Appeal Hearing. Day 4

Thursday, 5 March 2020
(10.36 am)
Submissions by MR LORD (continued)
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
Mr Lord.
MR LORD:  May it please your Lordship.  Mindful of
your Lordship’s observation to me yesterday about the
importance of a standard of proof, I thought with
your Lordship’s permission I would divert rapidly into
standard of proof, even if I then resume my submissions
on paragraph 25 of our skeleton argument.  If that would
be all right with your Lordship?
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
that’s an excellent idea.  Thank you.
MR LORD:  I’m very grateful, my Lord.
Dealing with this third ground which seems
principally to have now as its complaint that the
learned judge misdirected himself by applying
a heightened standard of proof, I will deal with the
paragraphs identified by the appellants as demonstrating
such error by the trial judge.
In summary, my Lord, the summary of our position is
as follows.  First, the judge did not actually misdirect
himself as to the standard of proof; secondly, the
learned judge’s articulations of his approach in these
various paragraphs in his judgment are consistent with
the case law including in particular the civil and
commercial jurisprudence looking at dishonesty and that
there was no «misdirection» by way of any error of
approach by him.  Thirdly, in any event, the judge’s
findings on matters to which such paragraphs relate are
not unreliable and, fourthly, further or alternatively,
such findings are not such as to render the overall
dismissal of the counterclaim unsafe.
By way of brief background, I make three points.
First, when one is looking at the standard of proof
that the learned judge applied, it is important to
remember that the appellants alleged a state-sponsored
conspiracy to raid.  This was not a simple case of
dishonesty but a case of serious wrongdoing on
a spectacular scale involving a host of people and
officials and courts in Russia.  There is, with respect,
no basis for this court to start from the position that
this was inherently — anything other than inherently
improbable and no reason to depart from that normal
starting point simply because of its context,
notwithstanding Mr Stroilov’s submissions to the
contrary.  Moreover, there was no warrant at all for any
suggestion that Bank St Petersburg or Mr Savelyev would
be inherently likely to engage in such activity or
conduct.
Secondly — and that, my Lord, that claim of
state-sponsored conspiracy to raid, that was in effect
the malign explanation for which the appellants
contended.
Secondly, in a time of grave financial crisis with
collapsing asset values, facing a borrower whose
business had collapsed, the Bank was anxious to protect
its position and its security.  Those are matters that
were found by the judge and can’t seriously be
challenged.  This was especially the case given that the
defaulting borrower had made no secret of the fact that
he would seek to thwart the Bank’s enforcement rights if
he possibly could and that constitutes the Bank’s
explanation which the judge, in shorthand so we say,
often referred to as the benign or more benign version
of events.
With those brief prefatory remarks, may I go briefly
to some case law, not because there’s any uncertainty
about the relevant law on the standard but simply to
show your Lordship as quickly as I can the way in which
the standard of proof is referred to in the relevant
case law, particularly the civil and commercial cases
dealing with fraud as opposed to the family law cases,
in order to show your Lordship that the way in which —
the language which the judge used in his judgment is
consistent with the correct approach as set out in
a number of different ways in these cases.
It’s important in this context, in my respectful
submission, to note that whilst we are dealing with the
standard of proof, there being only one standard of
proof, there is in a case such as the present a strand
of jurisprudence which informs the right approach by
a trial judge, where you have a case based upon the
inference of fraud or serious wrongdoing.
Where you have that claim, there is a body of
jurisprudence which is particular and peculiar to that,
which doesn’t in any way subvert the overarching
approach set out in In re H and In re B by
Baroness Hale.  It’s consistent with it but does require
some additional thought by the judge which we say is
what the learned judge is doing in these various
paragraphs.
Could I, my Lord, take you to authorities bundle 3,
and divider 38, please.  I’m not going to dwell on this
case because your Lordship knows the authorities.
Your Lordship has seen this case already, it’s
a decision of Mr Justice Bryan in the case of JSB Bank v
Kekhman.  Starting at paragraph 41 and through to
paragraph 56, the learned judge collects what he
identifies as the relevant authorities in a case such as
his in which there were allegations of bribery and other
dishonesty.
I’m only going to try to canter through these cases
just to show your Lordship the way in which the language
can differ and to try to capture the varied nature of
the lexicon which may be used consistent with the right
approach.
Paragraph 41 there’s a heading «Pleading and proving
fraud».  There’s a reference there to a decision of
Mr Justice Flaux as he then was on a strike-out
application in the Kekhman case where Mr Justice Flaux
in turn referred to the well-known Three Rivers v Bank
of England case.  If I can go to page 41 of the
judgment, subparagraph 42.3, the well-known passage from
Lord Millett’s judgment in Three Rivers.  Pick it up at
paragraph 185:
«It is important to appreciate that there are two
principles in play.  The first is a matter of pleading.»
Then that runs on.  Overleaf at paragraph 186:
«The second principle, which is quite distinct, is
that an allegation of fraud or dishonesty must be
sufficiently particularised, and that particulars of
fact which are consistent with honesty are not
sufficient.  This is only partly a matter of pleading.
It is also a matter of substance.»
Then further on in that paragraph Lord Millett said
this:
«At trial the court will not normally allow proof of
primary facts which have not been pleaded, and will not
do so in a case of fraud.  It is not open to the court
to infer dishonesty from facts which have not been
pleaded, or from facts which have been pleaded but are
consistent with honesty.  There must be some fact which
tilts the balance and justifies an inference of
dishonesty, and this fact must be both pleaded and
proved.»
Then going, please, to the burden of proof at
page 43 where the learned judge has a heading «The
burden and standard of proof in relation to fraud» and
he records in paragraph 46 that the standard does not
change in a fraud case, In re B, citing Lord Hoffmann.
He then goes on to cite the passage your Lordship is
familiar with from Lord Nicholls in the earlier case of
In re H, over the page.  Then within that citation from
Lord Nicholls is the following, at the end of that top
paragraph, slightly indented text:
«Built into the preponderance of probability
standard is a generous degree of flexibility in respect
of the seriousness of the allegation.
«Although the result is much the same, this does not
mean that where a serious allegation is in issue the
standard of proof required is higher.  It means only
that…»
Then it runs on and your Lordship is familiar with
that phrase.  But importantly:
«The more improbable the event, the stronger must be
the evidence that it did occur before, on the balance of
probability, its occurrence will be established.»
Then in paragraph 48 your Lordship will see the
reference to In re B which your Lordship has already
seen and I won’t dwell on that.
Then going to paragraph 49 if I may on page 45,
Mr Justice Bryan refers to a Supreme Court judgment in
the case of Gale v Serious Organised Crime Agency, he
quotes Lord Phillips.  Your Lordship can see what is
there said at paragraph 9 and I’m going to stress the
following:
«Lord Phillips said in that case: ‘The burden of
proof is on the claimant and the standard of proof they
must satisfy is the balance of probabilities.  While the
claimant alleged serious criminal conduct, the criminal
standard of proof does not apply, although «cogent
evidence» is generally required to satisfy a civil
tribunal that a person has been fraudulent or behaved in
some other reprehensible manner.  But the question is
always whether the tribunal thinks it more probable than
not’.»
Pausing there, we would stress the quotation by
Lord Phillips in this Supreme Court case of the
requirement for cogent evidence, that that’s generally
required.
Paragraph 50, there’s a citation from Phipson on
Evidence saying:
«The standard is flexible [that’s the standard of
proof] in its application…»
At the end of that quotation they say this:
«Thus if a serious allegation is made then more
cogent evidence may be required to overcome the
unlikelihood of what is alleged in order to prove the
allegation.»
Then in B3 there’s a heading «Inherent
probabilities» which your Lordships consider, I don’t
think one needs to dwell on that.
Over the page at paragraph 52, he sets out an
extract from Fiona Trust v Privalov which your Lordship
has already seen and the decision of Mr Justice Andrew
Smith, saying this:
«It is well established that ‘cogent evidence is
required to justify a finding of fraud or other
discreditable conduct’ per Lord Justice Moore-Bick in
Jafari-Fini v Skillglass Limited.  This principle
reflects the court’s conventional conception that it is
generally not likely that people will engage in such
conduct: ‘where a claimant seeks to prove a case of
dishonesty, its inherent improbability means that, even
on the civil burden of proof, the evidence needed to
prove it must be all the stronger’, per Lord Justice Rix
in Markel v Higgins.»
Then paragraph 53, there’s a reference to the need
for cogent evidence which was made in a number of cases
including the Three Rivers case which I have already
taken your Lordship to earlier in this passage, and then
in paragraph 54 and 55 the judge explains why those
principles are as they are.  In 55 he says:
«It has already been noted that the reason why more
cogent evidence is required to prove fraud than to prove
negligence or innocence is because the evidence has to
outweigh the countervailing inherent improbability of
the commission of fraud.»
Then paragraph 56 is relevant:
«In this regard in Jafari-Fini v Skillglass,
Lord Justice Moore-Bick stated at [paragraph 40] (in the
context of considering the standard of proof in the
context of an allegation of bribery)…»
Then there’s a quotation from the Jafari-Fini case
and this is important.  There’s a reference to the
flexibility of the standard which allows proper account
to be taken of the seriousness of the allegations and
the consequences proving them.  So that’s all relevant
even in a civil case.  Then the Court of Appeal said
this:
«Thus in civil proceedings the ‘presumption of
innocence’ is not so much a legal rule, as a common
sense guide to the assessment of evidence.  It is
relevant not only where the cause of action requires
proof of dishonesty, but wherever the court is faced
with a choice between two rival explanations of any
particular incident, one innocent and one not.  Unless
one is dealing with known fraudsters, the court should
start from a strong presumption that the innocent
explanation is more likely to be correct.»
We would say, my Lord, with respect, that this is
a case where there was no basis for the trial judge to
find that my clients were known fraudsters.  I’ll come
to the question of untruthfulness that’s relied upon in
my submissions in relation to these paragraphs in
Mr Stroilov’s submissions.  But the important point is
there was no basis for finding that the claimants were
known fraudsters, still less that they were known to be
state-sponsored raiders of assets.  So therefore they
were entitled to the starting point and the approach
which we see set out in paragraph 56 of this judgment in
accordance with a Court of Appeal case.
LORD JUSTICE PATTEN:  We need to read 57, don’t we?
MR LORD:  We do, my Lord, but that was why I made the —
LORD JUSTICE PATTEN:  I know.  But the assessment has to be
an overall assessment which takes into account the other
findings of fact that the judge has made on other
issues.  It’s not simply a sort of self-contained issue
by issue assessment.
MR LORD:  No, my Lord, I completely agree with that.  In
that regard I would refer to the observations of my Lord
the Lord Chancellor I think on the first day at page 23.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I don’t
think I’m the Lord Chancellor really.  I don’t think
I’ve really ever been the Lord Chancellor and there
seems to be a lot of —
MR LORD:  Sorry, my Lord.  I’m not sure whether that’s
a promotion or not.  Probably not.  I apologise for
that.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I don’t
know whether it is or not but I think we’ll leave it
out.
MR LORD:  Sorry my Lord.  My Lord the Chancellor.  I do
apologise.
The chair of this tribunal said on Day 1 at page 23
to Mr Stroilov that there was a or may be a disconnect
and an important one between the dishonesty alleged and
found by the judge and the conspiracy the appellants are
trying to prove.  So all I was seeking to — I take
my Lord Lord Justice Patten’s point but there is
a difference between lies and untruthfulness that may be
told by a litigant on the one hand and findings of fraud
or conspiracy to raid on the other.
I’m not at all suggesting that the court wouldn’t
consider, if it comes to untruthfulness, what that
connoted.  But it’s not quite right to elevate what
happened in this case, even at its highest against my
clients, into findings that somehow displace the general
starting point that we see set out in these cases, in my
respectful submission.  Nothing through the judge’s
findings take you to a place where there’s been enough
relevant dishonest conduct found, dishonest conduct or
fraud found to take you out of this approach.
And secondly, two other points on these authorities.
As you go through the judgment, one has to have in mind
contextually what the learned judge is finding in terms
of the allegations against my clients because, as
Mr Stroilov rightly said, that’s relevant context here.
If the judge was finding that elements of the conspiracy
were being proved and made out, or there had been
evidence of raiding or the like, one could see how that
starting point, the benefit of the starting point would
be being eroded.  But that wasn’t, on a fair reading,
what was happening here.  The judge, as he went through
the serious allegations, found step by step that they
were not made out, including very confident rejections
of some of the most important foundations for them.
