Gaydamak v Leviev – enforcing contracts in the UK

This case is an extremely factually complex one and in this post we’ll therefore be covering the facts and the points of law in a rather selective fashion. The case of Gaydamak v Leviev concerns a dispute over a contract purportedly agreed in 2001 regarding the splitting of Mr Leviev’s and Mr Gaydamak’s business assets in Angola between them, and whether there was an enforceable Settlement Agreement reached at a later date (and what the terms of that agreement were). The High Court determined that a contract had been agreed and signed by both parties, that there was an enforceable Settlement Agreement in place relating to the dispute, and that General Kopelipa had not made false representations to Mr Gaydamak to entice him to sign the Settlement Agreement. Mr Gaydamak’s claim was therefore dismissed.

The facts in Gaydamak v Leviev

As stated above, this case is quite factually complex. We’ll therefore stick to dealing with an outline of the facts. Mr Gaydamak and Mr Leviev (“the Parties”) had, and have, substantial business interests in Angola. In 2001 the Parties agreed to split their respective Angolan businesses 50/50 between them. An agreement was drawn up as to this effect, allegedly signed, and handed to the Chief Rabbi of Russia for safe-keeping. Mr Leviev later stated that he never signed such an agreement and that the agreement handed to the Chief Rabbi was a manuscript agreement committing Mr Gaydamak to make regular charitable donations to Jewish communities.

The second issue in the case was the “drop hands” Settlement Agreement relating to litigation over the previous contract that was agreed by the Parties in 2011. Mr Gaydamak alleged that he was offered $500 million to compensate him for his losses, with $50 million to be paid up front. Mr Leviev stated that he never offered anything of the sort and that he had instructed General Kopelipa, attending on his behalf, that he would not pay any money. The issue therefore arose as to what instructions Mr Leviev had given, whether General Kopelipa had made a fraudulent representation, and, if so, whether General Kopelipa had actual or apparent authority to make such a representation.

The law relating to creating contractual agreements

As every law student knows, a contract is composed of four elements: offer, acceptance, consideration and intention. In order to avoid insulting the intelligence of our readers we will therefore deal only briefly with these points.

An offer is an indication by one person that they are prepared to deal with another person on certain terms. This is different from an “invitation to treat” (i.e. a tender) where negotiations are opened, offers are sought from a variety of sources, and the “best” offer selected for the contract.

Acceptance is, obviously, indicated when the other party consents to the terms offered. This is as opposed to a counter-offer, whether the other party amends the terms and submits them for the party’s deliberation. Acceptance of an offer must generally be communicated by words or action – silence is not to be deemed acceptance (Felthouse v Bindley).

Consideration has been described as the “price of a promise”. It can be absolutely minimal (hence the term “peppercorn rent”) but it must exist. It is essentially what party A is transferring to party B for the use of or ownership of the property.

The position on whether the parties to the contract intended to create legal relations depends on the circumstances in which the contract came into existence. If it is a commercial venture then the presumption is that there is an intention to create legal relations. If it is a “domestic” agreement then the presumption is that the agreement is not legally binding. The party seeking to enforce the agreement must then seek to persuade the court that there was such an intention.

The High Court’s decision in Gaydamak v Leviev

On the first issue – whether the partnership agreement had been signed – the High Court found that the agreement was signed in a meeting between the Parties in December 2001. The High Court relied on the evidence that had been put before it in deciding this, particularly on the statements of Mr Gaydamak and Mr Dagan as to the significance of the greeting “mazel u’bracha” (meaning “good fortune and blessing”) which was used on the day that the agreement was allegedly signed in December 2001. Further, the High Court preferred the evidence of Mr Gaydamak to that of Mr Leviev.

On the second issue – whether there was an enforceable Settlement Agreement – the High Court found that there was. The Parties had signed the 2011 agreement and acted in reliance on it. Of particular significance was the fact that Mr Gaydamak was provided with an Angolan diplomatic passport – something that he had been promised by General Kopelipa upon the signing of the Settlement Agreement. Further, Mr Gaydamak’s defence that there was not a date specified on the front of the 2011 Settlement Agreement (and that it was therefore not yet in force) was dismissed as relatively weak, seeing as Mr Gaydamak had signed and dated the Settlement Agreement in his own hand on 6 August 2011.

Finally, the High Court dismissed the contention that General Kopelipa had made representations of fact relating to payments outside of the Settlement Agreement but accepted that General Kopelipa had been Mr Leviev’s agent. However, General Kopelipa would not have been acting with actual or apparent authority if he had made such representations as the Settlement Agreement stated that Mr Leviev would not make such payments and the Settlement Agreement contained an entire agreement clause.

The High Court therefore dismissed the claim on the basis that there was an enforceable Settlement Agreement that covered the litigation.

Our specialist commercial solicitors’ thoughts on Gaydamak v Leviev

This is an interesting and, it has to be said, rather exotic case. What it demonstrates is that clear and precise notes of meetings should be taken and that agents, if instructed, should be provided with written instructions to clarify the limits of their authority. Further, it demonstrates that ambiguity in commercial relationships can be damaging and extremely costly.

If you have a commercial dispute then contact Redmans‘ commercial dispute resolution team.