BVI Court Releases a $38 Million Judgment in Unfair Prejudice Dispute Between Kyiv-Based Shareholders
Martin Kenney & Co (BVI), led by Justin Fenwick QC (London) and instructed by ENGARDE Attorneys at Law (Kyiv) successfully represent claimants in a complex oppression remedy claim before the BVI High Court against Andrey Adamovsky and Stockman Interhold SA.
On 1 October 2014, Justice Edward Bannister QC of the BVI Commercial Court delivered a judgment to resolve a nearly five-year-old dispute between three Kyiv-resident shareholders of Oledo Petroleum, a BVI company.
The unfair prejudice case was tried before Judge Bannister for five weeks in Road Town, Tortola, in the British Virgin Islands (the “BVI”).
In early 2010, Oledo Petroleum sold its controlling stake in Vik Oil, a Ukrainian petrochemicals distribution business, to TNK-BP, the Anglo-Russian oil venture. On 18 January 2010, $71.6 million arrived into Oledo Petroleum's bank account in Riga, Latvia from the sale. One day before the funds arrived, Andrey Adamovsky, the sole director and a 50% shareholder of Oledo Petroleum, secretly terminated minority shareholder Andriy Malitskiy's authority to act as a co-signatory over the company's bank account in Riga. Over the next 48 hours, the funds from the sale of Vik Oil were transferred from the company's account to the account of Stockman Interhold SA, a BVI company owned by Mr Adamovsky.
In 2012, Mr Malitskiy and Igor Filipenko, 50% shareholders of Oledo Petroleum, sued Mr Adamovsky and Stockman in the BVI in response.
The Court dismissed all of the defences and counterclaims of the defendants, with the exception of an admitted debt owed to Mr Adamovsky of US$1,056,558.
The court concluded that Mr Adamovsky “…had no right to expropriate the property of others for his own advantage.” Mr Adamovsky was unable to justify his “unilateral and unannounced appropriation of Oledo Petroleum’s only asset to, in reality, himself,” held the Judge. The Court also found that “Mr Adamovsky simply used the money taken from Oledo [Petroleum] as working capital of Stockman to fund its business.” In the end, the court said that “Mr Adamovsky’s motive in transferring the Oledo [Petroleum] money to Stockman was selfish.”
The Court said that:
“One is left, therefore, with the unfair and deliberate destruction of the entirety of the value of the claimants’ shares in Oledo [Petroleum] in order that Mr Adamovsky could use the money for his own commercial purposes.”
The Court found that Mr Adamovsky was liable to pay to his colleague shareholders, Messrs Filipenko and Malitskiy, the sum of US $35,802,000 (less a $1,056,558 set-off right). Stockman was made jointly and severally liable with Adamovsky (but without the benefit of the set-off) to “…compensate the Claimants for the loss of value of their shares as a result of” Stockman's receipt of $35.8 million being beneficially owned by the Claimants – on the basis that “…Stockman joined with Mr Adamovsky in unfairly prejudicing the Claimants as members of Oledo [Petroleum].”
The Court also awarded approximately $1.3 million of prejudgment interest against the Defendants for the unwarranted deprivation of the Claimants’ funds for 4.7 years. The Defendants were also ordered to make a summary payment of $750,000 in costs to the Claimants by 15 October 2014. Approximately $1,000,000 of additional costs sought by the Claimants will be assessed by the court if the parties fail to agree on a figure.
Ten fact witnesses and four experts testified during the five-week trial from 16 June to 16 July 2014. The expert witnesses were Penny Cassell, forensic accountant, of KRyS Global for the Claimants; Ian Thompson of FTI (London), forensic accountant, for the Defendants; Professor of Ukrainian law Evgen Kubko for the Claimants; and Tatyana Slipachuk, expert on Ukrainian law, for the Defendants. Many of the witnesses were cross-examined from Kyiv, Vienna or Moscow by videoconference facilities at the Court.
Martin Kenney & Co, Solicitors (“MKS”) acted for the Claimants. MKS was instructed by ENGARDE Attorneys at Law (Kyiv), and led by Justin Fenwick QC of 4 New Square (London). Appleby (BVI) acted for the Defendants.
The case has now moved to its enforcement of judgment phase.
DATED 8 October 2014.
MARTIN KENNEY & CO, Solicitors
Third Floor, Flemming House
Road Town, Tortola
British Virgin Island VG1110
+1 (284) 494-2444
Attn: Martin S. Kenney, Managing Partner
– and –
ENGARDE Attorneys at Law
4-G, Vul. Andrushchenko
Kyiv, 01135, Ukraine
+38 044 498 7383
Attn: Roman Ognevyuk, Partner