So there wasn’t any reason with respect why the
forensic dynamic should have been working against my
clients as the judge went through his fact-finding
assessment.  Quite the contrary.  If anything, and I’ll
come to the Morskoy Bank lies and what they connoted,
great play has been made of that, but if anything, the
more the judge made findings as to the alleged
conspiracy claim, the more he would have been reassured
of the need to require cogent evidence before he was
finding a further iteration thereof.
I was only really wanting to show your Lordships
this miscellany of cases, not because the standard is
uncertain but just to show the different ways in which
respected judges at first instance and on appeal have
expressed the same concept.  It’s the same concept, one
standard of proof, but requiring — but flexible and
encompassing some of these concepts on the way.  When
one looks at what the judge said, in our submission he’s
not to be criticised for his approach, that one can’t
take from his language that he misdirected himself, and
when one looks at how he made his findings in the
390 pages of his judgment, one can see that he was not
misdirecting himself.  It’s relevant in this context to
remember that the appellants do not challenge any of his
primary factual findings.
Now, the vast majority of his fact-finding exercise
in this case would fall into that category, so the court
should take some reassurance, in my respectful
submission, that the trial judge’s fact-finding exercise
has been done to the relevant — in accordance with the
relevant standard because the vast majority of the
product of that is not challenged on appeal.  What’s
challenged is his evaluation of where those primary
facts tended.
Can I, with that introduction, come to the list of
paragraphs, if I may, that my Lord asked me to deal with
and Mr Stroilov has helpfully set out in a note.
I make the following submissions.  I’ll start with
paragraph 1634, if I may.  We say this, my Lord.  It is
true that the counterclaim always faced the difficulty
that it relied on proof of the inherently improbable.
The learned judge said that it also faced the:
«… burden of proof that could only be discharged
by showing the facts to be capable of innocent
explanation such as to give rise to the inference of the
conspiracy or conspiracies pleaded.»
The way in which the judge expressed himself, in my
submission, is consistent with the way in which
Lord Millett expressed himself in the Three Rivers case
about what is in fact not open to a court in terms of
inferring fraud if in fact all you have are facts which
are consistent with honesty.  That you need to have some
other fact proved that would tilt the balance.
We say that what the judge is referring to in
paragraph 1634 can be understood in that way and that
when the learned judge came to determine the relevant
matters, he made findings without any reference to any
heightened standard of proof.  He is here describing the
starting point that he adopted, which was the fact that
the counterclaim was inherently improbable, which it was
especially given the grand scale of conspiracy that was
pursued at the trial.  It wasn’t the case of a simple
fraud — not that any fraud is acceptable but there are
frauds and there are frauds and this was on the most
grand and spectacular scale.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Can
I just ask you what you say about the statement that the
counterclaimants — they faced the difficulty that the
burden of proof could only be discharged by showing the
facts to be incapable of innocent explanation?
MR LORD:  My Lord, that could have been expressed
differently but, in my submission, that is consistent
with what Lord Millett said in the Three Rivers case.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So
that’s correct?
MR LORD:  Lord Millett said that it’s not open to a court to
infer fraud if the facts are consistent with honesty.
I gave the — I don’t want to mangle this, I want to
give the exact quotation that I just gave.  In my
submission, it may be clumsily expressed but the burden
of what the judge is driving at is, with respect, clear
and he has very high authority for that.  I’ll read out
Lord Millett.
LORD JUSTICE PATTEN:  This is back where we’ve just been?
MR LORD:  It is, my Lord.  I’m sorry my recollection is
faulty, it shows you how quickly my memory is failing.
It is, my Lord, paragraph 186 of the Kekhman judgment,
at 330 at bundle 3/38 where he said this:
«At trial the court will not normally allow —»
Sorry, it’s at trial:
«It is not open to the court to infer dishonesty
from facts… which have been pleaded but are consistent
with honesty.»
So if the facts are consistent with honesty, then it
is not open to the court to infer fraud without some
fact proved, otherwise proved that tips the balance.  In
my submission, that is all the judge was here trying to
articulate.  It may have been better if he had
faithfully taken this passage from Three Rivers but we
say, with respect, that that was what he was driving at
then.  If one looks at his judgment, we say that he
approached it in the right way.
LORD JUSTICE PATTEN:  But isn’t Lord Millett there really
talking about the need for the facts that are relied on
to establish the fraud to have been identified upfront
in the pleadings so that when the court hears the
evidence, it knows, and more particularly the defendants
know, that those facts are being relied on, if
established, as evidence in fraud.  I take your point
that he does say «not open to the court to infer
dishonesty from facts which have not been pleaded, or
from facts which have been pleaded but are consistent
with honesty», but speaking for myself I’m not quite
clear how the second part of that is consistent with the
other authorities, if one just took it in isolation.
MR LORD:  He does say in paragraphs 184 to 186 that there
are two distinct principles and he’s dealing with
pleading, the need for pleading, which is obviously
a matter of fairness and to allow the alleged fraudster
to know the case he has to meet, and to inform the court
as to what it’s going to be asked to find from which to
infer the fraud.  But he is at pains to go on to say
that it’s not limited to pleading, it’s about what the
court can find, whether it can find honesty.
What I’m putting is that that is really — that
gives great support, in my respectful submission, to the
way in which Mr Justice Hildyard expresses himself in
this paragraph.  But if one looks through the judgment,
we say that Mr Justice Hildyard perhaps made the mistake
of phrasing the matter differently in different places
but one can see from this miscellany of cases in Kekhman
that courts do try to capture this approach, this
flexible approach in different language, in slightly
different ways.  But, with respect, it’s to parse this
judgment, with respect, to alight on paragraph 1634, one
paragraph out of all this judgment, and to say that this
experienced Chancery Division judge did not know what
the standard of proof was that he had to be applying to
this sort of case.
It is worth noting as a preface that he did get
submissions, he was given submissions as to the standard
of proof.  Mr Stroilov corrected his submission when we
found the first day of the transcript of his oral
closing submissions, and they’re worth looking up.
They’re in the supplementary bundle, behind divider 12
at page 176 — sorry, tab 14, my fault.  Supplementary
bundle, tab 14, page 176, Day 44 of the trial.  It’s
internal page 64, prefaced by «Closing submissions by
Mr Stroilov».  At line 17 and onwards he said this.  He
said:
«But I would suggest that the first thing I need to
touch upon is the standard of proof for fraud [as
read].»
Your Lordship will see what he said.  Mr Stroilov
there drew the judge’s attention, as the very first
thing he said —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Which
is the internal page?
MR LORD:  It’s page 64 of Day 44, it’s the bottom right
quarter, and it’s the last inch of the page really.
So he drew the learned judge’s attention
specifically to that matter and the need not to apply
a higher standard.  He referred the learned trial judge
to that authority, Mr Justice Eder, which your Lordship
will find at page 180, I think it’s in the same divider.
So that’s supplementary bundle, tab 14, page 180, where
we’ve extracted paragraph 88 because that is the
paragraph which Mr Stroilov emphasised to the judge, as
we’ll see back in the trial transcript.
I don’t need to refer to paragraph 88 but
your Lordship will see what’s there set out.  I’m not
sure actually that paragraph 88(ii) is actually right.
I think that is an overstatement of the retreat from the
previous understanding.  Be that as it may, relevantly,
this case was being drawn to the judge’s attention to
stress the importance of not applying a different
standard of proof because of the gravity of the
counterclaim.
Then going back, if I may, to the transcript at
page 177, page 66, line 7, Mr Stroilov asked the judge
to scroll down one page of that authority and he said
this:
«In the authority the bottom line is paragraph 88,
that’s what I specifically rely on [as read].»
Mr Justice Hildyard said:
«Yes, okay, so I should be particularly careful on
that [as read].»
And Mr Stroilov said «Yes», and then the matter went
on.
So your Lordship can see that this was something
which was specifically drawn to the judge’s attention.
In my submission, it is most unlikely in these
circumstances that he would have misdirected himself and
thought there was a different standard of proof when he
went through his fact-finding exercise.
I’ve dealt with paragraph 1634, may I go to
paragraph 942, please, and the use of the word
«plausible».  Your Lordship will see in the third to
last line the judge used the word «plausible» and
I think there is a query that’s raised in relation to
that particular word.  In my respectful submission, the
judge was only deciding here whether the Bank’s point
about the use of the original purchasers was plausible.
This was only one step in his reasoning in this regard,
his reasoning starts on this point earlier and it runs
on later in the judgment.  He goes through further
points in the next few paragraphs until he reaches his
conclusion at paragraph 945 where he says:
«I have concluded, and find, that…»
Then it goes on.  And then he says later in that
paragraph:
«I accept the claimants’ case that it was intended
to enable the Bank…»
So it runs on.  We say that that’s a finding of fact
not premised on any heightened standard of proof.
If we go, please, to paragraph 958 to 960 where we
find the reference to «benign» and «malign» in relation
to the form of the repo arrangements and their purpose,
and paragraphs 958 to 960 are prayed in aid.  I’ve made
a submission that «benign» and «malign» are shorthand
for the competing explanations and that anybody reading
this judgment would understand what the judge meant by
that and my Lord the Lord Chancellor has pointed out
that the judge on certain occasions found the Bank’s
explanation not to be innocent, found on occasion there
was untruthfulness, but it’s clear when he used these
terms what he has in mind.  He is at all times comparing
the explanations that the Bank advanced with the very
serious and spectacular allegation of this
state-sponsored raid.
He was right, with respect, to have that seriousness
very firmly in mind.  We say if one looks at these three
paragraphs and his references in them to «benign» and
«malign» and the need for evidence of sufficient
strength to oust the more benign explanation, we say
that this does not demonstrate a heightened standard of
proof.  It was up to the appellants to prove their
malign explanation, it was their case on this dishonest
conspiracy to raid to prove.  The Bank put forward an
explanation of the arrangements, the repo arrangements,
which as the judge termed it was benign.  On the Bank’s
view of the world, that was a benign security
arrangement.
The appellants had to be able to show that their
explanation, as the judge termed it «more malign», was
the more probable than the Bank’s one so their
explanation had to be supported by evidence of
sufficient strength to do so.  The judge was saying no
more than that and we say there was nothing unorthodox
about the way the judge was expressing himself in that
paragraph.  We say there’s no magic in those terms,
they’re just descriptive labels.
Moreover, by this point in his reasoning on the repo
arrangements, the judge has already concluded the
various points in favour of the Bank.  For example
paragraph 945 where he makes findings — sorry,
paragraph 944 where he made a finding that:
«… the fact that the Original Purchasers… was
plain to see on the face of the Memorandum… it was not
dissembled or disguised; and Dr Arkhangelsky did not
object at the time.»
So Dr Arkhangelsky didn’t come back and say this is
unfair, this is sinister, this looks like you’re trying
to tee up a raid on my assets.  Dr Arkhangelsky entered
into these arrangements with lawyers helping and
ferrying the documents to and fro for signature.  These
are matters the judge found.  He found that’s how these
documents were actually entered into and he rejected
Dr Arkhangelsky’s case that there was trickery or
intimidation or coercion.  So these were important bits
of context.
In paragraph 945 he made the findings that he made
there, again in favour of the Bank, those are findings
on original purchasers.  In paragraph 950 he made the
finding that the documentation was not intended to
prevent or impede Dr Arkhangelsky from exercising his
right of repurchase.  That’s an important finding.  So
on the face of these documents — and bearing in mind
that Dr Arkhangelsky’s case was «I need some breathing
space».  He promised 300 million roubles were going to
come from his timber company, which never came, so
that’s some $10 million that never showed up.  What he
essentially was asking for was some breathing space and
the judge found he was given valuable breathing space
through these arrangements.  On the face of these
arrangements, Dr Arkhangelsky had the right to
repurchase his businesses so when one comes into the
raiding territory, one has to remember that, that
actually on the face these were security arrangements
that the Bank was upfront about, that Dr Arkhangelsky
entered into freely, with legal help, made no complaint
about their terms and, on Dr Arkhangelsky’s position at
that time with the Bank, ought to have been able to have
repurchased, to take back the keys to his businesses.
When one understands that, all the air goes out of
the tyres, as it were, here.  All the sinister aspect of
the repo evaporates and actually the judge has actually
travelled much further down the road of investigating
the sinister nature as alleged than perhaps some judges
would have done, with the greatest respect, when one
sees them in their proper context.
