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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Caldero Trading Ltd v Beppler & Jacobson Ltd & Ors [2013] EWHC 2191 (Ch) (23 July 2013) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2013/2191.html Cite as: [2013] EWHC 2191 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		7 Rolls Building Fetter Lane London EC4A 1 NL
		23/07/2013

Mr Justice David Richards:

Introduction

1. This judgment relates to an issue tried pursuant to an agreed order disposing of a petition brought under section 994 of the Companies Act 2006. The issue is whether sums invested in the company which is the subject of the petition, Beppler & Jacobson Limited (BJUK) or in its wholly-owned subsidiary, Beppler & Jacobson Montenegro D.O.O. (BJM) by or on behalf of its majority shareholder were invested by way of loan or capital.
2. The petition was presented by a company called Caldero Trading Limited, incorporated in Cyprus, which holds just over 25% of the shares in BJUK. The balance is held as to just under 70% by the third respondent, Leibson Corporation (Leibson) and as to 5% by the fourth respondent, Belinda Capital Limited (Belinda). Leibson in incorporated in the British Virgin Islands and Belinda in Nevis.
3. The petition was presented on 3 May 2012 and directions were given for an expedited trial commencing on 13 July 2012. The petition was settled on terms set out in the agreed order made by Newey J on 16 July 2012. The order recited that the court was satisfied that it was just and equitable to wind-up BJUK and that its affairs had been conducted in a manner unfairly prejudicial to the interests of the petitioner. The order provided for Leibson to purchase the petitioner's shares at a price to be fixed by an expert as the fair value of the shares in accordance with the terms of schedule 1 to the order.
4. The expert valuation requires the prior determination of the issue whether sums were invested by way of loan or capital (the Investment Issue). Paragraph 2 of the order of Newey J provides that "the trial be adjourned for the determination of the Investment Issue in accordance with the directions in paragraph 3 below". Paragraph 3(1) provides that "the trial shall be limited to the determination of any issue as to whether any sum invested in the First and/or Second Respondent was invested (or was agreed to be invested) by way of loan or capital ("the Investment Issue") and the carrying into effect of the purchase of the petitioner's shares".
5. The individuals most closely involved with BJUK were Zoran Becirovic, a citizen of Montenegro, and Igor Lazurenko, a Russian citizen. In 2002, they agreed to use BJUK as a joint venture holding company for an investment or investments in Montenegro. In April 2002, the shares of BJUK were taken in agreed proportions, such that Mr Becirovic held 70,000 shares representing 20% of the share capital, and Leibson held 280,000 shares, representing 80% of the share capital. It is in dispute whether Mr Lazurenko was acting on his own account or as an agent. The shares held by Leibson were and are ultimately owned and controlled either by Mr Lazurenko or by his principal. In October 2004, Mr Becirovic's registered shareholding was increased by the transfer from Leibson of shares representing 5% plus one share. In April 2008, Mr Becirovic transferred all his shares to the petitioner (Caldero), which is wholly owned by Mr Becirovic. In October 2010, Leibson transferred shares representing 5% of the issued shares of BJUK to Belinda, a company owned by Mr Lazurenko.
6. The investments made by BJUK were the purchase and renovation of two hotels in Montenegro, the Avala hotel at Budva on the Adriatic coast and the Bianca hotel (then called the Bjelasica hotel) in the mountains at Kolasin. The Avala was purchased for €3.2 million and subsequently renovated at a total cost of some €36 million. The Bianca was purchased for €1.56 million and a total of some €6.95 million was spent on its renovation.
7. The issue to be determined is the extent to which the finance provided for the purchase and renovation of these hotels was made available by way of loan or capital. The answer will obviously have significant impact on the fair value of the shares held by the petitioner. I have been told that the difference is at least €10 million.
8. Mr Becirovic's consistent position has been that it was agreed that all finance for the purchase and reconstruction of the hotels would be provided as capital. Even if any part of the finance was provided as a loan, as a matter of accounting between the parties, it would be treated as capital introduced by Mr Lazurenko.
9. Mr Lazurenko's case has undergone a significant change. Both before and after the presentation of the petition, it was his case that all finance provided by Mr Lazurenko or his principal would be repaid before Mr Becirovic received any return. In other words all funds provided were to be treated as loans repayable before any profit was split in the agreed proportions between the parties. This was clearly stated in a witness statement made by Mr Lazurenko on 15 May 2012 and in points of defence verified by him on 25 June 2012. On 11 July 2012 Mr Lazurenko put forward a different basis on which he said it had been agreed that finance should be provided. His revised case was, and remains, that it was agreed that the first €8.2 million of funding for the Avala hotel and the first €4.7 million in respect of the Bianca hotel would be treated as capital with the result that Mr Becirovic's 20% shareholding gave him an equivalent interest in the capital so provided, but that any finance in excess of that sum would be provided or treated as provided by way of loan.
10. The trial was largely taken up with the oral evidence of Mr Becirovic and Mr Lazurenko. Each gave emphatic evidence in support of their respective positions. Mr Becirovic says that all sums invested for the purchase and renovation of the hotels were agreed to be provided by way of capital. Mr Lazurenko says that all sums in excess of €8.2 million for the purchase and renovation of the Avala and all sums in excess of €4.7 million for the purchase and renovation of the Bianca were provided by way of loan, while the sums of €8.2 million and €4.7 million were provided as capital. It is common ground that Mr Lazurenko was responsible for providing the finance and that Mr Becirovic carried the responsibility for arranging and executing the purchase and renovation of the hotels.
11. The only other witness was Branko Colovic, Mr Becirovic's lawyer in Montenegro. His evidence does not particularly assist in determining the central issue. He was not involved in any of the discussions with Mr Lazurenko and his recollection of what he was told by Mr Becirovic in the early years of the venture on the critical point is by no means clear. It will not be necessary to make much reference to his evidence.
12. There was no written agreement governing any of the sums invested. Determination of the issue therefore depends ultimately on the credibility and reliability of the evidence of each of the principal protagonists.
13. Mr Lazurenko was born in Russia in 1962 and served as an officer in the Russian Army from 1984 to 1993, with responsibility for communications. After leaving the army, he joined a Russian company called Alfa Eco Company, which exported and traded in crude oil and oil products. His boss there and subsequently was German Khan. Alfa Eco later became part of the Alfa Access Renova Group, which in about 1997 purchased TNK, a major producer of crude oil in Russia. Mr Lazurenko moved with Mr Khan to TNK. In September 2003, BP plc merged its Russian oil and gas interests with TNK to form the TNK-BP group. Mr Lazurenko became the Director of its Logistics Department. Mr Lazurenko states in his witness statement that he was "very highly paid at TNK-BP". Mr Khan, as one of the principal individuals behind the Alfa group and the TNK-BP group has a reputation as a very wealthy and powerful businessman and, if press reports are to be believed, is now worth many billions of dollars.
14. In late April 2012 Mr Lazurenko resigned from TNK-BP. Serious allegations were made against Mr Lazurenko by TNK-BP and proceedings were commenced against him and others in the Chancery Division in August 2012. Permission to serve the claim on Mr Lazurenko and others out of the jurisdiction was set aside in November 2012 on the grounds that Russia was the appropriate forum for the proceedings. So far as I understand, no proceedings have been brought against Mr Lazurenko in Russia. Caldero's costs of the petition are funded by TNK-BP.
15. Mr Becirovic comes from Montenegro and started in business in the late 1980s. He was initially involved in trading in various goods and commodities, such as wood, cars and chemicals, and for three years from 1992 he lived in Cyprus where he had a business. Since the mid-1990s, he has had various business projects in Russia and has spent much of his time there. In 1996 he started his own construction business in Russia which is still trading. The majority of his business interests are now in Montenegro.
16. Both Mr Lazurenko and Mr Becirovic have a good understanding of spoken and written English but their spoken English is limited and, sensibly, both gave evidence through interpreters. Both gave their evidence in Russian, although Mr Becirovic's first language is Montenegrin. They are both intelligent but Mr Lazurenko struck me as being, by some margin, the more sophisticated business operator, reflecting no doubt his involvement at a senior level in a very large international concern. The highly-controlled manner in which he gave his evidence, frequently taking issue with the precise wording of questions or the interpretation of his answers, was noteworthy.

Chronological outline

17. I will now set out a chronological outline of the relevant facts, doing no more at this stage than indicate the principal matters in dispute.
18. While Mr Becirovic of course knew Montenegro well, Mr Lazurenko first visited it in about 2000, following the end of the conflicts in the former Yugoslavia. At that time and until 2006, Montenegro was part of Serbia. Mr Lazurenko formed the view that there could well be investment opportunities, particularly in land, and he explored this possibility in visits to Montenegro. He did, however, for legal and other reasons, find this a very frustrating process.
19. In late 2001, Mr Lazurenko was introduced to Mr Becirovic in Moscow by a mutual business contact. In his witness statement, Mr Lazurenko describes his understanding and perception of Mr Becirovic at this time:

"In about late 2001, I was introduced to Zoran Becirovic. The introduction was made in Moscow by Ratco Citakovic, who was a businessman who ran tours to Montenegro from Russia. He told me that Mr Becirovic was extremely well connected in Montenegro and would be a useful person to know for a potential investor in the country. It seemed to me from my visits to Montenegro that, due to its undeveloped nature, anyone wishing to acquire land in Montenegro would be assisted by having someone who had strong connections at a local and state level. I got to learn that Mr Becirovic was well known and well connected in Montenegro, which is a small country with a small circle of power. In particular, he is very close to Milo Dukanovic, the current Prime Minister of Montenegro who has been the Prime Minister or President of Montenegro for a long time. However, Montenegro was also a very poor country and I did not get the impression that Mr Becirovic had much by way of wealth."

20. A number of further meetings and discussions followed. It is agreed that they discussed the possibility of co-operating in making investments in Montenegro and it is also agreed that Mr Lazurenko said that he represented a serious investor who would provide the funds for investments. Mr Becirovic says, but Mr Lazurenko denies, that Mr Lazurenko said that his principal was Mr Khan.
21. In early 2002, Mr Lazurenko and Mr Becirovic agreed to make a bid for the Avala hotel which they knew was to be offered for sale as part of a privatisation process. They agreed that the bid should be made by an English-incorporated company in which the shares would be held by them or on their behalf or, on Mr Lazurenko's case, on behalf of his principal. BJUK was used for this purpose.
22. The tender process for the sale of the Avala hotel commenced on 22 April 2002, with a closing date of 21 June 2002. Mr Becirovic had meetings with the prime minister and the deputy prime minister of Montenegro to discuss the situation. He had detailed discussions with a Mr Armenko, a director of the state-owned company which owned the Avala hotel. From Mr Armenko, he learnt that if an offer was made to purchase the hotel at €3-3.5 million, together with a commitment to invest €9 million in its reconstruction and refurbishment, this would be well received. Mr Becirovic reported this to Mr Lazurenko and they agreed to make a tender bid to purchase the hotel for €3.2 million with a commitment to spend €9 million on its renovation. A bid on these terms was filed on 19 June 2002.
23. It is common ground that by the time of the bid for the Avala hotel the parties had agreed the basis on which finance would be provided for its purchase and renovation. There is very little further common ground on this central issue. Mr Becirovic and Mr Lazurenko differ markedly as to the time at which and the circumstances in which their agreement was made and, of course, they differ on the terms of the agreement.
24. The bid was awarded to a higher bidder, which then failed to sign the contract and provide the required deposit. Mr Becirovic suspects that it was not a bona fide bidder. By a letter dated 20 August 2002, BJUK was informed that the winning bidder had been excluded and it was invited to enter into negotiations to increase its bid rather than to complete its bid on the terms which it had offered. This was contrary to Mr Becirovic's understanding of the relevant law. He understood that BJUK, as the next highest bidder, was legally entitled to complete the purchase on the basis of the bid which it had submitted. On 20 September 2002, the Privatisation Council announced that there had been no successful bid and that therefore the tender had failed. Mr Becirovic and Mr Lazurenko decided to challenge this decision and on 18 October 2002 BJUK filed a complaint in the Supreme Court of Montenegro to annul the decision of the Privatisation Council, thereby enabling BJUK to purchase the Avala on its original bid terms. On 3 April 2003, the court ruled in BJUK's favour.
25. Negotiations proceeded with the Tender Commission over the following eight months. The Tender Commission made this a difficult process, raising unexpected requirements at short notice on a number of occasions and delaying the finalisation of the relevant arrangements. One condition raised, with which BJUK complied, was to provide a performance bond in a sum of €9.032 million in respect of the renovation works. One of the documents required by the Tender Commission was a business plan, setting out a detailed breakdown of the figures for reconstruction. This is a document on which Mr Lazurenko places some weight and I shall return to it. The contract for the purchase and reconstruction of the Avala was finally signed on 16 January 2004. Mr Becirovic was responsible for the process leading to the contract and for dealings with the Tender Commission.
26. In view of the problems and delays of the bid for the Avala, Mr Becirovic and Lazurenko looked for other investment opportunities. Mr Becirovic suggested that they should bid for the Bianca hotel, which he knew was going to be offered for sale by way of a tender process managed by the court as a result of the insolvency of the owner. They agreed to submit a bid with €1.56 million as the purchase price and a commitment to spend €3 million on renovation of the hotel. Again a business plan was prepared as part of the tender. The bid was successful and the Bianca was purchased by BJUK in October 2003.
27. BJM was incorporated on 14 October 2003 as a wholly owned subsidiary of BJUK. Its intended function was initially to operate the hotels while the legal title to the hotels remained with BJUK. It was subsequently agreed to transfer title to the hotels to BJM which took place in December 2005, while ownership of the land plots on which the hotels were built remained with BJUK.
28. On 4 October 2004, shares representing 5% of the issued capital of BJUK plus one share were transferred to Mr Becirovic, thereby giving him just over 25% of the share capital. The circumstances and reasons for this transfer are contested by the parties. Mr Becirovic says that agreement for the transfer was reached with Mr Lazurenko in about October 2002 and that Mr Lazurenko handed him a certificate for the additional shares in Moscow at that time. Mr Lazurenko says that the discussions which led to the transfer of shares to Mr Becirovic took place in April 2004.
29. The renovation works on the Bianca were carried out between September 2004 and July 2005. The total cost was eventually a little over €6.95 million, substantially more than the amount provided in the bid. Various spreadsheets showing projected and actual expenditure were prepared. Mr Lazurenko relies heavily on an Excel spreadsheet prepared by him in August and September 2004 as demonstrating that any costs in excess of those provided in the bid were to be provided by way of loan, not capital. This is a central document in the case. There is no direct evidence that it was sent to Mr Becirovic who denies ever having seen it. He submits that it does not provide substantial support for Mr Lazurenko's case. Until the trial, Mr Becirovic alleged that this document had been forged by Mr Lazurenko and there were several rounds of evidence from computer experts going to this issue. Ultimately on day 11 of the trial, Mr Becirovic abandoned his claim that the document had been forged.
30. The renovation and reconstruction of the Avala hotel took place between April 2006 and July 2011. It remained open throughout this period. Mr Lazurenko describes the layout of the hotel as follows in his witness statement:

