Business Control (Schweiz) AG v Shibalova
[2025] NZHC 1120
•9 May 2025
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2021-488-0001
[2025] NZHC 1120
BETWEEN BUSINESS CONTROL (SCHWEIZ) AG
Plaintiff
AND
INNA SHIBALOVA
Defendant
Hearing: 07 October 2024 to 15 October 2024 Appearances:
S Wroe and T Ashley for Plaintiff Defendant in person
Judgment:
9 May 2025
JUDGMENT OF WILKINSON-SMITH J
This judgment was delivered by me on 9 May 2025 at 3.30 pm.
Pursuant to Rule 11.5 of the High Court Rules.
………………………… Registrar/Deputy Registrar
Solicitors/Counsel:
S Wroe, AucklandSanford & Partners, Rotorua Copy to Defendant
BUSINESS CONTROL (SCHWEIZ) AG v SHIBALOVA [2025] NZHC 1120 [9 May 2025]
Introduction [1]
Background[14]
Pleadings[76]
Issues[123]
Breach of contract[123](1)
Assignment [123](4)
Private Security Act [123](6)
Limitations of Actions Act [123](7)
Quantification of loss[123](9)
Alternative cause of action – quantum meruit[123](11) Quantification of loss [123](15)
Limitation of Actions Act [123](17)
Choice of law[124]
The law in Victoria [129]
Assignment of a chose in action[131]
Contractual interpretation[154]
Contracts for personal services[157]
The PSA[163]
Statutory interpretation[177]
Limitation of Actions[182]
Discussion[185]
Was there an Oral Term in the MPOL Contract to the effect that Ms Shibalova would be liable for payment of the 35 per cent fee only if it was able to be
deducted from the collected amount before it was paid to a family member or bank account?[185]
What is the correct interpretation of the phrase in the contract “collected on your behalf”?[194]
Were monies “collected” on Ms Shibalova’s behalf?[225]
Did Ms Shibalova breach her contract with MPOL?[230]
Did MPOL express an intention to assign its interest in recovery of the 35 per cent fee to BCS?[235]
When was the Assignment Agreement entered into?[245]
Did Mr Grover have authority to bind MPOL when he made the purported assignment?[254]
Was the subject matter of the assignment ascertainable and identifiable when it came into existence?[256]
Did BCS provide consideration for the assignment?[259]
Is the MPOL contract a contract for personal services that could not be assigned?
[260]
Does s 127 of the PSA apply so as to prevent recovery of the fee?[267]
Does Ms Shibalova have a defence under s 5 of the Limitation of Actions Act?
[274]
What is BCS’s loss?[287]
What interest is payable?[290]
Alternative cause of action – quantum meruit[300]
Result[301]
Costs[303]
Introduction
[1] In 2006, Inna Shibalova took USD 10 million from a Hong Kong bank account which she operated with her father, who was a Russian lawyer and businessman. The money was not hers. It is described as the proceeds of a port company sale in Russia.
[2] From those funds, Ms Shibalova transferred USD 9.6 million to an account operated by her married boyfriend, Andrey Ivanov. She believed that he would invest the money on her behalf and leave his wife so that they could be together. Instead, Mr Ivanov stole the money and disappeared.
[3] Ms Shibalova was living in Melbourne. In July 2007, she realised that she had been deceived and engaged the services of a Melbourne-based private investigation firm, MPOL Group Pty Ltd (MPOL), to recover the money. She signed a contract with MPOL (MPOL Contract) agreeing to pay investigation fees, expenses and disbursements, plus 35 per cent of all monies collected on her behalf and returned to her directly or indirectly to a family member or bank account.
[4] MPOL engaged the services of Business Control (Schweiz) AG (BCS), a private investigation firm based in Switzerland. The investigators located the missing money in a Sicilian bank account in around August 2007. They travelled to Sicily and persuaded the Italian police that the money had been stolen from Ms Shibalova. Subsequently the investigators discovered Mr Ivanov living in London and advised authorities. Mr Ivanov was prosecuted through the Italian courts and sentenced to imprisonment. By 2015, all of the money was returned to the Shibalova family.
[5] Ms Shibalova paid the contractually agreed investigation fee, expenses and disbursements, but she did not pay the 35 per cent fee on the money returned. In 2013, MPOL went into liquidation.
[6] BCS claims that MPOL’s contract was assigned to it by an agreement dated 4 September 2010 but actually signed in two parts in around October 2010 and early 2011.
[7] BCS says that as a consequence of the MPOL Contract and the assignment of that contract, it is entitled to be paid the 35 per cent fee on the money recovered.
[8] The claim was filed in the Whangārei High Court as Ms Shibalova is now living near Whangārei.
[9]BCS sues Ms Shibalova for breach of contract and claims:
(a)judgment in the sum of EUR 2,678,215;
(b)interest at the contractual rate of 1.85 per cent per month, or alternatively interest under s 10 of the Interest on Money Claims Act 2016 (IMCA) at a rate and for a period to be determined by the Court; and
(c)costs.
[10]As an alternative cause of action, BCS sues Ms Shibalova for:
(a)quantum meruit damages in the sum of CHF 312,000 and EUR 382,602 as a fee for services rendered;
(b)interest under the relevant provisions of the IMCA; and
(c)costs.
[11]Ms Shibalova defends the claim. She says:
(a)the 35 per cent fee was a collection fee rather than a commission or success fee, which she was only required to pay if the recovered funds came into MPOL’s possession before being returned.
(b)there was no valid assignment of the contract to BCS; and
(c)the MPOL Contract was a contract for personal services incapable of assignment.
[12]Ms Shibalova raises the following affirmative defences:
(a)BCS’s claim is barred by s 127 of the Private Security Act 2004 (Vic) (PSA).1
(b)BCS’s claim is partially statute-barred by the Limitation of Actions Act 1958 (Vic).
[13] All parties are agreed that the applicable law is that of the state of Victoria, Australia, which is where the MPOL Contract was signed.
Background
[14] Ms Shibalova grew up in Russia and moved to Australia when she was 17 years old. In 2006, she was living in Melbourne and studying law at the University of Melbourne. Ms Shibalova’s father is a Russian businessman and lawyer who had access to considerable wealth. He and Ms Shibalova’s mother lived in Russia and were separated. Ms Shibalova also has a sister, Maria Kluyts.
[15] While at university in Melbourne, Ms Shibalova began a relationship with Mr Ivanov, who was also a student. Mr Ivanov was Russian and was married to an Italian woman.
[16] In about June 2006 Ms Shibalova’s father, Alexander Shibalov, concluded negotiations to sell the majority shareholding in the Nakhodka Fishing Port Open Joint Stock Company in Russia. The price was approximately USD 26–27 million. Ms Shibalova says she was named as the majority shareholder in the port, but her father was the beneficial owner of the shares. Following the sale of the shares, Ms Shibalova had access to USD 10 million which was in a Hong Kong bank account. She says that she was to invest the money to provide for herself, her mother and her sister. Ms Shibalova’s father was in a new relationship and Ms Shibalova’s relationship with her father was not entirely positive. She says that she did not trust him to provide for herself, her mother and her sister.
1 As explained later in the judgment, the version of the PSA relevant to this matter is that enacted on 27 June 2007. Accordingly, all references to the PSA in this judgment are to that version of the Act.
[17] In July 2006 Ms Shibalova took USD 10 million from the joint Hong Kong bank account which she operated with her father and transferred it to an account that she controlled. She then transferred USD 9.6 million to Mr Ivanov’s account at the Banca di Roma in Sicily, Italy. Ms Shibalova says that the intention was that the funds would be held in Mr Ivanov’s account on term deposit for a short period before being invested in her name in an infrastructure project in France.
[18] Ms Shibalova believed that Mr Ivanov intended to leave his wife and marry her. Mr Ivanov clearly had no such intention. He left Australia in November 2006, ostensibly to travel to Italy in order to procure a divorce from his wife. He maintained contact with Ms Shibalova and continued to lead her to believe that the money was safely invested on her behalf.
[19] After transferring the money to Mr Ivanov’s Italian bank account in July 2006, Ms Shibalova cut all ties with her family. She changed her telephone number and made it impossible for her family to contact her. In or around September 2006, Ms Shibalova’s parents hired a private investigation firm in Melbourne to locate Ms Shibalova. The private investigator they dealt with was Mark Grover, who was a director of MPOL. Ms Shibalova’s sister Ms Kluyts flew to Melbourne in July 2006 but Ms Shibalova would not speak to her about the missing money or anything else.
[20] In July 2007, Ms Shibalova happened to see Mr Ivanov in Melbourne at a time when she believed him to be in Europe. Ms Shibalova realised that Mr Ivanov had lied to her and when Mr Ivanov would not engage in contact with her, she realised that he had stolen the money.
[21] On 13 July 2007, Ms Shibalova contacted MPOL to seek assistance to recover the transferred funds and other money that she had given Mr Ivanov over the course of their relationship. Apart from the USD 9.6 million, Ms Shibalova had transferred other significant sums of money, including approximately AUD 820,000. She had also purchased a Maserati motor vehicle which she gave to Mr Ivanov.
[22] Ms Shibalova says that it was a complete coincidence that she went to the same private investigation firm that her family had previously engaged to find her.
Mr Grover, for his part, says that MPOL had around 3,000 files at the time Ms Shibalova approached him, and he did not realise that his new client was a person he had previously investigated.
[23] Mr Grover was initially sceptical about Ms Shibalova’s story, involving as it did such a large sum of money and a Russian and Sicilian connection. However, once Mr Grover verified what Ms Shibalova was saying, he agreed that MPOL would act for her. Mr Grover explained to Ms Shibalova that the task would be difficult and there was a real prospect that no money would be recovered. Mr Grover also explained that he would need to engage other investigators and agents as the investigation would be international.
[24] Mr Grover’s first meeting with Ms Shibalova was on 13 July 2007. Very quickly after that meeting, Mr Grover engaged the services of Philip Ryffel of BCS to assist with the European side of the investigation. Glenn Birrell of Gosh Solutions Pty Ltd (Gosh Solutions), another Melbourne-based investigator, was also involved in the investigation from the beginning. Mr Birrell was described as an ex-senior fraud investigator with the Australian police, then working as a private investigator in the same building as MPOL.
[25] On 30 July 2007, Ms Shibalova signed the MPOL Contract. The contract is recorded on MPOL group letterhead and headed “Re: Matter of Andrey Ivanov and request to locate the subject, investigate and establish restitution for the moneys stolen from to you.”2
[26]The contract states:
Inna Shibalova has engaged MPOL Group Pty Ltd and its agents to conduct inquiries to locate the current whereabouts of Andrey IVANOV that relate to the recovery of moneys owed (“the matter”).
To our professional costs initially, work performed in the matter shall be undertaken on a fee for service basis on the following terms:
(1)Investigation hourly fee: $150.00
(2)Travel hourly fee: $150.00
2 The heading appears to contain a typographical error.
(3)Kilometre fee (per km) $.75
In addition to the above fees, administrative, Debt recovery and disbursement charges apply, including but not limited to:
(1)All travel, and related disbursements incurred as per AMEX charge sheet
$ At Cost
(2)All investigators and consultants hired as per [their] charges
$ As invoiced
(3)Mobile and long distance telephone calls are chargeable at Telstra rates, as published from time-to-time.
(4)All monies collected on your behalf in regards to this matter and returned to you directly or indirectly to a family member or bank account will incur a fee of 35% of the collected amount.
A deposit in the amount of $40,000 is payable.
MPOL Group Pty Ltd’s ‘Conditions of Sale’ shall apply - attached.
[27] The standard conditions provide that those conditions are to be governed by the law in force in the state of Victoria, Australia.
[28] Mr Grover says that it was MPOL’s practice to charge commission, fees and disbursements, and that he would not accept lower than 30 per cent for the commission. Nor would MPOL operate on a commission-only basis as the cost of paying those who would need to be involved and the cost of international travel would be extremely high. Mr Grover says that a fees-only arrangement would not have been attractive enough for MPOL to take on such a risky and all-consuming engagement. The work involved in the investigation meant that MPOL had to turn down other work.
