Appeal Hearing. Day 1

Monday, 2 March 2020
( 10.30 am)
Submissions by MR STROILOV
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Good
morning, Mr Stroilov.
MR STROILOV:  Good morning.  May it please the court,
I appear with the permission of the court in the
exceptional circumstances of this case, representing the
appellants as a McKenzie Friend, despite not being
qualified.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
and the appellant is —
MR STROILOV:  That’s right, my Lord.  This is
Dr Arkhangelsky.
Of course the respondents are represented as they
were below by my learned friends Mr Lord
Queen’s Counsel, Mr Birt Queen’s Counsel and
Mr Eschwege.
My Lord, the respondent’s solicitors have very
kindly agreed to discharge what is actually our duty to
provide the bundles to the court.  Just to check that
everything has reached you, you should have two volumes
of the core bundle, one smaller volume of supplementary
bundle and — well, not much smaller but slightly
thinner.  And then three volumes of authorities running
I believe to what is tab 45 now, if I’m not mistaken,
because there were late additions.  But hopefully if
you’ve got all these bundles?
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
I think we have got everything we need but we’ll let you
know if we haven’t.
Just for your information, I work exclusively or
almost exclusively electronically so if you want to put
in any documents in the course of the hearing, I would
like them sent electronically.
MR STROILOV:  Yes, I’m grateful, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Can
I just say something about the timing.  Have you
discussed timing with Mr Lord?
MR STROILOV:  We haven’t, my Lord, and I apologise for that.
The way I am applying it in my own mind, I plan to end
well before the end of tomorrow.  I don’t promise to end
by lunchtime, I do hope though.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  That is
fine.  That’s what I was going to suggest.  But there’s
one additional hurdle you will have to overcome and that
is that today we’ll be rising, breaking for lunch at
just before 12.55 and coming back a bit late at 2.05 and
we’ll be finishing for the day at 3.40.  I’m sorry,
that’s unavoidable.  But for the rest of the four days
we’re able to sit the normal court times, between 10.30
and 4.15.  So it shouldn’t be a problem.  And, secondly,
you can take until the end of tomorrow because you’re
going to want to have a reply after Mr Lord has made his
submissions.
MR STROILOV:  Yes, my Lord, I am grateful.
Unless I am expressly invited by the court to do so,
I don’t propose to spend any time outlining the
background and things like the chronology of events and
dramatis personae.  I don’t know how —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  No,
none of that.  Just so you know, we’ve all read the
judgment.  I think all of us probably more than once.
We’ve noted that the judgment is longer than the
well-known English novel Pride and Prejudice and so —
we enjoyed it nearly as much.  We’ve read the skeleton
arguments and we’ve done, for my part anyway, quite
a lot of reading around the subject as well.  So we’ve
read, I don’t say we’ve read the bundles completely,
that would be not right, but we’ve looked at the grounds
of appeal, the respondent’s notice and the relevant
documents.
MR STROILOV:  I am extremely grateful for this indication.
Then let me begin by saying this.  You will have
read then that the learned judge made some very, should
I say, uncomplimentary findings about Dr Arkhangelsky
personally.  Dr Arkhangelsky disagrees with those
findings strongly.  However, we know the rules and we
accept the rules.  There is little we can do about it.
We can challenge the overall fairness of the trial and
we do that and when I get there I will submit that we’ve
got good grounds to do so, but other than that we accept
that you must proceed on the basis of such findings as
have been made.
What we say about this as a general point is that
those findings have little relevance to the
counterclaim, they are important for the claim and they
affect Dr Arkhangelsky’s credibility.  But at least at
this stage and generally in the context of counterclaim,
we are not asking you and we did not particularly ask
the learned judge to accept his word for anything.  We
say that the fraud we allege has been proven by
documentary evidence and by respondents’ own evidence.
We say we can show that this is an inference which
arises inevitably on the basis of the judge’s own
findings and if that is right, then the appellants are
entitled to redress as victims of fraud.  A victim of
fraud doesn’t have to come with clean hands.  So in that
regard, these findings are irrelevant.
My Lord, you will have seen that there are six
grounds of appeal which you will see in the core bundle,
volume 1, page 19.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes.
MR STROILOV:  They are, I submit, quite considerably
overlapping and interconnected and of course different
standards of review apply to issues of English law, of
Russian law, of factual findings and factual evaluation.
In an effort to achieve greater clarity and efficiency,
hopefully, I propose to change the order slightly in
which I address the individual grounds.  I propose to
start with Ground 3, try to persuade you that the judge
misdirected himself on the standard of proof which is of
course an issue of English law.  Secondly, I will move
to Ground 1 territory and start with the last sentence
of Ground 1:
«The judgment fails to step back and consider the
most probable explanation as to the claimant’s state of
mind which would satisfactorily cover all the facts [as
read].»
I will submit this is another identifiable
misdirection on English law of evidence, piecemeal
analysis of circumstantial evidence and relatively
straightforward in this regard.
Thirdly I will make submissions on what we say
a proper analysis should have been and I will try to
take your Lordships through the findings of fact in the
judgment which we say give rise to an irresistible
inference of fraud.
That will be probably the longest part of my
submissions, mostly under Grounds 1 and 2 which are
interconnected.  But I will also interpose Ground 4
along the way because it is a distinct ground because it
is the highest hurdle et cetera, also to challenge the
particular finding of fact but it is most intelligibly
addressed in context of other factual findings.
Fourthly, I propose to make a relatively brief
alternative submission on the application of burden of
proof under Article 1064 of the Russian Civil Code.
Then, fifthly, having covered Grounds 1 to 4,
I think that will be a convenient moment to address you,
also relatively briefly, on the different standards of
review on appeal which apply the different grounds
because that is affected by the delay in delivery of the
judgment.  I will address Ground 5 along the way as part
of the submission on the standard of review.
Finally, part 6, I will address Ground 6, fairness
of the trial.
I propose to stop there and give way to Mr Lord at
that stage because if I have anything additional to say
on the grounds raised in the respondents’ notice,
I submit it’s probably more appropriate to do that in
reply.  I don’t propose to take very long.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  That’s
absolutely right and something I was going to suggest to
you.
MR STROILOV:  I’m grateful, my Lord.
So Ground 3, standard of proof.  We focus on
paragraph 1634 of the judgment, page 412 of the core
bundle.  1634, there is an introduction but then at line
7 of this paragraph, the learned judge says:
«The Counterclaim always faced the difficulty that
it relied on proof of the inherently improbable and a
burden of proof that could only be discharged by showing
the facts to be incapable of innocent explanation such
as to give rise to the inference of the conspiracy or
conspiracies pleaded.»
We say this is a misdirection.  There is no need for
us to show that the facts are incapable of innocent
explanation.  All we need to show is that our
explanation of the facts is more likely than not, and
I will shortly take you to a number of passages in the
judgment which we say demonstrates that this is not an
unhappy turn of phrase on the part of the learned judge
but rather a consistent application of what we say is an
erroneous standard.
May I take you to two cases to emphasise the legal
principle which we mean.  Firstly that is the decision
of the House of Lords in In re B 2009 which is at
volume 2 of the bundle of authorities, tab 19.
Lord Hoffmann, basically he starts the discussion of the
standard of proof pretty much from the beginning, from
paragraph 1, but this is mainly background.  And then at
paragraph 11 you will see the well-known passage from In
re H (Minors) quoted Lord Nicholls, quoted by
Lord Hoffmann.  Then in paragraph 12 he emphasises:
«The degree of confusion which is possible on this
issue is exemplified by the fact that despite the
painstaking clarity with which Lord Nicholls explained
that having regard to inherent probabilities did not
mean that ‘where a serious allegation is in issue the
standard of proof required is higher’.»
Then Lord Steyn in McCann case cites this very
passage as authority for the existence of a heightened
civil standard.  Then he continues to illustrate the
same kind of confusion in submissions in various cases.
Then in paragraph 13, he says quite strongly:
«The time has come to say once and for all that
there is only one single standard of proof and that is
proof that the fact in issue is more probably accurate
than not [as read].»
Then he continues if you can read to the end of
paragraph 13.
Then in paragraph 14, he quotes again Lord Nicholls
and in paragraph 15 stresses the significance of the
laws to whatever extent is appropriate in the particular
case.  Then he says Lord Nicholls was not laying down
any rule of law et cetera, if I may ask you just to read
to the end of paragraph 15.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes.
MR STROILOV:  Then, my Lords, further on in this judgment,
Baroness Hale, starting at paragraph 62, also discussing
the standard of proof.  In the case report, that’s
page 32, paragraph 62, you will see once again she
quotes from Lord Nicholls from In re H.  Then her
Ladyship comments over the page and after setting out
the principle about the standard of proof and the
inherent probability, then she comments:
«If he had stopped there, perhaps there would have
been no difficulty, provided that lawyers and courts
paid attention to the whole passage, including the words
which I have italicised, rather than extracting a single
phrase.  But he went on …»
Then she quotes Lord Nicholls’ further passage
trying to reconcile his statement of principle to
earlier cases which suggested something in the nature of
a heightened standard of proof.
Then she quotes from Lord Lloyd in the same case.
Then in the end of this quotation, Lord Lloyd sounds
a note of caution about complicating this proposition
about the standard of proof in cases of serious
allegations.  He says, and Baroness Hale quotes:
«There remains the question whether anything should
be said about the cogency of the evidence needed to ‘tip
the balance’.  For my part I do not find those words
helpful, since they are little more than a statement of
the obvious; and there is a danger that the repeated use
of the words will harden into a formula, which, like
other formulas (especially those based on a metaphor)
may lead to misunderstanding.»
Then Lady Hale gives an endorsement to this comment
in paragraph 64.
Then there is some further discussion of cases where
the test was understood and misunderstood.  The passage
I would like to draw your attention to, my Lords, is
paragraph 70 where her Ladyship says:
«My Lords, for that reason I will go further and
announce loud and clear that the standard of proof in
finding the facts necessary to establish the threshold
under section 31(2) … is the simple balance of
probabilities, neither more nor less.  Neither the
seriousness of the allegation nor the seriousness of the
consequences should make any difference to the standard
of proof to be applied in determining the facts.  The
inherent probabilities are simply something to be taken
into account where relevant in deciding where the truth
lies [as read].»
Then at paragraph 72, there is a further discussion
about the seriousness of the allegation where her
Ladyship says:
«There is no logical or necessary connection between
seriousness and probability.  Some seriously harmful
behaviour such as murder is sufficiently rare to be
inherently improbable in most circumstances.  Even then
there are circumstances, such as a body with its throat
cut and no weapon to hand, where it is not at all
improbable [as read].»
Then she goes on until the end of paragraph 72.
My Lords, another case I will ask you to look at is
at volume 3 of the bundle of authorities, tab 38, it’s
the case of Kekhman which is a big case but the one
thing I’m interested in is a helpful review of cases
postdating In re B where this issue occurs.  It starts
in tab 38, Kekhman —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Sorry,
can you just tell me the name of the case again?
MR STROILOV:  Kekhman, it’s K-E-K-H-M-A-N.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
just give me a second to get it up.
MR STROILOV:  It’s tab 38.  I beg your pardon, my Lord, it’s
JSCB Bank, or Bank of Moscow I think sometimes it’s
referred.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Bank of
Moscow.  Yes, Mr Justice Bryan, I’ve got it now, thank
you.
MR STROILOV:  That’s right, my Lord.
Then at paragraph 46 there is a discussion of the
burden and standard of proof in relation to fraud where
paragraphs 46 and 47 are just review of the authorities
we’ve just discussed and some further.  But then it
starts at paragraph 51 under the heading «Inherent
probabilities».  There is a summary of the law as it is
on this point on inherent probabilities.  Sir, as you
can see, paragraph 51, the court emphasised:
«Care must be taken in working out what in
a particular case is inherently probable or improbable.
It is generally correct that, absent other information,
the more serious the wrongdoing, the less likely it is
that it was carried out because most people are not
serious wrongdoers.  The standard of proof remains the
same but more cogent evidence is required to prove fraud
than to prove negligence or innocence [as read].»
Then there is some review of the authorities,
Fiona Trust, Three Rivers District Council.  In
particular I would ask you to read paragraph 57 where
there is a discussion of, if there are already serious
findings of dishonesty, how that affects inherent
probabilities.
LORD JUSTICE MALES:  You want us to read 57?
MR STROILOV:  57.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes.
MR STROILOV:  And then some examples of how it works.  You
can see at paragraph 60 that this was an issue in the
Kekhman case itself.  The claimants admitted at
paragraph 60 that Mr Kekhman had proved himself to be
a dishonest witness who lied to the court and was
dishonest in further respects.  Paragraph 61, the court
records that the defendant’s counsel accepted, rightly
in my view, says my Lord, that this is the right
approach, that findings of dishonesty affect the balance
of — affect the inherent probabilities in relation to
other allegations of dishonesty.
Then similar approach taken in Fiona Trust v
Privalov as you can see recorded at paragraph 62,
a lengthy quote from Fiona Trust.  I think if you can
just read the quotation from Fiona Trust, you will get
the flavour of how this principle worked in Fiona Trust.
Then at paragraph 63, as the judgment quotes from
Mr Justice Eder in Otkritie v Urumov:
«I am prepared to accept that in a very broad sense
it may well be true to say that it is inherently
improbable that a particular defendant will commit
a fraud.  But it all depends on a wide range of factors.
For example, if the court is satisfied that it hasn’t
been admitted that the defendant has acted fraudulently
or reprehensibly on one occasion, it cannot necessarily
be considered inherently improbable that such
a defendant would have done so on another [as read].»
Then I would ask you to read to the end of this
citation.  And then there is a similar — at
paragraph 64 there is a similar approach taken in
Novoship v Mikhaylyuk case.
My Lords, we say that from In re B and from the
authorities reviewed here in Kekhman, three points
follow as points of principle.
Firstly, in civil proceedings, including civil fraud
proceedings, there is no presumption of innocence in any
way similar to the one in the criminal proceedings.  No
legal rule whereby you have to assume innocence.
Secondly, it is often but by no means always
inherently improbable that people get involved in
dishonesty.  But that probability heavily depends on
context.
You are inherently unlikely to meet a lion in
Regents Park but of course the world is bigger than
Regents Park.  There are far-away places where there is
nothing surprising about encountering a predator among
animals or indeed among businessmen.  This is a risk.
