Borrow big. It's cheaper that way... (Author unknown)
As many of our readers will recall, in one of our earlier articles we told the story of two entrepreneurs and business partners — Pavel, a Russian national, and Stefan, a German national (names changed). The gist of the story is this: Pavel lent his partner Stefan, with whom he had a close business relationship that was almost a friendship, a substantial sum — 45,000 euros for a term of three years. When the repayment deadline arrived, the parties signed a supplementary agreement extending the term by a further six months. Even after those additional six months elapsed, however, the loan was not repaid, and Stefan stopped responding. On the recommendation of business partners in Germany, Pavel approached our law firm and asked us to help him recover the money lawfully owed to him. After reviewing the written demand letter from our firm's attorney, Stefan wasted no time in responding, sending a letter claiming that he had already repaid the entire debt as follows — a total of 25,000 euros deposited into Pavel's account in Germany, to which Stefan had access; 10,000 euros transferred by wire to another of the creditor's accounts in Russia; and the remaining 10,000 euros in cash. Our client's version, however, was completely different — 15,000 euros had been given to Stefan separately for a real estate deal and had indeed then been deposited into Pavel's account; a further 10,000 euros had been deposited by Pavel into his own account himself; 10,000 euros had indeed been transferred, but in settlement of a different debt that Pavel had lent in Italy; and no cash had ever changed hands at all. Since there was no prospect of resolving the dispute out of court, we, acting on our client's instructions, turned to the court to represent his interests. Many of the documents that would have conclusively proven the transfer of funds were missing. Our firm's attorney faced a far from simple task — gathering, over the course of the proceedings, every available piece of circumstantial evidence and witness testimony to prove the lawfulness of our client's claims. In this article, we continue the story and describe some of the details of the court proceedings that followed.
Important to know
If a pre-trial demand letter does not help, the creditor is entitled to use the simplified dunning procedure (German: Mahnverfahren) — it is faster and cheaper than ordinary litigation.
Even before the court hearing, the attorney gathered strong evidence supporting our client's account.
First, the attorney obtained and presented to the court copies of customs declarations showing that Pavel had carried large sums of foreign currency across the border. These declarations clearly showed that Pavel had first taken 15,000 euros into Germany, and then, six months later, a further 10,000 euros. In addition, a copy of a customs declaration was also found showing that, when flying to Italy on holiday, Pavel had also been carrying a sum exceeding 10,000 euros. This indirectly confirmed that Pavel did in fact carry large sums of cash with him when meeting his business partner Stefan.
Second, the attorney obtained all the statements of account movements for our client's account in Germany, to which Stefan had access. Once these statements and printouts were obtained, it became clear that the 15,000-euro and 10,000-euro sums had been deposited using different bank cards. This fact did not escape the attorney's notice and served as strong evidence that at least 10,000 euros had been deposited into the account by the client himself. It also gave the judge good reason to doubt the truthfulness of the defendant's account.
Third, the attorney did serious preparatory work with witnesses beforehand. Pavel's wife, Irina (name changed), gave important testimony in court. The attorney explained in detail how the witness examination would work and asked her to recount, calmly and precisely, everything she remembered. Through carefully guided questions, he helped her recall the details of the two men's meeting in Italy. The details Irina gave in court served as additional evidence supporting her husband Pavel's account. The attorney also found and brought into the case Pavel's friend Ivan (name changed). He had been in Germany at the time Pavel gave Stefan 15,000 euros as a deposit toward the purchase of an apartment. Although Ivan had not been present when the money changed hands, he knew that the two men were planning to meet to sort out the real estate matter. He had also heard that our client was going to put down a deposit on the property, and that Stefan always handled such transfers.
During the court hearing, the attorney presented the court with all the circumstantial documentary evidence gathered during trial preparation. He also pointed to the supplementary agreement signed between the creditor and the debtor, which showed that the debt had not been repaid by the date it expired. Stefan's testimony, in fact, contained a good number of contradictions. The attorney took note of all of them and raised them in court. In addition to the above, the attorney actively questioned the witness called by the defendant — Stefan's wife, Anna (name changed) — during the hearing. She was asked, among other things, under what circumstances her husband had repaid the 10,000 euros to Pavel, exactly when this happened, whether she had actually seen the banknotes themselves, and what exactly the two men had discussed at the time. Anna's answers to the attorney's questions were confused and evasive. In the end, she stated that, during the men's meeting at their home, she had seen a full envelope on the table bearing the logo of a major German bank, Sparkasse. She added, however, that she had been occupied with the small children and did not know exactly where the envelope had come from, what exactly was in it, or whether it had actually been handed over by her husband to our client.
Later in the hearing, Pavel's wife, Irina, was also questioned. As mentioned above, according to our client's account, Irina had been with her husband at the ski resort when Pavel gave Stefan the 10,000 euros as a loan. Irina recounted that Pavel had declared a large sum of money at the airport — something she could not recall happening on any of their earlier holiday trips. She then described being present during the men's conversation in the hotel room, when the money changed hands. She was able to recall the details: the two men sat at a table during the conversation, Stefan spoke to Pavel in English about upcoming new projects, and a thick stack of green banknotes was handed to Stefan in a clear plastic folder. At the exact moment the money was handed over, Irina had gotten up from the table, but remained in the hotel room, and so she did see the money actually change hands. It should be noted here that the witness gave her account at the German court hearing in Russian. Her words were translated into German by an interpreter, who made two significant translation errors:
· first, the witness's statement that the money had been handed over in a clear plastic folder, which allowed Irina to see the banknotes herself, was translated as though the money had been handed over in an opaque envelope;
· second, the statement that she had gotten up from the table at the moment the money changed hands was translated as though she had gotten up and left.
Fortunately, our firm's attorney, who is fluent in both Russian and German, noticed the translation errors in time — errors that could otherwise have significantly affected the outcome of the case. He intervened during the witness examination and provided the judge with the necessary clarifications.
After the painstaking preparatory work our attorney carried out ahead of the trial, aimed at defending our client's interests, a favourable outcome was not long in coming. After a thorough review of all the materials, the court ruled in Pavel's favour. It was established that Stefan did indeed still owe his lender a substantial sum — 45,000 euros. The court therefore ordered the defendant, in its judgment, to pay this amount to the claimant, together with the corresponding interest for late payment, within one month of the judgment becoming legally binding.
In closing, we would like to point out that, despite the seemingly straightforward nature of a loan agreement, we always recommend taking a businesslike approach when lending money and drawing up all the necessary supporting documentation. Unfortunately, abuse, or even deliberate fraud, can occur on either the borrower's or the lender's side. Taking precautions in good time will help you effectively protect your interests should the matter end up in court. If you find yourself in a similar situation, our firm's highly qualified and experienced attorneys are ready to advise you and will do everything possible to restore your rights and recover the property that belongs to you.
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