[29] MPOL entered into separate agreements with the other investigators that it engaged to assist including Mr Ryffel of BCS and Mr Birrell of Gosh Solutions. Those agreements provided for payment of fees and disbursements, and for a share in the 35 per cent charge on the recovered money.
[30] On 16 July 2007, at the instigation of Mr Grover, Ms Shibalova met with Mr Birrell to discuss the investigation. Mr Birrell took a detailed account from
Ms Shibalova setting out the background and circumstances which led to her taking such a large sum of money and transferring it to Mr Ivanov.
[31] Ms Shibalova described to Mr Birrell how she had travelled to Hong Kong so she could be present when her father transferred the USD 10 million to an account of which she was a signatory. She explained that she immediately moved the money to an account that she had opened in her own name and then sent the majority of it to Mr Ivanov’s bank account in Italy. She told her father that she had given it to the Red Cross.
[32] Mr Birrell attempted to engage the interest of the Victorian police and took Ms Shibalova to the police to report the theft. According to Ms Shibalova the police opened a file but did not progress the matter.
[33] Mr Ryffel’s role was to establish whether the money could be traced in Europe. In August 2007, BCS traced the stolen funds to a bank account in Catania, Sicily. Mr Grover and Mr Ryffel travelled to Catania where they were met with suspicion by the Sicilian police, who were aware of the transfer of the money as it was the largest deposit ever made by electronic funds transfer into a Sicilian bank account. The Sicilian police apparently suspected that the money was the proceeds of crime, and it was frozen and potentially liable to forfeiture. This caused some problems for the investigators, who were arrested. Eventually, however, the Sicilian police accepted that the funds were legitimately obtained by Ms Shibalova’s family and had been stolen from her.
[34] The money in the Sicilian bank account remained frozen by order of an Italian court. The total amount frozen was identified in the Report of Release from Seizure and Restitution of Sums eventually issued by the Italian Court as EUR 7,039,246.04.
[35] In 2008 the private investigators discovered that Mr Ivanov was living in London with his wife. They advised the Italian authorities and criminal and civil proceedings were commenced against Mr Ivanov in Italy.
[36] Ms Shibalova was entitled to be represented in the criminal proceedings against Mr Ivanov, and Mr Ryffel was concerned to find a reliable Sicilian lawyer to assist Ms Shibalova, particularly given that Catania is said to be a known mafia town. Initially, Mr Ryffel engaged German lawyers with Italian connections in order to help break down the cultural barriers faced by a Swiss investigator in Italy.
[37] With the assistance of the German lawyers, Mr Ryffel travelled to Catania and met several Sicilian lawyers, one of whom was Nino Grippaldi. Mr Ryffel made enquiries to establish whether Mr Grippaldi would be suitable to act for Ms Shibalova. According to Mr Ryffel, Mr Grippaldi was well-known and respected, and his involvement opened many doors within a short time.
[38] A separate civil lawyer was engaged, and parallel civil proceedings were commenced in case the criminal case was unsuccessful. Mr Ryffel and Mr Grover made frequent trips to Catania to meet with the Italian lawyers and with investigators from the Guardia di Finanza (the Italian law enforcement agency responsible for dealing with financial crimes), and later attended court hearings.
[39] Between August and December 2007, Mr Ryffel visited Catania seven times. He says that the visits were necessary in order to obtain the cooperation of Italian lawyers and Guardia di Finanza officers.
[40] Initially, MPOL’s financial arrangement with BCS and Mr Ryffel was based on a verbal “handshake” deal regarding fees. It was agreed that Mr Ryffel and BCS would work on the investigation for a discounted daily rate, and that BCS would get part of the 35 per cent fee if the money was recovered. The agreement was later formalised in a written contract. Mr Ryffel says that his usual daily rate was CHF 1,200, but he agreed to charge CHF 600 on the basis that he would share in what he understood was a commission or success fee.
[41] Ms Shibalova formed, or appeared to form, a close personal relationship with both Mr Grover and Mr Ryffel. At one point Ms Shibalova moved to Europe to be closer to the investigation. She shared a flat in Zurich with Mr Ryffel and a friend of his. She was in daily contact with Mr Ryffel and worked in his office.
[42] Ms Shibalova says that she paid approximately AUD 450,000 to MPOL in fees and disbursements between August 2007 and December 2010. Mr Grover says that substantial amounts were paid out during the investigation as disbursements, including the fees of the Italian lawyers, multiple trips to Europe, Mr Birrell’s fees, and Mr Ryffel’s fees and disbursements up until 2010. Mr Ryffel said that in order to trace the money initially and to locate Mr Ivanov, substantial payments were made for information.
[43] Ms Shibalova says she paid the Italian lawyers’ fees directly (although it seems that the civil lawyer maintains that he was never paid for the entirety of his invoices). In 2010, Ms Shibalova also lent Mr Grover a sum of money which she says was AUD 50,000.
[44] By late 2010, Mr Grover was having trouble paying BCS. He was losing confidence that Ms Shibalova and her family would pay the 35 per cent fee if the money was returned. Mr Ryffel was confident that Ms Shibalova would pay and was willing to continue his involvement in the matter.
[45] Mr Grover was in Zurich in July and August 2010. He says that he and Mr Ryffel discussed possible solutions to the financial issues between them including. whether BCS might take assignment of the rights under the MPOL Contract. Mr Grover said that he mentioned to Ms Shibalova the possibility that the MPOL Contract might be assigned to BCS as he was going through a marriage break-up and was involved in a relationship property division. He had little appetite for legal proceedings to enforce the contract with Ms Shibalova. Ms Shibalova says that the issue of assignment of the MPOL Contract was not discussed with her. In evidence, Mr Grover agreed that the assignment was not discussed in any detail.
[46] In an email dated 6 October 2010, Mr Ryffel emailed Mr Grover with the subject line “Detailed invoice”. Mr Ryffel advised that he was flying to Catania again and that the upcoming criminal trial would require travel twice a month for approximately four to five months. Mr Ryffel advised that many of the expenses (including flights, hotels and taxis) had been covered by BCS since July 2008 and that, according to the agreement that he had with MPOL dated 4 April 2008, these expenses
should be reimbursed when invoiced. Mr Ryffel asked Mr Grover if he was able to settle the costs and said:
…Alternatively, we could come to a new agreement regarding allocation of the success fee. I will consider it a fair solution to share the success fee and increase my part to 11.5% under the circumstances that I have to cover all of my costs myself…
[47] On 7 October 2010, Mr Grover sent an email to Ms Shibalova regarding Mr Ryffel’s expenses. He advised Ms Shibalova that he had received an invoice from Mr Ryffel for his expenses on the case to date. Mr Grover said in the email that he did not recall instructing Mr Ryffel’s attendance on these matters, and he had not given Ms Shibalova permission to speak directly to Mr Ryffel, who was subcontracted to MPOL, about the contract between MPOL and Ms Shibalova. Mr Grover reminded Ms Shibalova that he was responsible for bills and commissions at the time of settlement of the court case, which included those of Mr Birrell, the Italian lawyers and Mr Ryffel.
[48] The expense report/invoice from Mr Ryffel dated 5 October 2010 shows a daily rate of CHF 600 (being half of Mr Ryffel’s usual daily rate of CHF 1,200) and lists various items including disbursements and expenses relating to travel and hotels.
[49] On 10 January 2011 Ms Shibalova wrote to Mr Ryffel saying that prior to Christmas 2010, Mr Grover had asked her to assist him to pay Mr Ryffel’s invoice.
[50]Ms Shibalova said:
As we all have too much invested in this case (both money and-wise) I feel obligated to continue investing my time and money in it. Emotional aspect aside, it has certainly been challenging for me to keep up with all the expenses. I explained to Mark that I simply [can’t] afford to pay your or Mark’s bills. I owe Mark so much money that [without] his kindness or support we wouldn’t even be where we are today.
Having said that, I am also acutely aware of Mark’s situation and know what he is going through (having gone through similar experience Harry). The pressures are draining and it’s the time when you find who your real or true friends are. I know that from when I was until November with David Phillips, that Mark is basically broke his wife was the [signatory] of all assets and cash on hand.
I am not sure what transpires between you and Mark in relation to your invoice but hope that you can show some leniency and human kindness a very special person that has changed the [lives] of many people his networks and charity work. You will never find a more man than Mark, he is not greedy and will never ask anything of you.
Philip I am unable [to reimburse] Mark your invoice as I don’t have the money. Especially in light of the real possibility to recovery from Italy this year I ask that you be kind to a man that has always done right by all.
[51]Mr Ryffel replied by email dated 10 January 2011 saying:
Just received your Email. there is no worry regarding [outstanding] invoices concerning my part. Mark and I found a solution and everything is settled including this coming trip.
I don’t hope there will be much further expenses have to be done in this case and if so we just have to find a solution to get around.
Looking forward seeing you soon. Have a safe trip to Italy.
[52] Mr Ryffel says that the “solution” he and Mr Grover had found was the assignment of MPOL’s contract to BCS. By letter dated 4 September 2010, they had recorded an agreement (Assignment Agreement) as follows:
MPOL Group Ltd (“MPOL”) has been engaged by Inna Shibalova (the “Client”) to provide investigative and recovery services (the “MPOL Services”) in relation to establishing the whereabouts of Andrey Ivanov and recovering from Andrey Ivanov monies which were transferred to Andrey Ivanov by Inna Shibalova (the “Matter”, of which she says beneficially belonged to her father, Alexander Shibalov).
MPOL has engaged Business Control (Schweiz) AG Ltd (“BCS”) to provide investigative and recovery services (the “BCS Services”) to take over from MPOL in relation to the Matter. Due to the fact that BCS is located in Europe, and that the Matter would therefore be much more recoverable by BCS, MPOL transfers its entire interest and claim in the Matter to BCS.
This letter agreement (the “Agreement”) sets out the terms and conditions under which the BCS Services have been and will be provided and under which the entire interest and claim in the Matter is transferred to BCS.
The parties acknowledge and agree that BCS has provided the BCS Services as from 1. July 2007 and that BCS will continue to provide such services until the parties were to agree otherwise. BCS will proceed as it shall deem appropriate to effect a recovery in the Matter and BCS will do that at its own expense.
The parties agree and acknowledge that MPOL has signed a contract (the “Contract”) with the Client on Monday 30. July 2007. That contract states that all monies collected on behalf of the Client in regards to the Matter
and returned to the Client directly or indirectly to a family member or bank account will incur a fee of 35% of the collected amount.
The parties agree that MPOL transfers its entire interest and claim in this fee to BCS for its Services provided in the Matter. The fee of 35% (or whatever other amount can be recovered with regards to the Matter) shall directly by the Client be transferred to a bank account owned by BCS in Switzerland.
Therefore, Philip Ryffel or one of his designated subcontractors are allowed to do any negotiations related to the commission.
This contract cannot be cancelled at an unreasonable time preventing BCS from receiving monies based on its agreed right to 35% of all amounts directly or indirectly recovered for the Client in relation to the Matter.
This Agreement shall be governed by Swiss law.
If any provision of this Agreement is held to be illegal, invalid or unenforceable, in whole or in part, under any applicable enactment or rule of law, such illegality, invalidity or unenforceability shall not affect the remainder of this Agreement, and the Parties shall in good faith attempt to substitute a legal, valid and enforceable provision which achieves to the nearest extent possible the same effect as would have been achieved by the illegal, invalid or unenforceable provision.
Please indicate your acknowledgement and acceptance of the foregoing terms and conditions by signing this Agreement.
[53] Mr Ryffel says that the Assignment Agreement was backdated and likely signed around October 2010.
[54]An annex to the Assignment Agreement (Annex) is undated and provides:
Annex to the Service Agreement signed on the 4. September 2010
Between
(the “Parties”)
Business Control (Schweiz) AG (CHE-112.690.512), Bahnhofstrasse 71, CH-8001 Zürich (hereinafter referred to as “BCS”)
and
MPOL Group PTY LTD (ACN 100 833 752) of 1044 Dandenong Rd Carnegie in the State of Victoria (hereinafter referred to as “MPOL Group”)
Whereas:
AMPOL Group entered into an Investigations Agreement with lnna Shibalova (the “Client”) dated 30. July 2007 (“The MPOL Agreement”).