People live this in those places.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So
leaving lions aside for one moment because I find that
example incredibly unhelpful, you say often but not
always it is the case that it’s inherently improbable
that people will be dishonest but not always?
MR STROILOV:  But that depends on the context entirely.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  It
depends on the context?
MR STROILOV:  Entirely.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Thank
you.
MR STROILOV:  The reason why we say if you are adjudicating
a dispute between reputable English companies, you would
consider it inherently improbable.  It’s the realities
of English commercial life.  It’s not any general
consideration about how the world works.  There are
places where it works differently.
And thirdly, if serious dishonesty has already been
proven against particular individuals or against — even
against a particular group, then you no longer need to
assume inherent improbability of dishonesty in
considering the motives of their other actions.  The
inherent probability has become more complex, it becomes
the probability of B given that A.  And in some cases,
the result may be that dishonesty is more inherently
probable than honesty.
My Lord, we say that the learned judge has not
applied this —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Sorry,
I’ve got two principles.  I think you said there were
three?
MR STROILOV:  Yes, firstly no legal presumption of
innocence.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  No
presumption of innocence.
MR STROILOV:  Secondly, inherent probabilities depend on
context.  Thirdly, findings of dishonesty change
inherent probabilities dramatically.
There is other context as well.  For example, if it
is shown that we are in a — we are talking about
a country where the realities of commercial life are
very different.  That’s also relevant to affect inherent
probabilities.  Of course it does not remove the need to
prove on the balance of probabilities fraud against
these particular parties but general evidence of what is
happening in Russia is something to be taken into
account in assessing —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Was
there evidence before the judge, general evidence of
what you say is dishonesty generally in Russian
business?
MR STROILOV:  Well, there was some and I will get there in
due course, my Lord.  But we also say that he was —
well, given the number of Russian cases in this court
and in the High Court nowadays, we say an English judge
is entitled to take judicial notice of what is the
consensus in those cases about the realities of and the
inherent probabilities of Russian —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Take
judicial notice of what precisely?
MR STROILOV:  Of the reality that Russian commercial life is
generally less clean than western commercial life and
dishonesty is more likely there.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Was
that submission made to the judge?
MR STROILOV:  I don’t think it was made in those terms.  I’m
not quite sure, my Lord, I don’t expressly recall saying
exactly that.
He does make some reference to other cases as
illustrating the realities of Russian life.  If I may,
I won’t jump forward, I will get there and show them.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Okay.
MR STROILOV:  We say this misapplication of the correct
standard is evident in many cases in the judgment, but
one which is particularly illuminating and which I would
like to begin with is at paragraph 10 — it starts at
paragraph 1091 at page 281 of the core bundle.  I don’t
propose to read this whole passage, it’s just — because
you’ve read the judgment already.  You will recall what
the learned judge is discussing here is the evidence
given by three of the bank’s witnesses and three of
Renord’s witnesses in criminal proceedings in Russia
against Dr Arkhangelsky.
The evidence, as the judge has found, was
orchestrated and fundamentally false.  He says that in
paragraph 1094.  Then he explains the events which
I trust you generally recollect.
And then at paragraph 1104, he characterises the
evidence of Mrs Malysheva as:
«… a pack of lies … the lies are fundamental and
inexcusable, and raise the obvious question: why were
they told?»
Then, my Lord, the discussion starts at
paragraph 1110 where the learned judge summarises our
submission and the inferences we invited to make from
those facts.  Then his comment in paragraph 1111 is:
«I cannot go as far as that.  Even though I accept,
with real and abiding concern, that a contrived and
coordinated tale was concocted, and that this and its
context cast considerable doubt on the reliability and
sense of propriety of the Claimants, I must remind
myself (not for the first or last time in this case)
that the more serious the allegation the more assiduous
must be the exploration of alternative explanations, and
the more cogent must be the evidence of a malign rather
than a more benign rationale.»
Then in paragraph 1112, there is some suggestion
that the origin of these lies may have been in the civil
case brought by Mrs Arkhangelskaya in Russian courts.
Then in the end, he comments:
«Though I continue to harbour doubts as to these
more benign origins, for what on any view is an
extraordinary fabrication, I cannot exclude them.»
Then at 1113 he declines to infer, as we invited him
to infer, that from the fact these lies were told or, to
call a spade a spade, perjury was committed, he
shouldn’t(?) feel that they were covering up their
fraud.  He declines to do that.
Then in 1114, once again he suggests it may have
originated with Mrs Arkhangelskaya.
Then at 1115, the bottom line is:
«But, as I see it and find, the purpose of the
concocted chorus was to support and substantiate the
criminal proceedings, as part of the continuing ‘war’
against Dr Arkhangelsky; and I do not infer from any of
this any recognition or concern that the repo
arrangements were fraudulent; the evidence was concocted
and coordinated to assist the Morskoy Bank criminal
complaint. That is reprehensible: but, in my judgment,
it does not demonstrate a conspiracy to conceal the repo
arrangements because the participants recognised them to
be fraudulent.»
Now, this, my Lords, is clearly, on proper reading
of the judgment, this is a development of the
fundamental point he makes in paragraph 1111 about the
assiduous exploration of alternative explanations and
cogent self-evidence for a malign rather than a more
benign rationale.
Then what follows, my Lords, deserves some
discussion.  Firstly, I dare say it invites a rather
interesting ethical question as to what is more benign,
a perjury calculated to complicate your opponent in
a crime or a perjury calculated to cover up your own
fraud?  I submit it is not at all obvious that the
former is more benign than the latter.  If anything, it
is perhaps the opposite.  In truth —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
— I don’t want to interrupt you, Mr Stroilov, too much
but the key to this finding and indeed many findings is
that your case, as he says in the last sentence of 1115,
was to prove a conspiracy to conceal the repo
arrangements because they recognised them to be
fraudulent and that they had decided upon a course of
action early on to enter into the repo arrangements to
raid the appellants’ assets.
MR STROILOV:  Yes, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I just
think we have to be careful to distinguish between the
allegations of dishonesty, of which there were many in
this case, and the actual conspiracy which you were
trying to prove.
MR STROILOV:  Of course, my Lord, yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  You
understand that evidence.
MR STROILOV:  Of course, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes.
So when you said, just to complete the point, when you
said it may be just as likely that the perjury was to
conceal your own fraud, you are assuming a conspiracy
that you’ve set out to prove.
MR STROILOV:  Yes, my Lord.  What I am saying is, and once
again I propose to focus on paragraph 1111 where he set
out the facts, there are two possible explanations.  He
says basically that he is conducting an assiduous search
for a more benign rationale before he can infer a malign
rationale.  What he ends with is an explanation which is
not more benign, it is simply less helpful to our case.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Let’s
assume for a moment that he’s wrong in the way he puts
what he has to do and that what he should have done was
simply apply the standard of proof as we’ve seen it
described in In re B.
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  How
would this affect this part of his reasoning?
MR STROILOV:  He would have to ask himself, without going
into — without really differentiating between more
benign or less benign explanation, he would have to ask
himself what the likeliest explanation is in all the
circumstances.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  And
wouldn’t he have had to ask himself whether the evidence
of the bank’s behaviour in relation to the Morskoy loan
and the criminal proceedings resulting from it actually
proved or made it more or less likely that a conspiracy
to raid the assets of the appellants had happened?
MR STROILOV:  Of course.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  But
what I think we see in many of these facts is
a disconnect between that dishonesty alleged and found
by the judge and the conspiracy you were trying to
prove.
MR STROILOV:  Well, my Lord, we say that in this particular
instance, it seems to result from the misdirection on
the standard of proof because what he has, he has a set
of quite extraordinary facts, he has some alternative
explanations and he says that, before he can accept our
explanation, he must carry out an assiduous search for
a more benign explanation, rather than simply consider
the balance of probabilities —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  He
doesn’t really come to a benign explanation.  He just
comes to a different explanation.
MR STROILOV:  Quite, well he says he comes to it — well, he
indicates, I think, in paragraph 1111, that he comes to
it because he’s trying to find something more benign and
in practice he finds something which is as malign but
less helpful to our case.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  That
may be right.
MR STROILOV:  It may be but it may be not.  The way it
reads, my Lord, is something about this approach looking
for alternative explanations, not necessarily more
benign, alternative explanations and asking himself if
that’s plausible.  It would have been perfectly
appropriate in a criminal case where we have to prove
our case beyond reasonable doubt and then he checks if
there is any room for reasonable doubt.  That would have
been appropriate but in the case of a civil fraud, well,
the way he words it and the way, I would submit, he
seems to consider it is wrong.
You do not need to conduct an assiduous search for
more benign explanations, you need to consider our case
on the balance of probabilities.  And it may well have
been, as your Lordship has pointed out, it may have been
that on the right test, the inference we invited would
have failed anyway but the point is you can’t be sure
because he hasn’t applied the right test.
I think a further illustration of the extent of this
error is paragraph 1112 here and the suggestion that
this lie originated with the counterclaimants
themselves.  I would submit that this illustrates that
this supposed presumption against serious allegations
seems to have been so strong in his mind that he thought
it was permissible to engage in pure speculation and
there is no basis in evidence.
Out of these six false witnesses, two were at the
trial.  They were of course cross-examined on this
matter at some considerable length.  Neither of them
remotely suggested any such explanation for this — for
giving this false evidence.  And of course the other
four either chose not to attend or the bank chose not to
call them.
Further, this speculation actually contradicts the
findings which the learned judge made earlier in the
judgment in a different context when this presumption
about benign and malign explanations was not in his
mind.
If I may ask you to look at paragraph 1042, that’s
page 264 of the core bundle, so there is this discussion
of the civil proceedings brought by the appellants in
Russia.  Then you will see at paragraph 1043 he outlines
the unusual features of the claim, if I may ask you to
read paragraph 1043, this paragraph.
LORD JUSTICE PATTEN:  Mr Stroilov, just help me on this,
would you?  This particular issue, the paragraphs in the
judgment you’ve just been showing us and the judge’s
analysis of what are the alternative explanations for
why they should have lied in the way they did, all this
is relevant to I think the first or second way in which
you put at the trial the conspiracy allegations, in
other words that they predated the repo agreement.
MR STROILOV:  Yes, my Lord.
LORD JUSTICE PATTEN:  So although we’re looking at these
paragraphs in the judgment and you’re very fairly making
the points about the way the judge expressed himself in
these paragraphs, the ultimate conclusion of whether
this evidence establishes one of the pre-repo agreement
conspiracies has also to be looked at, doesn’t it, in
the round by reference to the other evidence and the
other findings which the judge makes in relation to
those agreements?
MR STROILOV:  Absolutely, of course, my Lord.  And I will
come —
LORD JUSTICE PATTEN:  Yes, this isn’t a criticism of you,
it’s just —
MR STROILOV:  I readily accept that, my Lord.  For the
moment I’m only trying to demonstrate an error of law —
LORD JUSTICE PATTEN:  Clearly this evidence shows that these
individuals are capable and did lie and they’re capable
to that extent of dishonesty.
MR STROILOV:  Yes, my Lord.
LORD JUSTICE PATTEN:  As my Lord has said but in terms of
whether there was a pre-repo agreement conspiracy of the
kind that was alleged, one needs to look at the other
material, doesn’t one?
MR STROILOV:  Absolutely, my Lord.  This is just one of
the — it’s probably just a forensic point to be fair
but it is extraordinary, the way in which the judge
dismissed our forensic point —
LORD JUSTICE PATTEN:  Yes, I see that.
MR STROILOV:  Absolutely.  We don’t say that this alone
would have been sufficient, absolutely not.
My Lords, then in paragraph 1044, subparagraph (2),
the learned judge expressly finds that:
«… the suggestion that the Counterclaimants
determined deliberately not to disclose the repurchase
side of the repo arrangements to improve their case on
‘gift’, which was much emphasised on behalf of the Bank,
ignores the Bank’s own presentation and Mr Sklyarevsky’s
evidence on behalf of the bank that Mr Erokhin [that’s
the Russian lawyer] on behalf of Mrs Arkhangelskaya did
show the court the repurchase side but the court ruled
it irrelevant.»
So, my Lords, it would make sense if he was applying
a different standard of proof and in the context of
Morskoy Bank criminal case he was applying it, then it
might make sense, but here on the balance of
probabilities he finds, well, that’s not what happened
but there on a criminal standard he thinks there is
still reasonable doubt.  Otherwise I just don’t see how
in the light of these findings, his paragraph 1112 makes
sense.
Then, since we are here and on the Russian
proceedings, I think over the page in subparagraph (4)
to (6) of paragraph 1044 you see what is probably
another manifestation of the same error.  Basically what
you see — what he says in subparagraph (4) is, and the
picture is — well, he finds the facts that’s what the
bank was doing.  Then in subparagraph (5) he says this
is consistent with our case on conspiracy but doesn’t
necessarily mandate it.  In paragraph (6) he says there
is an alternative explanation.
So what he has here are two alternative explanations
and no analysis of the balance of probability between
them.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Do you
not accept that he was entitled to consider an obvious
commercial explanation for the bank’s conduct, even
dishonest conduct, namely the aggressive pursuit of its
own interests?
MR STROILOV:  He was entitled to consider it but what he had
to consider as well was the balance of probabilities
between this explanation and our case.  And he seems,
simply having found an explanation which is probably
more benign or at least less helpful to our case, having
found such explanation he does not go further, he does
not ask himself, well, is it more likely than the
counterclaimants’ case?  He just stops there as if
that’s the end of the enquiry.  In context of other
passages in the judgment, I submit that that shows that
he was applying the same mistaken view of the standard
of proof here as well.
The next passage I will ask you to look at is
paragraph 941 at page 244.  Again this is the learned
judge’s — this follows from the learned judge’s
analysis of the repo agreement itself and how it was
done.  Then, having discussed the facts, the particular
issue he is focusing on is why there was this
complicated scheme where ostensibly independent
companies were original purchasers and the assets would
be transferred to them.
In 941 and then in 942, once again the question the
learned judge asks is what is — there is obviously
a justification offered by the claimants that basically
that was necessary in order for them not to be —
because of the regulatory requirements of the Central
Bank so basically it would have been a~breach of those
requirements if they openly took the assets on their own
books.
