BL-2022-000438 - [2025] EWHC 2212 (Ch)

Fecha: 22-Ago-2025

The argument that the joint venture was intended to be a 50/50 arrangement and the guarantee is inconsistent with that arrangement

F.1.1.

The argument that the joint venture was intended to be a 50/50 arrangement and the guarantee is inconsistent with that arrangement

58.

I note that, on the sharing of profits and losses under the JVA, in his witness statement, Mr Dunn said: “It was always the agreement that the profits and losses would be divided equally between me on the one hand and Chris and Kostas on the other”. This was a point which Mr Dunn re-affirmed in his oral evidence. The Defendant in his closing submissions appeared to endorse that view, referring to the above passages as part of the “wider factual matrix”, and referring expressly to Mr Kazolides’ half share of the losses.

59.

I do not consider that the guarantee is inconsistent with the joint venture being a 50/50 arrangement as described. In fact, I consider that the guarantee performed a critical role in ensuring that losses were distributed 50/50 between Mr Dunn on the one hand and Mr Kazolides and Mr Stylianou on the other hand. I reach that conclusion on the following basis:

(1)

As explained above, the Company was a vehicle wholly owned by Mr Kazolides (through a nominee) and Mr Stylianou.

(2)

Clause 6(e) of the JVA provided for losses to be shared 50/50 between the Company and Mr Dunn.

(3)

In circumstances where, on the sale of the villas and after using the entire proceeds to part pay its debts, the Company faced a substantial shortfall, there was the prospect that the sums outstanding to Mr Dunn might far exceed the sums owed to the Company under the JVA (i.e. the Deemed Purchase Price of CYP 330,000). In short, there was the possibility that the bulk of the loss might fall on Mr Dunn.

(4)

Whilst under the Net Loss provisions, that loss was to be shared 50/50 between the Company and Mr Dunn, if the Company had expended all of its funds, in practical terms there was no way in which Mr Dunn could require the Company to pay for its share.

(5)

The guarantee performed the function of providing a mechanism for Mr Kazolides and Mr Stylianou to plug this gap by paying for the Company’s shares of the Net Losses.

(6)

As was common ground between the parties, the guarantee is a “see to it” obligation where Mr Kazolides and Mr Stylianou guaranteed that the Company would perform its obligations under the JVA. Any claim under the guarantee sounds in damages, not debt (Moschi v Lep Air Services Ltd [1973] A.C. 331 at 345B, 348H, 357E).

(7)

The damages suffered by Mr Dunn in a shortfall scenario would be capped at the level which the Company had failed to contribute under the loss-sharing arrangements (as required by clause 6(e)), so that he only bore 50% of the Net Losses.

(8)

In the circumstances, I reject the Defendant’s case that there was no guarantee at all. Absent the guarantee clause, if there was a material shortfall and the Company had insufficient funds to bear the loss, Mr Dunn in practice would have had to bear all of the shortfall.

(9)

For the avoidance of doubt, I also reject the Claimant’s case that the guarantee provision would allow Mr Dunn to recover the entirety of his loss (plus interest) from Mr Kazolides, which is what he claims in this action. Such an interpretation would mean that Mr Kazolides would bear the entirety of the loss of the joint venture, even though the joint venture was a failure, and that Mr Dunn would be repaid the entirety of his investment plus 8% compounded over a 17 year period. Such an outcome would be inconsistent with Mr Dunn’s own description of the profit and loss sharing arrangements as quoted in paragraph 58 above.