B.The primary purpose of the MPOL Agreement was to investigate and recover substantial funds taken by Andrey Ivanov from bank accounts maintained by lnna Shibalova (“the primary purpose”).
C.The parties acknowledge and agree that BCS has provided the BCS Services as from 1. July 2007 and that BCS will continue to provide such services until the parties were to agree otherwise. BCS will proceed as it shall deem appropriate to effect a recovery in the Matter and BCS will do that at its own expense.
D.MPOL Group entered into an Investigations and recovery service agreement (the “Service Agreement”) with BCS on the 4. September 2010, which stated that the parties agree and acknowledge that MPOL had signed the MPOL Agreement with the Client on Monday, 30. July 2007.
E.The MPOL Agreement states that all monies collected on behalf of the Client in regards to the Matter and returned to the Client directly or indirectly to a family member or bank account will incur a fee of 35% of the collected amount.
F . The parties agreed in the Service Agreement that MPOL transferred its entire interest and claim in this fee of 35% to BCS for its Services provided in the Matter, and that whatever amount of money could be recovered from the Client should directly be transferred to a bank account owned by BCS.
Agreed:
1.BCS will deduct all cost (inter alia actual expenses incurred and third- parties cost as invoiced to BCS) it had to borne from the received fee for the recovery. That will result in the distributable sum for the Parties (the “distributable sum”).
2.50% of the distributable sum shall be transferred as directed by
Mark Grover to a Swiss Bank Account to be opened Mark Grover or an Account in France. 50% of the distributable sum shall remain with BCS.
3.All provisions contained in this annex are only applicable as far as they put BCS in an advantageous position with relation to the agreement signed by the parties on the 4. April 2008. Otherwise the agreement from the 4. April 2008 between the parties remains applicable.
4.This Annex shall be governed by Swiss law.
5.If any provision of this Annex is held to be illegal, invalid or unenforceable, in whole or in part, under any applicable enactment or rule of law, such illegality, invalidity or unenforceability shall not affect the remainder of this Annex, and the Parties shall in good faith attempt to substitute a legal, valid and enforceable provision which achieves to the nearest extent possible the same effect as would have been achieved by the illegal, invalid or unenforceable provision.
[55] Mr Ryffel was in Australia between mid-December 2010 and mid-January 2011 and said that the Annex was probably signed during that time although he does not recall exactly.
[56] Ms Shibalova contends that the Assignment Agreement and Annex cannot have been signed until December 2013 at the earliest because of a reference in the Annex to a Swiss business number CHE-112.690.512 which she says was not in use until December 2013. Ms Shibalova says that Mr Grover had no ability to assign the MPOL Contract because MPOL was placed into liquidation in May 2013. Ms Shibalova also says that Mr Grover cannot have assigned the MPOL Contract to BCS in January 2011 because Mr Grover signed a contract with Mr Birrell of Gosh Solutions relating to the “commission” in February 2011.
[57] The evidence was that the Swiss business numbers (called UID numbers) were assigned to Swiss companies in January 2011, but were not in common use until 2013. Mr Ryffel says that BCS’s UID number became accessible on the public register from January 2011. The UID number was included in the Annex which Mr Ryffel says was most likely signed in January 2011, but not in the Assignment Agreement which Mr Ryffel says was most likely signed at the end of 2010.
[58] By 2011 Mr Grover was under pressure from Mr Birrell of Gosh Solutions about payment of Mr Birrell’s invoices. In February 2011, Mr Grover and MPOL signed a contract with Mr Birrell and Gosh Solutions regarding the “commission". Mr Grover says that the February 2011 contract simply recorded the earlier verbal arrangement and was signed after the MPOL Contract had been assigned to BCS. Mr Grover said he did not want to tell Mr Birrell about the Assignment Agreement and he trusted Mr Ryffel to honour the agreement with Mr Birrell.
[59] Mr Birrell subsequently proposed to Ms Shibalova that she place a caveat on her property to secure payment of his fees. He said in a letter dated 13 April 2011 that he had provided his services at a lower rate and charged for reduced hours as well as becoming involved urgently in July 2007 while on holiday. Mr Birrell said that his company had not been paid since 2008 and that he had spent approximately 650 hours on the investigation. Mr Birrell said in the letter that “Mark (MPOL) is under
tremendous financial pressure as he has to my knowledge had to meet the majority of the financial commitments of this investigation”. Mr Birrell said the non-payment for his time had placed considerable financial strain on his company and pressure on his family, and the time could have been spent more productively elsewhere.
[60]Ms Shibalova replied to Mr Birrell on 3 May 2011, and said:
I share your sentiments and concerns and do not doubt that the money from Italy will be recovered by the end of this year 2011. As discussed with Mark, the charging of my property was not discussed at or since the time Mark and I made an agreement as to his fees. I told Mark in March 2011 (before leaving for Catania yet again) that I was surprised and disappointed about this development (the charging of the property idea). I am a person of my word and do not intend to renege on my agreement with Mark. I assure you that everyone will be paid for their time and expenses when the money is returned from Italy. If the money is not returned, then we will sit down and discuss an alternative solution.
[61] On 5 May 2011 Ms Shibalova sent a further reassuring email to Mr Birrell, copied to Mr Grover, stating:
I would never “burn you”, Mark or David Philips. I regard you all as my friends and mentors. You have assisted me and done for me more than my own father in my lifetime. I look up to you all. Why would I want to turn on you?! It’s just stupid. I am a straight shooter and always mean what I say. I always had intended and still intend to honour my agreement with Mark (and that means David and you plus the Italians).
[62] There is no reference in this correspondence to Ms Shibalova having already paid a significant sum to MPOL (which she says was in the region of AUD 450,000). However, the fact that Ms Shibalova paid fees and expenses between 2007 and 2010 is not disputed by Mr Grover although the amount is not confirmed. It appears that MPOL paid some lawyers’ fees, including EUR 10,000 to Mr Grippaldi in 2009, and that MPOL paid invoices and costs in 2007 and 2008 to Gosh Solutions and BCS as well as disbursements, fees to informants and costs associated with tracing the money and Mr Ivanov. Ms Shibalova also advanced a loan to Mr Grover. The amount of the loan is in dispute, and it is not clear to what extent, if any, it has been repaid.
[63] Ms Shibalova says that unbeknown to any of the investigators, she entered into a side arrangement with her father in 2007. That agreement, dated 2 October 2007,
was recorded in Russian but was produced in a translation.3 In a letter dated 17 September 2007, Ms Shibalova’s father agreed to help her as a witness in the Italian court proceedings on the condition that she make and execute a confidential agreement with him transferring all her rights, obligations and liabilities in relation to payments to any legal or physical persons; especially all rights, obligations and liabilities to Mr Grover. It was stipulated that Ms Shibalova must not disclose the agreement to any third party. The letter continued that:
… all money that may be won and received in case you are successful in your legal proceedings against Ivanov must be transferred (either by you or by your lawyers) to an account nominated by me. I, in turn, take full responsibility for performing all your obligations and liabilities in relation to payments or financial arrangements between you and any legal or physical persons that may be involved in or [carry out] work in your legal proceeding against Ivanov.
[64] In the letter, Mr Shibalov guaranteed partial payment to the Italian lawyers. He said he would not pay all of their ongoing bills. He categorically forbade Ms Shibalova to make any advance payments to Mr Grover, citing distrust of Mr Grover.
[65] BCS does not accept the authenticity of this letter, nor the agreement dated 2 October 2007, and suggested to Ms Shibalova that they may have been fabricated.
[66] By May 2011, Ms Shibalova and Mr Grover had fallen out. Mr Grover had not repaid the money Ms Shibalova had lent him in 2010. He sent abusive emails to Ms Shibalova. Mr Grover says that he was angry because a Russian acquaintance in Melbourne had called to say that Ms Shibalova’s father had been making enquiries and had told the acquaintance that his family would shortly owe Mr Grover some money and he did not plan to pay. At this time, Mr Grover was in considerable personal and professional trouble and was under financial pressure. He had separated from his wife in 2010 and was going through a difficult divorce. He was also suffering from depression.
[67] Mr Ivanov was convicted of the criminal charges he faced on 9 February 2012. He was sentenced to imprisonment and an order was made for restitution of the stolen
3 The copy of this agreement provided to the Court is unsigned.
funds to Ms Shibalova. The Italian Court insisted that the funds could only be returned to Ms Shibalova and not to her father. Mr Ivanov filed an appeal which related to half of the frozen funds only.
[68] On 29 May 2012 Mr Grippaldi advised Ms Shibalova that half of the money was being released. In a further email dated 30 May 2012, Mr Grippaldi sought instructions on how to deal with questions from the investigators. Ms Shibalova replied that in her opinion, the best answer for Mr Grippaldi to provide in response to questions from the investigators was that he was not authorised to release Ms Shibalova’s information to anyone other than her. She said that the investigators were welcome to get in touch with her to ask their questions. The first half of the funds was released by the Italian authorities to Mr Grippaldi in 2012 pursuant to a power of attorney Ms Shibalova had executed so that Mr Grippaldi could receive the money on her behalf.
[69] In December 2012, Mr Grippaldi advised Mr Ryffel that they were awaiting an appeal hearing and the money was in a government-controlled fund. This was not true as only half of the money was still held by Italian authorities, and half had already been returned.
[70] By 2013, MPOL was in financial difficulty. A liquidator was appointed in May 2013. Mr Grover was charged with improperly taking money from one of his companies and was bankrupted in 2015.
[71] In 2015, Mr Ivanov’s appeal was dismissed, and in April 2015 an order was made for the release of the remaining funds. Those funds were again paid to Mr Grippaldi pursuant to the power of attorney Ms Shibalova had executed. In an email to Mr Grover dated 24 November 2015, Mr Ryffel said that Mr Grippaldi had told him the civil trial could be another couple of years, and the money was still in the Ministry of Justice fund. What Mr Grippaldi told Mr Ryffel about that was not true.
[72] Mr Ryffel continued to attempt to contact Ms Shibalova’s family. In 2016 he contacted Ms Kluyts, who was living in Hong Kong, asking for help to contact or arrange a meeting with her father. In 2017, Mr Ryffel advised Ms Kluyts that he was
the official point of contact with regard to the implementation of the agreement between Ms Shibalova and Mr Grover. In 2018, Mr Ryffel located Mr Shibalov in Latvia. By this stage Mr Ryffel believed that the stolen money had been returned, but that had not been confirmed to him. Mr Ryffel issued an invoice addressed to “Mr Alexander Shibalov or Mrs Inna Shibalova” dated 24 May 2018 in the sum of EUR 2,864,938.61, as this was 35 per cent of the sum that he believed had been collected and returned to the family (35 per cent of USD 9,600,000).
[73] In order to deliver the invoice, Mr Ryffel set up a meeting with Mr Shibalov in Latvia on the pretext that he was a notary who would assist Mr Shibalov with the sale of an apartment. Mr Ryffel gave Mr Shibalov the invoice and Mr Shibalov signed it. The exact date on which this meeting occurred is not clear; however, it was at that meeting that Mr Ryffel learned for the first time that the money had been returned in full. Mr Shibalov promised that Ms Kluyts would be in touch in the next few weeks and that she would pay the 35 per cent fee. That did not happen.
[74] In February 2020, Mr Ryffel visited Ms Kluyts in Hong Kong and was told that her father had lied, and she had not received any money. Ms Kluyts told Mr Ryffel that the contract was between her sister and Mr Grover, and that he should look to Ms Shibalova for payment.
[75] Proceedings against Ms Shibalova were subsequently filed in New Zealand by BCS.
Pleadings
[76] BCS filed a statement of claim dated 21 December 2020 pleading breach of contract and claiming compensatory damages in the amount of USD 3,360,000 together with interest at the contractual rate of 1.85 per cent per month, or alternatively interest at a rate and for a period to be determined by the Court, plus costs.
