RKKW’s clients win a dispute for over PLN 24,2 million. The court’s decision is legally binding

During the dispute, RKKW represented plaintiffs, who were shareholders and members of the board of a company, which used to be listed on the stock exchange (GPW). In 2010 they concluded an investment agreement with a French investor, who was supposed to financially support the company and subsequently buy plaintiffs’ shares. After gaining control over the company, the investor declined to fulfil his commitments, thus evading the effects of the investment agreement. In doing so, he pleaded an error as to the financial position of the company and claimed that it significantly differed from what had been indicated by RKKW’s clients. At the same time the parties had previously agreed that for each day of delay in concluding the share purchase agreement the party shall pay a contractual penalty of PLN 2,000.

After a long period of evidentiary hearings (with participation of many witnesses and witness experts), the District Court in Warsaw confirmed the French investor’s duty to conclude the share purchase agreement with the plaintiffs for the total amount of PLN 6,6 million. Defendants’ arguments regarding the existence of a legal basis for their denial of concluding the share purchase agreement were not supported by the Court. Thus, the Court of First Instance awarded a total of PLN 17.6 million in late payment penalties to the clients of RKKW. The adjudicated sum was the effect of a 5-year delay in fulfilling the agreement and the height of the daily penalty, which had been lowered by the Court and reached PLN 1,000.

The defendant appealed against the judgment in its entirety. However, during the appeal proceedings, her claims concerning the duty of concluding the purchase agreement were withdrawn. Nevertheless she appealed against the contractual penalty by claiming that they were grossly excessive and requesting that they be further mitigated.

In a judgment of 15.03.2022 (file reference: VII AGa 2195/18), the Court of Appeal in Warsaw dismissed the appeal in its entirety. When pointing out the lack of basis for further mitigation of the penalties it brought up numerous arguments, which were stressed by the plaintiffs’ attorney during the appeal proceedings. Among them were:

1. The judgment of the Court of I Instance in regards to the lowering of penalties may be changed only in the event of a flagrant breach of the principles of the institution of proportionality, which did not take place during the proceedings.
2. Defendant’s refusal to conclude the purchase agreements was an effect of her personal decision and undertaken strategy, which did not come from any external circumstances. The total amount of the penalties is not a result of the imposition of an abnormally high contractual penalty, but solely a reflection of the extent of the delay knowingly committed by the defendant;
3. The necessity of taking into account the incentive function of the contractual penalty;
4. The extent of the distress suffered by the plaintiffs as a result of the defendant’s conduct, both pecuniary and non-pecuniary (including entanglement in unwarranted prosecution proceedings);
5. The defendant’s financial resources and assets (multi-million dollar revenues and profits).

The court’s decision is legally binding.

The clients were represented by attorney-at-law Aneta Pankowska (Partner) with help of attorney-at-law Piotr Frelak (Counsel). During the appeal proceedings, attorney-at-law Marcin Michalik (Senior Associate) and Aleksandra Rudzińska (Junior Associate) also participated in the case.