"It is a very large hotel that has a very prominent position in Budva, right next to the beach. It has four large buildings in a "T" shape and a number of villas, which are perhaps better described as "townhouses". The main building, which includes the reception and communal areas as well as guest accommodation, is referred to as N1; there are then two buildings of guest accommodation referred to as N2 and N3; the Old Avala was, at the time of the purchase, a two-storey building that had been damaged in an earthquake but was still in use. The villas, as it turned out, were also in a poor condition."

31. The reconstruction was carried out in two main phases. The villas and N1 were reconstructed in 2006-07, opening in July 2007, at total cost of a little over €18.37 million. N2 and N3 were reconstructed in 2007-08, opening in July 2008, at a cost of just under €9.05 million. The old Avala was demolished and reconstructed between January 2008 and July 2011, at a total cost of a little over €8.5 million.
32. It is largely common ground that the extent of the reconstruction works and the costs involved turned out to be substantially greater than had originally been envisaged by Mr Becirovic and Mr Lazurenko. Part of the finance required for the first major phase of reconstruction was raised by two 5-year loans of €3 million each taken by BJM in April 2007 from Prva Bank at an interest rate of 6.5% pa. These loans were reduced to just over €1 million in July 2007, with the balance of €5 million replaced by a 5-year loan from Hypo Bank. Mr Lazurenko relies on these loans in support of his case, while Mr Becirovic says that under their agreement the loans were to be treated as capital such that as between the parties' responsibility to repay the loans rested on Mr Lazurenko's side. Mr Becirovic points to the fact that the balance of the funding required for this phase of the reconstruction was provided by Mr Lazurenko's side, but Mr Lazurenko said that this was because BJM could not afford to borrow any further sums. These bank loans were in 2008 replaced by finance provided by Mr Lazurenko's side. Mr Becirovic says that this supports his position while Mr Lazurenko's explanation is that BJM was unable to make the required tranches of capital repayment starting in mid-2008 from its operating profits, and the international banking crisis prevented BJM from being able to refinance them by further bank loans.
33. There was a deterioration in the relationship between Mr Becirovic and Mr Lazurenko in 2009-2010, for reasons which are largely irrelevant to the issue to be determined. Mr Becirovic and Mr Lazurenko met in Moscow in October 2010 and there is an important conflict of evidence as to what was then said. It is Mr Becirovic's case that Mr Lazurenko said words to the effect that there should be a written shareholders' agreement which would record that the finance provided by Mr Lazurenko's side for the purchase and reconstruction of the hotels was provided by way of capital and did not stand to be returned ahead of Mr Becirovic's interest. Mr Lazurenko denies that any such discussion took place. He denies that there was any discussion of a shareholders' agreement or that he agreed that the investment from his side should be treated as capital and recorded as such in an agreement. Mr Becirovic's evidence is that he instructed his lawyer to prepare a draft shareholders' agreement but that in the light of the discussion with Mr Lazurenko on 5 October 2010 he did not regard this as urgent or contentious. The earliest draft shareholders' agreements in evidence date from August 2011. It is common ground that Mr Becirovic did not provide a draft shareholders' agreement to Mr Lazurenko until 8 March 2012. This was in the form drafted in August 2011 and, apart from confusion between BJUK and BJM, recorded the terms as regards the provision of finance for which Mr Becirovic contends. It is common ground that Mr Lazurenko did not expressly agree to or sign the agreement.

General approach of the court

34. In the absence of any record of the terms agreed between Mr Becirovic and Mr Lazurenko, the court is faced with the difficult task of deciding which of them is telling the truth. I was reminded by counsel for both parties on guidance given by judges on the approach to be adopted in such cases. Perhaps the best known is that of Robert Goff LJ given in The Ocean Frost [1985] 1 Lloyds Rep 1 at 57:

"Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, references to the witness' motives and to the overall probabilities can be of very great assistance to a Judge in ascertaining the truth."

35. In this case, quite apart from the absence of any record of the agreement reached between the parties, there is precious little documentary evidence which bears at all on the issue. As will appear, there are really only a handful of documents on which each side has sought to place reliance. The accounts of BJUK do not assist. The only accounts prepared until May 2009 were for a dormant company. Accounts were prepared in May and July 2009 for each of the years ended 30 November 2003-2007. Those accounts, and the accounts for later years, are inconsistent with the cases of both parties.
36. The general absence of documents has perhaps led to exaggerated reliance being placed on the few documents thought to be in point. This is therefore a case, more than most cases of a commercial type, which turns on the credibility of the two principal witnesses. Their lack of credibility in other important respects and the overall commercial probabilities may be factors of great importance.

Credibility issues

37. I will deal first with issues of credibility on important, related matters. These concern Mr Lazurenko. There are three areas to be considered: first, an alleged resolution of the shareholders of BJUK and alleged agency agreements; secondly, the change in Mr Lazurenko's case on the basis of the agreement; and thirdly, his case that he was at all times acting for a principal.

Alleged resolution and agency agreements

38. I deal first with the alleged resolution and agency agreements. On 31 May 2002, at Mr Becirovic's request a resolution of the shareholders of BJUK was passed that "increasing of the share capital cannot be done without written approval of the existing shareholders". This resolution was registered at Companies House on 13 June 2002. On 27 November 2010, there was filed at Companies House a purported resolution of shareholders, signed by Mr Lazurenko on behalf of Leibson, bearing the date 1 June 2002. This purported resolution stated that the resolution dated 31 May 2002 was cancelled. It was alleged in the petition and the particulars of claim that this later resolution came into existence only in or around November 2010 and that Mr Lazurenko created it as a preliminary step to prepare for the exclusion of Mr Becirovic.
39. In March 2011 the accounts of BJUK for the year ended 30 November 2009 were approved by the director of BJUK. Whereas the accounts for previous years had shown BJM as a subsidiary of BJUK with a value of some £1.7 million, the accounts for 2008/09 showed a nil balance in the balance sheet and did not reflect BJUK's ownership of BJM. A note to the account read that BJUK "kept the investment as agent for the principal based on the agency agreement dd 03.03.2003 with Lawson Trading Ltd. The investments were transferred to the Principal". If the investments had indeed been held by BJUK as agent based on an agreement made in March 2003, they should never have been shown as investments in BJUK's accounts. Caldero and Mr Becirovic denied knowledge of any such agency agreement or of any entity called Lawson Trading Limited (Lawson). They first learned of them when the director of BJUK sent the accounts for 2009/10 and 2010/11 under cover of a letter dated 8 February 2012.
40. Pursuant to an order made on 3 May 2012, BJUK and Leibson provided copies of the alleged agency agreements. The first bears the date 4 March 2002 and is expressed to be made between Lawson, described as the Principal, and BJUK, described as the Agent. It recites that:

"The Principal wishes to appoint the Agent as its exclusive agent to conduct the Principal's Business as aforesaid on its part, in the name of the Agent, acting as nominee for the Principal."

Clause 5.4 of the purported agreement provides:

"It is expressly agreed by both parties that all monies, assets, shares, lands, buildings held by the Agent other than monies to the extent of the commission and expenses referred to in clause 8 below, shall be held by the agent as nominee or bare trustee for the principal."

Clause 5.2 provided that BJUK would not disclose its status as nominee or trustee for Lawson to any third party except as expressly authorised by Lawson. A purported attachment dated 22 April 2002 provided that BJUK entered into the tender procedure for the Avala Hotel as agent for Lawson and prepared and submitted its offer to purchase the Avala Hotel also as agent for Lawson. This agreement was stated to have a duration of one year and was purportedly replaced by a further Agency Agreement bearing the date 3 March 2003. This agreement was stated to be for a period of 10 years and was to similar effect as the earlier agency agreement. Four purported attachments to this second Agency Agreement were disclosed, dealing with the submission of a tender and offer of the Bianca hotel (dated 12 May 2003), the acquisition by BJUK of the Bianca and Avala hotels (dated 24 July 2003) and increases in the capital of BJUK (dated 24 January and 26 December 2005).

41. It was alleged in the amended points of claim that these agency agreements, and the accounts of BJUK purporting to reflect them, were "produced by and upon the instructions of Mr Lazurenko and the Beneficial Owner with the dishonest intention and purpose of defrauding Mr Becirovic and Caldero of their respective interests in the joint venture".
42. Separate points of defence were filed on behalf of Leibson, Belinda and Marcel Telser, the director of BJUK, on 26 May 2012. In its points of defence, Belinda pleaded that Mr Lazurenko was one of its beneficial owners and as regards the purported shareholders resolution denied that Mr Lazurenko created it as a preliminary step to the exclusion of Mr Becirovic and denied that it came into existence only in or around November 2010. The word "purported" was denied and therefore essentially it was pleaded that the resolution was genuine and had been passed on the date stated.
43. As regards the alleged agency agreements, Belinda pleaded in its defence that they were genuine and had been made on the dates they bear. At paragraph 74, it pleaded:

"Since 4/3/02 BJUK held all its monies, assets, shares, lands and buildings as nominee or bare trustee to Lawson and since 26/12/05 BJM held the hotels as agents of Lawson by virtue of the Agency Agreements."

In paragraph 87, it pleaded that the purported agency agreements and the accounts for the year ended 30 November 2009 were produced by and upon the instructions of Mr Lazurenko. The allegations of fraud and dishonesty in relation to the creation of the agency agreements were denied.

44. Amended points of defence were served on behalf of Leibson, Belinda, Mr Lazurenko, Lawson and Mr Scheklanov on 25 June 2012. These amended points of defence were expressly served in substitution for and superseded the existing points of defence served on behalf of Leibson and Belinda. The position taken by these respondents in the amended points of defence represents a significant shift from that previously adopted. They accepted "that there should be a parting of the ways in relation to BJUK, and that Leibson as the majority shareholder should therefore buy out Caldero's shareholding at fair value with no discount for minority shareholding" and that for the purpose of valuing the shares held by Caldero, the court should proceed on the assumption that the value of BJM's business should be reflected in the value of the shares. They pleaded and relied on open offers made to that effect, including on 16 May 2012 and 13 June 2012, which had been refused by Caldero. It was stated "the real issue between the parties, as reflected in these points of Defence, is whether the sums invested by the Respondents in BJUK and BJM were agreed to be invested by way of loan or capital".
45. Paragraph 4(4) of the amended points of defence pleaded as follows:

"In those circumstances the majority of the allegations set out in the points of the Claim are simply irrelevant. In relation to those allegations (set out below) the Respondents, solely for the purpose of these proceedings, do not take issue with the points of Claim."