[77] Ms Shibalova filed a statement of defence dated 16 March 2021. She pleaded that at the time the MPOL Contract was signed, it was agreed as a further oral term of the contract that she was liable for the payment of 35 per cent of the collected amount returned indirectly to a family member only if that payment was able to be deducted
from the collected amount before it was paid to a family member, because she otherwise had no means to pay the commission (Oral Term).
[78] She pleaded that no monies were collected by BCS or MPOL on her behalf and returned to her directly or indirectly to a family member or bank account; or alternatively, if any monies were collected on her behalf and returned, they were collected more than six years before the proceedings were filed,4 and the claim was outside the limitation period under the Limitation Act 1950 or the Limitation Act 2010 (whichever applied).
[79] An amended statement of claim dated 20 May 2021 was filed and was eventually followed by a second amended statement of claim dated 24 November 2021. The second amended statement of claim raised quantum meruit as an alternative cause of action and sought damages to be quantified prior to trial, together with interest and costs.
[80] Ms Shibalova filed a statement of defence to the second amended statement of defence denying all matters relating to the quantum meruit claim. She admitted that as a result of MPOL’s efforts funds were traced to a bank account in Italy and that attempts to negotiate the return of the funds was unsuccessful. She said that Mr Birrell had no involvement after 2008. She admitted that by order dated 14 September 2015 the Court of Catania authorised the return of funds to her but said the funds were not paid to her but were paid directly to her father at the direction of Mr Grippaldi and/or the Italian authorities.
[81] BCS filed a reply to the second amended statement of defence dated 5 September 2022 saying that it had insufficient knowledge of whether the funds returned were paid to the defendant or her father but admitting they were paid to a family member.
[82] A third amended statement of claim dated 1 July 2024 was filed. The first cause of action, namely breach of contract, was materially unchanged. The alternative
4 Ms Shibalova took the date of filing as 5 January 2021.
cause of action, quantum meruit, was amended to quantify the claim for damages as CHF 55,000 for unpaid invoices and CHF 372,000 as a fee for services rendered.
[83] A statement of defence to the third amended statement of claim, dated 13 August 2024 was filed by Ms Shibalova. Ms Shibalova pleaded that the MPOL Contract was ambiguous and that the alleged commission clause had two possible meanings and may refer more generally to monies recovered on the defendant’s behalf or more specifically to monies which were first transferred to MPOL’s account. The MPOL Contract is silent on the interpretation of the term “collection”.
[84] Ms Shibalova pleaded that she was not given notice of any purported transfer of the MPOL Contract to BCS, and the purported assignment of the MPOL Contract to BCS was ineffective in equity or at all.
[85] Ms Shibalova pleaded that MPOL did not perform any services pursuant to the contract between December 2007 and August 2010. She pleaded that such services as were provided by MPOL up to and including December 2007 were paid for; and if BCS provided any investigation services, they were not provided to Ms Shibalova or provided at her request, or provided on her behalf, or pursuant to her contract with MPOL.
[86] Ms Shibalova pleaded that no monies were collected by BCS or MPOL on her behalf; no monies were returned to her directly; no monies were returned to her indirectly; and the claim by BCS was statute-barred as it was filed outside the limitation period under the Limitations of Actions Act 1958 (Vic).
[87]For the first time, Ms Shibalova also sought to raise affirmative defences.
[88] First, she pleaded a statutory bar pursuant to s 127 of the PSA, saying that a party suing for a commission, fee, gain or reward must have a Victorian licence if the PSA required them to have a licence to provide the relevant services.
[89] Secondly, Ms Shibalova pleaded that the MPOL Contract was a contract for personal services which was incapable of being transferred or assigned without her consent under the laws of Victoria.
[90] Thirdly, Ms Shibalova pleaded that the alleged commission clause was a penalty in equity. Ms Shibalova said she paid MPOL approximately AUD 450,000 in 2007 and 2008. Any further sums above and beyond that approximate figure should be considered a penalty and unenforceable.
[91] As a fourth affirmative defence, Ms Shibalova pleaded reliance on the Fair Trading Act 1999 (Vic), which prohibits deceptive or unconscionable conduct. She pleaded that the commission clause in the MPOL contract was an unfair term because it:
(a)was an additional cost and was excluded from the up-front price;
(b)caused a significant imbalance in the parties’ rights and obligations under the contract;
(c)was not reasonably necessary to protect a legitimate interest of the trader; and
(d)would cause detriment to the consumer in that it would result in her paying an extravagant penalty.
[92] Ms Shibalova also sought to amend her pleadings to rely on the Limitation of Actions Act 1958 (Vic) instead of the New Zealand Limitations Act 2010.
[93] Section 5 of the Limitation of Actions Act prevents a claimant from bringing an action after the expiration of six years from the date on which the cause of action accrues. Ms Shibalova pleaded that the money on which the commission was payable was recovered in two tranches, with the first being recovered in 2012. She pleaded that any claim against those funds was statute barred.
[94] In addition, Ms Shibalova pleaded reliance on the Oral Term, namely that she was not liable to pay commission on any money recovered and returned indirectly to a family member unless the “commission” could be deducted from the collected amount before it was paid to that family member.
[95] Ms Shibalova further pleaded that the MPOL Contract, and in particular the commission clause, is subject to equities. She said that the MPOL Contract was drafted and approved by MPOL, and pursuant to the rule of contra proferentem, an ambiguous contractual term should be construed against the party that seeks to rely on it.
[96] In respect of the alternative cause of action of quantum meruit, Ms Shibalova pleaded that she had no knowledge of Mr Ryffel or BCS performing valuable services for her benefit; and that in any event, whatever work was performed by BCS, it was not performed at her request, with her consent or knowledge, or on her behalf.
[97] In respect of the quantum meruit claim, Ms Shibalova also pleaded reliance on the Limitations of Actions Act.
[98] Together with the new pleadings, to which BCS objected, Ms Shibalova served a statement from an Australian lawyer, Nigel Evans, addressing the issue of whether the MPOL Contract was a contract for personal services. BCS opposed the late evidence from Mr Evans, saying the issue had already been covered in expert evidence by Victorian legal experts Mr Harvey KC and Professor Liew.
[99] BCS obtained a supplementary report from Mr Harvey to address the law in relation to the PSA and Limitations of Actions Act and as to whether a Victorian Court would be likely to find that the MPOL contract was a contract for personal services.
[100] The inclusion of additional and affirmative defences in the statement of defence to the third amended statement of claim was the subject of a minute by Jagose J dated 28 August 2024.5 Jagose J noted that the contended affirmative
5 Business Control (Schweiz) AG v Shibalova HC Auckland CIV-2021-488-0001, 28 August 2024 (Minute).
defences appeared to be more detailed particularisations of Ms Shibalova’s direct denial of liability on the core pleading, substantially on the grounds that Victorian State law would not entitle enforcement of the assigned contract.6 Ms Shibalova’s application for adjournment of the fixture was dismissed and further timetable directions were made in respect of additional expert evidence relating only to any of the affirmative defences.
[101] BCS applied at the beginning of the trial for leave to file a fourth amended statement of claim dated 7 October 2024, seeking the following amendments to its pleadings:
(1)Amendment to the amount of damages sought in respect of the breach of contract claim from USD 3,360,000 to EUR 2,678,215.
(2)To amend para 65 from “Mr Ryffel worked in excess of 2,500 on this investigation, approximately 310 days, after the assignment in 2010” to “Mr Ryffel worked in excess of 2,500 hours on this investigation, approximately 310 days, before and after the assignment in 2010”.
(3)Amendment of the sentence in para 66, “Mr Ryffel’s reasonable fee for that work, through the Plaintiff, would have been CHF 372,000”, to add the words “plus 5% commission”.
(4)Addition of para 67: “BCS and Mr Ryffel received payment of CHF 60,000”.
(5)Amendment of the damages sought in respect of the quantum meruit cause of action from:
(a) CHF 55,000 for unpaid invoices; and
(b) CHF 372,000 as a fee for services rendered.
6 At [6].
to damages of:
(a) CHF 312,000 and EUR 382,602 as a fee for services rendered.
[102] Rule 7.7 of the High Court Rules 2016 governs steps taken after the close of pleadings date. That rule relevantly provides:
7.7 Steps after close of pleadings date restricted
(1) No statement of defence or amended pleading or affidavit may be filed, and no interlocutory application may be made or step taken, after the close of pleadings date without the leave of a Judge.
…
[103] The principles to be applied when considering whether to give leave to amend pleadings after the close of pleadings date were set out in Body Corporate 32561 v McDonough,7 and were summarised in Oraka Technologies Ltd v Geostel Vision Ltd as follows:8
(a)The paramount consideration is that the parties should have every opportunity to ensure that the real controversy goes to trial so as to secure the just determination of the proceeding.
(b)Due regard must also be had to whether the proposed amendment will cause significant delay or prejudice another party.
(c)Even where serious prejudice and significant delay will arise, an amended pleading may nevertheless be permitted if the proposed claim has substantial merit and will not cause injustice to the defendants.
(d)The Court should consider the merit, or absence thereof, in a proposed amended pleading.
(footnotes omitted)
[104] If an application is made to amend pleadings after the close of pleadings date, the benefit of the doubt in relation to the question of prejudice goes against the applicant.9
7 Body Corporate 325261 v McDonough [2014] NZHC 1821.
8 Oraka Technologies Ltd v Geostel Vision Ltd [2015] NZHC 991 at [17].
9 Hagaman v Hagaman [2023] NZHC 1168 at [12].
[105] The original pleading in relation to the breach of contract cause of action calculated quantum as a percentage of the monies believed to be recovered, expressed in USD. As a result of the discovery process, the exact amount recovered became available, expressed in EUR. The application to amend was as a result of that.
[106] Ms Shibalova did not oppose the amendment to para 67. She did oppose the addition of the five per cent commission in para 66, but only on the basis of her substantive argument as to whether the commission could be claimed at all. Ms Shibalova did not raise any prejudice arising from the amendment of the pleadings.
[107] Mr Ryffel’s evidence as filed was always that he undertook work before and after the purported assignment. The other changes reflected updated information available to BCS.
[108] After hearing from the parties and hearing evidence from Mr Ryffel during the trial, I found that there was no prejudice to Ms Shibalova in the amendments sought by BCS. I granted leave for BCS to file the fourth amended statement of claim dated 7 October 2024.
[109] During trial and after the plaintiff’s case had finished, Ms Shibalova applied to raise additional defences; namely estoppel and termination. The application was made at the point in the trial when Ms Shibalova was giving evidence under cross-examination. She wished to plead that Mr Grover’s abusive emails in May 2011 terminated any contractual arrangement. She also wished to raise a defence of estoppel in respect of the quantum meruit claim, saying that BCS was estopped from pursuing that claim as a result of Mr Ryffel’s email to Ms Shibalova dated 10 January 2011, which read:
Just received your Email. there is no worry regarding [outstanding] invoices concerning my part. Mark and I found a solution and everything is settled including this coming trip.
I don’t hope there will be much further expenses have to be done in this case and if so we just have to find a solution to get around.
[110] Ms Shibalova’s various applications to amend the pleadings all came very late. This matter was ready for trial in March 2023 when an earlier April 2023 fixture had to be vacated due to a revised time estimate and insufficient available court time. That resulted in an 18-month delay before a new date could be allocated. A similar delay would likely have resulted from a further adjournment.
[111] There was no objection to the application to amend the limitation defence to plead reliance on the Australian statute of limitations rather than the New Zealand statute of limitations. The other amendments were opposed. BCS submitted that it was not in the interests of justice for amendments to be made to the pleadings if those amendments would require adjournment of the fixture. As submitted by BCS, Ms Shibalova had every opportunity to put the new defences before the Court over the three and a half years before trial.
[112] BCS submitted that it would be significantly prejudiced by a second adjournment. The expense and time involved in these proceedings has meant that Mr Ryffel’s ability to work has been affected because he has had to reserve time for the trial and dealing with the proceedings. There would also be prejudice in BCS having to incur additional costs for further expert evidence.