He says he is relieved it is not necessary for him
to consider whether it is a breach of the Central Bank
requirements but then he says:
«What is necessary for me to decide is whether the
justification offered is a plausible one.  In my view,
the rationale that the Bank could simply take the shares
into its own books and that there would be regulatory
difficulties if it tried, seems to me plausible, even if
it may not provide the whole story …»
And whether justification is plausible, is this
really the question?  No, the question is whether,
taking into account the justification in our case, our
case is more likely than not.  And of course even the
justification may not tell the whole story.  Well, it
doesn’t — it tells you little about the claimants’ good
faith in going into this transaction.  It is just silent
on this.  Whereas the learned judge just says, well,
this justification is plausible and moves on.
Paragraph 958 then, a more general discussion of
repo deal.  Obviously this follows from some discussion
of how it was framed and the fact that there was no
provision for surplus recovery to be returned to the
appellants and so on.  Then in paragraph 958, his
comment is:
«… I do not think it necessarily connotes that the
repo arrangements were being put in place and given
effect with a view to ‘raiding’.  Seeking to have the
‘whip-hand’ on a recalcitrant borrower is one thing;
expropriation is another.  The more benign [explanation]
can only be dislodged by evidence of sufficient strength
to oust it in favour of a more malign one.»
Then in paragraph 960, once again:
«… there is in my judgment nothing sufficient to
contradict the more benign view of the facts that (as it
was put in the Claimants’ written closing
submissions)…»
And then there is a quotation.
This analysis once again seems to indicate at least
a preference for a benign explanation simply because it
is more benign, not because it is otherwise more
probable on analysis of the facts, and we say this is an
error.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  That’s
an important submission, isn’t it?  You say not only
here but in other places that the judge is preferring
a benign explanation simply because it is more benign
and not because it is more probable.
MR STROILOV:  That’s right, my Lord, that is the essence of
Ground 3.  And of course it would have been in line,
especially with some of the older cases which were
subsequently disapproved of in In re B by the
House of Lords.  That was at one time a view, that there
is in practice a heightened standard of proof to
allegations of fraud in civil cases and I think there is
some dicta from those times suggesting that in such
a context and in allegations of this seriousness, the
difference between civil standard and criminal standard
is theoretical but not practical really.
But that is an outdated view, the House of Lords has
stated clearly that is not the case and, in my
submission, it seems from these passages and a few more
I will take you to that the learned judge was still in
the clutches of this old and erroneous view.
LORD JUSTICE PATTEN:  I think this is the first of your
three points really.  What you say is that it amounts,
all this, to applying a presumption of innocence so that
the practical effect of it is that the burden of proof
almost becomes reversed.  Obviously it’s for you to
prove on the balance of probabilities there was
conspiracy but the way the judge formulates it in his
own direction to himself, he doesn’t start with a sort
of clean sheet of paper, he starts with a sort of
built-in presumption against finding fraud.
MR STROILOV:  Exactly, my Lord.  And of course we say, well,
what he should do, he should simply look at
circumstantial evidence and look at this neutrally.  For
a moment — well, once he has established dishonesty of
the claimants, in particular in the context of Russian
commercial life, which is less important, but dishonesty
of these particular claimants in other contexts, he
should simply consider the different explanations on an
equal basis and look which of them is better consistent
with the facts, regardless of whether they are benign or
malign and regardless of whether they help our case or
their case.  He just needs to conduct a factual enquiry
to find the truth about what happened on the balance of
probabilities.
I think in paragraph 1124 — well, it’s rather
a little later.  You will see starting in paragraph —
sorry, I have taken you to the wrong paragraph.  If
I may ask you to look at paragraph 1124, that is the
reason — 1124 is a discussion of the allegations we
made about the involvement of Russian state authorities.
There is no need perhaps to go through this in much
detail but in paragraph 1127 he refers to why the point
remained and that connects to my Lord’s earlier question
about the evidence of general practices in Russia where
we refer to this report by National Anti-Corruption
Committee.  I would ask you to read paragraph 1127 and
the quotation there.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  He then
deals after that with the evidence of the status that
report has.
MR STROILOV:  Yes, my Lord, he does.  And I don’t feel —
well, you can see paragraph 1131 what his findings on
that was.  I think he does in perhaps some tentative way
but he does accept that the report does demonstrate the
prevalence of «raiding» in the Russian Federation.  But
then he makes the obvious point that, well, this doesn’t
mean this happened in this particular case.
LORD JUSTICE PATTEN:  But he does talk — he sort of comes
back to the point in 1133, doesn’t he, because it talks
about, in the second sentence:
«Given the gravity of what is alleged, and its
consequences, and the need for cogent proof, I do not
consider that there is sufficient evidence…»
et cetera.
MR STROILOV:  Indeed, my Lord.  We say, well, quite apart
from the fact that he seems — well, by now he seems to
be asking a much more narrow question of himself because
what we said is, well, this corresponds — this
notorious scheme of raiding corresponds precisely to
what happened in this case, in the round, the whole
sequence of events.  And then the learned judge narrows
it down to a much more specific question as to whether
the default was deliberately engineered by the bank.
And there he says — once again he refers to all the
wrong factors.  He says:
«Given the gravity of what is alleged, and its
consequences, and the need for cogent proof…»
Well, my Lords, all those things are actually the
least relevant.  What is relevant is circumstantial
factual evidence and what is the most likely explanation
of the facts.  But he seems to stress once again that,
in his mind, you can’t really consider this different
serious on an equal basis.  You have to — it’s too
serious, you need particularly cogent proof and we say
that’s an error.
LORD JUSTICE PATTEN:  But this is all still concerned,
isn’t it, with the version of the conspiracy which
places the unlawful conspiracy pre the repo arrangements
being put in place, isn’t that right?
MR STROILOV:  Not necessarily, my Lord.  Here, supposing
that the learned judge is right to find that — I don’t
think he actually found this in so many words but
supposing the correct finding is that the repo deal was
done in good faith to enforce the security but at
a later stage the bank developed and/or the bank and/or
Renord or at any rate all the people who we say are
parties to the conspiracy, developed an interest in
raiding these assets rather than in simply realising the
security in raiding the assets for themselves without
paying full and proper consideration.  Then the fact
that they followed what is —
LORD JUSTICE PATTEN:  I only said that because in 1133 at
the start he says:
«… I do not consider that the evidence is
sufficient [that’s the evidence he’s been talking about]
to demonstrate such premeditation in December 2008 and
January 2009…»
Which is before the agreements were in place,
isn’t it?
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I
think, Mr Stroilov, what he’s actually doing is now
dealing at some length with his paragraph 901 because at
901 he reformulates the allegation of conspiracy and the
points that you make in support of it and then goes
through them one by one.  He doesn’t distinguish though
between those that relate to — the first categorisation
of the conspiracy, namely that it took place in 2008
when — before really things got going and the later
allegation of the conspiracy, that it only started at
a time when there was an imminent default in early 2009.
So what he’s doing is going through each — so you
may be right.  He’s going through each of the points
that he makes in 901, this is point (3), the allegedly
unusual features of the repo arrangements which are said
of themselves and in context to suggest dishonest
collusion and raiding.  Obviously that is primarily
focused on the earlier conspiracy —
MR STROILOV:  Yes, my Lord, but he is going through this in
chronological order.  But of course an important point
to bear in mind, the three versions of the conspiracy,
is that this is slightly artificial in the sense that,
well, we were pressed and probably rightly by the
learned judge that we must particularise when we say the
conspiracy took place.  But that does not change the
nature of the conspiracy alleged very much.  It may be
that up to a certain point in time the bank was acting
in good faith and then they saw the opportunity to —
for a profitable fraud and changed course.  At what
point in time that actually happened, well, it’s
interesting in a number of respects but that does not
change the nature of our case very much.
I take your point, my Lord, that, yes, if he looks
at this list of questions and considers each
separately — and I will consider this with a little
more stress on it actually at a later stage, this method
of analysis~— be that as it may, the point I’m making
is that once again when he comes to his bottom line, so
to speak, in paragraph 1133, he basically says, well,
given the gravity of this and its consequences, cogent
proof is required.  This is not enough —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Is this
a complaint?  Let’s assume that what he was saying at
11 — whichever it is — 33 is that there wasn’t, at the
beginning when the repo arrangements were put in place,
a conspiracy to raid the assets of the appellants, is it
a complaint that he didn’t reconsider the question of
whether those repo arrangements were made use of later
in what had by the later time become a conspiracy to
raid the assets dishonestly?
MR STROILOV:  I think yes, that is part of the complaint.
It rather belongs to the next part of my submissions
where I will try and persuade your Lordships that he
analysed the evidence in piecemeal and failed to analyse
the evidence in the round.  That is probably
a manifestation of that rather than of any error as to
standard of proof.
But in principle, yes, he had to consider all the
parts and then compare them with what is known about the
mechanics of raiding used in Russia and what does the
involvement of state authorities signify.  Everything
had to be considered in the round and the question he
had to ask is how consistent is the totality of the
facts with our case, with their case, is there any
likely alternative explanation which is more likely than
either party’s case and analyse the balance of
probabilities on that basis.  But rather than that, he
goes to individual allegations and in relation to many
of them he says, «Well, this is too serious, I require
proof which is more cogent» and that’s —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Is it
too serious that he’s saying or is he really saying —
I mean, I’m totally paraphrasing so it’s not what the
judge himself said but is he not really saying: it’s not
a question of how serious it is, it’s just a question of
how much more likely it is that the theory of the bank
protecting its own interests and aggressively attacking
a defaulting customer explains what happened?
So he’s saying, well, of course there may have been
some conspiracy, but he starts his judgment by saying
there’s not a shred of evidence of that conspiracy.  So
you didn’t have a mole from the bank coming to give
evidence and saying, «Yes, they all sat together in
a smoke-filled room in the middle of 2008 and decided
that they were going to take the appellants’ assets by
hook or by crook by fraud», and so you had to rely on
inference.  And he evaluates all the factors that you
relied upon one by one in meticulous detail, as
everybody accepts, and comes to the conclusion that the
most likely evidence is that they grew not to like the
appellants very much and to want to enforce their
interests as aggressively and as effectively as they
could, but without any regard to integrity or honesty,
but not as a conspiracy as alleged.
MR STROILOV:  My Lord, there are a few answers to that.
Firstly, that’s not what he says.  He says time and
again, no — like in 1133, simply because we are looking
at it now:
«Given the gravity of what is alleged…»
So he starts with «gravity», and its consequences
and the need for cogent proof and that’s not the first
or the last time, as I think he says elsewhere, he says
he has to remind himself of that supposed principle
quite often in this case.  So this is not a proper
analysis on the balance of probabilities which the
authorities require, my Lord, and which your Lordship
has just outlined, but that’s not what seems to have
happened in this judgment.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
the problem, if I may say so, comes back to the point
I made first thing this morning to you, which is that
you were trying to prove a particular conspiracy here:
an agreement to cause you loss by dishonestly doing X, Y
and Z, repo, forging documents and then dishonestly
bringing criminal proceedings, giving dishonest evidence
et cetera et cetera, setting up Renord and Baltic and so
on as ultimate purchasors to achieve a transfer of the
assets.  But he’s looking and comparing at every stage
whether or not there was a conspiracy to bring that
about and he says, «Well, no, I don’t think that’s what
this shows».
MR STROILOV:  Well, once again, at the moment I’m trying to
persuade you that in each of these instances, he is
applying the wrong standard.  Secondly, I will move on
to try and persuade you that actually this method of
analysis was wrong in itself because it is piecemeal
analysis of circumstantial evidence.
My Lord, I take the point.  Of course we had to
prove a particular conspiracy we allege and not just
some conspiracy and some dishonesty; but on the other
hand, something you have to bear in mind — and we may
have to go to the pleadings at some point — is that the
conspiracy was pleaded rather widely, as it always is,
to capture various foreseeable scenarios.  Then,
secondly, I would submit it’s right and proper to be
a little more flexible in taking pleadings points
against litigants in person.  Well, of course the
pleadings are pleadings but some lenience is
appropriate.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So for
the purposes of this argument you’re really saying what
my Lord put to you, which is that he started from the
proposition that the conspiracy alleged was inherently
unlikely, which he shouldn’t have done, and he should
have simply evaluated the evidence and decided whether
it was more probable or not?
MR STROILOV:  Quite so.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  That’s
your submission on this, and we’ve seen that from the
use of — I’ve counted nine uses of «benign» and 14 uses
of «malign» in the judgment.
MR STROILOV:  Yes, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Which
seems to signal where he was doing what you complain
about.
MR STROILOV:  Yes.  My Lord, in a way I’m tempted then to
miss all the paragraphs where one of those words are
used because you will have already seen them.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
but don’t let me discourage you from hammering the point
home, Mr Stroilov.
MR STROILOV:  My Lord.
Once again, over the page at 1138, he discusses
whether state officials were involved, were implicated
in any conspiracy.  Once again, he says:
«Again, I take into account that the most serious
the allegation and the more improbable the event sought
to be established …»
And then there is a quotation from Lord Nicholls in
re H.
But that may well be and probably is a rather
out-of-date understanding of re H and without really
taking account of subsequent cases.
Now, discussion of —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  You say
it’s out of date and you’ve said that several times but
re B was decided on 11 June 2008.
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So was
re~B cited to the judge because I don’t think he
mentioned —
MR STROILOV:  I think he mentions it in the end.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  He
does, yes.
MR STROILOV:  He does it when he talks about the burden of
proof.  I think it’s paragraph 1634.  So he does cite it
but he does it in relation to burden of proof; he
doesn’t seek to really engage with the standard of
proof.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
I think he only cites paragraph 2 of Lord Hoffmann’s
judgment in re B.
MR STROILOV:  That’s right, my Lord.  I don’t recall,
I stand to be corrected but I don’t recall there being
any submissions on the standard of proof before the
learned judge because I think people assumed that —
well, especially on our side, I assumed that the learned
judge would certainly know more about it than I can tell
him and of course, for my part, I wouldn’t ever think
I need to make any submissions, I assumed that it would
be a right to reply.
Paragraph 1140, my Lords, once again:
«This requires an assessment as to whether the long
train of events following default [with reference to
paragraphs] … reveals a pattern of conduct as well as
an ultimate result consistent only with a pre-conceived
and coordinated ‘raid’.»