Then if one goes to paragraph 959, within the three
paragraphs about which complaint is made, your Lordship
will see that the learned judge is clearly looking
forwards and backwards when he is coming to his factual
findings in relation to the repo.  He says this:
«I have taken carefully into account that the
curiosities of the original ad hoc drafting did favour
the claimants.  I have also borne in mind the use
ultimately made of the curiosities.»
So he is looking there forward at the fact — at the
use that was made or not made of these curious features
and he’s satisfied that testing it by, if you like, the
proof of the pudding, that confirms his finding that
this was not entered into as an indicia of an intention
to raid the assets.
And that’s a faultless piece of reasoning.  That’s
a good example of where the judge is carrying out
exactly the standing back and the looking forward and
backwards, if you like the dynamic fact-finding exercise
which he is said not to have carried out.  The fact that
he doesn’t refer to looking at things in the round at
lots and lots of places in the judgment, only let’s say
half a dozen, doesn’t mean that isn’t what he’s actually
doing.
Through this judgment the learned judge is
ceaselessly testing his thought process and his
fact-finding analysis with all the other points,
counterfactuals, other facts, explanations, he’s
endlessly doing that at, dare I say, great length.  One
can see that’s the exercise he’s engaged upon, it’s an
active process.  It is a multi-factorial exercise.  He
hasn’t said «That’s what I’m doing» all the time.  He
doesn’t need to do that.  The proof of the pudding is in
the judgment, that’s what he’s actually doing.  One can
see here that he’s looking forward in time and then he’s
also looking backwards.  He says «Standing back».
In the fifth line or the fourth line of the
paragraph he says:
«In my judgment, none of that is enough, of itself
or in combination…»
Again he’s looking at things piecemeal, he’s looking
at things in the round, in combination, and he’s
obviously looking backwards, that’s at the way the thing
came to be entered into and its features, and he’s
looked forward in terms of how it was used.  That is,
with respect — then he makes the findings he makes in
959, or rather he explains the import of these
arrangements, which was that they were handing over the
keys on default, but he finds that was an acknowledged
way of dealing with problems and so on.
So when one comes to 960, one has to view all that
judicial reasoning that has, if you like, fed into this
finding.  When he says:
«In other words, there is in my judgment, nothing
sufficient to contradict the more benign view of the
facts…»
Then he goes on to find in effect that he finds the
repo was entered into as the Bank suggested, in other
words the more benign explanation to enhance its control
over the borrower’s assets rather than prompted by the
conspiracy to raid.  We say, with respect, there’s
nothing to be faulted in the judge’s reasoning about
that part of the case.
If I could go, please, to paragraph 1044,
subparagraph (4), where he’s here dealing with
litigation arising in relation to the Morskoy Bank loan.
Your Lordship will know that the — by way of relevant
background to orientate the court, if your Lordship
would be kind enough to go to paragraph 502 of this
judgment, with the heading «Morskoy Bank loan», one can
see when the Morskoy Bank loan was entered into and its
circumstances.  Dr Arkhangelsky procured
Western Terminal to take out this loan for 56 million
roubles from Morskoy Bank at the end of March 2009.
Now, pausing there, Morskoy Bank has got nothing to
do with the Bank St Petersburg, nothing whatsoever even
alleged to be connected to Bank St Petersburg, so it’s
a separate bank.  By this point in the story
Dr Arkhangelsky had, consensually as the judge found,
entered into the repo, had defaulted such that the —
well, had defaulted but in any event the Bank, via the
original purchasers, had gained the control of this
particular company, in other words Western Terminal.
When one goes over the page, at paragraph 504 and 505,
one can see the significance of the judge’s findings in
those paragraphs.
Dr Arkhangelsky had signed and procured this loan to
Western Terminal, although that loan required
shareholder approval and it had not been approved by
Sevzapalians who had become the 99% shareholder pursuant
to the repo arrangements.  What had happened here is
that notwithstanding that Dr Arkhangelsky had
consensually entered into the repo arrangements which
comprised the vesting of control over Western Terminal
in Sevzapalians, and notwithstanding the fact that by
the end of March 2009 Dr Arkhangelsky was in default of
the loans so as to have lost his right to call for
repurchase, what he was engaged upon was procuring
a loan to a company he had no right to control, which
proceeds were then spirited away to benefit
Dr Arkhangelsky.  That was a very serious turn of events
and that is the background — that’s the important
background to the Morskoy Bank loan.  It then spawned
various proceedings in Russia, civil and criminal, and
your Lordship will see the background to those.  If you
go, please, to paragraph 592 of the judgment — that may
be a false reference.
What happened, steps were taken, Mrs Arkhangelskaya
took steps to challenge — sorry, my Lord.  Go back to
592.  I won’t… 592 picks up the criminal complaint in
this regard and sets out in the paragraph September
2009, the beginning of proceedings against
Dr Arkhangelsky for fraud in connection with the
Morskoy Bank loan for the reasons that I’ve explained
earlier.
Going over the page to paragraph 596, the judgment
sets out the chronology in relation to the Morskoy Bank
criminal proceedings in Russia, including the way in
which Morskoy Bank itself became a party, culminating in
the court judgment in I think 2010 against
Dr Arkhangelsky.  So that’s the relevant background for
Morskoy Bank.  So importantly, we say, this has got
absolutely nothing to do, couldn’t have anything to do
with the first or second alleged conspiracies.  This
arises in relation to Dr Arkhangelsky’s procurement of
a loan at the end of March 2009 by Western Terminal
although control of that company had been contractually
ceded by him to the Bank.
So it has nothing to do with what really —
ultimately with what the judge was being asked to find
and it happened, as a matter of chronology, after the
first and second conspiracies were said to have been
form.  That’s the relevant context to go back to all the
complaints in these paragraphs about the Morskoy Bank
loan and Morskoy Bank chorus.
If one goes to paragraph 1044 — it’s probably
necessary to start at 1042.  So in 1042 your Lordship
will see the heading «Counterclaimants’ civil and
criminal proceedings».  What happened was that
Mrs Arkhangelskaya or the proceedings in her name were
initiated in Russia seeking to set aside the repo
arrangements on the basis that they had been entered
into so as to bind her — she had a right as a spouse to
various property.  What had happened was that it had
been encumbered without her consent by her husband.
That was the burden of the proceedings in Russia.  And
she hadn’t known about what Dr Arkhangelsky, her
husband, was effectively contracting and the effect it
had on assets in which she had an interest.
The judge says in paragraph 1042:
«… the basis on which proceedings were brought on
his behalf [that’s Dr Arkhangelsky], and indeed were
initially successful in the Russian courts, was
thoroughly curious.»
Then in 1043 the judge goes on to expand upon
features of these claims and these were claims against
the Bank to set aside the repo.  Your Lordship will see,
I don’t need to — just for your Lordship’s note really,
1043 sets out, 1043(1), what those claims were.  The
judge says, perhaps with a little charity:
«The artificiality is obvious and brought home by
the fact that Dr and Mrs Arkhangelskaya had the same
lawyer (Mr Erokhin) and OMGP was represented by a
Mrs Abarina, also one of Dr Arkhangelsky’s lawyers.»
So the judge was really saying in a coded way there
this looked like a put-up job really by
Mrs Arkhangelskaya to try to get out of or challenge the
repo arrangements in Russia.
Then what the judge notes in these various
proceedings that followed, in subparagraph (2) he says
this:
«Secondly, and just as extraordinarily, neither side
appears (at any point, including appeals) to have relied
on the repurchase side of the arrangements…»
So it runs on.  What the judge found was neither
Mrs Arkhangelskaya nor, when it came to involve itself
in Morskoy Bank litigation matters — sorry, my Lord.
This is the repo.  Sorry, that neither side, when they
were involving themselves in the repurchase
transactions, referred to the repo side of the
arrangements.  That’s the background to 1044 in respect
of which complaint is made.  The judge says:
«What inferences or conclusions may be drawn from
these curiosities?  In my view…»
Then he goes through a series of points and I think
complaint is made in relation to what he says in
paragraphs (4) to (6).  In subparagraph (4) he says that
his findings — well, in paragraph (4) he makes findings
as to what he thinks was going on.  Then he goes on to
say that the findings do not necessarily mandate the
inference of a raid and it was consistent with
a shorter-term and less complex objective of protecting
realisation.
We say, my Lord, that that is not a decision of any
heightened standard of proof, the judge ends up drawing
no conclusion about it.  Subparagraph (5) says it is
consistent with the raid but does not necessarily
mandate such a finding and subparagraph (6) says it is
also consistent with something else, in other words not
the raid.
The judge doesn’t say he prefers that explanation so
he ends up with two competing explanations that he does
not overtly decide between.  But ultimately, if the repo
stands, as he found that it did, this was irrelevant
since the Bank on his findings were seeking to maintain
control over the asset, the repo was enforceable, as
he’d found, and his findings in that regard stand.  None
of those matters with respect have any real bearing on
what he found in relation to the various iterations of
the conspiracy.
If I can go to the Morskoy Bank complaints at 1111
to 1115, and I think Mr Stroilov asked for these to be
read in conjunction with paragraphs 1042 to 1044 which
obviously I’ve just taken your Lordship to, which is why
I tried to make a link there between those earlier
paragraphs and the Morskoy Bank criminal claim.
Your Lordship knows the upshot of this complaint by
Mr Stroilov, that the judge found that Bank witnesses
had told untruth to the criminal court in Russia in
relation to the Morskoy Bank proceedings because they
had not referred to the repo side of the matter.
Pausing there, that was obviously a diffidence that
he’d found Mrs Arkhangelskaya had also had in her civil
litigation in Russia.
In paragraph 1111 the judge said:
«… 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.»
We respectfully submit that he was right so to hold
based upon the inherent probabilities.  But the question
here is what the judge means by this and actually, when
you read on, this is not the exercise that he is
conducting.  The judge here has concluded the
explanation is malign in the sense that it was
dishonest, as he says in the first sentence of
paragraph 1111, and he finds that that casts doubt upon
the reliability and sense of propriety of the claimants
so he’s made that adverse finding.
But the really important question he was then
addressing was why such untruthfulness had been told.
Was it to hide the repo because the Bank thought it was
fraudulent or was it to support and substantiate the
criminal proceedings as part of the «war» against
Dr Arkhangelsky.
Then he goes on in paragraph 1115 to make a positive
finding as to the explanation.  He finds that the
purpose was part of the war but wasn’t because the Bank
thought that the repo was somehow fraudulent.  Obviously
one has to see that in the host of his previous findings
about the repo and how it came to be entered into and
his reference to the concerns the Bank may have had
about the balance sheet aspect.
When one is looking at this bit of the story, one
can see why, to put up my Lord the Chancellor’s point
about disconnect, there is a serious disconnect between
unacceptable untruthfulness by the Bank in the
Morskoy Bank criminal proceedings on the one hand and
inferring from that the conspiracy to raid on the other,
that whilst that does — I accept that is a contrary
factor for the judge to bear in mind in terms of
credibility and explanations, one has to see the context
and one couldn’t begin to jump from the judge’s findings
in the context of the repo, as he’s carefully found it,
to find that this betokened a conspiracy to raid.  That
would have been a perverse finding to make, not one that
he should have made had he allegedly applied the right
standard of proof.
LORD JUSTICE MALES:  Giving false evidence in support of
criminal proceedings, which could obviously have very
serious consequences, is obviously a pretty serious
thing.  Does that, to use the phrase you used earlier,
go some way to erode the starting point which you say
the judge should take in considering inherent
probabilities in that he is now dealing with people that
he knows are willing to take these rather serious steps?
MR LORD:  Well, that would be a factor, my Lord, that he
would be entitled to take into account by way of
context —
LORD JUSTICE MALES:  And does he anywhere?  You say he would
be entitled to take that into account but does he do so?
MR LORD:  I’m not sure whether he does —
LORD JUSTICE MALES:  In considering his conclusions about
dishonesty?
MR LORD:  What I was going to say, my Lord, was that none of
that — his findings here do not lend any support to the
probability of the conspiracy and that’s the relevant
analysis.  It doesn’t actually make the conspiracy more
likely on the judge’s findings.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Well,
I was going to ask you about that because if you go back
to paragraph 1112, in the last sentence he says:
«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 when he’s expressing his doubts about the case
as a whole at the end, at 1635, he says that one of the
things that gives him misgivings about the whole thing
is:
«The chorus of plainly false evidence [that was]
orchestrated in the context of the Morskoy Bank
proceedings».