[113] Some of the matters Ms Shibalova raised as affirmative defences were really legal arguments that could be made subject only to prejudice arising from the lack of expert evidence about the law in Victoria. Raising legal issues late, in a situation where foreign law applies, requires additional expert evidence.10
[114] Reliance on s 127 of the PSA was raised far too late; however, steps were taken by both parties to obtain the necessary expert evidence. If the PSA operated as a complete bar as Ms Shibalova contended, the additional defence would have overwhelming merit. The late amendment meant that BCS incurred additional expense in obtaining evidence to answer the new defence; however, permitting the amendment did not necessitate an adjournment. Nor was there insurmountable
10 See, for example, Hawaiki Submarine Cable LP v Tonga Cable Ltd [2019] NZHC 1595, [2019] NZAR 1775 at [56(b)], where it was confirmed that “[t]he content of foreign law must be established by evidence”.
prejudice. The amendment raised a legal argument with additional evidence required only because the law of Victoria applied and not the law of New Zealand.
[115] I reached a similar conclusion in respect of the defence that the MPOL Contract was a contract for personal services and unable to be assigned. BCS’s legal expert, who was already briefed for trial, could and did give evidence on that point without the need for an adjournment. There was no significant prejudice to BCS, and it was in the interests of justice to permit Ms Shibalova to plead the additional defence.
[116] The proposed affirmative defences of unconscionable conduct and breach of the Fair Trading Act were in a different category. Ms Shibalova provided no evidence to support her contention that a commission of 35 per cent was unconscionable. To argue these defences, she would have needed leave to serve and file further evidence well after the exchange of briefs. The application to amend was made less than eight weeks before trial. These new defences would inevitably have required a further adjournment of the trial which would have created significant prejudice to BCS.
[117] Although Ms Shibalova was self-represented at trial, she was represented by counsel prior to the trial scheduled for April 2023. Her previous counsel did not include the proposed new defences of unconscionable conduct or breach of the Fair Trading Act in the original pleadings. I was not persuaded that these defences had such obvious merit that the trial should have been adjourned. While a 35 per cent collection fee or commission might seem large, it has benefits to both parties. MPOL and the other investigators faced a difficult task in tracing and recovering the money and would foreseeably have needed to neglect other aspects of their business, potentially for years, in taking on Ms Shibalova’s case. The 35 per cent fee incentivised significant effort on their part, which was in Ms Shibalova’s interest. The skills which the investigators brought to bear were specialised, and they were prepared to progress the case when the Australian police did not. There was no expert evidence briefed regarding the issue and no evidence at all to contradict Mr Grover’s evidence that a 30–50 per cent commission was normal in the private investigation industry.
[118] Ms Shibalova’s application to raise two further defences during trial — namely, termination and estoppel — could not be entertained. BCS’s case had finished. BCS’s
legal experts had given evidence and been cross-examined. Ms Shibalova was herself under cross-examination. There was no evidence briefed about the law in Victoria as it related to the proposed new defences. The prejudice to BCS of granting the application would have been overwhelming.
[119] The issues that Ms Shibalova raised in relation to an alleged Oral Term of the contract, interpretation of the contract, and equitable principles relevant to the assignment of a contract did not need to be pleaded and were argued. Ms Shibalova also argued that the 35 per cent fee was a “collection fee” which could only apply if MPOL collected the money in the sense that the money was paid to MPOL and then paid out to Ms Shibalova.
[120] The application to amend the pleadings in respect of the Limitation of Actions Act was granted at trial.
[121] The application to amend the pleadings to include the defence that the claim was barred by the PSA was also granted, as was the application to plead the defence that the MPOL Contract was for personal services and incapable of assignment.
[122] The applications to raise additional affirmative defences, namely estoppel, termination of contract, unconscionable conduct and breach of the Fair Trading Act, were declined.
Issues
[123]The issues are as follows:
Breach of contract
(1)Was there an Oral Term in the MPOL Contract that Ms Shibalova would be liable for payment of the 35 per cent fee only if it was able to be deducted from the collected amount before it was paid to a family member or bank account?
(2)What is the correct interpretation of the phrase in the contract “collected on your behalf”?
(3)Were monies “collected” on Ms Shibalova’s behalf and returned to her directly or indirectly to a family member or bank account?
Assignment
(4)Did MPOL express an intention to assign its interest in recovery of the 35 per cent fee in equity to BCS?
(i)When was the Assignment Agreement entered into?
(ii)Did Mr Grover have authority to bind MPOL when he made the assignment?
(iii)Was the subject matter of the assignment ascertainable and identifiable when it came into existence?
(iv)Did BCS provide consideration for the assignment?
(5)Is the MPOL Contract a contract for personal services that could not be assigned?
Private Security Act
(6)Does s 127 of the PSA apply so as to prevent recovery of the 35 per cent fee?
Limitations of Actions Act
(7)When did the cause or causes of action accrue in relation to the breach of contract?
(8)Did Ms Shibalova or her agents conceal the right of action by fraud so as to postpone the start of the limitation period?
Quantification of loss
(9)What is BCS’s loss?
(10)What interest is payable?
Alternative cause of action – quantum meruit
(11)Did BCS provide a valuable service for the benefit of Ms Shibalova?
(12)Did Ms Shibalova request or freely accept those services?
(13)Is BCS estopped from claiming its fee?
(14)Did Ms Shibalova know, or ought she to have known, that BCS expected to be paid for its expenses and services and was not being paid from July 2010 onwards?
Quantification of loss
(15)What amount should BCS be paid for services rendered?
(16)What interest is payable?
Limitation of Actions Act
(17)What is the applicable limitation period?
(18)When did the quantum meruit cause or causes of action accrue?
(19)Did Ms Shibalova or her agents conceal the right of action by fraud so as to postpone the start of the limitation period?
Choice of law
[124] BCS’s Assignment Agreement with MPOL had a choice of law clause designating the law of Switzerland as the applicable law.
[125] The conditions attached to the MPOL Contract provided that “[t]hese conditions will be governed in accordance with the law in force in the state of Victoria”. By the time of trial, the parties agreed that Ms Shibalova’s liability to BCS as assignee of the MPOL contract is an issue governed by the law of the state of Victoria.
[126] The claim based on the equitable principles of quantum meruit is governed by New Zealand law. Neither party pleaded that foreign law applied to the claim in quantum meruit.
[127] Foreign law is a question of fact. The Court must identify the law arising on the issues and apply it to the facts in the way that it would be applied if the case were heard in the foreign court.11
[128] A party who relies on foreign law must plead and prove it. Where the parties have failed to plead or to prove foreign law, the Court applies New Zealand law by default.12
The law in Victoria
[129] I heard evidence from Mr Harvey for BCS and from Professor Liew and Mr Evans for Ms Shibalova in respect of the following matters:
(a)assignment of a chose in action;
(b)the approach to the interpretation of a contract;
(c)contracts for personal services;
(d)the PSA;
(e)statutory interpretation; and
11 See Hawaiki Submarine Cable LP v Tonga Cable Ltd, above n 10, at [56].
12 Mount Cook (Northland) Ltd v Swedish Motors Ltd [1986] 1 NZLR 720 (HC) at 726– 727; Hawaiki Submarine Cable LP v Tonga Cable Ltd, above n 10, at [56].
(f)limitation of actions.
[130] There was considerable agreement between the legal experts, and where they did not agree, the differences were largely immaterial to the issues I must decide.
Assignment of a chose in action
[131] A chose in action is a right enforceable by an action. It may be used to describe the right of action itself. It is a personal right of property. A right to sue for a sum of money is a chose in action and is a proprietary right.
[132] Mr Harvey and Professor Liew disagreed about the nature of the chose in action which MPOL purported to assign to BCS. Mr Harvey said the entitlement to the 35 per cent fee would be regarded as a future chose in action by a Victorian court, being “a mere expectancy or possibility of becoming entitled in the future to a proprietary right”.13
[133] Professor Liew said it would be regarded by a Victorian court as an existing chose in action, in that it was “a right arising out of a then-presently existing contractual relationship, albeit a right contingent upon the successful collection of monies on Ms Shibalova’s behalf”.
[134] Both agreed that legal assignment of a chose in action requires notice to the obligor by virtue of s 134 of the Property Law Act 1958 (Vic), and that the assignment in this case could only be an equitable assignment. The experts agreed that courts of equity have upheld equitable assignments of choses in action regardless of whether the chose in action arises at common law or in equity. An equitable assignment of a future chose in action is effective to bind the subject matter when it comes into existence, subject to two criteria: first, the subject matter must be capable of being ascertained and identified when it comes into existence,14 and secondly, there must be consideration for the assignment.15
13 Norman v Commissioner of Taxation (Cth) (1963) 109 CLR 9 (HCA) at 26.
14 Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1 (HCA) at 26–27.
15 Norman v Commissioner of Taxation (Cth), above n 13, at 24.
[135] Mr Harvey said that the subject matter of the assignment, being 35 per cent of the sum recovered, is both ascertainable and identifiable at the time it comes into existence. Both experts agreed that BCS’s undertaking to provide any future services without payment constituted consideration for the assignment.
[136] The experts agreed that whether or not the assignment to BCS was an assignment of a present or future chose in action is not determinative. Either can be assigned in equity and if consideration was required, that was present, and the assignment is binding between the assignor and assignee without notice to the obligor.16
[137] The second area of disagreement was much more central, being the effectiveness of the Assignment Agreement and Annex to create a valid assignment.
[138] The experts said that the central question a Victorian court would consider is whether MPOL manifested an intention to transfer the chose in action to BCS with immediate effect.
[139]The criteria for the assignment of a chose in action in equity are:
(a)no particular form of words is required, but there must be expression of an intention to assign;17
(b)the subject matter of the of the assignment must be ascertainable and identifiable at the time when it comes into existence; and
(c)the assignment must be supported by consideration.
[140] Professor Liew’s opinion was that an essential question is whether MPOL manifested the relevant intention to assign its right to recover the 35 per cent fee to BCS. In Professor Liew’s opinion, it is likely that a Victorian court would answer the question in the negative.
16 Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 (HCA) at 622.
17 Shepherd v Commissioner of Taxation (Cth) (1965) 113 CLR 385 (HCA) at 391.
[141] The first reason, according to Professor Liew, is found in the words of the Assignment Agreement itself. Professor Liew said that the term “MPOL transfers its entire interest and claim in this fee to BCS”, taken on its own, may indicate an intention to make an immediate disposition. However, Professor Liew said the term goes on to refer to “[t]he fee of 35% (or whatever other amount can be recovered…)”. Professor Liew said that the incongruency between “35 per cent” and “whatever other amount” would cast doubt on whether, in substance, Mr Grover intended to dispose of MPOL’s contractual right to the fee. Rather, Professor Liew says it would seem more consistent with the Assignment Agreement being provided to BCS as security for payment due by MPOL to BCS under the agreement between BCS and Mr Grover dated 4 April 2008.
[142] Professor Liew also relied on the fact that the Assignment Agreement provided that the contract “cannot be cancelled at an unreasonable time preventing BCS from receiving monies based on its agreed right to [the commission]”. Professor Liew said the fact that MPOL contemplated that the Assignment Agreement could be cancelled is inconsistent with an immediate, final and settled intention then and there to transfer MPOL’s contractual right to BCS.
[143] Professor Liew pointed to the fact that in three subsequent documents, Mr Grover appears to have attempted to deal with the 35 per cent fee as if MPOL remained its owner. The first is the Annex, which seeks to vary the terms of the Assignment Agreement. The second is the agreement signed by Mr Grover and Mr Birrell dated 4 February 2011, in which Mr Grover offered a portion of the “commission” to Mr Birrell. The third is an agreement dated 19 March 2013, signed by Mr Grover and Mr Birrell, which sought to further vary the recipients and division of the “commission”. Professor Liew regarded these three documents as strong evidence that Mr Grover never had the requisite intention to effect an equitable assignment when he entered into the Assignment Agreement.
[144] Mr Harvey disagreed with Professor Liew and considered that a Victorian court would find that the Assignment Agreement and Annex expressed an intention to assign by MPOL. Mr Harvey relied upon the term that “…MPOL transfers its entire interest
and claim in the Matter to BCS”, which appears in the second paragraph of the first page of the Assignment Agreement.