Once again, this illuminates the same error.  We
don’t have to prove it’s consistent only with our case.
We have to prove that is the likeliest explanation to
the extent that it is more likely than not to happen to
be the truth.  That’s all we have to prove.
Paragraph 1241, in relation to Baltic Fuel Company.
Once again the evidence is meagre.
«It is not such, in my judgment, as to displace the
possibility that consistently with my view that
Renord-Invest and SKIF were corporate vehicles available
for use for the control and fulfilment of various
potentially independent projects, Renord-Invest and/or
Kontur were used by Mr Smirnov (rather than the bank
and/or Mr Savelyev) as vehicles for the purposes of an
oil business which included Baltic Fuel…»
Once again there is no real analysis of the balance
of probabilities.  He says, well, the evidence is not
such as to displace the possibility and then an
explanation which is more — well, which is perhaps more
unhelpful to our case.  This cogent proof displacing
possibilities is not really how you conduct balance of
probability analysis.
Paragraph 1265 where he starts the analysis of
options and then in the actual body of the paragraph,
once again he formulates the ultimate question is:
«To determine whether the auctions were abnormally
conducted with features and results having no plausible
innocent explanation such as to support an inference of
conspiracy, I turn to address…»
And there is then a list of seven sub-issues.
Paragraph 1366, he’s talking about potential
complicity of auction organisers.  Once again at the end
of paragraph 1366:
«But once again, unanswered questions and surprising
indifference is not proof of impropriety if there are
any benign explanations which are not implausible.»
And I accept that unanswered questions and
surprising indifference are not the best kind of proof.
They may be proof in some circumstances, especially if
there is no explanation why the questions haven’t been
answered.  But once again, well, he seems to formulate
the test wrongly, and wrongly in the same way.
Paragraph 1525, that’s conclusions on auction sales,
subparagraph (5):
«The counterclaimants’ case that the claimants
adopted a repeated tactic of presenting and packaging
the assets to be sold at auction …» and so on.
He says, he indicates at the end of this paragraph
that our:
«… fundamental allegation that this was
a stratagem … struck me as plausible.  However, in the
end I have concluded that the Bank being entitled to
sell assets separately pledged separately, the
justifications advanced by the Claimants for the
packaging and process of sale are not so implausible
that they must be rejected bearing in mind the heavy
onus of proof in the context of an assertion of
dishonesty.»
LORD JUSTICE MALES:  Sorry, where are you reading from
there, please?
MR STROILOV:  That is paragraph 1525, subparagraph (5).
My Lords, I submit that the learned judge is quite
consistent throughout the judgment on different issues
applying the same mistaken standard of proof.  Of course
insofar as — he had to take account of inherent
probabilities, of course, but on proper application of
the principles there was no reason to assume that
inherent probability of serious misconduct or dishonest
behaviour on the part of these claimants was
particularly low.  He made a number of serious findings
of dishonesty against them.  I probably don’t need to go
through them now, I will come to them in context in due
course.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Doesn’t
that provide a handicap for you, that he did find
a number of serious allegations of dishonesty proved
against the bank but he didn’t find that those
allegations weighed in favour of the alleged conspiracy?
So doesn’t that mean that he wasn’t completely
predisposed to always finding in favour of a benign
explanation?
MR STROILOV:  That’s not quite — my Lord, I think it is —
in a way there is — I would submit there is a bit of a
confusion in the passages I have cited between
a presumption in favour of a benign explanation and
a presumption in favour of the claimants’ innocence of
the fraud alleged against them.  And both are wrong, in
my submission, in law.  Both are wrong.  But he seems —
in some cases, he seems simply to follow the supposed
presumption in favour of a benign explanation.  In some
cases he seems to stray into an even more serious
presumption of innocence.  But both are erroneous, in my
submission.
Of course, insofar as where it is a preference
simply for a more benign explanation, that is not
justified in this case, I say, because there have been
a number of serious findings of dishonesty, because
there has been evidence of the practices which are
widespread in Russia and partly because it is now,
I would submit, a generally accepted view in the
High Court, in the Russian cases that the realities of
commercial life in Russia are different from the western
commercial life.  It is unfortunately less unlikely that
dishonesty will be committed.
So having taken that into account, he should have
simply — there is simply no basis for saying that the
inherent probability of dishonesty in this case is low,
he had to consider probabilities equally without, so to
speak, discriminating against serious allegations,
allegations against serious dishonesty.
My Lords, before I move on now to my next point,
which is under Ground 1 piecemeal analysis of
circumstantial evidence, one point I am slightly
concerned about, I recall that at the trial, if we did
not make a short break before lunch, then shorthand
writers —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes, we
don’t have breaks in this court unfortunately.  The
shorthand writers can stop and catch up later if they
need a break.
MR STROILOV:  I’m grateful.
My Lord, in that case, I move on to my second point
which is slightly confusingly Ground 1, last sentence.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes.
MR STROILOV:  Probably a convenient place to begin is
paragraph 1259 of the judgment where —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Can you
just remind me precisely the point that this is
addressed to?
MR STROILOV:  We say that — probably I will, rather than
paraphrase, let me quote Ground 1, as we put Ground 1.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  This is
just Ground 1, pure Ground 1?
MR STROILOV:  Yes, my Lord, I think it is.  And this is
a submission under the last sentence of Ground 1:
«The judgment fails to step back and consider the
most probable explanations as to the claimant’s state of
mind which will satisfactorily cover all the facts [as
read].»
I think I might in the course of this submission —
I fear I might stray into Ground 2 territory slightly
because this is related.  There is also, I would submit,
in some instances the loss of focus on what the real
issue was, and the issue was good whether the claimants
were acting in good faith in all these events.  So I
will partly — I make some advances in the Ground 2
territory and I will recap on them, but principally this
is Ground 1.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Can you
go that far and say that the central question for the
judge was, as you put it, whether the claimants were
acting in good faith in all this?  I mean, that’s not
the issue, is it?
MR STROILOV:  That is how this is formulated in Russian law.
In practice, as we alleged, there was no good faith
because it was dishonest.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Doesn’t
it depend on what all this is?
MR STROILOV:  I beg your pardon?
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  You
can’t just say they were not acting in good faith in all
this, you have to be more specific about what they were
not acting in good faith in relation to, to make your
Russian law claim good?
MR STROILOV:  Yes, my Lord.  Probably I am just formulating
badly.  I am not suggesting that it was enough for us to
show enough of bad faith in relation to some
disconnected events that this is a conspiracy claim.
However — well, it’s probably more helpful, my Lord, if
I address this point when I get there.  I would say that
there is a loss of — I am just flagging for the moment
that I might stray into Ground 2 but mainly this is
a submission under Ground 1.  And then I do address
Article 10 of the Russian Civil Code and its application
at a later stage if I may.
My Lords, I suggest we start at paragraph 1259 of
the judgment where the learned judge records my
submission about the nature of the case, he had to
consider the nature of the counterclaim, and here is the
case of Kuwait Oil Tanker Company v Al Bader, where the
Court of Appeal explained basically how cases of
conspiracy are usually proved.
May I just ask you to read the passages from Kuwait
Oil Tanker case quoted in paragraph 1259?
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes.
MR STROILOV:  So my Lords, this counterclaim belongs to the
type of cases where it is essential for the judge to
make correct inferences from a mass of almost entirely
circumstantial evidence, including on some occasions
really what I may describe as rather thin evidence in
the sense that we sometimes rely on admissions combined
with knowledge rather than overt acts and that, on what
the Court of Appeal says, in this case is quite proper.
There is a further helpful discussion of how this is
supposed to work evidentially in the case of Ablyazov
(No8) which is at bundle 3 of the bundle of authorities,
tab 24, Ablyazov (No8).
At paragraph 52 of this report, which is helpfully
highlighted here by this — in the bundle, that’s
page 1356 of the report, paragraph 52, the court
explains how this works:
«It is, however, the essence of a successful case of
circumstantial evidence that the whole is stronger than
the individual parts.  It becomes a matter from which
there is no escape.  This is why a jury is often
directed to avoid piecemeal consideration of
a circumstantial case [as read].»
Then there are references to other cases,
Lord Simon:
«Circumstantial evidence … works by cumulatively,
in geometrical progression, eliminating other
possibilities.»
Then Shepherd v the Queen quotation, if I may ask
you to read through that.
My Lords, basically it is clear what the court is
saying here.  You cannot just follow the chronology of
the events and you cannot just follow the pleadings and
then when you come to a particularly interesting or
suspicious point, stop and ask yourself: well, is this
enough for me to infer fraud?  That is not how a
circumstantial — then you say no and then you move on.
That is an error of piecemeal analysis.  The way you
have to analyse a case based on circumstantial evidence
is to make findings about all the facts and then step
back and consider the totality of the facts and try to
infer an explanation which makes sense of all of them.
Because unlike some of the cases quoted in Ablyazov,
this is a civil case.  Basically then among — if there
is one possible explanation which covers all the facts,
well and good, that’s easy.  If there is more than one,
you have to base them on the balance of probabilities
and see which is the likely explanation.
However, if you look at the judgment, it appears
that the learned judge fell into precisely this error of
piecemeal analysis.  He considers first the repo
arrangement and agreements in some detail.  Then at
paragraph 935 he stops to assess whether the repo
arrangement in itself demonstrates or supports an
inference that the bank was planning a raid.
This goes on for quite a while and I’m not
suggesting you need to re-read it again.  But basically
at paragraph 960 he suggests — well, he concludes that,
no, this is not enough.
You would expect, because this is a circumstantial
case, it would have been fine if this was a provisional
conclusion.  But later on, he steps back and considers
all the facts and reconsiders potentially this
particular conclusion, he has to consider all the facts
in there.  But he never does that.  He simply looked at
this particular element of the factual narrative, he
says this is not enough, he moves on.
Then the subsequent significance of the introduction
of Mrs Malysheva, paragraphs 961 to 969.  A smaller
point, smaller forensic detail.  A similar error of
analysis in paragraph 969.  He says, well, this fact is
not enough to infer fraud, essentially.  Once again,
this is piecemeal analysis.
Then he moves on to consider at some length the
events of the following months, including the bank’s
decision to call a default, a cross-default, to replace
the management of the Western Terminal and Scan, to
transfer the shares of Scan to subsequent purchasers.
He then finds that Mr Arkhangelsky was trying to
meet Mr Savelyev and Mr Savelyev evaded the meeting
whereas the claimants’ case was that essentially the
opposite was the case, it was impossible to reach
Dr Arkhangelsky.  You will see that in paragraphs 1036,
1037.
Then in paragraph 1038, he once again, after this
point about who was trying to meet whom and who was
hiding, he then stops there and asks himself, well,
whether again this evidence that Mr Arkhangelsky was
trying to meet Mr Savelyev unsuccessfully and
Mr Savelyev was evading, plus the fact of the removal of
the management in Western Terminal and Scan (inaudible)
was it done, is this enough to infer the conspiracy?  He
says no and then this is the end of the analysis of this
particular part of factual matrix.
He moves on and in paragraph 1119 he considers the
events up to — he has by now considered the events up
to the point when the active involvement of the Russian
state authorities on the bank’s side becomes evident.
He once again stops to consider whether that
justifies the inferences which we sought.  Indeed
I think if we look a little further at paragraphs —
later on we come back to the same point which we
discussed a little earlier about the report of National
Anti-Corruption Committee.  He seems to feed this much
more general evidence and much more general point we
were making about the totality of the events being
remarkably consistent with a notorious raiding scheme.
But then in paragraph 1131 and the following, he
seems to try and fit this general point into effectively
the straitjacket of his piecemeal analysis and where he
basically narrows it down to the question of whether
they deliberately engineered a default.  But then in
particular, where this error is particularly evident, in
my submission, are in the analysis of the auction sales
where of course it was essential to see the picture as
a whole rather than to consider particular events in
piecemeal.
Just to recap, the events — the factual sequence is
summarised at paragraphs 627 to 628.  I am not sure
whether — how well you remember this.  It is obviously
quite a complicated sequence of events.  Then perhaps
it’s just worth mentioning this for your Lordships’
record and then move on to what I’m trying to say, if we
need to get back to this.  I would — for the factual
summary, I note it is in paragraphs 627, 628, 630 and
then 632 to 634.  That is the complicated sequence of
transactions which he had to consider.
Again I hope it’s a fair summary to say that our
case was relied on a combination of many features of
these auctions as supporting the counterclaim.  Most
significantly, but I’m not proposing to give you an
exhaustive list but most significantly you have a large
number of auctions, in each auction you have two
bidders, both, according to the judge’s finding,
secretly controlled by the claimants and the lot is sold
one step above the starting price in each case.
Secondly, in each case there is no marketing beyond
one newspaper advertisement which is a formal
requirement of Russian law for the validity of the
auction.
And then also in each case, the assets are sold in
very — in a fairly unattractive form, either as a part
of an asset which has a real value, like half of Onega
Terminal or some part of the terminal while the other
parts are being — under claimants’ control but are
being sold separately at some different time.  Or
subject to encumbrances such as most typically the
pledge to the bank.  There were a number of auctions
where assets were sold subject to the bank’s pledge, all
between the same body of Renord’s companies under the
bank’s control, Renord and SKIF.
Now, the judge’s analysis of this begins at
paragraph 1265.  That’s page 321, paragraph 1265.  You
can see that he identifies seven sub-issues there and
really important here, with respect, this identification
of issues is imperfect in several respects.  Issues (1),
(2) and (3) here are just background and they were
mainly agreed between the parties.  We were not bringing
a claim to set aside particular auction sales on the
basis of some form of non-compliance with the Russian
law.  It was a much more general claim under Article
1064 of the Russian Civil Code where we alleged
dishonesty and bad faith rather than a breach of any
technical rules on public auctions.
This is where I will stop to make the points.  Quite
apart from piecemeal analysis, another danger in this
approach is losing focus on the real issue of how he
should have analysed the auction sales and the entire
sequence of events and focus in to some extent on the
hypothetical claim against auction organisers to set
aside the sale.
However, I am on piecemeal analysis now.  Having
identified these seven issues in paragraph 1265, he
then, you will see in paragraph 1315, identifies a
further three sub-issues in terms of his original
sub-issue (5) which is basically why there were no third
party bidders.  Then he splits it into further
sub-issues in paragraph 1315, whether the third party
interest was dampened or deterred in one of the three
ways which we mentioned.