MR LORD:  But my Lord, that rather suggests the learned
judge has taken into account this matter as he’s gone
through the trial.  That’s the first point.
But secondly this point, my Lord.  Mr Stroilov
referred in his skeleton to the Lucas direction which
your Lordship I’m sure will be familiar with, in the
criminal context, which is a requirement for the jury to
be directed about the approach to lies being told by
I think a defendant in a criminal case.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Just
remind me because you may realise that criminal
directions are not my bread and butter.  The Lucas
direction is just because a defendant has lied in one
case, it’s not more likely or less likely that he would
have lied in another, is that it?
MR LORD:  Can I just get my note because it’s not actually
either my bread and butter.
LORD JUSTICE MALES:  As I recall, it’s that lies may be
evidence of guilt, ie going more than simply to
credibility, but the jury must be sure that that is the
right explanation and that there is not some other
explanation such as, for example, concealing some other
reprehensible conduct.
MR LORD:  My Lord, what I’ve done and I can hand this up if
I need to — I can’t because I’ve scribbled on it.  But
there is a Crown Court compendium, there is a Judicial
College guidance to judges for criminal cases, which
I’ve gone to, in May — I haven’t gone to the college
but I’ve gone to the approach.  It seems to be there are
three requirements — directions:
«Before the jury may use an alleged or admitted lie
against the defendant, they must be sure of all of the
following.  First, that it is either admitted or shown
by other evidence in the case to be a deliberate
untruth, ie it did not arise from confusion or mistake;
secondly, that it relates to a significant issue; and,
thirdly, that it was not told for a reason advanced by
or on behalf of the defendant, or some other reason
arising from the evidence which does not point to the
defendant’s guilt [as read].»
Then a further aspect:
«The jury must be directed that unless they are sure
of all of the above, the alleged lie is not relevant and
must be ignored.  If the jury are sure of all of the
above, they may use the lie as some support for the
prosecution case but it must be made clear that a lie
can never by itself prove guilt [as read].»
So one can see why Mr Stroilov perhaps didn’t go to
the Lucas direction because when one looks at that, it’s
actually an admonition against placing too much weight
upon untruthfulness in finding that somebody has done
something.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  That
was my recollection of it.
MR LORD:  Exactly right, my Lord.  It’s the very opposite of
the point that Mr Stroilov wants to advance.  It’s
actually saying there are lots of reasons for people to
lie about things and effectively you have to go very,
very carefully.  It can be some support but there has to
be other evidence and so on.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  It’s
not strictly relevant here.  The detail of it is all
about the way it’s put to a jury.  It’s not about judges
directing themselves.
MR LORD:  No, my Lord, but it, with respect, does capture
the disconnect that your Lordship raised.  It does
capture that.  It does capture that there is
a disconnect between, for example, lying about the repo
because you’re sensitive to the Central Bank of Russia’s
requirements, I’m not saying they’re breached but you’re
sensitive to that, lying about the repo for that reason,
and that being evidence of the conspiracy to raid.
That’s a very, very big leap.  It is a disconnect.  It’s
not just a disconnect, it’s a very substantial forensic
leap.  And, with respect, that is far too long, it’s far
too disconnected for it —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  You use
continuously the term «conspiracy to raid» which is
obviously the way it was put, but it’s really a question
of whether the Bank used dishonest methods to achieve
the goal which the judge himself finds was its goal to
get hold of the assets.  And if they did, then the third
species of conspiracy would have been made out, at least
potentially.  The problem I have is that the judge
actually accepted in various places that that was their
motivation.  They wanted to do everything possible to
get their assets.  He says that, I can’t remember the
paragraph numbers but somebody will remind us.  And he
also says that they used thoroughly dishonest —
a chorus of dishonest methods, both in Morskoy and in
relation to the repo, to achieve it because they would
stop at nothing.  But he then says: but that is
consistent with them just enforcing their lawful rights.
MR LORD:  With the greatest respect, my Lord, that is not
what he finds.  He doesn’t find that.  He doesn’t make
that finding, that’s what he doesn’t find.  It’s why
Mr Stroilov makes so much of the Morskoy Bank lies,
because that is the high point of the untruthfulness
against my clients.  The point I’m making is that is
absolutely not anything to do with the alleged
misappropriation.  Forget conspiracy —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  No but
it’s part of the war.
MR LORD:  We would say the war was because the Bank went to
enforce its security in a collapsing market.  By the
time of enforcement, the Bank knew that the Lair
valuations were hopelessly overvalued, the Bank
thought — I think probably dishonestly overvalued but
that doesn’t really matter.  So the Bank thought «We
have got no security here and we want to protect our
assets».  But by the stage of the Morskoy Bank chorus,
as it were, one needs to understand that the judge has
rejected the conspiracy to raid so in other words the
Bank is not engaged upon some premeditated attempt to
steal assets back at the end of 2008.  That’s a very
important finding.
What your Lordship has put to me, if I understood it
properly, with respect, is was there a dishonest
opportunistic smash and grab raid by way of the third
conspiracy?  The judge did consider that, my Lord,
because the first conspiracy was very much it was all
planned from the off and it involved lots of people and
it involved the forged contracts and it involved the
very idea of a repo and Mr Arkhangelsky was tricked into
entering into it and it was all part of a premeditated
plot to steal his assets, and that was the primary way
the case was put.  And the judge rejected that for very,
very strong reasons, very strong grounds.  There was no
basis to challenge his findings, so that means there was
no such conspiracy.
You have then as part of the fact-finding exercise
and the standard of proof assessment to build that in.
It’s an important part of the story because when one is
travelling through the probabilities, at this point in
time the judge has, we say rightly, rejected this very
improbable first conspiracy.
Then it’s said by the counterclaimants, well, there
was a second conspiracy where you sought to engineer
a default in March 2009 to which you weren’t entitled.
The judge has gone through that and he’s found the Bank
was entitled to do that.  Dr Arkhangelsky had promised
funds from the timber which hadn’t shown up, he had
wrongly concealed the arrest of secured vessels, and all
these matters came to the surface in about March/April
2009 and fixed the Bank’s intention to enforce its
security and in effect not to trade with Dr Arkhangelsky
anymore.
There’s nothing sinister about that.  That’s what
most banks would do.  And those findings can’t be
impeached.  So the second version of the conspiracy
fails, which means that by the time you come to the
enforcement, those first two versions have been rightly
rejected.  So it does make it, in my submission, it
makes it just as inherently improbable when you get to
the third version as it ever would be and probably
dynamically you’ve got even more cogent proof because
you have been led up the garden path.  By this stage you
have forensically been marched up the hill and marched
down the other side again.
You’ve been told as the judge: this is all part of
a grand conspiracy to raid.  And you’ve gone through the
material and you’ve said, «No, that isn’t what
happened».  So when one comes to the enforcement
proceedings and the pledged asset auction process with
which we are now really concerned, one can put out of
one’s mind any sort of dishonest or sinister motivation
or purpose.  That has gone.  That’s gone from account.
So when one comes to it, as the judge did, thinking,
right, what’s happening from the middle of 2009; he has
these parties at war, he has collapsing asset values, he
has Dr Arkhangelsky’s business disintegrated, the Bank
by this stage know that the business is not worth
anything and the assets are worth very little, by this
stage they know that, so again the motivation for the
third conspiracy has gone and that’s why one can’t just
cherry-pick like this because the motivation was always
this was a very valuable business.
And it turned out — the proof of the pudding was it
was built on sand.  It didn’t have any of the receipts
in the bank accounts it should have had.  The turnover
collapsed — Dr Arkhangelsky’s business, he had a timber
business that collapsed, he had a shipping business, the
ships of which either weren’t bought or were arrested
and essentially collapsed, he had an insurance business
that collapsed and he had a port business that
collapsed.
None of those businesses were banking or financial
services businesses.  The crisis came because of the
contraction in the credit market, as your Lordship will
be well aware, in 2008 — 2007 in fact, with the
collateralised debt obligations that fed through into
the credit markets and came out in the Lehman Brothers
collapse in September 2008.
But the trigger for the collapse was in the banking
world.  It wasn’t in the timber business or the shipping
business or the insurance business.  There was no
reason, if those were honest and proper businesses, why
they all collapsed and had no money in as soon as the
squeeze came on.  It’s because they were effectively
spurious businesses and the Bank realised that.  It
realised that it had been taken for a ride, putting it
colloquially, and that’s why it had to protect its
position.
It wasn’t the borrower coming along to say meekly,
I’m really sorry, Bank, I’ve taken you for a ride, can
I help the enforcement and what can I pay?  The
borrower, as the judge found, made no secret that he was
going to wage war on the Bank, to thwart the Bank’s
lawful entitlement to get what it could by way of
security out of this fiasco.  That’s the context of
this, which the judge heard over four months.  That’s
the story here.  That’s the atmosphere of the courtroom,
which I can’t really do justice to, with the greatest of
respect, but I’m trying to, to bring that to life.  One
doesn’t get all of that.
The Morskoy Bank criminal — that was a small part
of the story.  It’s featured large on appeal, in
a telescopic way, for obvious forensic reasons.  But in
the panoply of this dispute that the judge heard over 15
or 16 weeks, this wasn’t a major part of the case, this
was a sort of outlying criminal case to do with the
Morskoy Bank loan but it wasn’t on the critical path of
the enforcement or the repo, any of that.
Therefore it’s quite wrong to take that up and to
use it to blow up all the judge’s other findings.
That’s exactly what the appeal — what the cases say
shouldn’t happen.  It’s really very important and it’s
very hard, with the greatest respect, for an appellate
court that is not immersed in the case — this case is
hard enough to understand when one has been in the case
and knows what all the names are and knows who is who
and where they all were and how it fits in.  This was
a very, very complicated story on one level.  It became
very simple in the end but it’s quite complicated to
follow.
If you don’t know who all the names are and exactly
what ship is where and what loan is where and who is
linked to Renord or not, it becomes quite difficult to
go confidently through the forensic side of it.  But
that’s what the judge was able to do and that is why,
when your Lordship says to me the Bank did lots of
dishonesty in and about the repo, they did not.  That is
exactly what he found they did not do.  He flatly found
the opposite.  He found there was no dishonesty in the
entering into it, no dishonesty in the implementation of
it, they were entitled to do that, and it wasn’t even
used — and we’ll come to that — sorry, he found there
was nothing untoward about the repo arrangements.
And he can understand why the Bank would want that
additional protection in view of the way that the
borrower was carrying on.  He could understand that and
understand that that was a rational and plausible
motivation.
When one brings all that into play, one can’t
possibly elevate the Morskoy Bank criminal dishonesty
into something that knocks out all the other normal
approaches of standard of proof on the case law that the
court should be deploying.  The Lucas direction, where
we started, guards against that for very good reason.
The judge made findings that there was no
dishonesty, that’s exactly what he found.  He found —
your Lordships say the Bank had this motivation.  The
judge expressly found that there was no conspiracy to
raid.  By the time the enforcement proceedings started,
he found the Bank knew these assets had very little
value and what he was there finding was that the Bank
had some motivation that they may be able to exploit
them subsequently.  But what he found was that the Bank
went through all the legal requirements it was required
to go through in order to realise its security.
Now, that, with the greatest respect, cannot create
dishonesty.  That cannot be dishonest.  If you exercise
your loans qua pledgee in accordance with the mandatory
rules, that is not dishonest.  There was no basis for
this judge to make that finding, no evidence at all that
would have allowed that finding and he so found.
That is a complete answer to the third conspiracy
and it is a complete answer to the 1064 claim.  Complete
answer to that.  None of that depends upon, none of
that, none of those findings, which are primary findings
of fact, depend upon standard of proof or inference or
any of the criticisms.  The judge made actual findings
about what the Bank did.  Forget its motivation, what it
actually did as a pledgee under Russian law.  And it did
what it was obliged to do and it did not fail to do
anything that it was required to do.  He has made —
LORD JUSTICE PATTEN:  It’s a valid auction, is it, where you
sell an asset to yourself?
MR LORD:  Sorry, my Lord?
LORD JUSTICE PATTEN:  It’s a valid auction, is it, where you
sell an asset to yourself?
MR LORD:  Well, it may or may not — sorry, my Lord.  It may
or may not be a valid auction but the point that the
judge found, correctly, was that the pledgee’s duty is
to engage the auction process and at that point in time
the obligation to sell or auction the asset passes to
the state bailiff or the licensed auction house.
So the question of validity may or may not arise, it
wasn’t clear — and I took your Lordship to the pledge
law a couple of days ago, there was an issue about that.