46. The allegations concerning the purported resolution dated 1 June 2002 and the purported Agency Agreements are among those which are said to be irrelevant and which are therefore allegations with which those respondents "solely for the purpose of these proceedings, do not take issue". On the basis of the pleadings as they then stood, the order made by Newey J on 16 July 2012 recited that the court was satisfied that it was just and equitable to wind-up BJUK and that its affairs had been conducted in a manner unfairly prejudicial to the interests of Caldero and contained a declaration that "the purported Agency Agreements (as defined in the Amended Points of Claim) are null, void and of no effect as against" BJUK and BJM.
47. In those circumstances, the court must proceed on the basis that the allegations made in respect of the purported resolution dated 1 June 2002 and the purported agency agreements are well founded. The position therefore is that Mr Lazurenko must be taken to be a man who will prepare documents with dishonest intent and will present a deliberately false case to the court in points of defence and witness statements.

The respondents' change of case

48. The second matter is that on the central issue for determination before me, there has been a marked change of position by Mr Lazurenko. His case, as originally stated in these proceedings, was that all funds provided to BJUK were provided as loans, not as capital and would require repayment before Mr Becirovic received any share of profits. In his first witness statement on 15 May 2012, Mr Lazurenko clearly set out his position:

"11. ….. On the sale, any profit generated after repayment of the initial investment would be shared between the three involved parties. The investment took the form of three separate payments. There was the initial payment for the purchase. There was a payment for refurbishment and finally a payment for operating costs. The initial payment was loaned interest free. The payment for refurbishment was to be repaid with interest of 6.5% and the operating costs were to be repaid with interest of 15%. From the net profit, Mr Becirovic was to receive 20%, I was to receive 15% and the investor was to receive 65%. However, subsequently, the percentages were changed. Mr Becirovic requested a further 5% to reflect his additional responsibilities for managing the refurbishment of the hotels…

12. In paragraph 12 and 109 of his affidavit Mr Becirovic claims that he agreed with me that he would receive a 20% (later increased to 25%) interest in the business which would be "in capital and profit and that this was not subject to the capital investment" being repaid first and that the investment made in the business "was non-refundable". These are incredible claims and are denied by me. I would never have agreed to such a ludicrous business proposal. It makes no economic sense and is a lie."

Paragraph 9(6) of the amended points of defence which Mr Lazurenko verified with the statement of truth dated 25 June 2012 stated:

"Mr Lazurenko and Mr Becirovic agreed that in return for his participation, Mr Becirovic was to receive 20% of the net profits earned from the project and the investor was to receive 80% after repayment to the investor or any other lender, of any monies invested by him (plus interest)."

49. The change in Mr Lazurenko's case came with the service on 11 July 2012 of draft re-amended points of defence, two days before the trial fixed to start before Newey J. Paragraph 9(6) was proposed to be amended to read as follows:

"Mr Lazurenko and Mr Becirovic agreed that in return for his participation, Mr Becirovic was to receive 20% of the net profits earned from the project, ….. Over the course of a number of discussions, it was agreed that the net profits would be calculated as follows:

i. The initial sums invested in order to purchase and renovate the hotels would be treated as capital, with the investor having a priority right to recoup that capital from any net receipts. Those sums were EUR 8.2m in respect of the Avala Hotel and EUR 4.71m in respect of the Bianca Hotel.

ii. Any further sums invested would be borrowed either from the investor or from outside parties, including banks. Sums borrowed from the investor would be repayable in priority to any other payment to the parties and would carry interest (a) at 6.5% in respect of loans for the purpose of refurbishment and renovation and (b) 15% in respect of loans to meet any other expenses.

(6A) In later discussions between Mr Lazurenko and Mr Becirovic it was confirmed that all sums invested above the initial capital contribution would be treaded as loans repayable with interest as agreed."

50. Mr Lazurenko's explanation in his evidence for this change in his case is that at the earlier stages of the proceedings he was not concentrating on the basis of the investment. Only when this emerged as a central issue did he remember the precise terms on which investment had been made. I am wholly unpersuaded by this explanation, which I find incredible. The terms in which he denied any arrangement for Mr Becirovic to share in part of the capital, contained in his first witness statement, shows that he had clearly and carefully applied his mind to the point. Equally the amended points of defence verified by him on 25 June 2012 identified as the "real issue between the parties ….. whether the sums invested by the Respondents in BJUK and BJM were agreed to be invested by way of loan or capital". I find that the real reason for Mr Lazurenko's retreat from his originally stated position was that he realised that it was unsustainable. I am satisfied that his original case was deliberately false.

Mr Lazurenko as principal or agent

51. The third issue directly relevant to credibility is whether Mr Lazurenko invested in the project as principal or as agent. Mr Lazurenko's case is that he did so as agent. His evidence is that he told Mr Becirovic at an early stage that he was acting as an agent but that he did not disclose the identity of his principal. Mr Becirovic agrees that Mr Lazurenko told him that he was acting as an agent but says that he was told that the principal was Mr Khan. Mr Becirovic says that this struck him as entirely plausible, as Mr Khan has for many years been Mr Lazurenko's boss and was known to be rich.
52. In these proceedings, Mr Lazurenko has maintained that his principal is and was at all times a Russian citizen called Sergey Scheklanov. It is common ground that Mr Lazurenko had never mentioned Mr Scheklanov to Mr Becirovic, who only became aware of his existence in April 2012. On 11 April 2012, Mr Becirovic had a meeting in Moscow with Mr Khan, part of which was attended by Mr Lazurenko. Shortly after the meeting but on the same day Mr Becirovic received a call on his mobile phone from a caller introducing himself as Sergey Scheklanov. He said that he was Mr Lazurenko's principal and suggested that they should meet. Mr Becirovic said that he would wish Mr Khan to attend any meeting, but the caller said that while he would be glad to see Mr Khan he was leaving Moscow that day and had very little spare time. Mr Becirovic and Mr Scheklanov did not meet.
53. On 14 May 2012, after service of the petition on Mr Lazurenko and others, a firm of solicitors sent to Caldero's solicitors an unprompted letter stating:

"We are instructed by Mr Sergey Scheklanov. Mr Scheklanov acknowledges that he was the investor whom Mr Lazurenko represented in discussions with Mr Becirovic. However, Mr Becirovic is in fundamental breach of contract, agreement or understanding with Mr Scheklanov. In the circumstances, Mr Scheklanov hereby terminates any such contract, agreement or understanding for Mr Becirovic's breach."

54. On 15 May 2012, solicitors then acting for Leibson served a witness statement of Mr Scheklanov. Mr Scheklanov stated that he was the beneficial owner of Leibson and Lawson and that he provided funding for the purchase and refurbishment of the Avala and Bianca hotels. He stated that in the spring of 2002, Mr Lazurenko had informed him of what he described as "the potential Montenegrin project" and asked if he was interested in investing, giving him some account of the Avala hotel that was due to be sold. He said that he was interested but required more information and also stated that he preferred to keep his involvement confidential. He would not have the time to deal with the project on a daily basis and this would have to be dealt with by Mr Lazurenko. Mr Lazurenko subsequently informed him of the terms which had been agreed with Mr Becirovic. He referred to the basis alleged by Mr Becirovic for the investment as giving him an entitlement of 20% (later 25%) on the basis that the investment made by Mr Lazurenko would be capital and non-refundable. He commented that these "are incredible claims and are denied by me and Mr Lazurenko. I would never have agreed to such a ludicrous proposal. It makes no economic sense and is a lie". He goes on to make clear that Mr Lazurenko was agreeing with Mr Becirovic and investing on behalf of Mr Scheklanov.
55. In his first witness statement, also dated 15 May 2012, Mr Lazurenko confirmed the truth of Mr Scheklanov's witness statement and stated that he was acting at all times on behalf of Mr Scheklanov.
56. Paragraph 9(5) of the amended points of defence dated 25 June 2012 stated that the investor was Mr Scheklanov and that Mr Lazurenko was acting on his behalf. Mr Lazurenko's witness statement for trial made no mention of Mr Scheklanov, referring only to "a silent investor".
57. In his skeleton argument for the pre-trial review, counsel for the respondents stated:

"The respondents will not invite the Court to find at trial that there was in fact an investor. It is obvious that Caldero can ask the Court to draw an inference from this and from the absence of any disclosure in relation to an investor."

Peter Smith J, hearing the pre-trial review, was not satisfied with this stance. He made an order for specific disclosure by Mr Lazurenko and Mr Scheklanov of all documents comprising or evidencing communications between Mr Lazurenko and the investors. He further ordered Mr Lazurenko and Mr Scheklanov each to provide a witness statement identifying the investors and certifying that the order for disclosure had been complied with.

58. Mr Scheklanov provided a further witness statement dated 27 February 2013 stating as follows:

"4.1 I provided the funds that Mr Lazurenko arranged to be invested in the First and Second Respondents for the purposes of purchasing, reconstructing, refurbishing and operating the Hotels Avala and Bianca. I am the investor to whom Mr Lazurenko refers in his witness statement dated 15 February 2013, a copy of which I have seen.

4.2 I have no documents in whatever form comprising or evidencing communications between Mr Lazurenko and I which are or have been in my possession, power, custody or control relating to the funds invested into the purchase, reconstruction, refurbishment and operations of the Hotels Avala and Bianca. Mr Lazurenko and I did not correspond with one another or exchange emails. We both live in Moscow and we met regularly face to face for Mr Lazurenko to take me through developments and progress since the last time we had met. Mr Lazurenko would sometimes show me documents relevant to the business, but he did not leave the documents with me."

59. In compliance with the order of Peter Smith J, Mr Lazurenko also provided a further witness statement, in which he confirmed that Mr Scheklanov provided the funds for investment in BJUK and BJM and that Mr Scheklanov was the investor to whom he referred in his witness statement for the trial dated 15 February 2013. He further confirmed that there were no investors other than Mr Scheklanov.
60. Throughout his oral evidence, Mr Lazurenko repeatedly stated that he had been acting as agent for Mr Scheklanov and he referred to many discussions with Mr Scheklanov, including important discussions as to the terms on which funding was to be provided.
61. The respondents did not call Mr Scheklanov to give evidence at the trial, notwithstanding that if he was truly the principal he must have approved the basis of the investment of funds, as indeed Mr Lazurenko stated in evidence that he had done. Not only is Mr Scheklanov himself a respondent but, if he is the investor, he has every interest and reason to give evidence on an issue which directly and significantly affects his own financial position. He is said to be the beneficial owner of Leibson which is the party obliged by Newey J's order to purchase the shares held by Caldero. Mr Kitchener submitted that Mr Scheklanov was not a relevant witness because the agreement as to the basis of investment was made in discussions between Mr Lazurenko and Mr Becirovic. I disagree. Mr Scheklanov, if he was the principal, was in a position to give evidence of his discussion with Mr Lazurenko, which would be capable of being important corroboration of the case being put forward on his behalf.
62. The absence of Mr Scheklanov as a witness creates an acute dilemma for the respondents. If he was the principal, his failure to give evidence to support Mr Lazurenko's account tells strongly against their case. Equally, his failure to give evidence can be explained on the basis that in truth he was not the principal. If so, Mr Lazurenko has again shown himself to be a thoroughly dishonest witness in his written and oral evidence.
63. Mr Becirovic's case has since the start of these proceedings been that Mr Lazurenko had no principal. I accept that case. Nothing is known about Mr Scheklanov or any means or ability on his part to invest the sums amounting to approximately €50 million which have been invested in these hotels. Not a single document has been produced to support the case that he had any part at all in the project, not even any document supporting a transfer of funds for investment in the project. No documents had been produced supporting his allegation that he is the beneficial owner of Leibson and Lawson. His failure to give evidence at the trial is totally at odds with his alleged role as Mr Lazurenko's principal. I conclude therefore that Mr Scheklanov was not Mr Lazurenko's principal and that Mr Lazurenko has been repeatedly lying in his evidence to that effect. I am also satisfied that in 2002 Mr Lazurenko told Mr Becirovic that he was acting for Mr Khan.

The Hadiflake scheme

64. This is a convenient place to mention a scheme, which has been called the Hadiflake scheme, for the payment of overseas suppliers of materials for the renovation of the Avala hotel. By inserting Hadiflake, an offshore company, between BJM and offshore suppliers, a higher price could be paid to Hadiflake than was then paid by Hadiflake to the supplier. This enabled higher expenditure figures to be certified to the state-owned vendor, thereby accelerating release of the blocked funds held as security for the performance bond. Both Mr Becirovic and Mr Lazurenko knew about the use of the scheme, as both of them have accepted. It does not of course reflect well on either of them but it does not involve any untruthful evidence to the court and it does not assist in the determination of the issue of the investment terms agreed between them.

