Decision on Interim Receivership in Vasily Trubnikov v Julimar Management Ltd

Vasily Trubnikov v Julimar Management Ltd [2025] HKCFI 575 centers on a dispute over the management and control of a mining business in Mozambique. The Court of First Instance (the Court) was asked to consider the appointment of interim receivers and managers over the business.

Factual Background

The dispute began with an unfair prejudice petition filed by Vasily Trubnikov (the Petitioner) against Julimar Management Ltd and other respondents. Julimar Management Ltd, incorporated in Hong Kong in January 2021, is owned equally by the petitioner and the second respondent (the Company). The Company owns a mining business in Mozambique through its subsidiaries. In 2018, the Petitioner and the third respondent (R3) agreed to acquire a mining business in Mozambique, structured through Avant Exploration Limited, which holds 99.85% of the shares in Tazetta Resources Limitada (Tazetta), a company incorporated in Mozambique. Julimar Management Ltd is the parent company and investment holding entity, owning Avant Exploration Limited, which in turn holds the majority stake in Tazetta. Tazetta operates under four mining licenses granted by the Ministry of Mineral Resources and Energy in Mozambique.

The conflict arose from several events, including the breach of a Shareholders' Agreement (the SHA), allegations of asset diversion, and the exclusion of the Petitioner from the Company's management. As a result, the Petitioner sought the appointment of interim receivers and managers to manage the Company and its subsidiaries.

Decision of the Court

The Court dismissed the application for the appointment of interim receivers and managers, concluding that the Petitioner had not demonstrated a real risk of dissipation of assets or that the current protective regime was insufficient to protect his interests.

The Court's reasoning was grounded on several key points. The Court acknowledged that there were serious issues to be tried, in particular, the exclusion of the Petitioner from management, certain appointments, and the breach of the SHA. However, despite these serious allegations, the Court found that the existing protective measures, such as the appointment of the Petitioner as a director and the undertakings provided by the respondents, were sufficient to address these issues without necessitating the appointment of interim receivers and managers.

The Court concluded that the Petitioner had not shown a real risk of dissipation of assets. The evidence presented failed to substantiate the allegations of undervalued sales, fictitious documents, or tax fraud. The Court also found that the discrepancies in the shipping documents and the alleged digital alterations of sales contracts were insufficient to establish a risk of dissipation. Additionally, the Court found that the alleged inconsistencies in the shipping documents were minor and did not indicate any fraudulent activity.

The Court determined that the balance of convenience did not favor the appointment of interim receivers and managers. It emphasized the potential adverse effects on the Company's reputation and operations. The Court noted that the appointment of interim receivers is a drastic remedy, appropriate only when there is a clear risk of asset dissipation or significant prejudice to the Petitioner. The proposed interim receivers and managers would only exercise "desktop oversight" of the operations, which will continue to be handled by the existing ground personnel. The Court therefore found that this arrangement would not provide any substantial benefit and could potentially harm the Company's reputation and operations.

The Court rejected the argument that a deadlock justified the appointment of interim receivers. It concluded that the appointment of the Petitioner and R3 as directors of the Company enabled the Company to fulfill its statutory obligations and manage its affairs. The Court highlighted that a deadlock alone does not automatically justify the appointment of interim receivers, especially when other protective measures are in place. It emphasized that the Petitioner and R3, as directors, were capable of ensuring the Company fulfilled its statutory obligations and exercised its rights as a shareholder of the subsidiaries.

Other Observation

In the judgment, Linda Chan J also noted that if the main relief sought is a buy-out order, it is generally preferable to allow the current management or those likely to assume control to continue managing the Company. This approach should be maintained unless it can be demonstrated that their continued management would significantly harm the Company's value, and such harm cannot be adequately compensated through a buy-out order.

Key Takeaways

The Court's decision in this case establishes a precedent for high evidentiary standards required for appointing interim receivers. It underscores that such a remedy should only be granted when there is compelling evidence of a real and imminent risk of asset dissipation. This decision also highlights the importance of existing protective measures in safeguarding shareholder interests, emphasizing that a deadlock alone does not justify interim receivership, especially when the company can still function and fulfill its obligations. Moreover, if the main relief sought is a buy-out order, it is generally preferable to allow the current management to continue, unless it can be clearly shown that their continued management would significantly harm the company's value and that such harm cannot be adequately compensated.