Then, again confusingly, as he goes on with his
analysis, he identifies a few additional issues which
don’t fall into his original list of seven issues and
three sub-issues but appear in his analysis between
issues (5) and (6).
So starting at paragraph 1350, he discusses «Is
there any evidence of complicity on the part of the
auction organisers?»
Then paragraph 1368, «Is there evidence to support
the claim that the starting prices were grossly
deficient?»
And then paragraph 1380, «Has a case of bid rigging
causative of loss been demonstrated?»
So quite a lot of issues and sub-issues, many of
them rather peripheral and some of them quite central.
And then basically this part of the judgment amounts
to meticulous analysis of each issue and sub-issue to
answer each of those questions individually, but it is
in essence piecemeal analysis.  He doesn’t step back at
the end and does not look at all his factual findings
about the auctions and indeed about the earlier events
and ask what is the most probable explanation.
Another danger —
LORD JUSTICE PATTEN:  Well, just a minute.  He does set out
his conclusions, doesn’t he, about the auction sales at
1524 onwards?
MR STROILOV:  Sorry, at paragraph 1524, 1525.  I’m grateful,
my Lord.  I will come to that.  There are a few
difficulties with that but if I may keep you in suspense
for a little longer about that.
LORD JUSTICE PATTEN:  Okay.
MR STROILOV:  My Lords, another problem, another risk which
is inherent in piecemeal analysis is that you analyse
substantially the same issue under different headings
and come to — may sometimes come to different results.
On the very important issue of why there has been no
marketing effectively, no real marketing effort to
market these assets, the learned judge, with respect, is
confused and he says different things under different
headings.  If you look at paragraph 1306 under «Choice
and real purpose of auction sale», here he discusses
whether there has been any effort to find — to try and
sell the assets by way of a private arrangement or
contract.
In that sense, he records the fact that there is no
documentary evidence to suggest that there was.  He
discusses witness evidence given by some of the
witnesses for the claimants.  Then his conclusion is at
1309, he says:
«I formed the clear impression that both Ms Mironova
and Mrs Yatvetsky were so vague because neither had
direct knowledge of any concrete negotiations or even
preliminary negotiations. I do not reject their evidence
entirely.»
Then he explains what findings he makes.  Then what
is likely to have happened.  So basically that they were
very preliminary enquiries to test the waters at best
but no real effort to market.
Then he observes in paragraph 1310 that this is
consistent with our case and in paragraph 1311 he seems
to basically leave — he does not exclude the
possibility, I think it’s fair to say, that any approach
to third party, potential third party buyers was to
deter interest rather than to attract interest.  It’s
not a finding but that’s a possibility which he doesn’t
rule out here.
But then, if you compare this with paragraph 1335,
subparagraph (2), in different context, where he
considers sale of assets in attractive parcels, he says:
«… there is no evidence to contradict the oral
evidence on behalf of the Claimants that various and
substantial efforts had been made to attract interest at
a high level, even though undocumented.»
So does he accept this evidence that there were
various and substantial efforts or not, because he
simply contradicts himself here.
In paragraph 1342, I think, under the heading
«Inadequate marketing», the learned judge once again
relies on I think different bits of the claimants’
evidence.  His conclusion in paragraph 1343:
«The lack of any evidence of any marketing efforts
beyond the minimum prescribed speaks for itself. I do
not accept Ms Mironova’s extravagant claim that those
concerned took all possible steps and measures in order
to advertise this facility as widely as possible on the
media. There is no sign of that; there is no documentary
evidence to support it (though it might be expected to
be readily available if it existed); and even Mrs
Yatvetsky made no such claim.»
But then in his conclusions, in paragraph 1525,
subparagraph (6), he once again says:
«The same applies to the marketing efforts made: no
more than the basic minimum was done … but in each
case, absent proof that that which should have been done
was intentionally left undone there is no basis for the
inferences invited.»
Again it’s not — really the learned judge doesn’t
seem to be very consistent in these four places under
different subheadings in what exactly he finds about the
marketing effort and what significance he attaches to
this.
And of course this could have been avoided if he
stepped back and focused on the real issue: are all
these complex facts about auctions, are they consistent
with the claimants’ case that they were acting in good
faith, trying to maximise the recovery?  And then make
as the issue of marketing, immediately its significance
is clear and you address it in the correct way, not in
piecemeal way, as the judge addressed it.
Now, as my Lord has observed —
LORD JUSTICE MALES:  Isn’t it the other way round, so that
the test is not is it consistent with the claimants’
case that they were trying to maximise recovery, but
rather is the fact that the claimants do not seem to
have been trying very hard to maximise recovery
indicative of conspiracy?
MR STROILOV:  My Lord, I would suggest that the proper
analysis in a circumstantial case is in a way a lot
simpler than the piecemeal analysis the learned judge
used.  Basically what you have to do, you make the
factual findings on 100 issues or 200 issues, then you
step back and ask yourself: is this consistent with the
claimants’ case?  Is this consistent with the
counterclaimants’ case?  Thirdly, is there a possible
alternative explanation which is likely?
Then if it is consistent only with the
counterclaimants’ case, then it is simple.  If it is
consistent with both or more than that, then you have to
analyse the balance of probabilities.  Basically the
analysis of circumstantial evidence is the search for a
series which cover all the facts.  So both those
questions obviously are important, my Lord.
Looking at his conclusions in paragraph 1525, we
say — there are quite a few subparagraphs, but we say
this does not amount to trying to analyse the evidence
in the whole.  This is simply a summary of conclusions
on individual issues, analysed in piecemeal.  So
effectively this is a list of answers to individual
questions he has asked himself before.
But also there are, we submit, at least three
enormously important facts about the auctions which are
not included in this list.  They feature in his detailed
findings on other issues but not in this list.  Firstly
is the fact itself that the claimants, the bank,
secretly controlled the purchasers of the assets at
those auctions, his finding that whatever the beneficial
ownership of Renord in relation to these auctions they
were acting under the bank’s control, not as independent
third parties.
He identifies this as part of his list in
paragraph 1265.  In his list, I think subparagraph (6),
he identifies an issue which is in fact a number of
issues:
«The alleged links between Mr Savelyev and top
management of the bank, the participants in the auction
sales, and the ultimate recipients of the relevant
Terminals and assets; and the significance of the
undated ‘Stage Plan’.»
Then the actual — surely I should say at this stage
that among —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I’ve
lost you.  You say he identifies this as part of his
list in paragraph 1265 —
MR STROILOV:  1265, subparagraph (6), my Lord.
It is actually quite a number of issues: links
between Mr Savelyev and participants in auction sales,
then the links with ultimate recipients of the relevant
terminals and assets, and then the significance of the
undated «Stage Plan».
But of course out of these issues, I think all of
them are forensically important but surely the most
important one are the links with the participants in the
auction sales or in the transactions whereby the bank
purportedly realised its security, because that is what
the credit was given for and the question is whether it
was given for the genuine market price of the assets.
However, when the learned judge comes to answering
his question 6 at paragraph 1387 and the following, the
focus is lost.  The focus is mainly on whether one of
the ultimate purchasers of the assets, which was
a company called ROK No 1 Prichaly, which eventually
came to own Onega Terminal, whether that company is
linked to the claimants.  There is no focus on the
purchasers of the assets at auction, that’s Kontur and
Solo, or Mercury who you may recall was — effectively
there was a complicated transaction whereby the debt was
assigned to Mercury, together with the right to pledge.
In that way the assets are reunified with another part
of Onega Terminal.
There are earlier findings in different context —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
this is quite an important part of your argument
actually, Mr Stroilov, and I don’t think you should rush
over it.  What you’re now saying is that he lost focus,
are you, in considering whether the auctions were as
a whole contrived and failed to focus on the fact — by
focusing on ROK No 1 and other individuals, he failed to
focus on the fact that this was all part of a big deal
to bring the assets into the hands of the bank, a raid.
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Now, is
that consistent with the first sentence in
paragraph 1387 where he seems to say:
«That brings me back again to the Counterclaimants’
central contention that the persons really interested in
the auctioned assets never had to participate in the
auctions, since the (dishonest) plan contrived was that
they should be the ultimate purchasers under private
deals made after the assets had been laundered at
earlier auctions, and thus the real competitive interest
was kept away.»
Surely that was your central point?
MR STROILOV:  Well, my Lord, let me — I think this is not
quite how we formulated it.  Let me explain that.  In
our case, and I think here he quotes really from — at
some point he quotes my submission on that.
Basically — I can’t immediately find the quotation,
my Lord, I might find it later.  Basically, what we are
saying is that the question of what happened to the
assets after they were purportedly — after the pledges
were purportedly realised at auctions or otherwise is
only of peripheral significance, it’s forensic
significance.  It doesn’t matter very much whether
Mr Savelyev, for instance, actually ultimately owns
these assets now and derives income from them or,
alternatively, whether having sold them to companies
under his control at auctions and given — and having
given credit to OMG companies, basically at the level
which results from a contrived process of fake auctions,
he then may have sold these assets to whoever he may
have sold them.  There is no evidence of any price of
such a sale.  It may have been a much higher price, it
may have been a good bargain he gave to a friend and
that doesn’t matter.  He can do that.
But the purpose was to capture, to raid the assets,
to retain them within the conspirator’s control, and the
purported realisation of pledges was not that and
therefore the credit was not given to reduce
indebtedness.
So after let’s say Western Terminal is sold to
Kontur, well, we don’t know how it would have moved from
Kontur to Baltic Fuel Company, we don’t have the
evidence.  And even if Baltic Fuel Company is
independent but assuming Kontur and even though — the
learned judge is rather vague about it but assuming
Kontur was acting under the claimants’ control as
participants of the auction, then what we have is, well,
for some reason it changed hands.  The genuine owner is
now different.  We know nothing about whether there was
any consideration and in a way it doesn’t matter because
the fact is that no proper credit was given to the
appellants, and that if true market value was realised,
we say there would have been a surplus which was never
repaid in any form.
So that is the real point.  That’s why we say the
matter of central significance is the fact that by using
this purported auction process, they basically passed
the assets effectively to themselves via the companies
they controlled without giving proper credit.
So that is the central thing about auctions.  Of
course, what happened to them afterwards is forensically
interesting and he had to consider that as well but
without losing focus.
There is probably time to finish this point —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I don’t
really see the difference between that and the passage
at 1387.  I mean, obviously he’s focusing slightly on
the ultimate purchasers but he is nonetheless very
focused on the extraction of the assets from the
appellant.
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  The
plan being to extract the assets from the appellants,
isn’t it?  I mean, that’s what he thinks is the
accusation.
MR STROILOV:  Well, I think that is right and of course in
that sense it’s — paragraph 1387 is a reasonably
accurate summary of our allegations.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  What
you say is that he never really stepped back from the
detail to consider whether that was actually what
obviously had happened and there was only really one
explanation for it, bringing us back to the description
of how you prove a conspiracy in the passage you showed
us earlier.  Two passages.
MR STROILOV:  Quite, my Lord.  That is what we are saying.
And of course the fact that he reminds himself by way of
introduction into a much narrower issue, he reminds
himself of the wider issue and the substance of the
counterclaim doesn’t mean that he analysed the evidence
in these terms.  Our complaint is not that he
misunderstood our case and thought it was effectively,
I don’t know, 15 smaller cases, we are not saying that.
We are saying that he erred in analysis in that he never
actually answers this question —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  The big
question.
MR STROILOV:  The big question, indeed.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Shall
we break there and what I suggest is we come back at
2.05.  But for my part, I would be assisted by some
quite specific submissions on this point which does seem
to be an important part of your contentions.
MR STROILOV:  Indeed.  I am grateful, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So
don’t rush over it is what I’m saying.
(12.53 pm)
(The short adjournment)
(2.05 pm)
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Two
things, Mr Stroilov.  Very sorry to keep you standing
up, that wasn’t necessary, we’ll try to avoid that in
future.  I’m sorry we’re a little bit late and you need
to give me 30 seconds to sort out my IT.
MR STROILOV:  That’s quite all right, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Which
I’m not doing very well with.
Okay, fire away.
MR STROILOV:  My Lords, having reflected over the short
adjournment about the questions asked by the court in
the course of the morning, I feel it would be helpful
if, before coming back to the judge’s findings and
analysis on auction sales, I address you briefly on the
Russian law applicable to this claim and then take you
to our pleadings of the conspiracy so that there is
a better understanding of what exactly our case was.
Article 1064 of the Russian Civil Code is quoted in
the judgment at paragraph 786 at page 202 of the core
bundle.  It is quoted in different context but I think
it’s helpful for the court to have the statutory
provision in front of it.
So as you can see, this is generally formulated
liability for causing harm.  In the next paragraph, 787,
the learned judge quotes the summary of the elements of
this tort given in Fiona Trust case.  Basically there
are four elements: harm, causation, fault, unlawfulness.
The way we say it applies to our case, perhaps I had
better — well, I will explain this a little later.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  You
accept that that quote by an English judge correctly
encapsulates the Russian law?
MR STROILOV:  Indeed we do.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  The
quote by Andrew Smith?
MR STROILOV:  Indeed, my Lord, but there is further analysis
by Mr Justice Hildyard which I think it is helpful for
you to see but we have no quarrel with that.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  No
quarrel?
MR STROILOV:  Absolutely not.
Then the learned judge in our case returns to this
issue at paragraph 858 on page 219 of the bundle,
paragraph 858:
«… intentional causing of harm satisfies the
requirement of fault.»
Then he discusses causation at 859.  Then 860, and
that will become important later:
«… once harm is established, it is presumed to
have been caused unlawfully unless specifically
justified in law by the person who caused the harm .»
Then there is a discussion in 861 of Article 10
point about good faith or bad faith, so if you can read
this paragraph and evidence quoted there.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Are we
reading the quote from the evidence?
MR STROILOV:  Yes, quote from the evidence, yes, my Lord, if
you may.
I’m also asked to take you to 862.
My Lord, for completeness perhaps I should also
mention —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Do you
accept that that’s correct, 862?
MR STROILOV:  862, it is, yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So the
implication from 862 is that you have the burden of
proving your factual case as to the dishonest conspiracy
in order to establish a claim under Article 1064.