[145] The second page of the Assignment Agreement states in the first paragraph that:
The parties agree that MPOL transfers its entire interest and claim in this fee to BCS for its Services provided in the Matter. The fee of 35% (or whatever other amount can be recovered with regards to the Matter) shall directly by the Client be transferred to a bank account owned by BCS in Switzerland.
[146] Mr Harvey said there is no inconsistency between these two clauses, and it is plain that the intention was to assign the entitlement to the 35 per cent fee by MPOL to BCS. Mr Harvey said the position is confirmed in the next paragraph, which reads: “Therefore, Philip Ryffel or one of his designated subcontractors are allowed to do any negotiations related to the commission”. Mr Harvey said that this clearly manifests an intention that the entitlement is assigned to BCS. Mr Harvey regards the words “…or whatever other amount can be recovered with regards to the Matter…” as simply reflecting that the power given to Mr Ryffel or BCS assumes that he could negotiate a variation of the entitlement with Ms Shibalova. The bracketed words are therefore included only to make it abundantly clear that whatever amount is recovered is assigned to BCS.
[147] Mr Harvey did not agree that the paragraph which provides that the Assignment Agreement cannot be cancelled at “an unreasonable time” means that a Victorian court would find that it could be cancelled at a “reasonable” time. Mr Harvey said this interpretation flies in the face of the clear meaning of the preceding paragraphs of the Assignment Agreement. In order to read this consistently with the preceding paragraphs, which is what Mr Harvey said the Victorian court would do, this paragraph would be interpreted to mean that the Assignment Agreement cannot be cancelled at all under its own terms.
[148] Mr Harvey took considerable issue with the fact that Professor Liew supported his interpretation by reference to subsequent conduct of Mr Grover (dealing with the 35 per cent fee as if he remained its owner). Mr Harvey was firmly of the view that such evidence is inadmissible for the purpose of interpreting a contract under Victorian
law. Mr Harvey cited Agricultural and Rural Finance Pty Ltd v Gardiner, where the High Court of Australia said, “it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made”.18
[149] Mr Harvey said that there are numerous other authorities which stand for the same proposition in Victoria and in the other states of Australia.19 Mr Harvey said that the manner in which Mr Grover dealt with the 35 per cent fee after the Assignment Agreement and Annex were signed is entirely irrelevant to the interpretation of the provisions of the Assignment Agreement.
[150] There was a further area of disagreement between Mr Harvey and Professor Liew relating to joinder of an assignor in a claim arising from the assignment against an obligor. MPOL, as the purported assignor of the right to the 35 per cent fee, is not joined as a party to the claim. Mr Harvey was of the view that there is no need for the assignor to be joined to the proceeding against the obligor. Professor Liew thought joinder remains a relevant consideration.
[151] Professor Liew noted that the outcome of this case is unlikely to turn on this point of disagreement. Professor Liew said that even if Mr Harvey is right that the subject matter of the purported assignment by MPOL is a future chose in action which does not require joinder, and even if Professor Liew is right that joinder of the assignor remains a relevant consideration when dealing with a future chose in action, that requirement is likely to be dispensed with by a Victorian court in the present case.
[152] Professor Liew’s opinion was that, because MPOL has been wound up, there is no possibility of MPOL disputing the assignment or the right to claim against Ms Shibalova. To require joinder in those circumstances would cause unnecessary complexity, and a Victorian court would not do so. Both legal experts agreed that lack of joinder would not prevent a Victorian court from handing down judgment in this proceeding.
18 Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57, (2008) 238 CLR 570 at [35]. That case cites further authorities in support of this proposition.
19 Mr Harvey cites, as examples, Ryan v Textile Clothing & Footwear Union Australia [1996] 2 VR 235 (VSCA) at 261–262; FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 (VSC) at 346–350; and Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61, (2001) 53 NSWLR 153 at [26].
[153] I make the following findings in respect of the law of equitable assignment in Victoria:
(a)an assignment of a chose in action in equity requires an expression of an intention to assign with immediate effect;
(b)the subject matter of the assignment must be ascertainable and identifiable when it comes into existence;
(c)assignment of a future chose in action requires consideration;
(d)it is the unilateral intention of the assignor (assessed objectively) that is relevant;
(e)no particular form of words is required;
(f)notice to the obligor is not necessary;
(g)lack of joinder of the assignor to a proceeding against an obligor that arises from the assignment is not fatal;
(h)backdating an assignment agreement does not invalidate the assignment; and
(i)the misdescription of MPOL’s name does not invalidate the agreement.
Contractual interpretation
[154] There was some disagreement about the way in which a Victorian court would interpret contractual terms generally. Mr Harvey and Professor Liew agreed that as a general principle when interpreting a contract, it is not legitimate in Victoria to use as an aid in the construction of a contract anything which the parties said or did after it was made. Professor Liew, however, had a view that Australian courts are becoming more flexible in the approach to both pre-contractual and post-contractual negotiations and actions.
[155] The leading case referred to on the admissibility of pre-contractual negotiations, was the Australian High Court case of Codelfa Construction Pty Ltd v State Rail Authority (NSW), which states that:20
…prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
[156] Having heard from the expert witnesses, I make the following findings as to the law of contractual interpretation in Victoria:
(a)As in New Zealand, the Australian courts interpret contracts objectively, focusing on the words the parties have chosen to record their deal.
(b)The meaning of a term of a contract is to be determined objectively by what a reasonable person would have understood that term to mean. Determining the meaning requires consideration of the language used, the surrounding circumstances known to the parties to the contract at the time it was made and the purpose of the contract.
(c)Evidence of post-contractual conduct is generally inadmissible for the purposes of interpreting a contract in the state of Victoria. Professor Liew’s evidence on this point was more progressive in nature. While the law may be developing, the authorities relied on by Professor Liew were not directly on point and were not high-level authorities for the propositions he contends for. I must apply the law of Victoria as it currently is. It is not my role to seek to progress or expand it in any way. There are good reasons why post-contractual
[233] The bargain Ms Shibalova made with MPOL may or may not have been a good one, but she entered into it freely. She contends that she had little choice as there was no other apparent way to secure the return of the stolen money, but that situation was not created by MPOL. It resulted from Ms Shibalova’s dishonest actions in taking the USD 10 million in the first place and transferring it to Mr Ivanov. MPOL entered into a commercial arrangement and upheld its end of the bargain. Ms Shibalova however seeks to avoid the bargain she made.
[234]I find that the failure to pay the commission was a breach of contract.
Did MPOL express an intention to assign its interest in recovery of the 35 per cent fee to BCS?
[235] The factual matrix underlying the agreement to assign was set out in the evidence of Mr Ryffel and Mr Grover. It is also supported by the contemporaneous documents. By 2010, Mr Grover was having trouble with his business and had come to the view that Ms Shibalova was unlikely to honour the MPOL Contract. MPOL’s vulnerability would have been obvious to Mr Grover. Ms Shibalova had control of the situation and she had legal assistance in Italy. She no longer needed the private investigators. Their job was done in the sense that the money had been located and secured and its eventual return was just a matter of waiting for the legal proceedings to conclude in Ms Shibalova’s favour.
[236] In October 2010, Mr Ryffel provided an itemised invoice to Mr Grover, who contacted Ms Shibalova clearly concerned about liability for payment of it. The invoice was produced in evidence and shows disbursements and time claimed between July 2008 and October 2010. Mr Ryffel says that in the second half of 2010 he started talking to Mr Grover about ways of providing security for BCS’s unpaid fees. Mr Grover was in Europe in July and August 2010 and Mr Ryffel was in Australia in December 2010 and January 2011. There was ample opportunity for discussions to take place in person.
[237] Mr Ryffel says that they eventually agreed on the terms of an assignment and drafted the Assignment Agreement and Annex. Mr Ryffel believes that the Assignment Agreement was reached in October 2010 but was backdated to 4 September 2010 so that the assignment captured Mr Ryffel’s fees after that date. Mr Ryffel says that if he had not had the Assignment Agreement, he would have stopped work. As a result of reaching that agreement, the last invoice from BCS was written off, and Mr Ryffel did not charge any further fees.
[238] Mr Grover agrees that the Assignment Agreement was backdated because he and Mr Ryffel had agreed that the new deal would cover fees and invoices back to 4 September 2010 with other fees written off. Mr Grover said that the deal was that BCS would take over MPOL’s rights upon recovery of the funds under the MPOL Contract in return for an agreement to work on the remainder of the case
without charging any further fees or disbursements to MPOL. Mr Grover said that once the Assignment Agreement was signed in 2010, Mr Ryffel never again asked MPOL for payment of expenses or fees. The documentary evidence supports that position, as the last invoice issued by BCS was in October 2010.
[239] Ms Shibalova says that there is an inconsistency between the purported transfer of the entire interest and claim by MPOL to BCS and the statement in the first paragraph on page 2 of the Assignment Agreement that “[t]he fee of 35% (or whatever other amount can be recovered with regards to the Matter) shall directly by the Client be transferred to a bank account owned by BCS in Switzerland”. Ms Shibalova’s position is that the words “or whatever other amount can be recovered” indicates a lack of any intention to immediately assign the right to the 35 per cent fee to BCS.
[240] The words “or whatever other amount can be recovered” make it clear that the efficacy of the term is not dependent upon the whole 35 per cent being recovered. I read this as evidencing that MPOL intended to put BCS in the position that MPOL would have been in, including having the ability to renegotiate the amount of commission. I agree that the paragraph which reads that “[t]his contract cannot be cancelled at an unreasonable time preventing BCS from receiving monies based on its agreed right to 35%” could be seen as problematic. Professor Liew reads it to mean that the contract could be cancelled at a “reasonable” time. Such an interpretation would mean that MPOL did not intend to make a final and immediate disposition of its rights under the MPOL Contract.
[241] Professor Liew said that a Victorian Court would look for an intention that the assignor made an immediate disposition of the chose in action that was the subject of the Assignment Agreement. It is the unilateral intention of the assignor which is relevant. No particular form of words is required. Equity looks to substance and not form, so it is the substance of the agreement that matters and not the particular words used. Professor Liew said that the intention to assign must be assessed objectively in light of words, conduct and context.
[242] An assignment in equity requires an expression of intention to assign which is apparent from the document. The Assignment Agreement contains an illegality clause
so that if any provision of the agreement is held to be illegal, invalid or unenforceable under any rule of law, the remainder of the agreement is unaffected.
[243] The context of the Assignment Agreement, known to both parties, was that MPOL was in financial difficulty. Mr Grover as director of MPOL had no appetite or ability, nor sufficient financial means, to pursue litigation. The reference to “whatever amount can be recovered” implicitly acknowledged that BCS had a right to do as it wished about the commission including accepting a reduced amount. The Assignment Agreement has explicitly acknowledged that Mr Ryffel had the right to do any negotiations related to the commission. That right is inconsistent with MPOL intending to retain a right to cancel the Assignment Agreement. That is because the Assignment Agreement permits BCS to unilaterally take an action detrimental to MPOL’s potential future interest by negotiating or accepting a reduced commission.
[244] I do not read the reference to cancellation “at an unreasonable time” as importing an enforceable ability to cancel at a reasonable time. It is poor drafting, but the intention to assign is clear from the preceding paragraphs.
When was the Assignment Agreement entered into?
[245] The timing of the Assignment Agreement is important because MPOL went into liquidation in 2013. Mr Grover ceased being a director of MPOL on 9 April 2013. If the Assignment Agreement was signed either at a time when MPOL was in liquidation or when Mr Grover did not have authority to bind MPOL, the purported assignment would have no effect. Ms Shibalova argues that the Annex must have been signed after 2013. That is based on the inclusion of the UID number in the Annex.