But crucially the judge found, correctly, that the Bank
was acting perfectly lawfully in presenting the assets
effectively to the auction house and then taking the
results of that.  He found that there was no basis to
say that the Bank had interfered with that auction
process so as, if you like, to trespass into the
realisation process that it had no business involving
itself in.
So the question of validity of the auction or not
was a matter for the auctioneer, not the Bank, unless
the Bank had —
LORD JUSTICE PATTEN:  Well, the auctioneer didn’t know who
the bidders were or what their connection to the Bank
was.
MR LORD:  Yes, my Lord, but if there had been no bidders, as
there was evidence, what would have happened is that
actually the price would have gone down and down and
down.  So on that counterfactual, it would have been in
the Bank’s interest, on that basis, not to field any
bidders at all.  Because what happened — the law was
such that if there were no bidders —
LORD JUSTICE MALES:  That’s a separate point.  The judge
actually finds that but for a limitation period, the
auctions would likely have been held invalid, so they
were not valid.
MR LORD:  My Lord, he does say that.  It doesn’t fit very
easily with what he found earlier about Russian law
which I took your Lordship to yesterday, but the
important point is this: that if in fact — the
allegation is that dishonestly the Bank put up two patsy
bidders to get this auction away.  But an auction had to
be called by the auctioneer.  The pledgee doesn’t sell
the asset, it puts it in the hands of, if you like, an
official seller.  There is then an auction.  If nobody
comes forward — I’ll get the details, I hope they’re in
the judgment.  I don’t know the exact chronology, but in
effect what happens is there’s got to be further
attempts to sell the property which would involve
either, from memory, the property being offered to the
pledgee to buy because nobody at the auction wanted it,
or the reduction of the asking price, the reserve,
I think by first 15% and then 25% second time round when
the matter is put on the market.
So there wouldn’t be any incentive, on this
hypothesis, for the Bank to involve itself because it
could sit there and wait for the price to come down and
down and down.  I think in paragraph 1385, I’m helpfully
told, there may be some evidence of this — some finding
as to this.  Yes, paragraph 1385.
LORD JUSTICE PATTEN:  Yes.  Well, we’ve seen this.
MR LORD:  To pick up the point that I’m being taxed with,
the first point is the validity of the auction was not
a matter that could be visited upon Bank St Petersburg,
it did nothing wrong and therefore it did nothing
dishonest.
The judge found that it had not — there was no
basis to say it had deliberately tried to frustrate the
auction process.  The auction process happened through
the auctioneers.  It’s true that there were controlled
companies that participated to buy the properties but
there was nothing inherently dishonest about that.  It
wasn’t suggested that they couldn’t bid and the judge
found there was no basis to say that other bidders had
been deterred.
LORD JUSTICE PATTEN:  Well, if the Bank had no concerns
about the process and the use of these companies, why
did it lie about the connection between them right up to
and including the trial?
MR LORD:  My Lord, your Lordship will recollect that there
was some evidence about the concern about the regulatory
position in relation to the —
LORD JUSTICE PATTEN:  That doesn’t justify lying to the
court.
MR LORD:  Well, my Lord, it doesn’t, with respect, lead to
the inference that there was something dishonest going
on in and about the auction process because the judge
found that there was no basis to find that there had
been any exclusion of other bidders.  And therefore all
that — in the case of the Russian auction house, there
was no proper basis to say that was linked to the Bank
St Petersburg.  So an auction house had sold the pledged
assets, admittedly enough to these — with the
participation of the Renord-Invest companies, but no
evidence at all there was any other market demand out
there or that that had been suppressed or that the Bank
had actually done anything contrary to the realisation
process.
So stopping there, the Bank’s motivation could not
render culpable or unlawful or dishonest something that
it wasn’t obliged to do.  It did what it was obliged to
do.  It didn’t do any more or any less.  It certainly
didn’t do any more, but it didn’t do any less.  Like
lots of banks, it just did what it was required to do.
That, with respect, doesn’t begin to justify a finding
that there was some dishonest attempt to misappropriate
the property.
In this context, one has to keep reminding oneself
of the value of these properties and the judge had
evidence of the value, he saw pictures, he heard that
the Onega port didn’t have its own access to the sea.
This was one of the big assets your Lordships are being
asked to look about.  A port facility with no access to
the water.
The judge had heard these matters and had seen
Dr Arkhangelsky and his business and these are all part
of the multi-factorial assessment because the judge had
lived and breathed St Petersburg port.  He knew, he’d
seen pictures of the mud heap that was meant to be the
jetty for one of the berths, he’d seen these pictures.
LORD JUSTICE PATTEN:  Then why did he express himself in the
way he did in 1635(9)?  Consistently with what you’re
now submitting to us, you would have expected him to say
that wasn’t a lingering concern of his at all, that this
was just rubbish.  These were properties of no — assets
of no value, they didn’t realise very much because they
weren’t worth anything and that’s the end of it.
MR LORD:  He made that finding at paragraph 1525(9).  On
this point, my Lord — I accept that in the declaration
section —
LORD JUSTICE PATTEN:  Why does he say therefore in [1635]
(9) that your clients’ associates may now have an
interest in «assets of far greater value than they have
accounted for, even if that value could not have been
unlocked by Dr Arkhangelsky»?
MR LORD:  My Lord, he is speculating there, my Lord, in the
context of the declaration section.  What seems to have
happened, with the greatest respect, is that the learned
judge has emphasised the misgivings in order to justify
not giving the declarations.
LORD JUSTICE PATTEN:  Yes but they’re his misgivings,
they’re not anybody else’s misgivings.  He is the judge
you have said has immersed himself for weeks in this
litigation, knows every twist and turn of it, and is the
best judge to make the assessment and this is his
assessment, it’s not our assessment.
MR LORD:  I’m not suggesting — my Lord, the point is this.
There is a difference between emphasising the misgivings
that you had as a judge when you went through your
fact-finding process on the counterclaim, in the
declaration section, where you are saying to the reader
«The reason why I’m not going to give you your extra
present, Bank St Petersburg, is because there were
features of this case that caused me misgiving in the
context of your submission that this was a dishonestly
brought counterclaim.  I don’t find it was dishonestly
brought and that there were not issues to be tried and
therefore you don’t get the declarations and I’m going
to set those out shortly».  But those don’t do justice,
with respect, to his findings in the body of the
judgment when he’s actually in the counterclaim.
We’re here dealing with the counterclaim itself and
the findings in the counterclaim, they grapple with the
contrary points that were put to him but the judge makes
the findings that I’ve sought to show your Lordship
where he takes account of misgivings but comes to the
conclusions he comes to in an orthodox way.
So it doesn’t invalidate his bottom line, that he’s
been candid enough to confess to misgivings on the way.
That actually is a point in his favour, that he has
weighed up the contrary points and he’s honest enough —
he could just have said, well, it was all one way.  He
hasn’t done that.  He said, well, there was more to
this, Mr Lord, than you’re submitting.  I think there’s
more to this than you’re suggesting.
But that’s not to say — he doesn’t then, in my
submission, go on to make any findings that can be read
back into the counterclaim.  He was not making findings
in the declaration, he was making findings as to why he
won’t give the declaration.  He’s not actually making
findings that involve traversing or undercutting what he
has found in the earlier paragraphs.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Mr
Lord, I think my problem with this is a slightly
different one.  In paragraphs 1634 and 1635 he admits to
some very serious doubts about what happened, which we
don’t need to go into the detail, they’re very serious
doubts.  If those doubts were justified, then they do
cast a shadow over his findings of fact.
MR LORD:  Sorry, my Lord, I apologise but what —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I’m
just putting this to you.  Can we be satisfied that the
decision that he’s reached is safe when he expresses
himself in such really harsh terms about those doubts?
Because I accept what you say, he makes findings of fact
which, if they’re taken at face value, are not
challenged anyway, but the problem we’re faced with,
which we’re wrestling with in the court which I don’t
think you’re sort of addressing by just telling us,
reinforcing his findings of fact, we understand he made
those findings of fact, we understand we’re not in as
good a position as him.  But then he casts a great
shadow over those findings by expressing himself at the
end in the way he does.
The question for this court is, can it really be
satisfied that he had, bearing in mind what he said
about the standard of proof and the almost unscaleable
wall that the counterclaimants had to scale, can it
really be said that his findings are safe in the light
of the way he expressed himself?  I’ve never personally
seen a judgment like this.  I have never seen a judgment
where the judge says «I’m finding for the claimant on
facts 1, 2, 3, 4, 5, but actually I think it’s all
a scam».  It’s remarkable.
MR LORD:  He doesn’t say that my Lord.  Sorry, my Lord,
that’s 2 and 2 making 5.  I do apologise for putting it
in that rather blunt way but that is not what happened.
That is not fair.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Well,
let’s put it a different way.
MR LORD:  No, my Lord, but that’s fundamental to it because
he does not make those — he doesn’t say that.
I totally accept —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  He says
I have a «nagging and discomfiting feeling» «before,
during and after» the trial —
MR LORD:  He’s got a nagging feeling — sorry, my Lord, he’s
got a nagging feeling that there might be more out there
but lots of judges might have that nagging feeling.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Not
just more out there.  The trouble is I’ve read this
very, very carefully and he doesn’t just say there may
be more out there.  He then comes along and says these
are the:
«… principal features which … have encouraged
and fomented my misgivings, and which, in my view,
almost inevitably excited suspicion…»
MR LORD:  My Lord, what this shows is that he did actively
take into account these matters.  So it can’t be said —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  No,
I understand that.  My question to you is this and just
try if you will to address it.  Can we really be
satisfied that this is a safe decision in the light of
these extraordinary paragraphs at the end?  That’s
really what I’m asking.
MR LORD:  I understand, my Lord, and I made the submission
that you could be satisfied.  I’m dealing with the way
in which it is said that the standard of proof was
wrongly applied.  I was going through that and I need to
complete that so your Lordship has got a transcript of
that.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I know
but I’ve been pretty quiet and I just wanted you to have
a chance to address that question.
MR LORD:  I’m going to complete my submissions on the
specific queries, I can’t do more than that, try to
explain how he makes his findings in the judgment.  So
whatever he may have said at the end, and I’m not
suggesting it is an orthodox codicil to this judgment,
I’m not accepting that for a moment, my Lord, and do not
think that my clients did cartwheels when they saw this
rather quixotic ending to the document —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Cart-
wheels and quixotic endings, they’re not good for
judgments if we’re going to be satisfied they’re safe.
MR LORD:  Yes, my Lord, but the fact that in the context —
one sees the judge’s style in this judgment, it is
a discursive style where he explains his thought
process.  Now, that’s what he does.  What he’s doing at
the end is saying, «you are asking for a declaration
because you say, your principal submission is this was
dishonestly pursued.  I should tell you that I thought
there were contrary factors which I anxiously thought
about».
But what you have from that at the end in a rather
quirky way is the judge emphasising that his
fact-finding process up to rejecting the counterclaim
did give full account of those contra factors.  It’s the
very opposite of concern because even if it is finely
balanced, the judge is saying «Well, I’ve taken this
into account, that’s what I’ve actively thought about».
So one can’t say about the judgment that he basically
just defaulted to rejecting the counterclaim without
having gone through weighing up the countervailing
features.  That’s his task.
And to pick up the Lord Justice Leggatt comment in
Ablyazov about the need for restraint in evaluation, one
can see that in a case that is more finely balanced than
others, there’s a greater need to respect that judicial
weighing-up process because only the judge can actually
do that.  The fact that he weighs it up in that way and
comes down on one side doesn’t make it unsafe, because
when one goes through the way in which the challenges
are made, one can see that there’s no lack of safety or
unreliability about the particular bits of the case that
these misgivings refer to.
If one maps on to the misgivings, first what the
judge actually found relevantly in that regard and,
secondly, to see how that fits into the counterclaim
case of conspiracy or dishonest misappropriation,
however you want to put it, one can see that these
misgivings are not sufficient to call into question the
reliability of his ultimate dismissal of the
counterclaim and that’s what this appeal is against.  So
whatever the fault in the reasoning in places or however
it’s expressed, the bottom line we say is reliable and
not unsafe.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Let me
just put this specific question to you.  In relation to
loss, he finds that the auction was properly conducted
and that no other bidders were out there and no more
would have been obtained, so there isn’t really any
loss, and at the end he says «I’m affected by this
nagging and discomfiting feeling that the Bank’s trusted
loyal friends have made a lot of money», which obviously
is totally inconsistent.