Commercial probabilities

65. In a case such as the present, where there is a direct conflict of oral evidence and very limited documentary evidence, Mr Kitchener QC on behalf of the respondents submitted that the court should attach weight to the inherent commercial probabilities. He submitted that this commercial factor strongly supported the account given by Mr Lazurenko. It was, he submitted, inherently improbable as a matter of commercial reality that Mr Lazurenko would have agreed that Mr Becirovic should have a 20% interest, later increased to a 25% interest, not just in the net profit of the venture but in the total value of the hotels with no deduction for the cost of their purchase and renovation. This would involve the investor in effect making a gift to Mr Becirovic of 20% or 25% of all the sums invested in the purchase and renovation and it was simply unrealistic to think that any investor would agree to such a deal.
66. I do not consider that I can approach the determination of this issue on the basis that Mr Becirovic's case is commercially improbable.
67. It takes no account of the role which Mr Becirovic was to play. I have earlier quoted from Mr Lazurenko's witness statement where he sets out his understanding at the relevant time of the influence which Mr Becirovic had in Montenegro. He plainly regarded that influence as critical to his decision to invest in the acquisition and refurbishment of the Avala hotel. Moreover, Mr Lazurenko had no means of doing business in Montenegro. He needed a local partner. Mr Becirovic was to be responsible for all steps taken in Montenegro as regards the purchase of the hotels and to have overall responsibilities for their subsequent refurbishment, while not playing a day-to-day project management role. In effect, Mr Becirovic's role was as an active local partner while Mr Lazurenko was to be a more passive, financing partner.
68. It is common ground that Mr Becirovic's only return would be by virtue of the agreement he made with Mr Lazurenko. He was to receive no remuneration. It does not appear to me to be commercially implausible that he would stipulate for a return which was not restricted to net profit. It is not difficult to think of ventures where one partner provides the finance and another partner provides the contacts and undertakes all or most of the work where it is not just the profits but the partnership property and capital which is held on behalf of the partners in agreed proportions. As to the scale of reward to be provided to Mr Becirovic, there is no objective yardstick available to the court to determine what might be considered reasonable by a Russian investor agreeing to invest in Montenegro shortly after the end of hostilities in the former Yugoslavia.
69. I could nonetheless see some force in the submission of commercial improbability if Mr Lazurenko had been bound to provide an unlimited amount of capital. There was, however, no such obligation on Mr Lazurenko, at any rate perhaps beyond the sums provided for refurbishment by the bids for the two hotels. It is I think clear that the amounts ultimately invested in the two hotels considerably exceeded what either of the parties contemplated at the time of their acquisition. The extent of reconstruction and the amount spent was a matter for the two parties to agree. It was always open to Mr Lazurenko to scale back any proposals for reconstruction and to impose costs controls. There is abundant evidence that he did so. Simply by way of example, reference can be made to an email sent by Mr Lazurenko to Mr Becirovic on 16 March 2007 in which he directed that no further payments should be made and no contracts signed until there was a clear financial picture. Equally, he could determine that he would provide no further funds, as he did in an email sent on 17 November 2007, or determine that he was not prepared to provide further sums except on terms that they were to be provided by way of loans, to be repaid before any division between the partners as such. This follows from the absence of a commitment to provide unlimited funds.
70. I conclude that this is not a case where the commercial plausibility of either side's case will assist me in determining the issue which requires to be decided.
71. I turn now to the issues and evidence which are directly relevant to the determination of the investment issue.

The parties' accounts of the agreement

72. There is a limited amount of common ground in the accounts given by Mr Becirovic and Mr Lazurenko as to the circumstances in which they met and reached their agreement. They agree that they first met in late 2001 and had a number of meetings over the ensuing months at which they discussed the possibility of collaborating in investments in Montenegro. It is common ground that they agreed to collaborate in the submission of a tender to purchase the Avala hotel and that, by the time the tender was submitted in June 2002, they had agreed the terms of Mr Becirovic's participation. They are agreed that nothing was recorded in writing. They are agreed that Mr Lazurenko said that he was acting for an investor and that he himself would have only a relatively small interest.
73. The evidence of Mr Becirovic given in his witness statement for the trial is that, after Mr Lazurenko told him that he was acting for a serious investor who was not at that stage named, Mr Lazurenko made a proposal whereby the investor would provide the funds needed for an investment in Montenegro. Mr Becirovic would obtain a clear 20% interest for doing everything else, including locating and acquiring the investment object. His interest would not be net of the investment made by the investor. It was at this meeting or the next that Mr Lazurenko said that he would be getting a 10% interest. These discussions were all held in the abstract. They had not identified any particular investment opportunity, nor decided on the sort of investment they wished to make.
74. At this stage, Mr Becirovic says, this was only a proposal. Subsequently, Mr Lazurenko informed Mr Becirovic that the investor was Mr Khan and it was Mr Khan's involvement which attracted Mr Becirovic to the venture in view of his well known position and the opportunities which this might provide.
75. Mr Becirovic was aware of the proposal to sell the Avala hotel to the private sector and, he says, he suggested it to Mr Lazurenko as an investment opportunity. He knew that this would involve the investment of funds for the reconstruction and refurbishment of the hotel, which he discussed with Mr Lazurenko. They agreed that it would not be a case of buying and quickly selling an asset at a profit but that they would be tied into the project for a period. They agreed that Mr Becirovic would have overall responsibility for the reconstruction and refurbishment, although they envisaged that a local project manager would be engaged. They agreed to pursue this opportunity on the basis of the terms already discussed in the abstract, that Mr Becirovic would have a clear 20% interest. It was agreed to use BJUK as the vehicle for the bid and on 3 April 2002 Mr Becirovic became the holder of 20% of the shares of BJUK and Leibson became the holder of the remaining 80%. It was Mr Becirovic's understanding that the 80% holding was split as to 70% for Mr Khan as the investor and 10% for Mr Lazurenko.
76. Mr Becirovic travelled to Montenegro and held discussions with a number of his contacts as I have earlier indicated. The outcome was that he was advised that a bid should be made at the level of between €3 million and €3.5 million as the purchase price, with a commitment to invest €9 million for the reconstruction and refurbishment. Mr Becirovic discussed these figures with Mr Lazurenko at a further meeting in Moscow. They agreed that the bid to purchase the hotel should be at a level of €3.2 million and that there should be a commitment to invest €9 million in its reconstruction and refurbishment. It was later agreed to increase slightly the investment content to €9.032 million.
77. Mr Lazurenko's evidence given in his witness statement for the trial differs from the account given by Mr Becirovic in the following principal respects. First, at the early meetings, Mr Lazrenko says that he told Mr Becirovic that he would like to invest in plots of land in Montenegro and asked for Mr Becirovic's assistance with that, offering him a commission on the price of any plots of land acquired. Mr Becirovic came back with a proposal that he should receive a proportion of any net profits made after selling the land. This was agreed. Mr Lazurenko said that it was he who would identify land plots for purchase and that Mr Becirovic would secure the proper legal purchase of the land. In fact, no land purchases were made. At this stage, Mr Lazurenko had not mentioned anything about acting on behalf of a principal.
78. Early in 2002, Mr Lazurenko discovered on the internet that the Avala hotel would soon be offered for sale and he raised this opportunity with Mr Becirovic. The sums likely to be required were on a larger scale than Mr Lazurenko had been considering for the purpose of investment in land and it was in this context that he told Mr Becirovic that the funds for a bid for the Avala would come from a silent investor, although he did not provide the name. Mr Lazurenko offered Mr Becirovic essentially the same deal that he had offered on the land purchases, namely 20% of any net profit obtained on a sale. Mr Becirovic said that he wanted the investment to be undertaken through a joint venture company and, for that reason, it was decided to use BJUK and 20% of the shares were registered in the name of Mr Becirovic.
79. On or around 22 April 2002, when the tender announcement was formally made, Mr Becirovic told Mr Lazurenko that he would speak to his contacts in Montenegro. Having done so, Mr Lazurenko's evidence is that Mr Becirovic told him that "we would have to commit to spend a certain amount of money on renovation of the hotel, but that again through his connections he could ensure minimum levels of investment would be required. The figure we discussed was around €8 million. This will split into roughly €5 million for the renovation and the rest to buy the hotel. Mr Becirovic claimed the hotel was worth over €10 million, similar to the sort of figures previously given to me by Mr Armenko. I was therefore led to believe that Mr Becirovic would arrange for us to buy the hotel for less than it was worth."
80. In further discussions, Mr Lazurenko says that Mr Becirovic said that in return for securing the purchase of the Avala at a substantial discount he wanted more than 20% of net profit from the venture. Mr Lazurenko says that after negotiating the matter on further occasions and doing some calculations, they agreed that the investor would provide €8 million and that Mr Becirovic would ensure the purchase of the Avala at a purchase price of €3 million, together with the commitment to spend €5 million on the renovation of the hotel. The sum of €8 million would be treated as capital, so that in calculating the net profits of which Mr Becirovic would receive 20% no account would be taken of this investment of €8 million. Mr Lazurenko says they agreed that to the extent that any further sums might be required by the business for whatever purpose, the business would raise the further sums from banks.
81. It was only after this discussion and agreement that Mr Becirovic had further discussions with his contacts in Montenegro, resulting in the bid with a purchase price of €3.2 million and a commitment to spend just over €9 million on renovation. Mr Becirovic assured Mr Lazurenko, the latter says, that it would not actually cost €9 million to renovate the hotel and that it would in fact cost no more than €5 million.
82. Both these accounts differ in some respects from the evidence previously given in these proceedings by Mr Becirovic and Mr Lazurenko. In his affidavit sworn on 2 May 2012, Mr Becirovic made no mention of an earlier agreement reached in the abstract for his participation in any joint investment, but anchored the agreement in the context specifically of the bid for the Avala. In his witness statement dated 15 May 2012, Mr Lazurenko did not mention the proposals for the purchase of land plots in Montenegro and the discussions and agreement of terms for the involvement of Mr Becirovic. He says in that witness statement that they spoke on a number of occasions after their initial meeting "with a view to working together on a business project in Montenegro". He continued:

"I agreed with Mr Becirovic that we would seek to purchase properties in Montengro, primarily hotels. I informed him that I represented a potential investor. This was my friend Mr Scheklanov, though I did not disclose his identity in accordance with his requirement. Mr Becirovic would be involved in arranging the local requirements for the purchase and the subsequent refurbishment and establishment of the hotels so that their value could be maximised ready for sale. On the sale, any profit generated after repayment of the initial investment would be shared between the three involved parties."

83. These are not differences which will, in my view, help me in determining which of these parties is telling the truth. Fuller and, to some extent, contradictory accounts are not infrequently given in evidence for trial when compared with evidence filed early in the proceedings. Where each witness is seeking to recall the sequence of events 10 years earlier, without the aid of any documents, the existence of some differences is not a matter of great surprise. I do not regard the differences identified above as essentially undermining the credibility of either witness.
84. Leaving aside the fundamental differences between the evidence of the two parties, the striking feature of Mr Lazurenko's evidence is that agreement was reached on a figure of €5 million as being the likely cost of refurbishment, although the figure they agreed to put in the tender was just over €9 million. Mr Lazurenko's explanation is that Mr Becirovic assured him that the renovation would actually cost only €5 million.
85. In the absence of any documentary record of the agreement each party relies on a number of documents or alleged events in order to support its case. I will take each of these in chronological order.

The Avala business plan

86. In support of Mr Lazurenko's revised case that the parties agreed a figure of €5 million for reconstruction, considerable reliance is placed on some manuscript notes in Serbian written by Mr Becirovic on a draft investment plan. The investment plan was professionally prepared for submission to the seller of the Avala hotel as part of the sale process. It is submitted on behalf of Mr Lazurenko that these manuscript notes show that Mr Becirovic was working out how the figure of €9.032 million included in the bid for the Avala could be reduced to the figure of €5 million agreed with Mr Lazurenko. It is submitted that they show savings being made in respect of a number of items. It is also submitted that when confronted with this document and its manuscript annotations in cross-examination, Mr Becirovic gave inconsistent and, to some extent, incoherent explanations.
87. I am satisfied that the annotations on this document are not to be explained in the way submitted by counsel for Mr Lazurenko. First, and critically, the list of figures which are said to be the savings has written against it the words "100 new rooms". It is clear that the largest figure in the list, €1.574 million, is the figure attributed to the cost of 100 new rooms. There is, in my judgment, no satisfactory explanation provided on behalf of Mr Lazurenko as to why, if Mr Becirovic was trying to work out how he could reduce the reconstruction costs from €9.032 million to €5 million, he would factor in the construction of 100 extra rooms. Secondly, the list of figures which are said to constitute savings total €3.424 million. If deducted from €9.032 million, the result is approximately €5.6 million, not €5 million. It manifestly does not produce the result which it is submitted for Mr Lazurenko is the purpose of the annotations. Thirdly, although this document was disclosed in these proceedings Mr Lazurenko nowhere mentions in his witness statement either the document or the discussion with him which he said in his oral evidence he could clearly remember.
88. It does not surprise me that Mr Becirovic was in difficulty in giving a clear, distinct and coherent explanation when first confronted with this document. It had not featured in the case until it was put to him in cross-examination. He did not refer to it in his own witness statement and as I have just mentioned Mr Lazurenko did not refer to it in his. Mr Kitchener QC did not refer to it in his skeleton argument. When put to him on day 4 of the trial, Mr Becirovic had no opportunity to consider the meaning and significance of these annotations. They had been made by him some 10 years previously. He quite properly looked at the document overnight and sought to remember as best he could what he had been doing when making these notes. When his evidence resumed on day 5, he explained that he had remembered that he had been thinking about the possibility of building a new block containing 100 new rooms and a number of the facilities which were otherwise planned to be in other buildings. This appears to me to be a far more feasible explanation for the figures than that for which Mr Lazurenko contends.
89. There is a further feature of the Avala business plan on which Mr Lazurenko places some reliance. At the start of the document, under the heading "Business goals", the fourth out of the seven goals is stated as:

"Reinvestment of the profit into widening of hotel capacities and capacities of other connected activities, as well as into opening new hotel and tourism capacities."