MR STROILOV:  Well, my Lord, in that sense I don’t
necessarily agree.  Obviously if we do prove this, then
the liability is established, as he says.  But then of
course if the judge is unable to make findings on the
balance of probability, then the question of burden of
proof arises.  And I will submit at a later stage that
on proper analysis of Article 1064, in that rare
scenario the burden is on the bank to prove the
lawfulness of their action.  The way we apply this to
our case, and we submit is the correct analysis, is the
fact of harm is not difficult in that case —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  That’s
what I was going to ask you.  Article 1064.2 provides
that the person who has caused the harm is free from
compensation for it if he proves the harm was caused not
by his fault.
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So the
presumption is harm, the starting point is harm, is that
a right analysis?
MR STROILOV:  That is, and of course it is for us to prove
harm and causation.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Right.
Now, what is the harm that you point to here?
MR STROILOV:  Well, in our analysis there is no difficulty
at all in establishing harm.  He had the businesses and
assets, the bank enforced its pledges and its security
and the appellants lost their assets.  That’s harm —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  The
question is what is the counterfactual?  In other words
what are you comparing the situation that prevailed in
fact with and, on the judge’s analysis, the bank was
entitled to have the repo arrangements, they were lawful
under Russian law, they didn’t allow you a six-month
indulgence under Russian law and they were entitled to
repossess and therefore to prevent your clients having
any of their assets anymore.  Therefore the
counterfactual is the same as prevailed.
MR STROILOV:  My Lord, this analysis goes to lawfulness of
the damage which was in fact done.  The damage is caused
simply by the fact that the bank repossesses the assets.
Then in ordinary scenario, the bank would normally
easily establish the defence that they were enforcing
their lawful contractual rights in good faith and
therefore there will be no liability.  But in this case,
good faith is in dispute because we are alleging
dishonesty.  So in our analysis, the fact of harm and
causation arises — are satisfied simply by virtue of
the fact that they enforce the security, as a result the
appellants lost their assets.
LORD JUSTICE MALES:  If the bank had sold the assets at
auction at their proper value, whatever that was, and
applied the proceeds to discharging the loans and then
paying you any surplus, would there have been any harm?
MR STROILOV:  There would have been — there probably would
have been harm simply because the sale was enforced on
the appellants but there would be no unlawfulness.
LORD JUSTICE MALES:  Assuming proper value had been
achieved, whether that’s market value or whatever other
method of valuation, then where is the harm?
MR STROILOV:  The fact that there is proper market value
is — it goes to lawfulness, my Lord.  What we say is
the harm arises simply from the fact that the appellants
lost their assets.  The repossession in itself is —
LORD JUSTICE MALES:  But the assets were pledged so that the
bank was entitled to enforce its security to obtain
repayment of the loans, provided that it did so
properly, whatever that may mean.
MR STROILOV:  And that is why in that scenario the harm
would have been caused lawfully, they would have
a defence and there is no liability.
LORD JUSTICE MALES:  Right.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
you’re putting as your first point that the actions of
the bank were unlawful, dishonest?
MR STROILOV:  Yes, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  And
you’re saying if you prove that the actions of the bank
were dishonest, then the very fact that they resulted in
the appellants losing their property is enough to show
harm.
MR STROILOV:  Yes, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Whereas
what my Lord and I are looking at is counterfactual
positions, in other words what would have happened if
they’d been honest.
MR STROILOV:  Yes, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  And if
they’d been honest, on the judge’s findings anyway as to
the repo agreements and the six-month extension, you
would still have lost all your property.
MR STROILOV:  Yes, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Now,
the question then is — so the question may come down to
a legal question of Russian law because Article 1064 is
drafted in an unfamiliar way for us, but you’re right in
drawing attention to the lawfulness because of 1064.3
which says:
«Harm caused by lawful actions shall [and I read in
‘only’] be subject to compensation in the cases provided
by statute.»
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So we
assume this is not such a case.
MR STROILOV:  That they are not suggesting.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes.
So what I’m concerned about is how you get from unlawful
actions without comparing a counterfactual situation, to
harm?
MR STROILOV:  Yes.  My Lord, what the position under the
Russian law seems to be, according to the expert
evidence and according to how it was analysed in other
cases decided under Russian law in this country, is that
basically the order of analysis is, firstly, has there
been harm, that’s for us to prove; has there been
causation, that’s for us to prove.  Once we have proven
that, the burden shifts on them to prove lawfulness of
that harm.
So the way we apply it to this case is we say, well,
it’s obvious that they’ve caused a harm by repossessing
but the question is — well, it’s a different matter of
course how you quantify that harm and what’s the extent
of that harm, and it may range from minimal to —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So harm
does not equal loss, harm does not equal loss, if —
this is difficult for you, Mr Stroilov, you’re not an
English lawyer, but in English law you may have a wrong
which causes no loss.
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  No
financial loss.
Here you may have harm in the sense that there has
been a consequence of the unlawful conduct and I think
you’re submitting that it doesn’t matter what would have
happened had they not behaved wrongfully.
MR STROILOV:  Indeed, my Lord, it matters to quantify the
loss and of course —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  But
only for quantification but it doesn’t matter for
liability.  You understand the difference?
MR STROILOV:  Exactly, my Lord, that is precisely what
I submit.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  That’s
what you’re saying.
MR STROILOV:  Yes, that is what I’m saying.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Did the
judge understand that?
MR STROILOV:  I’m not sure really.  It seems that he did
simply by looking — by the way he summarises his
analysis.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Where?
MR STROILOV:  Actually I’m not…
Well, looking back at his analysis in paragraphs 855
to 865 —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I
wonder if we should go to Fiona Trust because in
Fiona Trust Mr Justice Smith finished paragraph 95 by
saying:
«If Russian law applies, the significant issues
concern the requirements of harm and causation [as
read].»
Maybe he tells us what those requirements are.
MR STROILOV:  I think we’ve got Fiona Trust in the
authorities bundle which will be tab 20, so that’s in
volume 2, tab 20.  The discussion of the Russian law
starts at paragraph 78.  Then the most relevant
paragraphs, in my submission, are paragraphs 94 and 95
in the case report.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  It’s 96
really.
MR STROILOV:  Indeed, yes.  Paragraph 96 is also relevant.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  It
seems to have been a different case which probably
didn’t raise this point.
MR STROILOV:  Well, my Lord —
LORD JUSTICE PATTEN:  The judge sort of avoided this issue
really, didn’t he, because while you were speaking — at
paragraph 1548 he deals with one of the various
arguments that the claimants advance as to why, even if
they were wrong about the dishonest conspiracy, there
still shouldn’t be any recovery, one of the points was
the public policy point based on the bribery.  But one
of the points — I’m looking at 1548 down to 1552 — was
there was no loss that had been suffered which is the
point I think my Lord is putting to you.  His conclusion
seems to be that he’s not able really to form a view
about that and if he was wrong about liability, then
that will have to go to some further hearing.
MR STROILOV:  Indeed, my Lord.  And of course, as my Lord
the Chancellor has pointed out, the loss and harm are
different concepts.  Of course there is a difficulty on
the basis of this judgment in quantifying the loss, even
approximately, because basically the judge does not
accept either side’s valuation.
LORD JUSTICE PATTEN:  Sorry to interrupt you but I think the
judge — I haven’t found it but that doesn’t mean it’s
not there — I don’t think the judge himself ever
addresses the point that you’re now submitting to us,
which is that the mere removal of ownership of the
property, albeit through the mechanism of the pledges
and the repo agreements and so on, can constitute harm
notwithstanding the absence, if you like, of
a counterfactual which would normally provide the means
of calculating whether you’d suffered loss in the sort
of conventional damages sense.
MR STROILOV:  No, my Lord, I don’t think the judge addresses
this at all.  Of course that becomes important only in
the light of the unexpected fact that in the end he says
«I can’t make findings either way on the balance of
probabilities, I have to decide on the basis of the
burden of proof».  And then of course it becomes
essential where we are talking about harm in which case
the burden is on us, or about lawfulness in which case
the burden is on them.
LORD JUSTICE MALES:  Does the judge anywhere make a finding
either that you did or that you didn’t suffer harm
within the meaning of Article 1064 and, if so, does he
identify what is the harm which he’s talking about?
MR STROILOV:  To the best of my knowledge of this judgment,
no, he does not address this, my Lord.  I stand to be
corrected and maybe I will be by my learned friends but
I believe he never addresses the elements of
Article 1064 specifically in the application of this
case.
MR LORD:  My Lord, I think it’s fair to say that this wasn’t
pleaded or put to the judge in these terms.
LORD JUSTICE MALES:  My next question was going to be did
Mr Stroilov identify anywhere the harm which you were
inviting the judge to find existed?
MR STROILOV:  It is probably — as I indicated I meant to do
anyway, it’s probably convenient at this point to look
at the pleadings and see how exactly is conspiracy —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
that’s useful and I think it would be useful to see how
the conspiracy, what the respondents describe as the
third version of your conspiracy, can we see how that’s
pleaded as well —
MR STROILOV:  Indeed, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  — when
we’re looking at the pleading of harm.
MR STROILOV:  That will be at volume 2 of the core bundle.
LORD JUSTICE PATTEN:  The trouble is that if the judge had
taken the view that harm was the same as what we would
call loss, then the question of whether or not — what
I’ll call the reverse burden was not something that he
could address because he doesn’t seem, although he heard
an awful lot of evidence including valuation evidence,
he didn’t actually make any findings about loss.  But it
may be that that’s a failure on his part because part of
his job was to see whether the Russian law applied and
where the burden of proof lay; by simply not making any
findings about loss and hiving that off to someone
actually affects how you address the question of
liability.
MR LORD:  Can I show your Lordship just a section of the
judgment on this?
LORD JUSTICE PATTEN:  Yes, if we’ve missed something,
certainly.
MR LORD:  It’s certainly germane to this particular point.
Paragraph 1380, there’s a heading:
«Has a case of bid-rigging causative of loss been
demonstrated?»
The reason I draw it to the attention of my Lord, in
respect of my Lord Lord Justice Patten’s question, is
that here the judge — he is dealing with what he
understands to be the counterclaimants’ case in the
context of Article 1064 and he expressly looks at the
very matters we’re now debating in paragraphs 1384 to
1386.  I won’t interrupt any more but I thought it
appropriate to raise it at this point.
LORD JUSTICE PATTEN:  So 1384 to 1386 is where you say he
deals with it?
MR LORD:  Yes.  What the judge is saying is I’m being asked
to find there’s bid-rigging but one of the issues I’ve
got to bear in mind is that this must be shown to have
caused some loss, in other words in effect that there
are some other bidders out there or there is some other
value to be derived, to pick up my Lord
Lord Justice Males’ point, there is some value out there
to be yielded to these debtors that has not actually
been accorded to them as a result of the matters they
complain of.  The reason he does it in these terms is
because it was never put to him that the
counterclaimants could succeed if they didn’t establish
the dishonest conspiracy to raid.  It was never put to
him in those terms.  A whole trial went by without that
being put.
MR STROILOV:  My Lords, in my submission, of course this
particular passage discussing the question of
bid-rigging is not quite the same thing as a general
discussion of how the Russian law applies to conspiracy.
This is a very discrete issue which appears as one of
the many sub-issues in his analysis of auction sales.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  You say
that, but it is really central because if the position
was that there was no evidence of any bidder being shut
out, then it’s very hard for you to say that you
suffered harm measured against a counterfactual of
lawful enforcement of the bank’s rights.
MR STROILOV:  My Lord, it does not necessarily follow from
what he says in this part of the judgment because
obviously on the analysis I have suggested to you, if
the action which is said to cause harm is bid-rigging,
then the harm can only be in some sense narrower than
the general harm on which we rely in the context of the
conspiracy overall.  Basically, if we look at our
general case, we are entitled to say that harm is not
a problem, of course we have suffered harm because they
enforce the security and we’ve lost the assets.  If
their actions on which we rely are narrowed down to
bid-rigging, then of course the — well, the point
I think the learned judge is making is, well, perhaps it
was of no consequence.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  He
doesn’t actually say that.  He says there was no
evidence that it was of consequence.
MR STROILOV:  Indeed, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  They
may be different.
MR STROILOV:  In terms of how it affects the analysis of his
analysis of Russian law and how the burden of proof
applies, this passage tells you nothing.  Because of
course he is making a point that, well, you have to
prove, if you rely on bid-rigging specifically rather
than on a general conspiracy, then you have to prove
causation from that particular action and that’s
different from saying that in terms of showing harm from
the overall conspiracy, you have to show some specific
loss and you have to show that, in case of lawful
enforcement, there will have been a difference.
The analysis suggested by Mr Lord and I think
tentatively suggested by this paragraph would be at odds
with what Article 1064 says and the accepted analysis in
Fiona Trust case.  If you start to analyse harm by
comparing the actual position where it was caused
unlawfully with a hypothetical position where it was
caused lawfully, and if there is no difference there is
no harm, that would mean that there is a reverse burden
of proof.
LORD JUSTICE PATTEN:  But the judge in paragraphs 1384, 5
and 6 was dealing with a very narrow issue of whether
bid-rigging, as he puts it, had caused loss.
MR STROILOV:  Right.
LORD JUSTICE PATTEN:  He wasn’t dealing with perhaps what
might be regarded as a more general question which is
whether, albeit absolutely pucker under the Russian
rules about auctions and so on, nonetheless by using
that system they were able to get the assets at an
undervalue.
MR STROILOV:  Quite.
LORD JUSTICE PATTEN:  And that’s a different question.
Because otherwise the end of his judgment, maybe
I haven’t understood it, doesn’t make any sense to me
because if he’d reached a conclusion that there was no
loss in any meaningful sense, then there was no basis
for him saying, well, ultimately he can’t decide whether
there has been any loss.
MR STROILOV:  Quite, my Lord.  This is a discussion of
a much more narrow point and partly it relates back —
and I hope to come back to these specific points on
auction sales.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  You can
also say, can’t you, that this is an example of his
salami-slicing?
MR STROILOV:  Exactly, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  And his
looking at the issues piecemeal rather than standing
back from the issues, because he has actually lost sight
of at least one thing, whether it matters or not I don’t
know at the moment, but he has lost sight of the
decision that he is being forced to make under Russian
law because he never actually has a paragraph, I think,
where he says «I’ve decided what the elements of the
Russian law claim is and now I’m going to tell you
what’s made out and what’s not».