[246] Ms Shibalova called Patrick Wille, a qualified Swiss lawyer, to give evidence regarding UID numbers. Mr Wille explained that the UID is a number assigned to companies registered in Switzerland. UID numbers were introduced by legislation passed in 2010, and one of the purposes of UID numbers was to harmonise the identification of entities throughout Switzerland. The legislation came into force on 1 January 2011 and existing entities in a statistical database held by the Federal Office for Statistics in Switzerland were automatically assigned a UID number. The legislation that introduced UID numbers initially provided for a transition period of
five years, which was later shortened to three years, for companies to change their numbering to the UID number. Mr Wille says that the commercial register of the Canton of Zug, where BCS was registered and domiciled until 2019, switched to the use of UID numbers on 5 or 6 December 2013. However, if BCS was already in the commercial register in 2010, it would have been one of an initial 500,000 companies assigned a UID automatically in January 2011.
[247] Mr Ryffel says that BCS was already in the commercial register in 2010 and was one of the initial 500,000 companies assigned a UID number automatically. That was not contradicted. The new UID number was accessible on the public register from January 2011. Mr Ryffel said that including the UID in a contract is not something that he has done regularly for BCS either back in 2010 or 2011, or since. He does not know why BCS’s UID number (CHE-112.690.512) is in the Annex. Mr Ryffel said that he cannot recall the details around the timing of the Assignment Agreement and Annex, but emails have helped to place events in the timeline.
[248] Mr Ryffel said that he was in Australia between December 2010 and January 2011, and saw Mr Grover there. Mr Ryffel said that he and Mr Grover had fully agreed the terms of the assignment and how the proceeds from the commission would be split by 10 January 2011. This is supported by the email from Mr Ryffel to Ms Shibalova on 10 January 2011 saying that he and Mr Grover had “found a solution”. Mr Ryffel is not sure whether the Annex had already been written up prior to that or was prepared afterwards, but he is clear that the events relating to the assignment, and the preparation of the Assignment Agreement and the Annex, occurred towards the end of 2010 and the beginning of 2011.
[249] It is notable that the Assignment Agreement, which was dated 4 September 2010, and which Mr Ryffel believes was in fact prepared in October 2010, does not contain the UID number. The UID number would not have been available in 2010. By contrast, the Annex does contain the UID number. The UID number would just have become available in January 2011 around the time Mr Ryffel emailed Ms Shibalova saying that he and Mr Grover had “found a solution”.
[250] Given Mr Ryffel’s evidence that it is not his practice to use UID numbers in contracts, and certainly not before 2013, a likely explanation for the inclusion of BCS’s UID number in the Annex is that the UID number was a new identifier in January 2011, and its existence was brought to Mr Ryffel’s attention around the time that the Annex was prepared.
[251] I found Mr Ryffel to be an honest and credible witness. Ms Shibalova contends that he and Mr Grover colluded to mislead the Court as to the timing of the Assignment Agreement and Annex. I reject that contention. Had Mr Ryffel been willing to mislead the Court in such a way, I consider that he would have been more definite about the circumstances and timing of the Assignment Agreement and Annex. He made concessions against interest, including that he could not remember exactly where or when the Assignment Agreement was signed, that he did not sign his copy of the Assignment Agreement, and that it was not his usual practice to include the UID number in contracts. nMr Ryffel did not attempt to explain things that he said he could not recall, even when any explanation he offered could not have been contradicted. He presented as an honest witness doing his best to tell the truth.
[252] The timing of the October 2010 invoice and the emails regarding that invoice are consistent with Mr Ryffel’s evidence. Mr Grover’s visit to Europe in 2010 and Mr Ryffel’s visit to Australia between December 2010 and January 2011 provided an opportunity for Mr Ryffel and Mr Grover to meet in person and come to the agreement regarding assignment and Annex that Mr Ryffel says they did. The 10 January 2011 email to Ms Shibalova saying that he and Mr Grover had found a “solution”, and the fact that Mr Ryffel never again presented an invoice or pressed for payment of the October 2010 invoice corroborates Mr Ryffel’s evidence about the timing of the Assignment Agreement.
[253] Coupled with the credibility findings about Mr Ryffel, the circumstantial evidence satisfies me by some margin that the Assignment Agreement was entered into in late 2010 or early 2011 and the Annex in January 2011.
Did Mr Grover have authority to bind MPOL when he made the purported assignment?
[254] MPOL was not in liquidation when the Assignment Agreement was made, and Mr Grover was still a director and able to bind MPOL. Mr Grover’s subsequent actions which are said to be inconsistent with MPOL having assigned its rights to BCS are irrelevant. The contract was complete, and Mr Grover’s post-contractual conduct is not admissible to aid in the interpretation of the contract.
[255] Mr Grover had personal issues and was acting irrationally and illogically at times, but his later actions do not change the fact of the assignment. I accept that Mr Grover knew he had assigned the MPOL Contract to BCS when he signed the contract with Mr Birrell in February 2011. I accept that he chose not to tell Mr Birrell because the news was likely to be very negatively received.
Was the subject matter of the assignment ascertainable and identifiable when it came into existence?
[256] Mr Harvey and Professor Liew disagreed about the legal character of the subject matter of the assignment. Mr Harvey said that a Victorian Court would find that the subject matter of the assignment was a debt. Professor Liew said that a Victorian Court would find that the subject matter of the assignment was a contractual right to sue to recover a debt.
[257] The Assignment Agreement refers to the 35 per cent fee and then states that that MPOL assigns its “entire interest and claim in this fee to BCS for its services provided in the matter”. I consider that MPOL intended to assign whatever right it held in relation to the commission. The intention is underscored by the Annex which is a side agreement giving MPOL a new right to claim a portion of the commission from BCS. The Annex was only necessary and useful to MPOL because of MPOL’s intention to assign its right to the 35 per cent fee to BCS. The parties essentially swapped positions. Before the Assignment Agreement, MPOL had a right to the commission and BCS had a claim against MPOL for a share. After the Assignment Agreement and Annex, BCS had a right to the commission and MPOL had a claim against BCS for a share in the commission.
[258] Whether the subject matter of the Assignment Agreement is characterised as a contingent future debt or an existing contractual right to sue to recover a debt, the subject matter of the assignment was the 35 per cent commission and was ascertainable and identifiable when it came into existence.
Did BCS provide consideration for the assignment?
[259] It is not in dispute that BCS’s agreement to write off previous invoices and provide future services without payment, as recorded in the Assignment Agreement, constitutes consideration for the assignment.
Is the MPOL contract a contract for personal services that could not be assigned?
[260] Ms Shibalova submitted that the MPOL contract was a contract for personal services and incapable of assignment. She says that her agreement with MPOL provided for the performance of complex professional services by Mr Grover, who she says was the “best Private Investigator in Melbourne Australia at the time”. Ms Shibalova says Mr Grover undertook to, and did, personally supervise the work of his agents and subcontractors. Ms Shibalova says that she entered into the agreement because of Mr Grover’s name, personality, experience and reputation, as well as his Australian and international network of agents. Mr Grover’s ability to lead and manage the team was important to Ms Shibalova.
[261] BCS said that the rights assigned were capable of transfer and the transfer did not offend the rule against assignment of rights in “personal services” contracts. BCS says that the Assignment Agreement’s delegation of obligations does not affect the outcome of the question of whether the rights assigned were capable of transfer for three reasons:
(a)First, the Assignment Agreement contains a severability clause which provides that if “any provision…is held to be illegal, invalid or unenforceable… such illegality, invalidity or unenforceability shall not affect the remainder of this Agreement”. The object of that clause is to ensure the assignment takes effect — any provision tending to render the assignment ineffective can be expunged.
(b)Second, the MPOL Contract expressly provided that responsibilities would be delegated to “investigators and consultants hired.” There can be no doubt that MPOL was allowed to delegate investigation and recovery tasks. The only obligation that could potentially be non-delegable was leadership of the investigation. But to the extent that is an issue, the clause transferring MPOL’s “entire interest” is severable. No issue arises regarding consideration because the Assignment Agreement still provided that BCS would continue providing its services and would do so at its own expense.
(c)Third, the rule in Don King Productions Inc v Warren, that assignment of a contract is to be construed as assignment of the benefit of the contract means that, for the purpose of interpreting whether MPOL intended to transfer its rights, only the transfer of rights ought to be considered.35
[262] It is important to consider what rights were purportedly being transferred at the time of the assignment and then to consider whether, objectively, the transfer of those rights materially altered Ms Shibalova’s rights under the MPOL Contract.
[263] BCS submits that the assignment was of nothing more than the “fruits” of the contract. BCS says that Ms Shibalova’s rights were not altered, and to whom she pays the 35 per cent fee should be of no consequence to her.
[264] BCS also raises the following matters as supporting a finding that the MPOL Contract was not a contract for personal services:
(a)The MPOL Contract was with a body corporate (Mr Grover’s name appears only as the signatory; any agent of the company could equally have signed). It must be a rare case in which a contract with a company will be “personal” because companies can so easily change hands — if Mr Grover had retired as a director and/or alienated the company (for example, if he had sold it to BCS), Ms Shibalova would have found
35 Don King Productions Inc v Warren, above n 21, at 631.
herself dealing with totally different individuals with no recourse under the doctrine.
(b)The parol evidence rule precludes reliance on representations that Mr Grover would in fact perform those services on Ms Shibalova’s behalf and supervise the investigation — if Ms Shibalova wished that to be a term of the contract, she could have specified it. To the extent the representation was made, it could only be taken into account as a representation that Mr Grover intended at that time to supervise. There was no contractual promise.
(c)The MPOL Contract contemplated that multiple “agents” would conduct inquiries, and that other “investigators and consultants” would be hired. The fact that investigators and consultants hired were to be charged as a disbursement means that they must have been outsiders to MPOL. On that basis, the investigation itself could not be a “personal” service (or alternatively, it was expressly agreed that to the extent it was personal, it could be delegated). The contract does not limit which outsiders could be engaged, how much they might charge, or where in the world they might be.
(d)The MPOL Contract contains standard terms. Aside from the standard terms in the “conditions of sale” annexure, it is likely that a large part of the letter was also standard, beginning from the paragraph “To our professional costs initially...”
[265] The contract which Ms Shibalova entered into with Mr Grover was not a contract for personal services in the sense that Ms Shibalova expected that Mr Grover would personally attend to the tasks that were required. Ms Shibalova was well aware that other investigators were subcontracted to MPOL. While she may have expected Mr Grover to oversee and manage the investigation, the assignment to BCS of the right to collect the commission does not alter her contract with MPOL in that regard. The assignment did not purport to assign obligations and could not effectively have done so. It did, however, assign the fruits of the contract. At the time
Ms Shibalova contracted with MPOL, she did not have any personal knowledge of Mr Grover. She contracted with his company.
[266] I find that the MPOL Contract was not a contract for personal services and , in any event, assignment of the fruits of the contract rather than the obligations was permissible and effective.
Does s 127 of the PSA apply so as to prevent recovery of the fee?
[267] Ms Shibalova submits that BCS cannot sue for recovery of the commission as it does not have a licence under the PSA.
[268] . Mr Harvey’s opinion was that a court in Victoria would not hold that BCS is bound by the provisions of the PSA, and accordingly, s 127 does not prevent BCS from bringing its claim against Ms Shibalova.
[269] Ms Shibalova did not provide any expert evidence on the point. She holds a postgraduate law degree (Juris Doctor in law) from the University of Melbourne and was admitted to the Victorian bar in 2007. She practiced in Victoria for approximately five years and says that she can give an opinion on the interpretation of s 127 of the PSA. I do not accept that Ms Shibalova is qualified as an expert in Victorian law. She is of course entitled to make submissions, and I have had regard to those. Ms Shibalova says the purpose of the PSA is public safety and consumer protection for those who engage with the private security industry. She submits there are very strong public policy reasons underpinning the PSA. Ms Shibalova says that s 127 of the Act gives effect to the purpose of the PSA by only granting licenced investigators the ability to recover fees and commissions. She submits that to allow BCS, which has never been registered as a licenced investigator in Victoria, to take an assignment of a Victorian private investigation agreement would be in breach of the PSA.
[270] Ms Shibalova submits that new amendments to the PSA set out very prescriptive requirements for subcontracting or assigning contracts, such that assignment or subcontracting will be prohibited without express notice to, and written consent from, the client. However, those amendments were not in place at the time MPOL assigned the contract to BCS.