90. It was submitted that this was inconsistent with an agreement between Mr Lazurenko and Mr Becirovic that the funds for the renovation of the hotel would be provided by Mr Lazurenko's side. It does not seem to me that this document sheds any light on the agreement between the parties. It is expressed in very general terms. I have elsewhere accepted Mr Becirovic's evidence that the business plans for both hotels were somewhat formalistic documents, required as part of the tender processes.

Increase in Mr Berirovic's shareholding

91. I am satisfied for these reasons that this document does not support Mr Lazurenko's case.
92. The second issue relates to the increase in Mr Becirovic's shareholding in BJUK from 20% to 25% plus 1 share. The share certificate in question is dated 3 April 2002 but both parties are agreed that it was not issued until some time after that date. Mr Becirovic contends that it was provided to him following agreement in October 2002, while Mr Lazurenko says that the agreement was reached in April 2004 and the share certificate provided to Mr Becirovic after that. It is not in dispute that the formalities in relation to the issue of the share were completed in October 2004. The records of the company include a resolution for the issue of the shares dated 4 October 2004 and the share register shows the shares as having been issued in October 2004. Company formalities were dealt with by a firm called DS Express in Moscow and it is common ground that they acted on Mr Lazurenko's instructions. No instructions as regards these additional shares have been disclosed by Mr Lazurenko.
93. Mr Becirovic's pleaded case in respect of the increase in shareholding given both in the petition and in the amended points of claim is as follows:

"During the course of the litigation in relation to the Avala and thereafter, Mr Becirovic pressed Mr Lazurenko for an increased share in the business venture (and, therefore, in BJUK) given that the burden on Mr Becirovic was greater than had been anticipated, particularly given the litigation. Mr Becirovic sought an interest sufficient to give him a blocking right in relation to major decisions of BJUK, namely an interest of 25% plus 1 share in BJUK. Mr Lazurenko told Mr Becirovic that he would have to discuss this with Mr Khan, but he eventually agreed to this. Accordingly, a transfer of shares representing 5% plus 1 share from Leibson to Mr Becirovic was registered on 4/10/04."

This account is imprecise as to dates. It is pleaded that Mr Becirovic pressed for an increased share "during the course of the litigation in relation to Avala and thereafter", that the burden of Mr Becirovic was "greater than had been anticipated, particularly given the litigation" and that Mr Lazurenko "eventually" agreed to this. It is then said that accordingly the transfer of shares was registered on 4 October 2004. It is also to be noted in view of evidence to which I will refer that Mr Becirovic pleads that he sought "an interest sufficient to give him a blocking right in relation to major decisions of BJUK" namely just over 25%.

94. In paragraph 26 of Mr Becirovic's affidavit sworn on 2 May 2012 he stated as follows:

"As the litigation relating to the Avala tender progressed, the complexity of the issues I had to deal with intensified drastically and brought with it unforeseen demands on my time. Consequently, I was keen to ensure that my interests in the business were adequately protected and that I was suitably rewarded for the extra time and effort I had to put into the business, over and above that which was originally anticipated.

I felt that because I would be putting so much effort into the litigation, it was only fair that I should have an increased share. Therefore, in October 2002 (before we issued the Court proceedings referred to above) I proposed to Mr Lazurenko that I should have an increased shareholding. In particular, I was keen to get a shareholding sufficient to enable me to block any major decisions. Mr Lazurenko told me that he needed to clear this with Mr Khan. Mr Lazurenko eventually agreed to my terms but the increased shareholding was not in fact implemented until 2004. The implementation of this agreement in principle was prompted by the completion of the Investment and Purchase Agreement of Avala in April 2004."

In this passage Mr Becirovic dates his proposal for an increased shareholding to October 2002, before the court proceedings were issued, and says again that Mr Lazurenko "eventually" agreed to it. He goes on to say that this was an agreement in principle which was not implemented until after completion of the purchase of the Avala in April 2004. He again states that he was keen "to get a shareholding sufficient to enable me to block any major decisions".

95. In his witness statement for the trial, dated 15 February 2013, Mr Becirovic tied his proposal for an increased shareholding closely to the decision of the Privatisation Council to declare the tender void and the prospect of a legal challenge to this decision as a result of which "the complexity of the issues I had to deal with intensified drastically and brought with it unforeseen demands on my time". Because of the effort that he would be putting into the litigation he felt that it was only fair that he should have an increased share. He reiterated that he was also keen to ensure that he had a sufficient interest to block any major decisions. Mr Becirovic added, for the first time, that Mr Lazurenko agreed to this proposal before the legal challenge got under way or in its very early stages and gave Mr Becirovic the share certificate for the additional shares in, as he recalls, a street in Moscow. In his oral evidence, Mr Becirovic moved away from the extra work involved in the legal challenge as the reason for his proposal and Mr Lazurenko's agreement that he should receive the extra shares:

"No, I have not said that. I did not say that the assistance that I had offered in terms of the Supreme Court challenge had a direct relationship in my equity stake. I have been referring to all the other things that have happened after we prevailed in the Supreme Court."

96. There are difficulties in Mr Becirovic's case that his proposal for an increased shareholding was made and agreed in October 2002 and that he was given the relevant share certificate at that time. First, there are the inconsistencies between the accounts given to which I have referred. Secondly, an increase in work caused by the need to challenge the Privatisation Council decision to reject the tender is an implausible reason for an increase in his interest. The legal process required little additional work by Mr Becirovic. The written complaint, running to four pages, was professionally drafted and lodged with the Supreme Court. There were no further steps to be taken in support of the application and it was simply a matter of waiting for the decision of the court which was delivered in April 2003. Thirdly, if Mr Lazurenko had handed a share certificate to Mr Becirovic in a Moscow street in October 2002, it would be a memorable event and it is therefore surprising that Mr Becirovic did not mention it in his pleading. Fourthly, communications involving Mr Becirovic's Serbian lawyer, Mr Colovic, show that in April to June 2004 Mr Colovic understood Mr Becirovic's shareholding to be 20% without any entitlement to a further 5%. It would be surprising if Mr Becirovic had not informed his lawyer about the arrangement made with Mr Lazurenko and that a share certificate had been handed to him in October 2002. Fifthly, it was in April 2004 that Mr Becirovic received advice that in order to block a special resolution of an English company he needed to have a shareholding in excess of 25%. Mr Becirovic at first accepted in cross-examination that this was when he had discovered that a blocking share needed to be over 25%, although he later said that it was just a "further confirmation of what I already knew". I find it highly unlikely that Mr Becirovic had any knowledge of this legal requirement before he received Mr Colovic's advice in 2004. The receipt of that advice provided an obvious reason why he would seek to increase his shareholding to over 25%.
97. I am unable to accept Mr Becirovic's evidence that he proposed an increased shareholding to Mr Lazurenko in October 2002 or that Mr Lazurenko agreed it in principle at that time or that he was handed a share certificate showing the increased shareholding in October 2002. I find that this matter was raised and agreed in April 2004. The reason for the proposal and for Mr Lazurenko agreeing to it was that Mr Becirovic would be taking a greater role in the management of the renovation process of the hotels than had previously been envisaged in addition to Mr Becirovic's desire to have a blocking vote on special resolution.
98. This casts doubt on the reliability of Mr Becirovic's own evidence. Moreover, I do not think that the incident of the share certificate being handed over in the street in Moscow is a detail which Mr Becirovic simply had mis-remembered. I find that it involved a deliberate embroidering of his evidence.
99. Mr Kitchener QC submitted that Mr Becirovic's reason for giving untruthful evidence on this issue was that he was otherwise in difficulty in providing a plausible explanation as to why Mr Lazurenko should have agreed in 2002 to Mr Becirovic having a gross, rather than a net, interest in the project. It was submitted that, because in 2002 Mr Becircovic's responsibility was limited to effecting the acquisition of the Avala with no continuing responsibility for the renovation, it was highly unlikely that Mr Lazurenko would have agreed to Mr Becirovic having a 20% gross interest without first taking account of the expenditure by Mr Lazurenko's side on the renovation process. I do not accept the submission, for two principal reasons. First, in my judgment, it mis-states the extent of the intended responsibilities of Mr Becirovic as agreed with Mr Lazurenko in 2002. I am satisfied that at that stage it was agreed that Mr Becirovic should have a continuing overall responsibility in respect of the renovation of the hotel after its acquisition. He was the partner with the local knowledge to enable him to oversee the project, which Mr Lazurenko by reason of his lack of experience of Montenegro and being located in Moscow, was clearly unable to do. The decision taken in 2004 that they would not engage a project manager but that Mr Becirovic would fulfil that role did not mean that Mr Becirovic went from a position of having no involvement at all in the renovation to having a day to day project management responsibility. Secondly, Mr Lazurenko's own case is that Mr Becirovic was to have the benefit of €5 million of expenditure of the renovation of the hotel being treated as capital, which would not sit well with his role being limited to that of arranging the acquisition.

Budget for renovation of the Avala hotel

100. The third issue is a difference between the parties as to whether and, if so to what extent, they discussed a budget for the renovation of the Avala hotel. Mr Lazurenko says that there was discussion on this topic which resulted in the agreed figure of €5 million. Mr Becirovic says that there was not any significant discussion of this topic and that the figure of just over €9 million was included in the tender because it was the figure which, he had been advised, was likely to be attractive.
101. It is, objectively, surprising that businessmen should agree on a joint bid for a hotel which will involve refurbishment and renovation without agreeing on at least a general figure for the costs of renovation. Equally surprising, however, is the absence of any written budget or other documentary analysis of the likely costs and the amount that the parties would wish to spend. There is no suggestion by Mr Lazurenko that there was any real analysis of how the alleged figure of €5 million was arrived at nor is there any evidence of any document which could merit the name of a budget being produced until the start or shortly before the start of work on the hotel. At that stage, and in respect of the different phases for development of the hotel, spreadsheets were prepared showing the actual and projected costs for different items. While Mr Lazurenko can been seen as concerned with the level of costs being incurred, there is no evidence that he protested when, very quickly, costs far outstripped the allegedly agreed figure of €5 million. It is surprising that there is no reference in any document to this figure of €5 million and no expressions of concern or recrimination that the cost had so quickly spiralled in excess of that figure.

