Our client, a major Russian property developer, was executing a large residential construction project in Yekaterinburg. All of its contracts with subcontractors included a withholding guarantee provision: 5% of a contract amount was payable upon project commissioning of a completed building. The amount paid to subcontractors from the withheld guarantee funds could be reduced due to costs associated with rectification of work defects, or due to breach of work implementation timelines. The contractor ceded its rights to the guarantee amount to a third party (affiliated with the contractor), which claimed the payment of the entire guarantee amount of about 200 million Rubles in the court. At the same time, a petition for injunction through the seizure of funds on the developer’s bank accounts was filed (and awarded), which caused considerable difficulties to the developer’s on-going operations. On the whole, the claim appeared to be an attempt of unlawful profiteering at the developer’s expense. The situation resembled a raider attack. At the time of requesting our assistance, the developer feared complete loss of the case in court, since judges appeared to be unwilling to accept its arguments in the dispute.
In the contractor cases the most important part of the work involves primary documents. We collected, thoroughly analyzed and clearly presented to the court all the evidence supporting the unlawfulness of the claims, as well as the contractor’s faults with respect to the quality of construction works and implementation timelines. We formulated a structured position and won the case.
The developer managed to avoid the paying out over 200 million Rubles and strengthened its reputation.