[271] The PSA is intended to regulate the provision of private security work within the state of Victoria. I agree with Mr Harvey that it would be an overreach to find that it operates extraterritorially. It would mean that a person resident in Victoria would likely find it difficult to engage a private investigator in another state or country to investigate matters in that other state or country as the investigator would not be able to enforce payment of fees. Apart from that, principles of statutory interpretation tell against a finding that the PSA operates extraterritorially.
[272] Section 127 captures only those required to be licenced under the PSA. A person who carries on work as an investigator in Victoria is required to be licenced. A person who carries on investigation work outside Victoria is not required to be licenced under the PSA as the PSA applies only in Victoria. As BCS did not carry out investigation work in Victoria, BCS was not required to be licensed under the PSA and s 127 is not engaged.
[273] Accordingly, I find that s 127 of the PSA does not prevent BCS from recovering the 35 per cent commission.
Does Ms Shibalova have a defence under s 5 of the Limitation of Actions Act?
[274] This proceeding was filed on 5 January 2021. That was within six years of the second payment of funds to Ms Shibalova’s attorney, Mr Grippaldi. No question of limitation arises in respect of the second payment in 2015. The first payment, however, was in 2012, and would fall outside the limitation period unless the start of the limitation period is postponed.
[275] Pursuant to s 27 of the Limitation of Actions Act, the start of the limitation period is postponed in cases of fraud. The section provides:
27 Postponement of limitation periods in case of fraud or mistake
Where, in the case of any action for which a period of limitation is prescribed by this Act—
(a)the action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or
(b)the right of action is concealed by the fraud of any such person as aforesaid; or
(c)the action is for relief from the consequences of a mistake—
the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it…
[276] Ms Shibalova says that in October 2007, she reached an agreement with her father purporting to transfer all her rights, obligations and responsibilities in relation to her financial dealings and arrangements with any persons carrying out various types of work connected to or arising out of her legal proceeding against Mr Ivanov. Ms Shibalova says she agreed not to disclose the agreement, and she did not do so.
[277] Ms Shibalova agreed in evidence that in 2012 she signed a power of attorney so that the recovered money could be paid to Mr Grippaldi. She also agreed in cross-examination that she could have instructed Mr Grippaldi to pay the 35 per cent fee and she said in cross-examination that she should have done that. When asked whether she told Mr Grippaldi not to give the investigators any information, Ms Shibalova agreed that she reminded Mr Grippaldi that her information was privileged, and that she would communicate directly with the investigators if required.
[278] In 2012, half of the stolen funds were returned to Ms Shibalova. Ms Shibalova did not advise MPOL or BCS that the money had been returned. It appears that she deliberately misled them about that and instructed Mr Grippaldi not to provide the investigators with information. When the remaining funds were released in 2015, Ms Shibalova failed to disclose that fact. At the end of November 2015, the investigators were told by Mr Grippaldi that the civil trial could take another couple of years, and the money was still with the Italian authorities. It was not until Mr Ryffel met Mr Shibalov in Latvia in about 2018 that he learned for the first time that the money had been returned in full. By that stage, the six-year limitation period was already expired, or close to expiry, in respect of the first payment.
[279] I consider that Ms Shibalova was deliberately fraudulent in her dealings with MPOL and BCS and sought to fraudulently conceal the repayment of the money to avoid any liability to pay the commission. In her first statement of defence, Ms Shibalova denied providing a power of attorney in 2015 or 2016 to allow distribution of the funds to herself, her father and/or her sister, and denied that the
funds were recovered in full. That was patently untrue as she admitted in evidence. Later, she admitted that to the best of her knowledge her father received half the funds in 2012 and half in 2015 but denied that it was as a result of a power of attorney to her father or sister. While that was technically true it ignored the reality that she had provided a power of attorney to Mr Grippaldi to facilitate the return of the money to her father and in that regard it was deceptive.
[280] In her brief of evidence served in March 2022, Ms Shibalova admitted providing a power of attorney in 2012 to Mr Grippaldi. Her evidence on oath confirmed that. Email correspondence between Ms Shibalova and Mr Grippaldi shows a determination on Ms Shibalova’s part to deceive MPOL and BCS regarding the return of the money.
[281] As noted above, in January 2011 Ms Shibalova sent an email to Mr Ryffel saying:
Philip I am unable to [reimburse] Mark your invoice as I don’t have the money. Especially in light of the real possibility to recovery from Italy this year I ask that you be kind to a man that has always done right by all.
[282] Essentially this was a plea to Mr Ryffel not to pursue payment of his invoices but to await payment of the commission. Further, as already noted, in May 2011 Ms Shibalova sent an email to Mr Birrell, in which she said:
I would never “burn you”, Mark or David Phillips. I regard you all as my friends and mentors. You have assisted me and done for me more than my own father in my lifetime. I look up to you all. Why would I want to turn on you?! It’s just stupid. I am a straight shooter and always mean what I say. I always had intended and still intend to honour my agreement with Mark (and that means David and you plus the Italians).
[283] These reassurances were all given after Ms Shibalova now says she had signed a side agreement with her father under which she had essentially agreed to deceive the investigators.
[284] In May 2012 when the release of the first half of the money was imminent, Ms Shibalova emailed Mr Grippaldi saying:
Re Grover & Birrell – I will most certainly pay Mark in due course and he can then pay all other people that he promised to pay. However, Mark and I have a private dispute which needs to be resolved before that happens. Mark borrowed money from me two years ago in his private capacity, he did not repay that loan and is now not communicating with me at all.
In my humble opinion, the best answer to all Mark’s and Glenn’s emails / calls is to say that I am your client and you are not authorised to release my information to anyone but the client. They are welcome to get in touch with me and ask the same questions. You can CC me on your email to them. I am sorry to have to deal with them on my behalf.
[285] The Italian court ordered the immediate release of half of the money on 25 May 2012. Mr Grippaldi, acting for Ms Shibalova, continued to give Mr Ryffel the impression that no money had been recovered saying that they were waiting for the appeal hearing. Ms Shibalova knew that the only way Mr Ryffel or Mr Grover would be aware that money had been recovered would be for her or Mr Grippaldi to tell them. She did not tell them, and she did not authorise Mr Grippaldi to do so. In fact, I find that she authorised Mr Grippaldi to mislead Mr Ryffel.
[286] I have no difficulty at all in concluding that the 2012 payment was concealed by fraud and that the claim is in time in relation to both the 2012 and 2015 recoveries.
What is BCS’s loss?
[287] On 31 July 2012, the amount of EUR 3,826,020.98 was released by order of the Italian court to Ms Shibalova. The balance of EUR 3,826,020.9836 seems to have been returned on either 20 May 2015 or 22 April 2015.37 At least it was ordered for return on that date. Ms Shibalova pleaded that the Court of Catania ordered the release of the second tranche on 14 September 2015 but that is not supported by the documentary evidence.
[288] The total amount returned to Ms Shibalova was EUR 7,652,041.96. Under the MPOL Contract, a commission of 35 per cent was payable when the money was returned.
36 The Plaintiff in closing submissions refers to the balance returned being EUR 1,339,107.34 but this is clearly a typographical error and refers to the commission amount.
37 The report of release from seizure was drawn up on 20 May 2015, and records that on 22 April 2015, the Italian court ordered the release from seizure of the sum of EUR 3,826,020.98.
[289] The commission payable on the amount returned is quantified at EUR 2,678,214.69.38
What interest is payable?
[290] In respect of the breach of contract, BCS claims interest at the contractual rate of 1.85 per cent per month, or alternatively interest under s 10 of the IMCA at a rate and for a period to be determined by the Court.
[291] Neither party pleaded reliance on Victorian law in respect of the award of interest. In oral submissions, BCS referred to New Zealand case law regarding whether an award should be made at the contractual rate or under the IMCA.
[292]The standard conditions of the MPOL Contract provided:
5.Unless otherwise specified or agreed in writing by MPOL Group Pty Ltd., the Invoice Price is due and payable to MPOL Group Pty Ltd. within 28 days from the date of MPOL Group Pty Ltd.’s Invoice.
6.If the Customer fails to make any payment on or by the due date of the payment being due then MPOL Group Pty Ltd. will have the right to: (a) claim immediate payment of all monies due by the Customer notwithstanding the due date for payment of any sale or extended terms agreed by MPOL Group Pty Ltd.; (b) immediately charge the Customer a penalty fee of $350.00 (including an amount of GST); (c) charge the Customer penalty interest on all monies overdue (including the amount specified in (b) hereof) at the rate of one point eight five percent (1.85%) per month calculated [from] the date when payment is due up to and including the date of actual payment.
[293] MPOL never issued an invoice to Ms Shibalova in respect of the commission. That is because Ms Shibalova concealed from MPOL the 2012 recovery. By 2015 when the second recovery occurred, MPOL was in liquidation and BCS had taken the assignment of MPOL’s claim. Ms Shibalova concealed the 2015 recovery from Mr Ryffel. BCS prepared an invoice addressed to Ms Shibalova but delivered it to Mr Shibalov.
38 This figure was rounded to EUR 2,678,215 in BCS’s fourth amended statement of claim and closing submissions.
[294] The penalty interest clause under the contract was not triggered by non-payment of an invoice.
[295] Interest is claimed in the alternative under the IMCA. Pursuant to s 17 of the IMCA, where the amount specified in a money judgment is expressed in a foreign currency, the Court has a discretion as to the rate of interest. The rate must fairly and realistically reflect relevant economic circumstances.
[296] There is very little case law providing guidance on when it is appropriate to apply s 17 in determining the appropriate interest rate. However, the Law Commission’s 1994 report concerning awards of interest on money claims refers to a possible justification for this section:39
Where a judgment is given in a foreign currency, to award interest at the prescribed rate under our scheme may not always be appropriate. Because the exchange rate between New Zealand and the other country fluctuates, to award interest at the prescribed rate may result in either over-compensation or under-compensation. Accordingly, where the parties can show that another rate is more appropriate in the circumstances, the courts should have the discretion to award interest at another rate.
[297] In the present case, there is nothing to suggest that fluctuations in the exchange rates mean that an award of interest at the applicable rate under the IMCA would be inappropriate.
[298] Pursuant to s 18 of the IMCA, where special circumstances make it inequitable to award interest in a money judgment under s 10–16 or s 17 of the Act, the Court may award interest on all or part of the money judgment at a rate and in a manner directed by the Court.40 The Court may award a lump sum as compensation for delay,41 or may determine not to award interest or a lump sum.42 There do not appear to be any “special circumstances” that engage s 18 in this case.
[299] Accordingly, I consider that interest ought to be awarded on the commission amount of EUR 2,678,215 from 22 April 2015 (being the latest date that the full
39 Law Commission Aspects of Damages: The Award of Interest on Money Claims (NZLC R28, 1994) at [210].
40 Section 18(1)(a).
41 Section 18(1)(b).
42 Section 18(1)(c).
amount of the commission fell due) until payment at the rate calculated in accordance with the internet site calculator under the IMCA.
Alternative cause of action – quantum meruit
[300] Having found in favour of BCS in relation to the first cause of action, it is not necessary for me to rule in respect of the claim in quantum meruit.
Result
[301] I give judgment for BCS and against Ms Shibalova in the sum of EUR 2,678,215.
[302] Ms Shibalova is to pay interest to BCS on the judgment sum of EUR 2,678,215 at the exchange rate applicable at the date of release of the judgment from 22 April 2015 until payment, at the rate calculated in accordance with the internet site calculator under the IMCA.
Costs
[303]I direct the parties to attempt to agree costs.
[304]If the parties are unable to agree on costs, I make the following directions:
(a)any application by BCS for costs is to be made by memorandum to be filed and served within 20 working days of the date of this judgment;
(b)any reply from Ms Shibalova is to be filed and served by memorandum within a further 10 working days; and
(c)memoranda as to costs are not to exceed five pages.
[305] I will deal with the issue of costs on the papers unless the parties indicate that hearing time is required.
Wilkinson-Smith J
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