The Bianca spreadsheet

102. The fourth issue arises in relation to the Bianca hotel, which was purchased in October 2003. The tender had opened on 10 May 2003 and BJUK's offer was accepted on 6 June 2003. Mr Becirovic arranged for the preparation of a business plan, similar to that prepared for the Avala hotel, as part of the acquisition process. It shows that over a 3-year period, a total of €3 million would be spent on the refurbishment of the hotel. The plan shows that the entirety of this sum would be raised by borrowing.
103. Mr Lazurenko's evidence is that he and Mr Becirovic agreed that the investor would provide a total of €4.5 million for the Bianca, split as to €1.5 million for its purchase and €3 million for its renovation. These funds would be treated as capital and so not deducted before calculation of Mr Becirovic's 25% share in the net profits. Mr Lazurenko goes on to say that they discussed that if any further funds were required, they would be raised from banks. It appears that Mr Lazurenko places this agreement before or perhaps at much the same time as the preparation and submission of the business plan. If so, there is a clear inconsistency between them, because the business plan shows the entire €3 million being the subject of borrowing by BJUK and BJM.
104. Mr Becirovic'e evidence is that there was no firm agreement on the costs of renovation. No architect or designer was engaged to prepare plans for the renovation until March 2004 and, on Mr Lazurenko's own evidence, it was not until about April 2004 that they really started to work on the designs. Mr Lazurenko accepts that it was only after this work had started that it became clear that the figure of €3 million for the cost of refurbishment was "overly optimistic". It may be noted that there is no documentary or other evidence indicating how a figure of €3 million had been calculated or how it would be spent or whether it would be sufficient to achieve an appropriate refurbishment of the Bianca hotel. The business plan prepared for submission to the court as part of the tender process for the Bianca hotel refers to sums totalling €3 million being spent in equal amounts over 3 years. The business plan contains no analysis of this figure or any means of understanding of how it has been calculated. I am satisfied by Mr Becirovic's evidence that the business plans prepared for both hotels were necessary parts of the tender processes rather than business plans in the more usual commercial meaning of a basis for the parties' joint venture.
105. Excel spreadsheets showing a detailed breakdown of actual and potential costs were being prepared from about September 2004. It is against the background of these budgets that Mr Lazurenko says that he prepared the Excel spreadsheet that has come to be known in these proceedings as the Bianca spreadsheet. His evidence is that in late August or early September 2004, he started to put together this spreadsheet as "a business plan reflecting the need for additional finance, as well as how the agreement the shareholders had reached was going to operate". He says that he and Mr Becirovic discussed the spreadsheet and agreed its content. He says that when he received an updated reconstruction budget under cover of an email dated 26 September 2004 from Mr Becirovic, he put the new figures into the spreadsheet and it is this revised spreadsheet which he has put in evidence.
106. The Bianca spreadsheet is a critical document in Mr Lazurenko's case. It was on the basis of this document that the respondents amended their points of defence to remove the allegation that all funds provided by the investors would be repaid before Mr Becirovic received any share of the profits and to substitute their case that no account would be taken of sums up to €8.2 million in respect of the Avala and €4.5 million in respect of the Bianca. The Bianca spreadsheet says nothing about the figures for the Avala but it appears to support Mr Lazurenko's case so far as it relates to the Bianca. Mr Kitchener QC, on behalf of the respondents, described it as the alpha and omega of his case.
107. As I have earlier stated, the authenticity of this document was challenged by Mr Becirovic and Caldero. There was a good deal of expert computer evidence but ultimately, on the day before closing speeches, Mr Hollington QC on behalf of Caldero withdrew the challenge. The expert evidence demonstrates that the document was created on 30 August 2004 and last modified on 27 September 2004.
108. The Bianca spreadsheet is a single page headed "Hotel "B" 5 Year BP [Business Plan] and shareholders agreement". At the top the word "DRAFT" appears in red. Under the heading "Own funds of BJL" (BJL being a reference to BJUK), the following appears:

"INFRASTRUCTURE payments

Purchase 1,560,000

Obligations paid 150,000

Reconstruction (own funds) 3,000,000

Total: 4,710,000"

Under the heading "Credit Funds", three "Credits" (meaning loans) are shown. Loans 2 and 3 (€800,000 and €300,000) are described as operational, i.e. for the ordinary business of the hotel, each with an interest rate of 6.5% p.a. Credit 1 for €1.7 million, described as "Reconstruction payment", is for three years at an interest rate of 6.5% p.a. Next to this there appears in red "ZB and IL will suggest credit opportunities without hipotec obligations".

109. Two scenarios are set out in the spreadsheet, describing an optimistic case and a pessimistic case for the company's performance over the years 2005-2009. In each scenario the projected loan of €1.7 million is repaid in full within the years 2005-2008, as are the two operational loans. In the optimistic scenario there is a return of capital of €3,532,500 over the years 2005-2008 but in the pessimistic scenario there is a return of €2,296,125 to shareholders. The first is described as a full return and the second as a 65% return. The fact that the loan of €1.7 million would be repaid ahead of shareholders, including Mr Becirovic, is shown in a further table headed "The Order of Funds Return and shareholders interest payments". This table divides the shareholders' interests between 65% and 35%, the latter stated to be "IL + ZB". In other words, it shows the undisclosed investor receiving 65% and Mr Becirovic and Mr Lazurenko receiving 25% and 10% respectively. Finally, there is set out a list of 11 matters which are described as being the responsibilities of the parties for the fulfilment of the business plan. These identify Mr Becirovic and/or Mr Lazurenko as being responsible in respect of different aspects of the company's business and financing.
110. Mr Becirovic denies that he ever saw the Bianca spreadsheet, let alone agreed it. Mr Lazurenko says that he sent the spreadsheet to Mr Becirovic by email. It would certainly be expected that he would have done. The two of them were in regular contact during September 2004, particularly in relation to the budget for the Bianca. There is however, no evidence at all other than Mr Lazurenko's word that he did so. No email has been disclosed either by Mr Lazurenko or the other respondents or by Mr Becirovic relating in any way to the Bianca spreadsheet. Given the extent of their disclosure, this is surprising. Even if, as Mr Lazurenko said he did and I have little reason to doubt, he regularly deleted emails which were simply repetitions of other emails or other emails which were no longer of any relevance, it is very surprising that he should have deleted any email relating to the spreadsheet, given in particular the lack of any written agreement or other statement of its terms. I find that it was not sent to Mr Becirovic.
111. Mr Lazurenko says that he and Mr Becirovic not only discussed the spreadsheet but agreed its content. If that is so, it is all the more surprising that there is no evidence of a copy of the spreadsheet being provided to Mr Becirovic and it is surprising that the document in evidence contains the words "draft" so prominently at the top. The spreadsheet also states that Mr Lazurenko's interest in the shares is limited to 10% with 65% being held by the investor and the remaining 25% being held by Mr Becirovic. On the evidence presented to me in this case, I have found that Mr Lazurenko had no principal but was acting on his own account. It follows that the spreadsheet on which he strongly relies contains within it a deliberately untrue statement.
112. Although the respondents plead in their re-amended points of defence that there will have been similar documents to the Bianca spreadsheet relating to the Avala hotel, none has been found.
113. Although the Bianca spreadsheet contemplates that the excess reconstruction cost over €3 million would be funded by a bank loan, no loan was in fact taken out for this purpose. There was an exchange of emails in February 2005 between Mr Lazurenko and Kirill Polupanov about taking a 3-year unsecured loan for €2.15 million. Beyond emails on 8 and 14 February 2005, the first of which was copied to Mr Becirovic, this suggestion does not seem to have progressed. The same is true of a statement contained in an email from Mr Lazurenko to Mr Becirovic on 21 April 2005, referring to "your proposal for credit". This does not seem to have been taken forward in any way.

Bank loans

114. The fifth area of evidence relates to the bank loans taken out for the purpose of the reconstruction of the Avala hotel. The total cost of the renovation was some €36 million and at one stage a total of €6 million had been borrowed from banks for this purpose. The balance of the funding, and the funding required to repay the bank loans, came from Mr Lazurenko's side. It is common ground that on 24 April 2007, BJM entered into a loan agreement with Prva Banka for two 5-year term loans of €3 million each at an interest rate of 6.5% pa. The purpose of the loans was stated to be the "reconstruction of tourist facilities" and Mr Becirovic accepted that this was the true purpose of the loans. The loan was secured by a charge over unrelated land owned by a different company, itself owned by Leibson and Mr Becirovic on a 75/25 basis. These loans from Prva Banka were subsequently reduced to a loan of €1.05 million, with effect from 25 July 2007. The amended agreement applying to the reduced loan provided for repayment "out of the cash generated through regular operations of the company". The balance was re-financed by a 5-year loan of €5 million from Hypo Bank, secured against the Bianca hotel, which had by then been renovated. Again the purpose of the loan was expressed to be for the reconstruction of "tourist premises", i.e. the Avala hotel. Capital repayments were due to commence on this loan in mid-2008, but BJM was unable to make the capital repayments from its operating profits and it defaulted on those repayments. Hypo Bank was repaid ultimately out of funds provided by Mr Lazurenko's side.
115. Mr Lazurenko relies on these long term loans to show that his agreement with Mr Becirovic was that funds in excess of the agreed capital amounts would be provided by way of loan, if possible from banks. First, the taking of long term loans for the express purpose of the renovation of the Avala is inconsistent with an agreement that all finance for the renovation was to be provided by Mr Lazurenko. Mr Berirovic's suggestion that the loans were only "formalistically" to be repaid by BJM cannot be reconciled with the terms of the loan agreements which envisaged repayment by BJM. Secondly, it is significant that the loans from Prva Banka should be secured by a charge over property jointly owned by Leibson and Mr Becirovic. Thirdly, there is no mention in any of the email correspondence relating to the loans that the need to take them arose because of any cash flow difficulties on Mr Lazurenko's side. This was to be contrasted with the short-term loans taken in late 2006 and early 2007 to make up for delays in the release of monies from the blocked account securing the performance bond. Fourthly, the amount agreed to be borrowed was, as appears from emails from Mr Lazurenko, limited to what the company would be able to afford.
116. These are all substantial points but there are other matters that must be taken into consideration. First, the fact that the loans were to be repaid in accordance with their terms, that is by BJM over the term of the loans, does not mean that as between Mr Becirovic and Mr Lazurenko's side the loans would not be treated when determining profits as having been contributed by Mr Lazurenko's side rather than being a deduction from profit.
117. Secondly, the absence of any direct reference by Mr Lazurenko or others to cash flow difficulties as a reason for the loans is not decisive. He indicated in one email that he wanted "all credit which we can afford". There is no evidence before the court as to the funding available to Mr Lazurenko in order to provide finance for the renovation of the Avala. There is no evidence as to whether he did or did not have access in April 2007 to funds which could have been provided instead of the two long term loans. Mr Lazurenko's emails which deal with proposals to take out the loans stress the need to control costs and to keep the amount of the loan within bounds that BJM was likely to be able to afford. This is not inconsistent with the provision of finance being his responsibility. If loans were to be taken by BJM, there had to be a proper regard for its financial circumstances.
118. Before the loans were agreed with Prva Banka in April 2007, Mr Lazurenko had emailed Mr Becirovic on 10 January 2007. Mr Kitchener places some reliance on this email. It is an isolated email, with no prior or later communications of which this can be seen to be part. Mr Lazurenko referred to there being "a problem with taking a credit for reconstruction – we will not be able to return it". He referred to the Bianca's loss of €1.6 million in 2006 and the worsening situation in 2007 and continued "We should change dramatically situation with Bianca's occupancy to have zero Pnl there and cover credit with Avala's positive revenue". He questioned the ability of the relevant manager to improve the Bianca's sales and continued "Nobody let us and we cannot afford to think about credit without understanding of way to return it and written description the funds which will cover the credit". Finally, he stated "Let's take in mind our only available €4.7 million and please let's think how improve dramatically sales situation in Bianca".
119. This is not an easy email to understand. In his witness statement, Mr Lazurenko states that there had been discussions between Mr Becirovic and himself before this email in which it had been agreed that he would procure a shareholder loan of €3.5 million and Mr Becirovic would obtain about €4.7 million from local banks. Mr Becirovic accepted in evidence that he had agreed to try and raise local bank finance but he had no recollection of the figure of €4.7 million. There is no other evidence explaining that figure or supporting Mr Lazurenko's evidence about the shareholder loan of €3.5 million.
120. It is said on behalf of Mr Lazurenko that this email supports his case that he had agreed that €5 million of the funding required for the renovation of the Avala would be provided by way of capital. That is arrived at by deducting €5 million from the budgeted figure for phase 1 being discussed at about that time of approximately €13 million. Mr Lazurenko's evidence is that the difference of approximately €8 million was agreed to be funded by the shareholder loan of €3.5 million and bank finance of €4.7 million. There is little to support this beyond Mr Lazurenko's own evidence and whether I accept it or not will largely depend on my overall assessment of his evidence.
121. No further external loans were taken by BJM after the loan from Hypo Bank refinancing €5 million of the loan from Prva Banka. Phase 2 of the Avala started in late 2007 and there were communications about its funding. In a short email sent by Mr Lazurenko to Mr Becirovic's brother, copied to Mr Becirovic, on 17 November 2007, he said that "No more outside payment will be available from off-shore (excluding high managers salary) and any credits for current activity allowed. We believe with Zoran that our excellent properties in Montenegro should earn money and live in current activity without cash outside and taking credits!" The expression "cash outside", as opposed to "credits", refers to funding procured by Mr Lazurenko. In fact, funding continued to be provided by Mr Lazurenko's side.
122. There was disagreement between the parties in April 2008. The disagreement appears to have been related to whether the budget they discussed for phase 2 included or excluded VAT. Mr Lazurenko put a stop to the provision of further funding and, in an email dated 11 April 2008, told Mr Becirovic that "the financing is ready for the full approved amount and will be restored immediately after the reconciliation of the budget". Mr Becirovic took grave exception to this course and replied in a long email sent on 14 April 2008. The bulk of this email is directed to the budget but in the course of it, Mr Becirovic said:

"We thought that we could reduce the amount to 14.5 million as a minimum before signing all the contracts. You and I always discussed 14 million, of which you were offering 9 and asking for 5 from me. We agreed that you (provide) 10 and I – 4 for now and 5 if required."

Later in the email, he said "I thought there were no money, you could have told me and I would have come up with a solution".

123. In fact, Mr Becirovic did not procure any funding for phase 2, all of which was provided by Mr Lazurenko's side. There is no evidence that Mr Lazurenko pressed or even requested Mr Becirovic to provide any funds, notwithstanding the agreement or discussion referred to by Mr Becirovic in his email of 14 April 2008.