MR STROILOV:  Quite, my Lord, that is — well, that is
a problem that his judgment does not really —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  It’s
not in your grounds of appeal but it is a problem.
MR STROILOV:  I would say —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Don’t
get into that now, Mr Stroilov.  That was something
I just wanted to make clear, that I wasn’t — so the
other side knew that I wasn’t seeking to divert you on
to something that wasn’t in your grounds of appeal.
But could you deal with the pleadings now?
MR STROILOV:  Indeed.  My Lord, perhaps before I get there,
just for completeness, it may be helpful if I explain
how the concept of conspiracy, which is of course
a common law concept, should be understood in the
context of Russian law because the learned judge does
not address this I think at all in his judgment.  It may
help you if you can look at the evidence of Russian law
experts on this, that falls under Article 1080 of the
Russian Civil Code.  If you look at the supplementary
bundle, tab 4 of the supplementary bundle, that article
is quoted by the claimants’ expert, Professor Maggs,
starting at page 65 at paragraph 24.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Sorry,
this is page 65 in that bundle?
MR STROILOV:  In the supplementary bundle.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Paragra
ph?
MR STROILOV:  Paragraph 24 gives you the text of
Article 1080.  And then paragraph 25, Professor Maggs
states his opinion, that what this means is that each
person liable under Article 1080 must have engaged in
conduct actionable under Article 1064, which is of
course different from a conspiracy in common law.
However, there was a dispute between the experts on
this which is summarised in their joint memorandum at
tab 3 of the same bundle, page 56.  Question PM15 and
then — well, if you can read these three paragraphs.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Page 56
of tab 3?
MR STROILOV:  Yes, my Lord, and then paragraphs 113, 114 and
115.
So you see there was a dispute on that between the
Russian law experts, and our expert said that
effectively Russian law is similar to the English law
and what you define as conspiracy under English law
falls under Article 1080, and Professor Maggs disagreed
and his view was that the requirement is more stringent
in that every coconspirator must have committed some
acts causing harm.
The judge never resolves this dispute in his
judgment and we say as our primary submission that
actually under both views we have proven liability.  But
insofar as this dispute is material, I submit that the
learned judge having said nothing about this, you should
apply the usual presumption that the foreign law is not
different from the English law.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  It’s
pretty difficult to do that when the judge had evidence
of Russian law which he could have decided.
MR STROILOV:  But he didn’t.  It may be that you feel you
simply have to remit it for —
LORD JUSTICE PATTEN:  Sorry, I just want to be clear what
the difference, so far as we’re concerned, between the
two experts was.  Professor Maggs says that it’s not
exactly like the English common law and you’ve got to
show that the defendant caused harm.
MR STROILOV:  Yes.
LORD JUSTICE PATTEN:  Well, in one view that’s what you’ve
got to show at common law but never mind.  Whereas the
other expert said it was just like conspiracy in tort
and deceit or intimidation could provide the unlawful
act.  I mean, I can see some differences in terms of who
has got to prove what but what’s the key difference then
between them for these purposes?
MR STROILOV:  I think the key difference is that he is in
liability of passive coconspirators basically, and it is
not necessarily relevant but it may become relevant
depending on your view of the facts.
LORD JUSTICE PATTEN:  Do the experts anywhere deal with the
question of what constitutes harm?
MR STROILOV:  Indeed they do, my Lord.  It will be in
a number of reports.
LORD JUSTICE PATTEN:  Well, we don’t have to go to all of
them but if you’ve got some convenient —
MR STROILOV:  It will be in the joint memorandum at tab 3.
LORD JUSTICE PATTEN:  I was looking but I couldn’t find it.
MR STROILOV:  And then I think at page 43 you have basically
the question, I think VG1 is more relevant:
«In what circumstances will a party be liable in
tort under Russian law?  [As read]»
LORD JUSTICE PATTEN:  Honest cause, fact of harm.  Oh, 36,
they agreed any harm is presumed to be unlawful.
MR STROILOV:  Yes, my Lord.
LORD JUSTICE PATTEN:  Okay.
MR STROILOV:  And the burden of proof they say is on the
defendant.  Then 37 —
LORD JUSTICE PATTEN:  Taking a property as a sanction during
lawful enforcement et cetera is not regarded as harm,
but misappropriation under the guise of enforcement of
spurious legal claims or civil claims would be regarded
as harm.
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  That
was agreed.
MR STROILOV:  It was agreed.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So you
would say that — unfortunately you probably can’t go as
far as to say these civil claims are spurious, can you?
MR STROILOV:  Well, I would say that at least some of these
enforcement proceedings were spurious.  When we get to
the actual factual detail of auctions, you will see that
there were some spurious civil claims between Renord
companies, which would then be settled and then
settlement agreement breached and then the enforcement
proceedings brought again, all in order to reduce the
starting price.  So of course these would be spurious
proceedings.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  For my
part, I find it quite difficult, if we’re going to be
asked to decide questions of Russian law that were not
decided below, particularly without them being
specifically identified as points of appeal, probably
you will need at some point, Mr Stroilov, to deal with
your contentions as to what should happen if we were
minded to allow the appeal, in other words whether you
contend for a retrial or whether you contend that we
should ourselves deal with the matter.
MR STROILOV:  Well, I will address that and —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  This
question highlights it very strongly.  If we were not
satisfied the judge had made appropriate findings about
harm, we would need to have submissions as to whether we
could do that on the material available, properly,
fairly to both sides.  I mean, for myself, at the
moment, looking at this expert document, I find it
pretty difficult to see what the answer is.
MR STROILOV:  Yes, my Lord.  I will address you on that
probably tomorrow.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
tomorrow is a very good day to do that, Mr Stroilov.
But can we look at the pleadings?
MR STROILOV:  My Lord, just one other point since we’ve got
this bundle open, it may be helpful to look at
page 45 — at paragraphs 45 and 46 because that explains
Article 10 of the Russian Civil Code and the doctrine of
abuse of rights.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  It’s
the last sentence of 46, really, that:
«The courts have not used abuse of rights as a basis
for preventing strict enforcement of the terms of
business-related contracts [as read].»
MR STROILOV:  But at the same time, my Lord, in the previous
sentence he says that Article 10 was used as basis for
negating the defence of lawful action under Article 1064
and that is what we rely on.  We are not trying to set
aside any particular transactions anymore.  We say what
is relevant here is that Article 10 is a valid basis of
negating a defence of lawfulness.
Finally, I am getting to the pleadings —
LORD JUSTICE PATTEN:  Can you just, before we leave this,
this will have to come back I think perhaps later in
your argument, certainly in the claimants’ response, but
you showed us paragraph 862 of the judgment where the
judge has considered the Fiona Trust decision and also
some of the expert evidence, and they — he says:
«It is, in these circumstances, common ground
between the Russian law experts that if the
Counterclaimants succeed in proving their factual case
as to the dishonest conspiracy to steal their assets,
liability under Article 1064 is established [as read].»
So I just want your help on this.  That common
ground, simply on reading that paragraph of the
judgment, suggests that the experts were agreed that if
you made out your allegation of fraudulent conspiracy,
then it was implicit, if you like, in that that harm had
been caused.  I mean, in other words, it wouldn’t have
been an answer to that to say oh, well, yes, they tried,
yes, it’s true we were hellbent on getting your assets
but in the process we actually sold them at their true
value.  All I’m really asking you at the moment is, is
this agreed position one that encompasses this issue of
harm?  I’m just not quite clear what —
MR STROILOV:  I don’t think it is an agreed position.  You
can see that what they — from the fact that in the end
the judge, when he comes to the point, when he says
«I have to decide it by applying the burden of proof»,
the fact that he still places the burden on us seems to
suggest that he thinks we are still on proving harm.  We
say that’s incorrect, but that seems to be his view.
LORD JUSTICE PATTEN:  No, I understand that point.  All
right.  Perhaps we had better go to the pleadings then.
MR STROILOV:  The pleadings, that will be in the core
bundle, volume 2, and then our re-re-re-amended — I may
be missing some «re» — in that defence and
counterclaim.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Which
tab?
MR STROILOV:  It’s tab 10.  Then page — the actual pleading
of the third version of the conspiracy begins at
page 539, starting at paragraph 179(a).  However it
is — well, as you see, there is a reference back to the
matters pleaded in paragraph 150 to 164 above, and it in
my submission makes sense to look through this, if only
quickly.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So
where are we starting?
MR STROILOV:  So we start at page 512, paragraph 150.  150,
there is a general pleading as to what we have termed
fraudulent dissipation of the assets owned by Scan
Invest and Terminal and other assets ultimately owned by
the counterclaimants.  There is a general pleading that:
«a. Each transaction was not a genuine arms length
commercial transaction, but a collusive and/or sham
transaction between closely connected parties …
«b. Each transaction was carried out at gross
undervalue …
«c. Each transaction took place without any genuine
attempt to market …
«d. The purposes of each transaction were, inter
alia, (i) to further remove the relevant asset out of
the reach of the Counterclaimants and/or (ii) to
disguise the fraud on the counterclaimants.»
LORD JUSTICE MALES:  So the transactions which are the
subject of this pleading are, or at any rate include,
the auctions?
MR STROILOV:  They do, they are the auctions mostly,
my Lord.
LORD JUSTICE MALES:  So the plea is that the auctions were
at a gross undervalue?
MR STROILOV:  Indeed my Lord, yes, we do.
At paragraph 152, we plead the connections between
the claimants and the prima facie purchasers of assets
at the auctions, we specifically name Solo, Mercury and
Kontur there, and then we plead some of the connections.
Then in paragraph 152, we plead some of the abortive
transactions which did not materialise.
Then paragraph 153, we plead this in relation to
I think each of the — well, to the sale of the Onega
land owned by Scan.
Then in paragraph 154, all parts of Onega Terminal
owned by LPK Scandinavia.  154A, a land plot at
Tsvelodubova.  155A and 156, various assets of
Western Terminal and what happened to them.  Then 157,
we come to Baltic Fuel Company.
Then in the end of this section — yes, there is
apartment, chattels, in 161 we plead how we say the
claimants are responsible for the fraudulent sales and
that continues into paragraph 162 and 163.  Then there
is a general conclusion in paragraph 164.
So these are the matters on which we seek to draw
together and we come back to this in paragraph 179A at
page 539, when the — seeks the inference of conspiracy.
Well, it isn’t very much if you look at
paragraph 179.  Well, we simply say and all these
factual details we say are — we invite an inference
from them that there was a conspiracy at some point
prior to all these events.  So that is how it has been
pleaded.
LORD JUSTICE MALES:  I was just noticing that the heading
which introduces this plea of the conspiracy is at the
foot of page 531, «Claim for causing harm, the scheme»,
and that led me to be encouraged that I might find
somewhere in these paragraphs your definition of what
the harm was that you say you suffered.  Am I going to
find that anywhere?  It looked as if it might be in
paragraph 174 which talks about getting the assets but
concludes with «without paying a full and proper
consideration», but I think that may only refer to the
two earlier versions of the conspiracy whereas, as you
pointed out, the third version begins at
paragraph 179(a) and refers back to paragraphs 150 to
164 which, as we’ve seen, also talk about the auctions
being at an undervalue, but I wonder if I’m
concentrating on the right bits or whether there’s
something else.
MR STROILOV:  Well, I think in paragraph 180 you have the
reference to a number of articles of Russian Civil Code
including 1064 and 1080.
LORD JUSTICE PATTEN:  Well, page 535, I’m just trying to
work out what paragraph it is — (g) in the middle of
that page, 177 it is, 177(g), you set out the various
companies and say:
«They assisted the fraudulent dissipation of assets
of Western Terminal and/or Scan by buying the said
assets at a gross undervalue at fraudulent and unlawful
public auctions.»
MR STROILOV:  Yes, my Lord.  These are simply — this is
where we plead what we mean by the conspiracy and who
were participants in that conspiracy.  I think it’s
not — with hindsight it’s not a perfect way to plead
it, but in paragraph 180 they simply say:
«The conspiracy and wrongs committed pursuant to it
all give rise to claims under Russian law under
articles…»
And a number of articles are quoted but including
Article 1064 and/or 1080 of the Russian Civil Code.
LORD JUSTICE MALES:  But I was also looking at your plea of
loss which may or may not be the same as harm and we
find that at page 542.  The first few pages are talking
about what would have happened if there had been
compliance with the moratorium and you say that you
would have been able to find alternative finance from
somewhere else.  Well, that seems to have been disposed
of by the judge’s finding on the moratorium and anyway
it was all pie in the sky that you were going to get the
money from another bank.  And then your alternative to
that at 181(e) seems to be the counterfactual which
my Lord has been discussing with you, that is to say
entitled to be put in the position in which they would
have been if the pledged assets had been sold honestly
at their proper market value and not fraudulently.
MR STROILOV:  That’s quite right, my Lord, yes, and that is
loss, not harm.  I say harm as element of liability is
established simply by virtue of repossession.
LORD JUSTICE MALES:  It may be, I’m looking at the moment in
vain to find where you define «harm» in terms which are
different from the loss that you’re talking about.
MR STROILOV:  I don’t think we do.  I don’t think we plead
that out.  But that is, we say, how Article 1064 works.
I don’t — I haven’t been able to find any of this —
LORD JUSTICE MALES:  Right, but what I put to you in my last
few questions is a fair summary of your pleadings,
is it?
MR STROILOV:  It is, my Lord, yes.
LORD JUSTICE MALES:  Thank you very much.
MR STROILOV:  Several points I think follow from the
pleadings when read against the relevant Russian law and
those are that the law is fairly general in terms of
liability for causing harm and the pleadings are fairly
general in that respect.  Well, we rely on a large
number of facts to establish that there has been
a dishonest conspiracy.  Put another way, this is simply
to say that this series of different sales in particular
but also the earlier events were not coincidental.  It
was not a series of coincidences, it was a strategy.
What we say is that it caused us harm and it was
dishonest, that’s all we need to prove.  We don’t need
to show to the judge that at a particular time there was
a smoke-filled room where such and such individuals were
actually conspiring.  That’s not —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
we understand that submission.
