Magdeev v Tsvetkov [2020] EWHC 887 (Comm) (14 April 2020 )

Magdeev v Tsvetkov [2020] EWHC 887 (Comm) (14 April 2020 )

The court found that the RM Employment Agreement was a sham and not a genuine employment contract, serving as a vehicle to pay interest on the US$10 million loan. The evidence did not establish that the parties agreed to treat salary and other payments as repayments of principal. The resignation letter did not amount to a clear waiver of the claim for repayment of the loan. The loan had not been repaid, and Mr Tsvetkov remained liable under his guarantee. The counterclaims failed on the facts and law.

Citation
[2020] EWHC 887 (Comm)
Parties
Claimant: Mr Rustem Magdeev; Defendant/part 20 Claimant: Mr Dmitry Tsvetkov; Part 20 Defendant: Mr Emil Gaynulin; Part 20 Defendant: Equix Diamonds DMCC (previously EK Diamonds DMCC); Part 20 Defendant: Equix Group Limited
Jurisdiction
England and Wales
Procedural Posture
Commercial Court Claim and Part 20 Proceedings / Final Judgment After Trial
Outcome
Claim allowed; counterclaims dismissed
Legal Topics
Loan Agreements, Guarantees, Illegality, Restitution, Sham Contracts, Employment Contracts, Repayment of Loans, Interest Claims, Counterclaims
Contract Law Commercial Law Restitution Conflict of Laws Loan Agreements Guarantees Illegality Sham Contracts +4 more

Case Brief

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Parties

Mr Rustem Magdeev

Claimant

Mr Dmitry Tsvetkov

Defendant/part 20 Claimant

Mr Emil Gaynulin

Part 20 Defendant

Equix Diamonds DMCC (previously EK Diamonds DMCC)

Part 20 Defendant

Equix Group Limited

Part 20 Defendant

Procedural Posture

Commercial Court Claim and Part 20 Proceedings / Final Judgment After Trial

Legal Issues

  1. 1 Whether Mr Tsvetkov is liable to repay US$10 million loaned by Mr Magdeev or whether it has been repaid
  2. 2 Whether the RM Employment Agreement was a sham and its legal effect
  3. 3 Whether payments made constituted repayments of principal or other obligations

Ratio Decidendi

The court found that the RM Employment Agreement was a sham and not a genuine employment contract, serving as a vehicle to pay interest on the US$10 million loan. The evidence did not establish that the parties agreed to treat salary and other payments as repayments of principal. The resignation letter did not amount to a clear waiver of the claim for repayment of the loan. The loan had not been repaid, and Mr Tsvetkov remained liable under his guarantee. The counterclaims failed on the facts and law.

Court Disposition

Claim allowed; counterclaims dismissed

Orders

  • Mr Tsvetkov is ordered to pay Mr Magdeev US$10 million under the guarantee.
  • Counterclaims by Mr Tsvetkov and Part 20 Defendants are dismissed.