The Peskov table

124. Sixthly, Mr Becirovic relies in support of his case on accounting exercises undertaken by BJM shortly after the commencement of the renovation works at the Avala hotel. This accounting exercise involved the preparation of tables identifying payments from funds provided for renovation but in fact applied towards meeting operating costs and payments out of operating income for renovation costs. Mr Becirovic correctly asserted in the period before trial that the accountant Mr Peskov had maintained accounting records showing these different payments. Only following the threat of an application for specific disclosure was disclosure given at a very late stage of a document which has become known as the Peskov table. While the disclosed document identifies a few payments from 2008 and 2009 it is a running account of such payments from January 2010 until 2013. Mr Becirovic's evidence is that this exercise was designed to show the extent to which money is provided for or generated by renovation or current business respectively was being used to support the other. Mr Becirovic says that this was important because finance for reconstruction was provided by way of capital but this was not true of finance provided for operating expenses. A running account was needed to ensure that funds provided by shareholders as capital were not treated as loans and vice-versa. Mr Lazurenko accepts that the purpose of the Peskov table was to show the extent to which there was cross-subsidisation between renovation and current operations, but he says that it was for the simple purpose of keeping track of the ordinary business of the company. It was precisely the sort of accounting exercise that is sensibly undertaken by any business.
125. Mr Becirovic relies on a payment of €500,000 from BJM to BJUK made on 22 October 2010 as showing the purpose of the Peskov table. I do not accept that it does achieve this object, both because the purpose of the payment can be seen from contemporaneous emails as being to enable BJUK to show positive income from BJM for the purposes of a reinstatement of the bank credit line and because the balance owed from the operational account to the renovation account of that time was, or appears to have been, substantially more than the sum of €500,000.
126. In my judgment, the Pesckov table is equally capable of supporting either hypothesis but contains no substantial evidence as to which is the correct explanation. I do not think that it will bear the weight which Mr Becirovic seeks to put on it and I do not find it of great assistance in resolving the issue in this case.

Alleged agreement in October 2010

127. The last significant matter relates to Mr Becirovic's evidence of an express agreement in October 2010. At a meeting held on 8 March 2012, Mr Becirovic handed to Mr Lazurenko a draft shareholders' agreement. It was drafted in English and defined BJUK as the company, BJM as BJ MN and the Avala and Bianca hotels as the Hotels. The operative part of the draft agreement provided as follows:

"1. The Shareholders confirm that the investment into the Hotels has been completed.

2. Regardless of the value and nature of the investment of each of the Shareholders into BJ MN and into the Hotels, none of the Shareholders shall be entitled to get the reimbursement of the investment into BJ MN or into the Hotels, so that any profit obtained from business activities of BJ MN shall be shared between the Shareholders proportionally to number of their shares in the Company and paid to the Shareholders without any restraint.

3. In case the shareholders or any of the shareholders individually, has provided a loan to BJ MN, by itself or through any third party under control of the shareholders or any of the shareholders, such loan shall be treated, for the purpose of this agreement, as an investment, so any payment that would be made by BJ MN to the borrower as a reimbursement of such loan, shall be shared by the shareholders as profit, proportionally to the number of their shares in the Company."

128. It is common ground that there was a discussion between Mr Becirovic and Mr Lazurenko and that Mr Lazurenko took away a copy of the draft shareholders' agreement. In his witness statement for the trial and in his oral evidence, Mr Lazurenko said that he told Mr Becirovic that the draft agreement fundamentally altered the agreement between the parties. Counsel for Mr Becirovic pointed out in closing that there was no pleading of an objection to the draft agreement but I do not regard that as significant and I accept that it is likely that at the meeting Mr Lazurenko did express his disagreement. By that time, relations had broken down between the two of them and I would not regard an objection or the lack of it at this stage as particularly significant in determining what had in truth been agreed between them some years earlier.
129. What is more relevant is Mr Becirovic's evidence and case as to the events leading up to the provision of this draft agreement. The relevant events start with a meeting on 5 October 2010 and there is, as counsel for Mr Becirovic submits, an important conflict of evidence as to what then took place. The background is that relations had been deteriorating between the two of them for some time and there had been an angry exchange of emails between them in August 2010 on an apparently trivial matter. They subsequently agreed to meet and did so in Moscow on 5 October 2010. An email sent by Mr Becirovic to his lawyer Mr Colovic on 7 October 2010 provides some evidence of discussions at and following the meeting. The email concerns primarily three companies which had been formed for investing in land, in each of which Caldero held 25% of the shares. Mr Becirovic had heard from the company agents that the companies had been dormant. He raised this with Mr Lazurenko at the meeting and Mr Lazurenko told him that he would look into it. He also agreed to send contact details to Mr Becirovic. When Mr Becirovic had not received those contact details on 6 October 2010, he called Mr Lazurenko and had "a fierce argument", to quote his email. The email tells Mr Colovic that they need to prepare shareholders' agreements for each of the land-owning companies so that the issue of stocks is not possible without signature of all the shareholders. There is no mention in this email of preparing a shareholders' agreement for BJUK and BJM setting out the basis of investment of funds into those companies. In a further email sent by Mr Becirovic to Mr Lazurenko on 7 October 2010, Mr Becirovic sought information as regards the accounts of BJUK or, as it may be, the auditing of those accounts. Mr Lazurenko simply replied "ok".
130. The evidence of Mr Becirovic and of Mr Lazurenko as to the meeting on 5 October 2010 is radically different. Mr Becirovic's account, given in paragraph 182 of his witness statement for the trial, is as follows:

"I was expecting the meeting to be hostile in view of our exchange of emails on 3 August 2010 and the subsequent lack of communication. In fact, the meeting was friendly. It was at this meeting (not as I originally said at the later meeting on 16 November 2010) that Mr Lazurenko raised the subject of entering into a new shareholders' agreement that would confirm the existing principles of our relationship. I will give the gist of the conversation, but I am paraphrasing. Mr Lazurenko said words to the effect 'We should not be fighting. We should get on with things as before.' (that is to say, Mr Lazurenko was saying that we should get the reconstruction and refurbishment going properly again). Mr Lazurenko went on to say words to the gist of the following: 'It is time to put everything on paper. The fact that I am investing and that you earn your shares by your work and that the investment does not get returned'. Mr Lazurenko offered his hand across the table. I shook it and we said 'let's drink to this'."

131. In his evidence, Mr Lazurenko completely denied this account of the meeting. He agrees that they met in Moscow on 5 October 2010 with a view to discussing day to day business issues and the renovation of the Avala. Mr Lazurenko says that the meeting was in fact very short and bad tempered. It came to an abrupt end because of a heated discussion about the minor issue which had been the subject of the email in August 2010. He says that there was no discussion of a shareholders' agreement at the meeting and he cannot understand why Mr Becirovic has chosen to lie about it.
132. I do not regard it as particularly significant that Mr Becirovic should originally, in his affidavit sworn on 2 May 2012, have placed this discussion at a meeting on 16 November 2010. It is agreed that a meeting took place on that date as well on 5 October 2010 and it seems to me entirely plausible that there could be confusion between the two meetings. It is not suggested that Mr Becirovic's case on this was strengthened by identifying 5 October 2010, rather than 16 November 2010 as the occasion for the alleged discussion. Equally, I do not regard as significant that Mr Lazurenko is almost certainly wrong to have identified the meeting on 5 October 2010, rather than the telephone conversation on 6 October 2010, as the occasion for a short and bad tempered argument. Mr Becirovic's email to Mr Colovic sent on 7 October 2010 makes clear that the argument was during the telephone conversation and not at the meeting.
133. The real issue is whether there was any, and if so what, discussion at the meeting on 5 October 2010 about a shareholders' agreement.
134. Mr Lazurenko's denial of any discussion about a shareholders' agreement at the meeting does not sit well with the respondents' pleaded case. The discussion alleged by Mr Becirovic is shortly pleaded in paragraph 53 of the amended particulars of claim. In the amended points of defence, the respondents deny the allegation that it was intended that the agreement alleged to have been discussed would set out the proportions in which the business would be split and that Mr Lazurenko's financial injections would not be repaid first. It does not, however, take issue with the allegation that the two of them discussed at the meeting entering into a shareholders' agreement to confirm the existing principles of their relationship, namely that Mr Becirovic had carried out all the work and Mr Lazurenko had provided all of the financing, and that all decisions relating to the business were made by consensus.
135. There is unchallenged and contemporaneous documentary evidence that Mr Becirovic was intending to raise the question of a shareholders' agreement and the financial basis of their participation at the meeting. His unchallenged evidence is that he prepared and emailed to himself two agendas on 5 October 2010, about an hour apart. He took one of the agendas, probably the second one, with him to the meeting but did not show it to Mr Lazurenko. The agenda is a long list of matters, some of them very minor. However, they include the following:

"27. Regarding the assets for the liquidity – auditing. Everything is clear and our general agreement that he invest into the reconstruction and that I perform the work. Only the assets invested into liquidity should be returned and regarding the rest, the profits should be split immediately.

33. He should give me all lawyers of all firms for all four companies, because they told me they were disbanded, after which they told me that they were not registered through them. He should give me auditing of the company in London. He should sign everything that was subject to our gentlemen's agreement regarding the company. Now it is time for that. Joint management.

36. Payment of all due so far, written confirmation and then continue."

136. There are nonetheless some real difficulties about Mr Becirovic's evidence as to what was said at the meeting. First, it is surprising that it was Mr Lazurenko who raised the question of the shareholders' agreement and volunteered that the agreement as to the basis of investment should be as Mr Becirovic contends in these proceedings. Secondly, Mr Becirovic said in his oral evidence that he and Mr Lazurenko had been discussing signing a shareholders' agreement for some time prior to the meeting. This was new evidence, not previously given in his very lengthy witness statement for the trial or elsewhere. Thirdly and most significantly, it now appears that Mr Becirovic did not take any steps following the meeting to instruct Mr Colovic to prepare a shareholders' agreement. He did not even mention it in his email sent on 7 October 2010 to Mr Colovic. This seems very surprising in view of the strained relationship which existed between the two of them and which, it appears, continued with the fierce argument on 6 October 2010 and also in view of Mr Becirovic's evidence that by this stage he believed, indeed knew, that Mr Lazurenko had been lying to him about Mr Khan being his principal and that he had suspicions that the funds invested by Mr Lazurenko had in effect been stolen from TNK-BP.
137. The earliest draft shareholders' agreement in evidence prepared following the meeting in October 2010 was prepared by Mr Colovic in August 2011. Mr Colovic was very uncertain in his oral evidence as to whether he had prepared an earlier draft and I am satisfied that, in the absence of any such draft or any record of it, the earliest draft prepared by him is that which is in evidence. Mr Colovic gave evidence, as one would expect, that if Mr Becirovic had instructed him to prepare a draft agreement, he would have done so. I consider it likely, and I find, that Mr Becirovic gave no such instruction to Mr Colovic until shortly before August 2011.
138. I am unable to accept Mr Becirovic's evidence that Mr Lazurenko spelt out and confirmed at the meeting on 5 October 2010 the terms on which funding had been provided for the purchase and renovation of the hotels.
139. Mr Hollington QC on behalf of Mr Becirovic fairly makes the point that, leaving aside the muddled references to BJM as opposed to BJUK, the draft agreements support the proposition that Mr Becirovic believed in July and August 2011 that investment by shareholders by way of capital or loan were not to be repaid prior to the division of profits between the two sides. The same point can, in my judgment, be made of the draft agenda prepared by Mr Becirovic in October 2010.
140. The question which the respondents must face is why in mid-2011 Mr Becirovic would be instructing his lawyer to draft an agreement which he knew to be fundamentally different from that which they say had been made with Mr Lazurenko. The answer provided on behalf of the respondents is that the entire project was by then complete and Mr Becirovic had nothing to lose from seeking to pressurise Mr Lazurenko into giving him a bigger share of what he thought were Mr Lazurenko's ill-gotten gains. This is advanced on the basis that, as Mr Becirovic has accepted in evidence, he thought that it was quite likely that Mr Lazurenko had been funding the project through funds embezzled from TNK-BP. With that in mind, he sought to blackmail Mr Lazurenko into agreeing the new deal. Reliance is placed on an email sent on 18 April 2008 by Mr Becirovic to Mr Lazurenko in which he threatened to arrange a meeting with Mr Khan to "tell him everything". A similar threat was made by Mr Becirovic in the exchange of emails in August 2010. It is not suggested that any further threats were made until an email was sent by Mr Colovic on behalf of Mr Becirovic to BJUK on 16 January 2012. The email attached a request to BJUK to call a general meeting and identified a number of general matters to be dealt with at the proposed meeting. Among them were the following:

"3. Issues concerning problematic investments in Montenegro, allegations of money laundering, problems with the Montenegrin anti-money laundering agency and its investigation regarding the possible procedure of establishing the origin of the invested capital and actual investors.