MR STROILOV:  Indeed my Lord.  So with this in mind, I come
back to the judge’s summary of conclusions in relation
to auction sales, which is in his judgment, core bundle
tab 6 at page 383, paragraph 1521.  As I was saying in
the morning, nowhere in this list and indeed hardly
anywhere in this particular discussion of auction sales
is there any assessment of the significance of the fact
that the purchasers of the assets at the auctions where
pledges were purportedly realised were controlled by the
bank and in some cases beneficially owned by
Mr Savelyev.
Perhaps it’s worthwhile to look at the findings made
earlier about that.  Paragraph 1156, there is a
discussion of what Renord-Invest group is.  That’s 1156
at page 297.  In subparagraph (6) of that paragraph
there is specific discussion and findings on Solo,
especially in I think the third sub-subparagraph of
subparagraph (6), unnumbered.  The learned judge says:
«There was a dispute as to Solo’s true ownership and
activities.  Mr Savelyev’s evidence was confused and
contradictory.  But in the end I took Mr Savelyev to
accept, and in any event I find, that Solo was
beneficially owned by the bank or as Mr Savelyev
preferred to put it (as I have previously explained)
‘the managers of the bank’, which I take in practice to
be himself and his ‘loyal friends’.»
Then near the bottom of the page there is
a reference to Mercury LLC and he explains what its
involvement was.  Then in the next paragraph, 1157, the
learned judge says:
«It seems to me to be clear that the Bank used the
Renord companies, and in the context those specifically
identified above, as and when it required them for such
undertakings, business operations or investments as
appeared to it expedient at the time.  It does not seem
to me to be possible to characterise the business of the
Renord Group more exactly: its diversity is itself
confirmatory of the Bank’s needs, and the facility with
which the companies were made available to it to service
them.»
Then in paragraph 1206.  I think I am completed
page 310, my Lords.  Paragraph 1206.  So after the
analysis on — further analysis of Renord and SKIF, the
learned judge said:
«That obviously raises a question as to the validity
(and propriety) of the auction sales where the only —»
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Sorry,
is that 1206?
MR STROILOV:  Yes, paragraph 1206, page 310.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
got it.
MR STROILOV:  That’s after discussions with Renord and SKIF,
the learned judge says — makes this comment about
auction sales.
But then, when he gets to actual auction sales,
I won’t take you to this unless instructed, we looked at
it in the morning, but the focus seems to shift to ROK
Prichaly and presumably by implication to Baltic Fuel
Company —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Are you
saying he never answered that question?  He says:
«That… raises a question as to the validity (and
propriety) of the auction sales where the only
participants were under common direction or control.»
And nowhere gives an answer to that.
MR STROILOV:  He does not, unless I am overlooking it in
some unexpected part of the judgment.  Obviously where
it should have been answered as a pre-condition of any
proper analysis of auctions is in paragraph 1525 where
he summarises his conclusions on auctions, and he simply
does not mention this fact.  He talks about many other
things but not the fact that the purchase at auctions
were under common control.
LORD JUSTICE MALES:  Isn’t that his first subparagraph,
which he describes as an extraordinary fact which
remains arresting?
MR STROILOV:  Well, it’s a slightly different point, isn’t
it, my Lord?  The fact that no third parties attended is
arresting and that’s rather posing a question —
LORD JUSTICE MALES:  Well, everyone who did attend therefore
is not independent.  That’s the other side of the same
coin, isn’t it?
MR STROILOV:  Well, the fact that third parties have not
attended is of course arresting, but there is — that
requires some focused analysis of why would the
claimants arrange fake auctions where the only bidders
are companies under their control?
LORD JUSTICE MALES:  Well, you may say he didn’t draw the
obvious inference from the arresting fact which he
identified, but is it right that he didn’t even include
it in his list of factors here?
MR STROILOV:  Well, my Lord, at any rate this is the extent
of the reference to this matter which, in my submission,
is significant enough to make — is the most important
matter about these auctions and then it makes the rest
of the list almost pale into insignificance in
comparison.
Of course another aspect of that which is also not
addressed in this list is the fact that the claimants
orchestrated bid-rigging at those auctions.  Causation
from bid-rigging is one issue he discussed and then in
subparagraph — I think in subparagraph (7), he
mentions — he muses about the question whether the fact
of bid-rigging gives rise to an inference of complicity
on the part of the organisers of the auctions.
What about the significance of the fact itself that
the claimants thought it necessary to orchestrate this
extraordinary series of rigged auctions?  What is the
significance in terms of assessing the probability of
our case?  Of course at this point it may be convenient
to return to his discussion of bid-rigging in
paragraph 1347, if memory serves.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  1387?
MR STROILOV:  Yes, my Lord — I think I am at the wrong.
Yes, 1380 to 1386.  It is of course important to
consider with care what he means by the failure to
demonstrate causation from bid-rigging, because
basically by definition bid-rigging is not a tool for
deterring third party interest in a sale.  It is a means
of faking competition where there is none so as to
validate a sham auction where in fact no genuine auction
took place.  Bid-rigging cannot be effective if there is
a genuine competitor who wants to compete.
Given that the experts are agreed that bid-rigging
is actionable under Article 1064, provided you show
loss, so you — in that context you should not read the
judge’s comments about causation as meaning that the
real cause of loss is not bid-rigging but rather the
absence of independent third parties, because that would
apply to every case of bid-rigging.  If there are
independent third parties who can compete, bid-rigging
would never be effective.
The way I submit you should read it is this.  The
fact of bid-rigging, which he seems to accept, requires
further analysis of what would have happened if the
auction failed for the lack of quorum, as it should have
because there was only one participant in effect.  And
that raises the question, well, would a further auction
be organised?  Probably, yes.  Would there be a reduced
starting price?  Possibly.  But most importantly, would
that have alerted the claimants and auction organisers
to the need for proper marketing effort so that there
would be genuine bidders, if without that they can’t
realise their security?
There is no such analysis in the judgment, but what
is also important is that this analysis is only possible
in context.  If you look at the question of bid-rigging
together with all the other allegations we make in
relation to conspiracy, some of them have been found to
be true, some haven’t.  In the end you have to look at
the totality of the facts and consider what the
claimants’ state of mind was and what their intentions
were.
In relation to that, again his conclusions in
relation to auctions in general make no reference to his
earlier finding in paragraph 1347, which I submit is an
extremely important finding.  He says:
«I also think it possible, and indeed more likely
than not, that by this time the Claimants and/or their
associates had determined to retain the assets within
their circle, with a view (by 2012) to realising their
potential by substantial investment of which they had
been starved: they were not interested so much in
maximising recoveries in diminution of the loans, but in
maximising benefit for themselves and their associates,
subject only to formal compliance with the Russian law
and practice.  On that basis, the lack of third party
interest undoubtedly suited the Claimants and may well
have been vital for the accomplishment of what had
become their preferred outcome.»
And of course — I’m asked to draw your attention to
the next paragraph, 1348.
In my submission, this paragraph 1347 is an
extremely important finding because had the judge done
what he said he should have done and stood back and
looked at the facts in the round in the end of the
process, then in relation to earlier events of 2009 and
in relation to the replacement of — to repo and
replacement of management and the sale of Scan shares to
subsequent purchasers and so on, in relation to all
these events, he makes a finding, «Well, this is still
consistent with the bank playing hardball, this is the
aim of realising the security and recovering its debts».
And now you move into a different, you have
a different state of mind which is not consistent with
trying to maximise the recovery.
And then if he had analysed the facts in the round,
he was bound either to reconsider his conclusions about
the earlier evidence because taken as a whole, the facts
are not consistent with genuine, honest efforts to
maximise recovery.  Or if he thought that the claimants’
intentions changed at some point, it is rather important
for him to consider at what point the intentions
changed.
In paragraph 1347, he is talking about
Western Terminal assets which are finally realised only
in 2012.  But there is no similar analysis in relation
to Onega assets where the first auction which purported
to be realisation of the bank’s pledge took place at the
end of 2009 and that’s quite close to the earlier events
which we say give rise to the conspiracy.  So the
question which he doesn’t answer is was that with the
same intention once again to retain the assets within
the bank/Renord/SKIF circle and realise their potential,
or was it still a genuine effort to maximise the
recovery of debts?
Now, that is the analysis he would have had if it
wasn’t piecemeal analysis, if it was a proper analysis
of circumstantial evidence in the round.
My Lords, perhaps I can now start what is going to
be a large part of my submission and I am conscious of
the fact that I only have, if memory serves, ten
minutes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Ten
minutes but you can still give us an introduction.
MR STROILOV:  I can, I’m grateful.
Having said all that and having identified what we
say are two principal misdirections which stopped the
judge from coming to the right conclusions, what
I propose to do now is to identify the factual findings
in the judgment which we say give rise to an
irresistible inference of the fraudulent conspiracy we
allege.  In other words, I’m going to suggest to you
what the proper analysis should have been on the part of
the learned judge.
I start with the actual repo arrangements and if
I may ask you to look at paragraph 926.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Are you
going to do this by going through paragraphs of the
judgment or are you going to tell us in advance what we
get from the paragraphs of the judgment?  For my part,
I find the judgment, although it’s set out in little
sections, the connection between them is not always very
well signposted.
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  If you
have anything to add to tell us how this fits together,
that would be helpful.
MR STROILOV:  Yes.  Well, my Lord, I have made an early
effort to do that which I hope I have since then
perfected, but I have made an attempt to do that in my
skeleton argument which is in the core —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  You
actually are allowed to refer to your skeleton
argument —
MR STROILOV:  Am I not?
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
you are, but it’s quite unusual for people to actually
do so.  That’s supposed to be what it’s for.
MR STROILOV:  My Lord, that is at the core bundle, volume 2,
tab 13, my skeleton argument, page —
LORD JUSTICE PATTEN:  Can you give me the paragraphs because
I’ve got it loose, separately.
MR STROILOV:  Yes, it is paragraph 17 of my skeleton which
is a very lengthy paragraph —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  It’s
little letters (a) to (t).
MR STROILOV:  That’s right, my Lord.  It is at page 673 of
the bundle, paragraph 17 of the skeleton, and we
identify the points in subparagraphs (a) to (t).
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So this
is the summary that I’m asking for really.  These are
your 20 best points that you’re going to string together
by going to the judgment, these paragraphs?
MR STROILOV:  Yes, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Is that
right?
MR STROILOV:  Yes, my Lord.  I do hope to make it clearer
this time than what the summary is but that is the
summary.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  No,
that’s very helpful.  If that’s the structure, then
that’s helpful and overnight we can take another look at
that paragraph 17.
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  You
wanted to start at 926?
MR STROILOV:  At 926, yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Of the
judgment.
MR STROILOV:  Yes, my Lord.  There is a — well, actually,
925, subparagraph (4) if I may.  The judge — this is
basically in the context of discussion of the unusual
features of the repo, and he notes that there is no
provision in any of the repo arrangements which regulate
what should happen in particular to any income generated
by the assets while they are under repo arrangements and
to any surplus from — in the event of realisation of
pledges.
Then in paragraph 926 he says:
«That last omission [that is to say no requirement
for the holder of the shares to account for any surplus
value] may be especially notable in circumstances where
(as I understood to be agreed, but in any event, I find)
the Bank, at the relevant time, supposed (on the basis
of the Lair valuations) that the value of the assets
considerably exceeded the amounts outstanding.»
Then in paragraph 930 to 931 —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So you
put that forward as a foundational finding that the bank
in fact thought it was dealing with very valuable
assets, much more valuable than the loans?
MR STROILOV:  Yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So you
put that forward as a motive presumably for trying to
raid the assets?
MR STROILOV:  Indeed, my Lord, but as we — not simply that.
We also say that given the form of repo agreements, the
fact that there is no provision for any account for any
surplus recovery and the findings of the judgment is —
and we shall take you to where the claimants’ intentions
at the time —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  That
dates it back to the drafting of the repo arrangement?
MR STROILOV:  Yes, my Lord.  Basically the first point we
are making is that this combination of the terms of repo
arrangements is the findings that the bank perceived the
value of the assets to be well in excess of the debts
and the judge’s findings about what the bank intended to
do or, more specifically, what they did not intend to
do, because basically he rejects the propositions that
the bank simply didn’t think about what should happen to
any surplus and they did not intend to repay the surplus
to the borrower or to return the shares.
And then I ask rhetorically, well, what is the other
logical — what is the only remaining logical
conclusion?  They intended to keep the surplus and that
is at the very least strong support to the conspiracy
allegation, well, if not actual proof.  Because that is
what we say.  We say we had some — we accept that we
had some debts, yes, but the bank had control over as
security for those debts.  The bank had control of the
assets, was a lot more, perhaps several times more, and
they saw the opportunity to grab those assets without
accounting for any surplus value.
Now, we say that the judge’s findings about their
state of mind at the time and his findings about the
terms of repo are simply inconsistent with any other
meaningful explanation.  So I have taken you to his
findings that they thought the assets were a lot more
valuable than the amount of the outstanding debts.
Then in paragraphs 930 to 931, he accepts the
evidence of our banking expert, Professor Guriev, that
it was — as he says, there were exceptional omissions
from — the absence of several provisions were
exceptional and of far-reaching effect.  So, as
Professor Guriev said, he would expect any such
arrangement to be «recorded in a formal, carefully
drafted contract, clearly setting out the material
terms», and in particular firstly the terms of the
restructuring of the indebtedness which is not referred
to anywhere; secondly, who is entitled to the income the
assets would be generating in the interim period; and,
thirdly, what should happen to the surplus.  He accepts
that is unusual.  As the learned judge accepts, that is
not standard practice.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Right.
That may be a good moment, Mr Stroilov.  Are you making
reasonably good progress today?
MR STROILOV:  Yes, I think I am, my Lord.  I still hope
I will be able to sit down before the end of tomorrow.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes.
It’s a tiring exercise, Mr Stroilov, particularly for
somebody who doesn’t do this for a living and we’re
conscious of that.  If you do get very tired, tell us,
because I’m conscious that you’ve done a Herculean job
today, if I may say so.
MR STROILOV:  I’m grateful.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  But you
just tell us if you get very tired and we can always
take ten minutes or something.  Meanwhile, we’ll meet
again at 10.30 in the morning.
(3.40 pm)
(The hearing adjourned until
Tuesday, 3 March 2020 at 10.30 am)

INDEX
Submissions by MR STROILOV ………………………1