MR LORD:  My Lord, there’s no evidence for that in the case.
He has identified that there’s no evidence for that,
that he’s speculating about what may happen.  We say
it’s inappropriate for him so to speculate.  We agree
with your Lordship.  It’s inappropriate for him to muse
in this way at the end.  He shouldn’t have done so and
there’s no basis — he is musing and speculating and in
effect musing after he, in the body of the judgment, has
gone through the evidence in the case and his findings
on the evidence.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes.
MR LORD:  And that’s his job.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So
that’s a problem with the judgment that you identify,
that he had no proper basis for doing what he did,
having made those findings, and then the question is, if
that’s right, does it actually make it unfair for the
appellants to be hoist with a judgment which is
equivocal?
MR LORD:  We would put it the other way around.  It would be
unfair to my clients to be deprived of this dismissal of
the counterclaim because of the speculation at the end
of the judgment that was both unnecessary and at odds
with his findings in the judgment —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Precise
ly, Mr Lord.  And this is why I’m challenging this point
so closely.  Once we accept that there are elements of
this judgment that are simply at odds with each other —
MR LORD:  Sorry, my Lord, I don’t accept — it’s not —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Those
are your words.
MR LORD:  Sorry, my Lord.  I’ve made — my submissions are
that what he’s doing here is summarising, he’s
summarising his misgivings.  I’ve tried to go through,
I’m going through the earlier — where he makes the
findings to show how this summary is to be read.
I don’t say that it’s at odds with.  What he’s here
doing is summarising what he describes as his
misgivings.  There’s always a danger in a summary that
it doesn’t do entire justice to the lengthy specific
findings.  So I’m not accepting that it is inconsistent.
I simply say that it is a summary and therefore
necessarily, if you like, a synopsis rather than
a reflection of exactly what he found.  I don’t accept
it’s inconsistent or at odds in that sense.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Okay.
MR LORD:  I don’t accept that.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Well,
thank you, I think I’ve had my answer.
MR LORD:  I think I’ve dealt with 1111 to 1115.  Going to
1133 which is another paragraph referred to.  In this
paragraph the judge finds there was not sufficient
evidence to «demonstrate such premeditation in
December 2008/January 2009» and he refers to «cogent
truth».
We respectfully submit this is not an example of
a heightened standard of proof.  Given the inherent
probabilities, there is a need for cogent proof of this
sort of raiding arrangement, in particular given the
judge’s findings which he recites in paragraph 1133 that
he has found against the appellants on the six-month
moratorium which he describes as crucial to his findings
in this regard.  There is no evidence that the Bank did
anything deliberately to engineer a default or that in
December 2008 or January 2009 it was setting up its
ability to do so.  To arrange extensions of certain
loans for Dr Arkhangelsky, with the background of the
repo, and in light of what Dr Arkhangelsky had said,
would be the payments that he anticipated to be able to
give to the Bank.
The counterclaimants had suggested that the pattern
was too clear to admit of a benign interpretation, see
paragraph 1124, but there is nothing in that which
assists with what the standard of proof was the judge
was considering.
Paragraph 1138 is identified, where the judge
actually cites re H.  In this paragraph the judge is, we
say, reflecting and recognising that the test is the
balance of probabilities.  What he’s doing here, he is
compressing the test, since he is not there saying that
it is all based on the inherent probabilities of the
relevant context, but he’s made findings in this regard
that obviously underscore the inherent improbability of
what the counterclaimants were alleging, namely that
Mrs Matvienko, the Governor of St Petersburg, and a host
of other senior officials were in a conspiracy to raid
Western Terminal and Onega, which was a very serious
allegation against numerous individuals in high office
without any direct evidence and inherently improbable.
That is all the more so when the background is borne
in mind, that this was a worthless business that
wouldn’t have been thought worth raiding.  Because by
this stage in the judge’s analysis, he has found —
that’s paragraphs 425 to 447 — that the Bank did not
then think the assets were actually worth very much.
So in order to establish this conspiracy, it was
right to suggest that it was inherently improbable and
that Dr Arkhangelsky had therefore to have sufficiently
strong evidence if he was to prove it on the balance of
probabilities.
In any event, the evidence for all these officials’
involvement in this sort of alleged conspiracy was so
thin it was largely non-existent.  And even if the judge
had asked himself a simpler question on the balance of
probabilities, was there a conspiracy to seize Western
Terminal and Onega, involving all these people, he would
obviously have concluded not.
Then if I go to paragraph 1144, the phrase
«consistent only with raid» — 1140, sorry.  This must
be shorthand for the fact this was a serious allegation,
an inherent probability or otherwise, such that cogent
evidence was going to be required to demonstrate it.
And we make the same submissions we made on 1634, that
the judge — this formulation is not inconsistent with
the Three Rivers formulation.
In any event, the key is to look at the paragraphs
where the judge made his decisions within the
counterclaim which are not made on the basis to
demonstrate something consistent only with the raid.  In
other words, he has made findings throughout this
judgment that do not — that can’t be in any way
challenged on the basis that he somehow got the standard
wrong.
Paragraph 1241, Baltic Fuel, this was not a decision
based on any sort of heightened standard of proof.  The
judge relied on his view of the Renord companies
previously reached as recited in paragraph 1241.  He
refers to Mr Smirnov’s evidence.  He refers to the
evidence of Mr Savelyev which was not challenged by the
appellants and that’s an important point.  It really
won’t do for them to say that they did it in an oblique
way.
If they were going to say that Baltic Fuel was owned
by Mr Savelyev, they should have put it to him and they
did not.  The judge was entitled to give weight to that
evidence and that of Mrs Yatvetsky, which he sets out
more fully in paragraph 1231.  He found the evidence
going the other way was meagre and he obviously did
decide this question of Baltic Fuel ownership on the
balance of probabilities and his findings were in any
event sufficient for a decision on that basis, however
he expressed himself.
I make those submissions in relation to Ground 4, in
other words there was evidence open to the judge to
reach the decision that he came to and that can’t be
challenged on appeal.  I won’t make any more submissions
on Ground 4.
Paragraph 1265, he is dealing with the issues
regarding the auctions and he says — he uses the phrase
«no plausible innocent explanation», he uses in this
paragraph.  Again, he’s using this as a shorthand to
refer to the need for the court to find cogent evidence
given the inherent probabilities.  But it’s necessary to
look at the paragraphs where he makes his decisions, not
this general opening paragraph.  When one comes to his
findings, it’s plain that he is applying the right
approach.  This is just a shorthand teeing up of where
this judgment is next going.
Paragraph 1346 to 1349, there is no decision in
these paragraphs based on any heightened standard of
proof.  Paragraph 1348 was a finding of what the Bank
was obliged and entitled to do under Russian law.
Paragraph 1349 was another positive finding that
a marketing exercise which appeared to be — which
appeared to the auction organisers was compliant had
taken place with a caveat, namely unless there was
sufficient evidence to establish that the auction
organisers were complicit.
So the mere use of «sufficient» there is not
relevant to any heightened standard of proof.  He simply
says that there would have to be sufficient evidence to
show that they were complicit, which the judge then goes
on to consider.
Pausing there, this was another serious allegation,
inherently improbable, that a series of auction
organisers, court bailiffs and independent auction
houses had been complicit in this conspiracy.  So again,
if the judge was requiring cogent evidence of their
involvement, that was not surprising and he would have
been right to do so.
Paragraph 1366 to 1367, the alleged complicity of
the auction organisers.  Paragraph 1366 refers to benign
explanations but in a specific context.  The judge is
considering against the unanswered questions of
surprising indifference, which is not in any event proof
of anything, on whatever standard of proof.  It was an
inadequate basis to infer fraud on the balance of
probabilities.
Paragraph 1367 includes the finding that there was
no evidence that the auction organisers were themselves
prevented or deterred by the claimants or Renord from
further effort as regards presentation and marketing.
And indeed there was no such evidence at all before the
court.  His last sentence in paragraph 1367 says that:
«[There is no] sufficient basis for inferring…
that the auction organisers’ marketing processes were
designedly deficient in terms of the Russian law
requirements.»
There is no suggestion here that he was applying
a heightened standard of proof, there was no sufficient
basis for the inference, and moreover there was no
evidence to support it in any event.
In paragraph 1352, he repeats his finding that the
advertisement by the auction organisers had not
demonstrated any breach of the rules.  The same point
can be made in that paragraph in relation to the
packaging of the assets for auction.  So against that
finding, it is difficult to see how he could have
reached any different conclusion at the end of
paragraph 1367.
Moreover, his findings earlier in this section are
all one way against the conspiracy, that’s the third
version of it, and not challenged.  For your Lordship’s
note, 1356, 1357, 1361, 1362, 1363 and 1365.
Going, please, to paragraph 1525(5), to the
conclusions on the auction process, where he held that:
«… the justifications… for the packaging and
process of sale are not so implausible that they must be
rejected, bearing in mind the heavy onus of proof…»
The points as to onus of proof I’ve already made.
The appellants did have to prove the fraud against the
inherent improbabilities.  At best the judge is here
saying there are two plausible explanations: the
appellants’ and the Bank’s.  But on the balance of
probabilities he has to be persuaded that the
appellants’ explanation is the right one.  They have the
burden of proof.  He’s not saying any more than that.
Moreover, earlier on in his judgment he has addressed
this issue specifically.
He has held at paragraph 864 that assets subject to
separate pledges in respect of different indebtedness
may lawfully be sold separately.  He has held at
paragraph 865 that there is no obligation on a pledgee
to sell pledged assets with non-pledged assets.  He ran
through the reasons why there was nothing wrong with the
Western Terminal processes at 1335.  This is comprised
in the main of clear findings of fact that are not
complained of.
In paragraph 1335(6), he uses the language «not so
implausible» but that is simply a compression of his
finding that the explanation which on his face may look
contrived has in fact been explained and he accepted
that explanation.
Similarly in relation to Onega Terminal at paragraph
1338.  These are clear findings he makes and nothing
here is on the heightened standard of proof.
He confirmed at paragraph 1352 that the process of
packaging and marketing does not demonstrate any breach
of the relevant law or rules.
So, my Lord, I’ve sought then to deal with the
various concerns about the way the judge has actually
expressed himself and, in my submission, there is no
heightened standard applied by the judge and the judge
has reliably approached his fact-finding process and
none of those queries, taken individually or
collectively, are sufficient to shake the court’s
confidence in the ultimate reliability of his
conclusions.
I’ve addressed the piecemeal submission I think
already.  In my submission, the judge did not misdirect
himself.  One has to read the judgment as a whole.
There are plenty of occasions when he refers to looking
at things in the round and plainly, on the face of his
judgment, what he is doing is endlessly checking and
cross-checking his findings as to what had or hadn’t
been found.
So we say, my Lord, that that is a — that there is
no reason for this court to hold that the judge has
effectively misdirected himself and therefore one is
back into the purview of the restraints on this appeal
court’s intervention with his findings.  Bearing in mind
his primary factual findings, which are not challenged,
which we’ve set out in our skeleton argument at
paragraphs 24 to 25.
The appellants accept that the judge carried out
a meticulous fact-finding exercise and that when one
puts that all together and looks at the judge’s primary
factual findings and understands that he had not
misdirected himself, the basis for this court to
intervene, we say, goes away.  What’s really happening
here, in our submission, is that the appellants are
using the fact that the judge has referred to the
approach he took in a number of different places to
entice this court to find that there’s a basis to
interfere with his factual findings on the basis of
misdirection because, absent that misdirection, there
wouldn’t be any warrant for the court to look into this
matter.
The judge found that the Bank was concerned to keep
control of its security and that the parties ended up
being at war over the Bank’s attempt to enforce its
security rights.  That is not challenged.  We say in
those circumstances, the judge was entirely right.
I think I’ve made my submissions on the context as to
the inherent probabilities, I think I’ve probably
adequately made those.
It is probably worth noting that the appellants had
no — that they accepted that they had no direct
evidence of the conspiracy in paragraph 868.  In
paragraph 868, the counterclaimants accept that they
have no evidence of an actual agreement amounting to
a conspiracy.