5. Committing and executing agreements in writing to all verbally agreed terms made by the shareholders of the company."

In fact, as Mr Becirovic accepted in evidence, there were no problems with regard to money laundering nor was there any investigation as regard the origin of the invested capital and the investors. He accepted that he was seeking to put pressure on Mr Lazurenko. Mr Lazurenko's unchallenged evidence is that when Mr Becirovic gave him the draft agreement on 8 March 2012, Mr Becirovic said that if he did not sign it they would be in a fight and he would see Mr Khan the next day.

Conclusion on the Investment Issue

141. In drawing together the various strands so as to arrive at a conclusion, I am acutely conscious that I do not have the benefit either of an unimpeachable witness on one side or the other or clear commercial probabilities or strong documentary evidence pointing to one conclusion.
142. Mr Lazurenko has certain matters on which he is entitled to rely. First, the Bianca spreadsheet is clearly consistent with his case as to the basis of financing the purchase and renovation of the Bianca hotel. Secondly, the bank loans taken out by BJM for the renovation of the Avala are capable of providing some support for his case. Thirdly, I have disbelieved the evidence of Mr Becirovic so far as it relates to an agreement for an increased share of 25% reached in October 2002 as opposed to about April 2004, and his account of the discussion with Mr Lazurenko in October 2010 concerning a shareholders' agreement.
143. Nonetheless, Mr Lazurenko faces formidable difficulties before his case can be accepted. First, his presentation of the case is, as I have found, shot through with dishonesty. His original claim that no part of the investment in the purchase and renovation of the hotels was to be treated as capital was, I have found, a deliberately false case. I am also satisfied that his evidence was deliberately untrue as to his alleged status as an agent for Mr Scheklanov. Throughout his oral evidence he was repeatedly lying on this subject. Nor can he ask the court to disregard the agency agreements which have been declared null and void by the order of Newey J or the false resolution. Secondly, there is no support at all for the figure of €5 million which he seeks to put forward as the agreed amount of capital to be provided for the renovation of the Avala hotel. If that truly was the agreed figure, it is extraordinary that it appears, nowhere in any communication between the parties or in a budget or elsewhere, and that there was no reference to it as costs escalated above that figure.
144. I do not regard the Bianca spreadsheet as providing the level of support for which Mr Lazurenko contends. If it truly represented the shareholders' agreement, as its title states, it is inexplicable that it was not sent by Mr Lazurenko to Mr Becirovic or otherwise recorded in a document to which both were in some way parties. Mr Kitchener QC seized on Mr Becirovic saying that it was possible that he had fleetingly seen it on a computer screen in Mr Lazurenko's office in Moscow. But Mr Becirovic was clear that he did not remember seeing it and I am satisfied that he did not do so. I reject as entirely untrue Mr Lazurenko's case that the spreadsheet was modified by Mr Becirovic and himself over several weeks from the end of August 2004 and that some changes shown in red were made at Mr Becirovic's request.
145. If the spreadsheet genuinely reflected the agreement, it is extraordinary that Mr Lazurenko did not rely on it from the start of these proceedings or at the very least plead the agreement it is said to reflect. Given that the document is headed draft, and was not sent or given to Mr Becirovic, I am satisfied that it was at best no more than a proposal being prepared by Mr Lazurenko. I have already found that Mr Lazurenko was entitled to control the level of expenditure by agreeing or not agreeing particular proposals for renovations. It follows that he was entitled to stipulate as a term for agreeing particular renovation plans that funding was to be provided not as capital but as a loan which would need to be repaid before Mr Becirovic received his share. It is entirely possible that it was such a proposal that Mr Lazurenko was putting down on the Bianca spreadsheet.
146. The bank loans taken by BJM for the renovation of the Avala hotel, though capable of being consistent with and therefore providing support for Mr Lazurenko's case, do not in my judgment provide the level of support which may be derived from the Bianca spreadsheet. They constituted only about one-sixth of the total sum spent on the renovation of the Avala hotel and indeed represented only about a third of the costs for the phase to which they related. I consider it to be quite likely that the reason for raising the loans was that Mr Lazurenko did not have available to him the requisite funds. It is a difficult issue to test because Mr Lazurenko applied for and obtained an order that the source of funds for the investment in the hotels should not be an issue for this trial and he has not put before the court any evidence as to the funds which were available to him from time to time for this investment. If he had wished to establish that there were no cash flow difficulties, there was no reason why he (or Mr Scheklanov, if he had in truth been his principal) could not have put evidence before the court, but he chose not to do so. I consider it likely that the loans were prompted by financial constraints on him. It is clear that in late 2006 and early 2007 Mr Lazurenko was anxious that the company should take out short term loans pending the release of funds held to secure the performance bond which is at least indicative of financial constraints. Mr Lazurenko's clear concern to control expenditure on the renovation does not suggests limitless resources (and also undercuts his case that he was concerned that Mr Becirovic should have an interest only in the net profits because that would provide Mr Becirovic with a strong incentive to control costs).
147. As I have made clear, Mr Becirovic's untruthful evidence concerning the events of October 2002 and October 2010 tells against him. I do not, however, accept the elaborate explanation put forward on behalf of Mr Lazurenko as to why Mr Becirovic was so anxious to date the agreement for an increased share of 25% to October 2002. As for his evidence for the conversation with Mr Lazurenko in October 2010 in which, he said, Mr Lazurenko volunteered that the agreement between them was in the terms put forward by Mr Becirovic, I conclude that this was an attempt to improve the evidence in support of his case rather to invent an entirely false case. In giving instructions to Mr Colovic to prepare a shareholders' agreement in August 2011, and preparing his agenda notes for his meeting with Mr Lazurenko in October 2010, I do not think that he was then inventing a new agreement.
148. Having considered all these various factors, and assessing the quality of the evidence of Mr Lazurenko and Mr Becirovic overall, I cannot accept the evidence of Mr Lazurenko that limits of €8.2 million and €4.7 million were agreed for the amount of capital or sums to be treated as capital to be provided by him in respect of the Avala and Bianca hotels. I find that the agreement reached between Mr Lazurenko and Mr Becirovic was that all the sums provided for the purchase and renovation of the hotels were to be treated as capital as between them and were not to be deducted before calculation of Mr Becirovic's share.
149. There are two further matters to deal with.

Payment-up of shares

150. First, an issue has arisen as regards the payment-up of the shares held by Caldero and formerly held by Mr Becirovic. The shares in question are the 70,000 shares issued and allotted to Mr Becirovic on 3 April 2002 and the 17,501 shares originally allotted at that time to Leibson and transferred by it to Mr Becirovic in 2004. The written resolutions of the directors of BJUK for the allotment of the shares and the issue of share certificates to Leibson and Mr Becirovic, dated 3 April 2002, state that the shares were unpaid. The accounts of BJUK for the years ended 30 November 2003-2008, prepared in 2009-10, showed all the issued shares of the company as being fully paid, although each balance sheet showed a figure of £350,000 for debtors.
151. The accounts of BJUK for the year ended 30 November 2009 contained a note stating that "75% of the ordinary shares capital were paid in May 2010", the same note appearing in the accounts for the next year. It would appear from this, although I have not looked at any documents evidencing it, that Leibson paid a sum equal to the nominal value of the shares held by it in May 2010.
152. Pausing there, and taking account not only of my findings as to the agreement for the provision of funds as capital by Mr Lazurenko's side but also his own case that over €12 million was to be provided by way of capital, I would have thought it implicit in the agreement between the parties that the capital to be provided by Mr Lazurenko's side would, as to the Euro equivalent of £350,000, be applied in paying up the shares issued to Leibson and Mr Becirovic.
153. At some point after the order of Newey J, the provisional liquidators of BJUK demanded that Caldero pay up the shares held by it. Caldero paid that sum, no doubt concerned that otherwise the provisional liquidators might take steps to forfeit the shares. This was referred to in a footnote in the skeleton argument by counsel for Caldero in which they stated "either the provisional liquidators need to pay the monies back or Caldero needs to be reimbursed by the Respondents". Shortly before the trial, Caldero's solicitors had written to the respondents' solicitors drawing attention to this matter and seeking reimbursement of the £87,501 paid in respect of the shares. A claim for reimbursement did not form part of the investment issue directed to be tried and there was no issued claim before the court at the start of the trial. In his opening, Mr Kitchener QC, on behalf of the respondents, said that they were not content for the issue to be dealt with in the course of the trial. He continued that if there were any issue it was disposed of by the order of Newey J which was effectively a settlement of the proceedings.
154. In his closing submissions, Mr Hollington for Caldero submitted that Mr Lazurenko's obligations included an obligation to pay up Mr Becirovic's shares and that Caldero was entitled to be indemnified in respect of the payment made to the provisional liquidators. Mr Hollington invited me to decide as "a question of law" whether it follows from my decision that there is an obligation on the part of the respondents to indemnify Caldero in respect of this payment.
155. In his closing submissions, Mr Kitchener repeated that the point had not been properly raised on this hearing and that it should not be resolved at this stage. In any event, he submitted that the claim failed on four grounds. First, any claim had been settled by the terms of the order of Newey J. Secondly, it would be an abuse for the matter to be raised now, given that it could and should have been raised and disposed of earlier. Thirdly, Caldero paid up the shares in order to avoid forfeiture and so as to be able to sell them under the terms of the order of Newey J and, accordingly, it made the payments for its own purposes. Fourthly, since operational expenditure was not required to be provided by the respondents, any money paid over in respect of the shares must have been provided for operational rather than for reconstruction purposes.
156. This question is further complicated by a concession made in the skeleton of counsel for the respondents dated 11 July 2012 and prepared for the trial fixed to commence in July 2012. The concession was that the respondents were and remained responsible to ensure that Caldero's shares were fully paid up. This concession was made in the context of an argument that Caldero did not have standing to seek a winding-up order because it could neither demonstrate that there would be a surplus available for distribution among shareholders if a winding-up order were made nor say that its shares were not fully paid.
157. The order of Newey J made no reference to this point. The skeleton states that the respondents were prepared to undertake to pay up the shares if the court required it as a condition of not making a winding-up order, and of course the order of Newey J did provide for a winding-up order in the event that the respondents failed to purchase Caldero's shares, but it contains no such undertaking.
158. I have concluded that it would not be right to make an order which finally resolves this point. In the light of what I have earlier said, I remain unclear as to the basis on which the provisional liquidators were entitled to demand payment up of the shares held by Caldero and therefore as to whether Caldero was bound to pay the sum demanded. This has simply not been explored in these proceedings but it is essential to a claim for reimbursement.
159. The respondents' concession in their skeleton was that they were responsible "to ensure that Caldero's shares are fully paid-up". It appears to me quite possible that they did indeed ensure that they were paid up by the payment of sums by way of capital to the company in 2003 and the following years. If, notwithstanding all that, the shares remained unpaid in 2012, I would wish to hear more developed argument as to the relationship between the concession and the terms of the order of Newey J.

Application for a debarring order

160. The other matter relates to an application made by Caldero for an order debarring the respondents from defending the investment issue on the grounds of their conduct, amounting to an abuse of process. I can deal with this shortly. The basis of the application as put to me was that the failure of Mr Lazurenko and Mr Scheklanov to give disclosure of any documents relating in any way to the principal/agent relationship said to exist between them amounted to such an abuse of the process as to make it unfair to Caldero for them to participate in the determination of the issue. Mr Hollington submitted that it was beyond argument that, if Mr Lazurenko had been acting as Mr Scheklanov's agent, there must have been documents relating to it. In my judgment, there were two insuperable obstacles to this application. First, if Mr Lazurenko had been Mr Scheklanov's agent, I do not accept that there must have been disclosable documents. Mr Lazurenko and Mr Scheklanov deny that any such documents existed. That may appear unlikely but it is not impossible. Whether it is true is not a matter which could be determined without hearing their evidence. It was not therefore a matter which could be determined conclusively against the respondents without a trial. The explanation, as I mentioned to Mr Hollington, for the absence of any documents might be that Mr Scheklanov had never been Mr Lazurenko's principal. The absence of any documents supported Mr Hollington's case that Mr Lazurenko had always acted on his own account. This too was a matter which could only be determined at a trial. I did not therefore accede to Mr Hollington's application that I should debar the respondents from participation in the trial. Having had the trial, I have concluded that Mr Scheklanov was never Mr Lazurenko's principal and therefore there was no failure to give disclosure. The problem was not that Mr Lazurenko and Mr Scheklanov were not giving disclosure, the problem was they were not telling the truth about their relationship. Untruthful evidence given before and during a trial is not ground for a debarring order but a basis on which the relevant party's case is rejected, as I have done. I will therefore dismiss the application for a debarring order.
161. As earlier stated, on the Investment Issue I accept Caldero's case.