Khanty-Mansiysk Recoveries Ltd v Forsters LLP, Court of Appeal - Civil Division, February 07, 2018, [2018] EWCA Civ 89

Resolution Date:February 07, 2018
Issuing Organization:Civil Division
Actores:Khanty-Mansiysk Recoveries Ltd v Forsters LLP

Case No: A3/2016/1546

Neutral Citation Number: [2018] EWCA Civ 89





Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 7 February 2018

Before :





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Between :

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Mr Simon Davenport QC & Mr Robert Strang (instructed by Humphries Kerstetter LLP) for the Appellant

Mr Jamie Smith QC & Mr Anthony Jones (instructed by

Womble Bond Dickinson LLP) for the Respondent

Hearing date : 30 January 2018

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JudgmentLord Justice Lewison:

  1. The issue on this appeal from Sir Bernard Eder is the scope of a settlement agreement. I can take the facts from the judge's clear judgment, which can be found at [2016] EWHC 522 (Comm).

  2. Forsters is a firm of solicitors. In that capacity they were instructed on behalf of and acted for a company, Irtysh Petroleum plc (``Irtysh''), in relation to the acquisition of an oil exploration opportunity in Russia and, in particular, in a share purchase agreement (the ``SPA'') entered into on 20 May 2010.

  3. Irtysh was in fact incorporated only shortly before the execution of the SPA i.e. on 12 April 2010 for the purpose of acquiring and developing the oil exploration opportunity. Before the incorporation of Irtysh, Forsters had already been retained in January 2007 by one of Irtysh's directors and shareholders, Rupert Galliers-Pratt (RGP), to carry out work preparatory to the incorporation of Irtysh and the acquisition.

  4. The oil opportunity took the form of three oil exploration licences in the Khanty-Mansiysk region of Russia. Under the terms of a privatisation agreement, a Russian company Yugra Balt Invest LLC (``YBI'') owned 49% of three companies each holding an oil field exploration licence (the other 51% was owned by the regional government and there was a mechanism in place by which YBI could increase its ownership to 99.9%). By the SPA, Irtysh agreed to buy 100% of the shares in YBI from Interguarantee Limited (``Interguarantee'') in return for the allotment of shares in Irtysh. Interguarantee was controlled by Dr Alexander Shadrin.

  5. In the period January 2007 to the end of June 2010, Forsters incurred fees and disbursements in respect of this project for which they issued an invoice (Invoice No. 301594 dated 1 July 2010) to Irtysh in the sum of £110,557.61 plus VAT (£19,295.61) totalling £129,853.22 (the ``Invoice''). On its face, the Invoice expressly stated that it was in respect of Forsters' ``Professional Services'' and ``Disbursements'' for the period ``January 2007 to June 2010''. This sum remained unpaid for some time and eventually became the subject of the settlement agreement.

  6. In about July 2010, Irtysh/RGP wished to move from Forsters to Fladgate LLP. Forsters insisted on a personal guarantee from RGP in respect of the outstanding fees. In the event, RGP did provide a personal guarantee in the form of a letter dated 12 July 2010 expressed to be executed as a deed and signed by him. The guarantee was in short form and stated simply as follows:

    ``I hereby guarantee to pay to you on demand the invoices issued by you to Irtysh in respect of your fees and disbursements on or around today but so that my maximum liability in respect of this liability is limited to a total of £74,837.18 plus VAT charged thereon.''

  7. The figure of £74,837.18 plus VAT is significantly lower than the total sum of £110,557.61 plus VAT stated in the Invoice and was calculated by reference to the work done by Forsters on the instructions of RGP in relation to the project before Irtysh's incorporation.

  8. July 2010 marked the cessation of relations between Forsters and Irtysh/RGP. It is Forsters' case that thereafter they did not know what was going on with the project but, unsurprisingly, they continued to press for payment of their outstanding fees.

  9. RGP disputed the amount of the Invoice. He complained that much of it represented time allegedly spent by Forsters with Dr Shadrin, the director of Interguarantee who acted on behalf of Interguarantee in the SPA. On 13 April 2012, Forsters emailed RGP seeking confirmation of when Irtysh expected to execute financing facilities and when it would be paying the Invoice. RGP replied the following day copying in Dr Shadrin, saying that ``We are scheduled to complete all the documents ... on Monday. I will confirm when all done. I am copying Alexander [Dr Shadrin] on this as the vast majority of the time that you have billed relates to the many hours that he spent with your colleagues''. There then followed further exchanges (including with Dr Shadrin) and, after some further delay, on 22 June 2012, Forsters chased RGP again for payment on his guarantee, enclosing a draft Claim Form and reminding him that he had assured them that the completion of Irtysh's loan facility had been imminent. RGP replied again disputing the quantum of the Invoice, saying ``As you know, I did not see any breakdown of these statements at the time that I was requested by your firm to sign document with Forsters. Since I was not present when the majority of the 'billed' hours were recorded, I have no way of knowing whether they are correct. Alexander Shadrin does not agree with your costings''.

  10. In early July 2012, Forsters then issued proceedings against RGP (the ``Guarantee Action''). The Particulars of Claim endorsed on the Claim Form stated:

    ``[Irtysh] owes [Forsters] £129,853.22 pursuant to [the Invoice]. By a Deed of Guarantee ... [RGP] guaranteed to pay [Forsters] on demand the amount due from [Irtysh] up to a maximum liability of £74,837.18 plus VAT.

    [Forsters'] claim is for £74,837.18 plus VAT pursuant to [the Invoice]. The sum is due in respect of legal services provided to [Irtysh] from January 2007 to June 2010.''

  11. On being informed that the Guarantee Action had been issued, RGP responded...

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