LORD JUSTICE PATTEN:  Which you never do.  I mean, sometimes
you do but it’s, in my experience, very rare that you —
MR LORD:  No, my Lord, but this was a case where given the
wide-ranging nature of the conspiracy and given how many
people were involved and the disclosure of documents and
emails and the cross-examination of witnesses at trial
from the Bank who wouldn’t necessarily have been
involved in the conspiracy, there was an awful lot of
material before the trial judge where one might have
thought there would be at least one smoking gun.  One
might have thought in this case that there would have
been some give-away sign somewhere.  I take
your Lordship’s point, of course that’s right, but this
was such a diffuse conspiracy involving so many people,
in Russia, in all different places, that the idea that
nothing would have got out, that nothing would have
leaked out and left a paw print was, with respect,
rather unlikely —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Wasn’t
there one example of their suppressing documentation
that they thought was damaging to their case, by having
it changed?  I can’t remember the details now.  In
disclosure, they’d disclosed something that then turned
out in cross-examination.  I hope I’m not confusing it.
MR LORD:  Sorry, my Lord, those were the debt reports in the
Bank.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  The
debt reports, yes.
MR LORD:  But they were all disclosed.  They were all
disclosed.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Tampere
d with.  They’d been amended.
MR LORD:  They hadn’t been tampered with.  I think there
were two different versions within the Bank for the
Bank’s records.  There was an issue about the Bank’s
record-keeping and bureaucratic practices —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Okay,
I think it’s a sideshow.
LORD JUSTICE PATTEN:  Well, this is a small point, isn’t it?
Yes, there’s no direct evidence so, you say, perhaps
because of the alleged scale of it there might have
been.  Well, okay.
MR LORD:  My Lord, so many people, and so many people
involved, the likelihood of there not being an informer
or a mole or some disgruntled person in the auction
house, somebody spilling the beans or blowing the
whistle, was something to take into account here.  This
conspiracy spanned such a long period of time through so
many processes that if the Bank’s purpose was as
Dr Arkhangelsky contended, you would have expected that
some of that would have got out in some shape or form.
Dr Arkhangelsky — in paragraph 874, one can see
what the judge there says about the counterclaimants’
case.  He obviously knows he has to look at matters in
the round but he’s rightly there identifying that the
crux of the counterclaimants’ conspiracy case was the
huge disparities in the sums realised, which was
a circular argument.  That was really what they hung
their hat on and the learned judge rightly held, well,
that’s circular, that doesn’t answer the question.  If
that’s why you’re proving conspiracy, that’s going to be
inherently difficult.  Well, it was.  And the truth is
that there really was nothing else.  This was all
tested.  There were lots of conspiracy theories run by
Dr Arkhangelsky through the trial but they were
rejected.
One doesn’t really get a flavour of how the — the
counterclaimants’ essential case was «Our assets are
worth much more than the Bank sold them for, you should
infer back from that» and that’s paragraph — it’s about
paragraph 900 to — it’s paragraph 900.  Sorry, 897 to
900 of the judgment.  It’s important to appreciate, when
one reads this judgment, that actually when one turns to
each of the chapters — if one looks at the index and
looks at what the judge was asked to go through by the
counterclaimants and his findings as to what actually
happened and what the evidence was, there was no basis
for this conspiracy claim, or even the wrongful
misappropriation aspect, at all.
There were suspicions and the judge, it’s right at
the end, said maybe there’s something else out there and
I’m not prepared to say this was dishonestly brought.
But that doesn’t invalidate his findings.  If one looks
at the index like a novel and goes to the chapters,
what’s being said about the dishonest conspiracy the
Bank is doing, and is it likely, and what’s the judge —
what’s the evidence he’s seen, what are the findings
he’s made, they all point in the direction of his
ultimate conclusion.  They all point to the dismissal of
the counterclaim, the burden of proof being on the
counterclaimants to prove that.  A serious and
inherently improbable claim.
It’s wrong to pick on these sort of disparate
references in the process and to elevate them to
something sufficient to dislodge the judge’s ultimate
conclusions.  It is important for one to think, well,
what was the judge being asked to find, and to think,
well, is that likely?  Is it likely that the Bank would
have wanted to dishonestly misappropriate assets that
they thought weren’t worth very much?  In other words,
whatever they may have hoped in the end, is it likely
that they would have gone to these lengths?  And the
judge said, no, it’s not likely and there is no evidence
before me that they did.  That was unimpeachable
conclusion.
He couldn’t have come to the other conclusion, he
couldn’t have found for Dr Arkhangelsky, that would have
been perverse.  That would have been against the whole
weight of the evidence.  We would have had 385 pages
going one way, or 375, and then we would have had some
misgivings identified as the basis for — one couldn’t
invert this judgment.  One simply couldn’t do that.  And
the vast majority of these findings are not challenged.
So when one turns the pages, one has to remember that
that story is not challenged, in other words that things
were alleged but now accepted that the judge rightly
said did or didn’t happen through the story.
If one turns it round in that way, one can see it
would be perverse to think this counterclaim could ever
have succeeded given the material the judge saw and
heard and that’s why this court can be confident that he
came to the right conclusion when one thinks actually,
would these queries as to the standard of proof, would
these be enough, would the Morskoy Bank criminal lies,
would that be enough, to find a state-sponsored
conspiracy to raid involving tens and tens of people,
would that be enough?  It would be laughable.
And I do ask this court because it would be a very
serious thing if this decision is questioned, given how
much has gone into getting here, to think long and hard
before —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  What do
you mean by that submission?
MR LORD:  My Lord, just how much money has been spent and
how much time has been taken up.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I don’t
think we decide on whether to allow an appeal on
substantial grounds because a lot of money has been
spent, do we, in these courts?
MR LORD:  No, but your Lordship was asking — what I had in
mind was the possible consequences for the parties and
the court, that’s what I had in mind, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  We’re
very conscious of the consequences.  That doesn’t affect
the legal question we have to decide as to whether the
judgment is safe.
MR LORD:  No.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I mean,
you will come to address, I hope, what should happen if
we’re against you on the main points.
MR LORD:  I will, my Lord, yes.
Just going to one of the authorities Mr Stroilov
referred to in divider 3, please, at tab 24, JSC v
Ablyazov, and to the case of inference from
circumstantial evidence, he took you to paragraph 52 and
53.  Can I just invite your Lordships to note at
paragraph 52 the court said this, Court of Appeal:
«It is, however, the essence of a successful case of
circumstantial evidence that the whole is stronger than
the individual parts.  It becomes a net from which there
is no escape.»
That is not this case.  Given the findings the judge
has made that are not challenged, this was not a net
which compelled the finding of conspiracy.  It was the
very opposite.  And to build on that submission, looking
further on down, the court said this:
«Or as Lord Simon of Glaisdale put it in R v
Kilbourne, ‘Circumstantial evidence … works by
cumulatively, in geometrical progression, eliminating
other possibilities’.»
That wasn’t how this worked, that was the very
opposite of the process.
The other possibilities, the more benign
probabilities, were coursing through this case.  They
were always present.  They never became less likely or
eliminated.  None of the forensic process that the
counterclaimants asked the judge to carry out actually
created this forensic effect.  The very opposite.
In paragraph 53, it is important to note the court’s
reference to a judge having to make findings on
individual pieces of evidence separately in relation to
the criticism about the piecemeal approach.
We say that the judge correctly made findings as to
the specific factors that he understood were the
building blocks for the counterclaim, that’s his
paragraph 901 list.  We say that he didn’t lose focus.
If one looks at paragraph 1387, he plainly maintained
his focus at all times.
My Lord, going if I may back to paragraph 901 and
given the timing I’ll take this very shortly.  If we can
go, please, to my skeleton at paragraph 25, I know
your Lordship has read the skeleton and I’m sure the
paragraph references in the judgment, so I can take this
very quickly.  I’ve dealt with a number of these in my
submissions in relation to Ground 3 in any event so
I would invite your Lordship to read across my
submissions in relation to Ground 3 in respect of
Ground 1, which is where I now am.
I think I was dealing with the repo at
paragraph 25(3) and we’ve set out subparagraph (4) what
the judge found about Mrs Malysheva’s involvement.  That
was to be expected given her particular experience of
handling events of default.
Paragraph (5), the Bank was entitled to refuse to
grant loan extensions in March 2009 and did not engineer
default.  That’s a factual finding that is not under
appeal.  The judge found the Bank’s decision not to
extend the loans as readily understandable, that is
a finding in his judgment, and it was under no duty to
assist the borrower.  And so it runs on.
Subparagraph (6), I think I’ve dealt with that.
That’s the question of the repo.  I think your Lordship
has our submissions on that but I do repeat our
submissions in relation to the repo we there set out.
Subparagraph (7), the judge made a finding as to why
the directors were involved of these two companies, it
was to secure control as distinct from a raid.  Again
that’s a factual finding he made, not challenged on
appeal.
In paragraph (8) he made a finding as to the
parties’ war in the Russian courts and that was part of
the Bank’s objective to protect and realise its
security, not that it was part of an objective to steal
the assets.
Subparagraph (9), the Gunard Lease.  The judge made
his findings that the Bank’s purpose in entering the
Gunard Lease was to protect the Bank’s security rights.
He made that finding and that shouldn’t be overturned.
Importantly, he found that the Gunard Lease, it was not
registered but even more importantly it was not deployed
for any purpose to do with the enforcement of the
security and had no effect on the values achieved at the
auction sales.
That is worth looking up in the judgment at
paragraph 1321.  It’s a good example of how the judge,
we say, came to a reliable conclusion because the Gunard
Lease, the judge found, looked uncommercial and excited
concern.  But having heard the whole case he was
satisfied that it wasn’t a sign of dishonesty or
conspiracy and he took into account the motivations and
all the asset values and so on, all you’ve heard as to
what happened, including the fact that the lease was
never ever deployed as part of the realisation of the
Western Terminal pledged assets.
LORD JUSTICE PATTEN:  I’m very conscious of the need not to
interrupt you but the Gunard Lease was an encumbrance on
the asset.  I’m not quite sure what the concept of
«deployed» is; what do you mean by that?
MR LORD:  It wasn’t actually — it was a potential
encumbrance, my Lord.  It wasn’t effective because it
hadn’t been registered, it was never registered.  It was
entered into, the judge held, for the purpose to help
secure the pledged assets as part of that securing
process.  He found it was never registered and therefore
wasn’t effective as a matter of Russian law qua
encumbrance, so it wasn’t actually an encumbrance but it
was a putative encumbrance, but the purpose was to
protect.
LORD JUSTICE PATTEN:  Is he simply meaning that those that
were entitled — sorry, that the pledgees didn’t say
«Oh, and by the way the asset is subject to this lease»?
MR LORD:  Exactly.  If one goes in paragraph 579, he
records —
LORD JUSTICE PATTEN:  You can just give us the reference.
I just wanted to understand what the concept of
«deployed» meant.  That was all.
MR LORD:  The lease had been signed but it wasn’t effective
under Russian law because it was never registered.  So
it didn’t ever become an actual encumbrance on the
pledged property.  What the judge found was, when
Western Terminal pledged assets were sent to auction,
went through the court process and were sent to auction,
it was never suggested that those assets were subject to
the Gunard Lease.
LORD JUSTICE PATTEN:  Because it wasn’t an encumbrance.
MR LORD:  It wasn’t an encumbrance.  So the sinister purpose
or the idea that the Gunard Lease showed that the Bank
wanted to, if you like, dishonestly drive down the value
of these assets when they were enforcing their security
from the middle of 2009, that suggestion was seriously
undermined in this respect by the fact that the Gunard
Lease was never ever deployed for the purpose that it
was said it was entered into.  It was said it was put in
there to drive the value down because nobody would buy
that asset for fair value because it had this long lease
on.
LORD JUSTICE PATTEN:  Could it be registered out of time or
later?
MR LORD:  I’m not sure about that, my Lord, but the judge
found that in the period of enforcement between 2009 and
2012, when the Western Terminal enforcement process
finally finished, a three-year period, it hadn’t been
used.  So the judge, with respect, rightly held,
forensically, in effect, well, the Bank weren’t —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  But he
also held that he couldn’t rule out the possibility that
it was being kept in reserve in case they needed it to
depress the price.  That’s what he said.  We can see it,
I can’t remember what —
MR LORD:  I’m not sure it was there said to depress the
price.  I think it was —
LORD JUSTICE MALES:  «I cannot exclude the possibility that
it was put in place and held in abeyance in case it was
needed to depress demand and reduce the market value of
the assets …»
1322.
MR LORD:  He then says:
«… but I do not think the evidence or inference is
sufficient to warrant such a finding.»
LORD JUSTICE MALES:  Yes, he can’t say it was and he can’t
say it wasn’t.
