A contractual provision prescribing the remedy for breach is ordinarily a secondary obligation. Its non-performance does not create a separate damages claim. Specific performance of a money obligation is exceptional, although shares in a private company may be specifically transferred where damages are inadequate. Delay alone does not bar that equitable relief without resulting prejudice or other circumstances making relief inequitable.

These consolidated proceedings arose from the separation of the business interests of three Ukrainian businessmen. Avonwick alleged that it sold an indirect interest in a Ukrainian steel business after a fraudulent representation that every shareholder would receive the same price per share. Mr Taruta advanced contractual, proprietary, restitutionary and tortious claims concerning alleged agreements to divide other jointly held assets. He also pursued loan claims and claims under an amended settlement agreement against Mr Mkrtchan.

The central issues included the applicable law, whether the alleged price representation and shareholders’ agreements had been proved, limitation, unjust enrichment, agency and joint tortfeasor liability, and the remedies available under the amended settlement agreement.

1. Disposition. The Avonwick claim, the claims concerning the alleged 2009 and 2010 shareholders’ agreements, the alternative claims, the claim under MOU 1, the claims against Prandicle and the loan claim were dismissed. The claim under the amended settlement agreement succeeded only to the extent that specific performance of clause 3.1.1 was ordered.

2. The alleged price representation had not been proved. The contemporaneous documents contained no reference to it, the transaction documents included non-reliance wording, and the seller’s minority interest and limited obligations differed materially from the controlling interest and extensive obligations sold to the onward buyer. Had the representation been made, it would have been fraudulent and materially relied upon. Mr Mkrtchan would also have acted with actual or apparent authority from Mr Taruta, and the common-design requirements for joint liability would have been satisfied.

3. Ukrainian law governed the alleged shareholders’ agreements. No express or implied choice of English law arose from an English-law contract made between different corporate parties. The parties, negotiations and most assets were connected with Ukraine. Under both Ukrainian and English formation principles, no binding shareholders’ agreement arose. Essential terms remained uncertain, the memoranda continued to change, no complete and unconditional acceptance was shown, and the alleged part-performance was equally explicable as performance in anticipation of later agreements.

4. The restitutionary claims failed. The payment under the Castlerose sale agreement obtained the contractual consideration promised under that agreement. The court could not disregard that bargain and attribute parts of its price to non-binding expectations concerning other assets. The alleged loans were also not proved.

5. Clause 3 of the amended settlement agreement prescribed the sole remedy for breach of the payment obligation in clause 2. It imposed secondary remedial obligations, not an independent primary obligation supporting a further damages claim. Specific performance was inappropriate for clause 3.1.2 because it required only payment of money and damages or debt afforded an adequate remedy.

6. Clause 3.1.1 required transfer of shares in a private company and was specifically enforceable. The claim was not subject to the six-year contractual limitation period, and laches was not established because the delay had caused no relevant prejudice. Specific performance of clause 3.1.1 was therefore ordered.

not stated in the judgment.