MR LORD:  But he’s looking at — he’s not saying that
couldn’t be a possibility but he’s looking at whether,
on the evidence before him, it seems to be made out on
the balance of probabilities.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  But he
could rule out the possibility that my Lord suggested
which is that — he would have been able to rule it out
if it had been impossible to register late.  That was
the reason I raised it.
MR LORD:  My Lord, certainly this was significant evidence
to suggest that the Gunard Lease was not entered into or
used for a dishonest purpose and was certainly more than
sufficient for the judge to find that this was not
a sign of the conspiracy.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Well,
he held it had no justification.  In 901(9):
«Mrs Malysheva’s (in each case aborted) efforts to
put transactions in place in relation to the assets of
Western Terminal and Scan, such as the Gunard Lease,
which could have no legitimate justification.»
MR LORD:  That was their case, that’s was what they were
saying.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Sorry.
You’re quite right.  You’re absolutely right.
MR LORD:  And that makes my point because that’s what would
have to be proved.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Sorry,
I’m doing searches on the judgment and coming up with
wrong things, for which I apologise.
MR LORD:  I understand that.  But one sees why we submit to
your Lordship that the judge came to the right
conclusion because this is an example of a finding that
he makes which he was entitled to come to that finding.
He didn’t apply the wrong standard of proof in this
regard.  It’s not suggested that there’s any doubt about
his approach to this finding and he’s made the finding
that he has about the Gunard Lease, about its not being
used and that he’s satisfied that its purpose wasn’t
a dishonest one in the sense relied upon by the
counterclaimants in paragraph 901.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Well,
we’ll have to look at it.  I think he did make some
pretty serious findings about the Gunard Lease in 1318
and following.
MR LORD:  Your Lordship has my submissions on that.
Very quickly, I’ve got a lot to cover, back to my
paragraph 25, subparagraph (10).  He makes some findings
that the police raids of the Western Terminal premises
as part of the repo, as taking control of the company in
the middle of 2009 did not show a state conspiracy.
He found Dr Arkhangelsky was not forced to flee
Russia as part of any state-organised conspiracy.  Again
the references are all there.  What was said was, as
part of the state raid, they forced Dr Arkhangelsky out
of Russia.  The judge went through the story, he went
through the chronology and he rejected that part of the
case.
These are all part of the buildings blocks that are
said to be the primary facts from which you infer
conspiracy.  As one is going through the list, one can
see that so far there is no support for conspiracy at
all and no suggestion, with respect, that the querying
of the judge’s language for standard of proof is enough
to be able to, if you like, get past these findings or
the fact the counterclaimants never actually made good
what they said were the foundational parts of their
claim.
I’ve dealt with the Morskoy Bank at paragraph 12.
I’ve dealt with the point about the series of
transactions.  We’ve given a host of references there.
But the judge found there was nothing improper or rigged
about this.  It’s an important point.  The pledged
assets were in different pledges and different parcels
with different loans, with different terms, different
parties involved and interested.  It’s not fair to
characterise the enforcement of pledges through a series
of transactions as being somehow sinister.  The judge
understood in the end the nature of the pledged assets
and that the obligation on the pledgee was to put them
into the auction process and they went through that
conveyor belt.  He meticulously charts the history, how
they go through and what happens to them and how they
come to be sold and moved around.  He had a very good
long look at all this to see what was going on.
Just pausing there, it’s a very long-winded
exercise.  If the intention was to raid the assets, it
was a very long-winded and public exercise spanning
three years.  If what’s really said was this was
a state-sponsored smash and grab raid, one might have
thought that a state-sponsored conspiracy would be of
something that was much more valuable and much more
capable of ready snaffling than in fact the assets that
we find referred to in the judgment.
Then in paragraph 15 and 16, I think I deal with the
final points.
We submit that the appellants can’t show that the
judge was plainly wrong on the conclusions that he
reached and one can’t just pick various gobbets out from
this judgment and say that that’s enough to find that no
reasonable judge could have rejected the conspiracy.  We
say that, in view of his factual findings, there is
actually no other reasonable finding but the dismissal
of the counterclaim.
If I can just deal with the final miscellaneous
points on Ground 1, if I may, dealing with Mr Stroilov’s
paragraph 17 as quickly as I can.  In paragraph 17
Mr Stroilov sets out a series of findings which he says
should lead to the inevitable inference of dishonest
conspiracy.  We say that that’s just not right.  The
weight of the evidence is flatly the other way.
But dealing with the points that he actually deals
with, I think I’ve dealt with this point in subparagraph
(a).  I’ve shown your Lordship the passages starting at
I think around about 425 to 447 where the judge actually
sets out his findings on this and it’s not really a fair
summary in paragraph (a).  The Bank had a developing
sense of concern about the security through the first
half of 2009, including anxiety about the ships, not
being told about the rest of the ships and so on.  The
crucial point is that by the middle of 2009, so before
the enforcement process began, the Bank realised the
Lair valuations were wrong.  So relevantly, for the
third version of the conspiracy, the key motivation of
a belief in the Lair valuations had, by this stage, been
punctured.  That had gone.  That’s a very important
point.
Paragraph (b), the repo, I’ve dealt with the repo.
The judge made findings, careful findings and actually
very comprehensive findings that it wasn’t entered into
with intimidation or deceit and so on.  And its purpose
was not to raid, it was done consensually and so on.
I’ve made my submissions on that.
Paragraph (c), replacement of the management.  I’ve
made my submissions on that.
I’m not sure quite what the point in (d) is.
Paragraph (e) we say: yes but so what?  The judge
found that this, in combination with the decision to
remove the managers, did not amount to evidence of
a raid.  See paragraph 1038.
Paragraph (f), the judge took this into account and
found that this did not suggest a raid.  See
paragraphs 1135 to — sorry, 1136 and 1138.
Subparagraph (g), the same points.  The judge dealt
with them in those earlier paragraphs.
Paragraph (h), similarly, I’ve dealt at length with
the Morskoy criminal case.
The Gunard Lease, I’ve dealt with the Gunard Lease.
I’ve dealt with the aborted transactions.  The judge
deals with those in 1326 and 1325.  Same findings, no
evidence they were ever deployed, so again no suggestion
they could have been kept in abeyance or reheated.
Paragraph (k), that’s consistent with the judge’s
findings that the Bank was trying to protect its
security.
Paragraph (l), there was no evidence there was any
other party willing to bid at the auction for this
property.  The judge rejected bid-rigging causative of
loss, that’s paragraph 1386 but also 1380 to 1386, so
the judge rejected the idea that there was any other
bidder out there and I’ve made the point that the upshot
of there being no auction was that the price of these
pledged assets would have just come down and the pledgee
would be able to buy them, either buy them at a reduced
price or re-enter the market.  So it really can’t be
suggested that this was part of the conspiracy.
Paragraph (m), the judge dealt with that.  The fact
that the Renord Group were used as a store of SVPs has
been explained by the judge.  But the judge rejected the
finding that the way in which the pledged assets were
actually realised, using the Renord-Invest companies,
was evidence of conspiracy.  The references are 1335 for
Western Terminal, 1338 for Onega.  The ultimate price
for Western Terminal, 1376 to 1378.  No bid-rigging,
1386.  Onega fair value, 1413 to 1419, especially 1413
and 1417.
Paragraph (n), Baltic Fuel was and is one of the
Renord-Invest companies.  The judge discusses that at
paragraph 1236 and goes on to make his findings that
Baltic Fuel had an independent business, was
a substantial independent company and didn’t make the
findings contended for.  But in any event, as
Mr Stroilov concedes, the ultimate ownership of
Baltic Fuel wouldn’t have actually materially changed
the analysis.  So although it was a point in the Bank’s
favour, even if that were to go in Mr Stroilov’s favour,
that doesn’t begin to start to found this conspiracy.
Then paragraph (o) doesn’t add materially to the
other points.
Paragraph (p), I’ve dealt with paragraph (p)
I think.  The judge went through at length the fact that
there’s no evidence that the Bank did anything untoward,
either deliberately subverted or deliberately omitted to
do something it was obliged to do as pledgee.
References in paragraph 1289, 1291, 1299, 1367.
Go to paragraph (q).  This is irrelevant.  If the
auction has been declared invalid, they would have had
to be rerun.  There is no suggestion on the evidence
that there were other bidders out there who would have
come forward in any future auction, so all that would
have happened would have been a series of failed
auctions with the starting price reducing each time.
That’s paragraph 1375 and 1385.
I’ve dealt with the point about whether they could
have been held invalid and I’ve made the point the only
liability on the Bank would have been if it had been
dishonestly complicit — sorry, the point really about
the auctions is there would have to be evidence of
dishonest subversion of the auction process involving
either the Bank — well, involving the Bank and
doubtless complicity with the auction houses but there
was no evidence of that.  Again, no explanation tendered
for why an independent auction house would want to
assist in a dishonest sale of pledged assets.  No
explanation tendered for why, what the motivation would
be for that, why they would want to risk things in that
way, there being no connection between Bank
St Petersburg and the auction house.
Subparagraph (r), I think I’ve dealt with that.  The
judge said at 1348 the Bank had to comply with the
requirements of Russian law.  He found they had done so.
So therefore the Bank had not done anything dishonest in
this case in the judge’s findings.
Then paragraph (s), this is not a fair summary.
I think I’ve made my submissions.  If one looks at —
the judge found there was no evidence that the initial
selling price would have been achieved and he found that
the substituted starting price was fixed in accordance
with the valuation advice.  That’s paragraph 1375.  He
found that the preordained steps did not mean the value
established was false or deficient.  That’s 1376.  And
he pointed to other valuations at the time that seemed
to underscore the reasonableness of the starting point.
That’s 1377.  See also in this regard 1335, 1338, 1356,
1335(10) and 1378.
Then paragraph (t), the point about untruthfulness.
Well, the Bank’s witnesses were also believed on many
points and it was the judge’s job to weigh up the
evidence, including the oral testimony, to see what
weight he put on it and so on, and he did that.  Mrs
Malysheva didn’t attend.  She had left the Bank by this
stage and she refused to attend so there was nothing the
Bank could do about it.
My Lord, I’ve dealt as quickly as I can with
Mr Stroilov’s further points there.  If I could just
deal finally with his Ground 1 points in paragraph 20.
We say in paragraph 20(a) that is too glib and impartial
an analysis of events of the claimants’ rights and of
their lawful exercise of them, as the judge found, and
I made my submissions on that.
Paragraph 20(b), the judge expressly found the
auction process was carried out in accordance with the
law and there was no evidence of bid-rigging or that it
caused harm to the appellants.
Paragraph 21, the Lucas direction, I’ve made my
submissions on that.
Paragraphs 22 to 23.  With respect, that twists
these concluding paragraphs.  I’ve made my submissions
to this effect.  It takes them out of context and
ignores the previous 385 pages of the judgment.
Paragraphs 24 to 26 seems to invert the approach.
It seems to presume conspiracy unless disproved.  The
judge took account of all the facts the appellants now
point to and he found conspiracy was not the likely
explanation and there is, with respect, no basis to
interfere.
If I may go please on now to Ground 2.  I’ve made my
submissions on the law, Russian law.  I will just
summarise an important consequence of Russian law and
I rely upon my skeleton argument so I won’t, my Lord,
repeat my submissions — I won’t repeat the written
material.  I’ll take it that your Lordship will
obviously take account of our written submissions in our
skeleton.
But in terms of the Russian law I do make this
submission.  1064 depends upon harm being established by
the claimants and harm is to be equated with loss.  I’ve
made my submissions on that.  Mr Stroilov’s skeleton
argument seems to acknowledge that burden and that
construction.
In paragraph 43, subparagraph (a), Mr Stroilov
contends that the appellants, that’s his clients, had
proven that they had suffered loss caused by the
respondents’ actions.  So he is, with respect, accepting
in writing that harm and loss are to be equated.  It is
plainly right on 1064 that that is the approach.  There
is no bifurcation under 1064 whereby the court looks
first at whether there is some loss and then goes on to
quantify the amount of that loss.  1064 is only engaged
in relation to compensatable loss which a claimant
proves to have suffered, in other words compensatable
harm, sorry, which the claimant proves he’s suffered,
that is to be equated with compensatable loss.  So.
There’s no scope for saying, as Mr Stroilov tries to
in the note he handed in yesterday, well, there are some
suggestions of some loss somewhere and the question of
quantum can be built upon later.  That’s clearly not
how — that’s how English law might work but that’s not
how the Russian tort, 1064, how that operates.
We respectfully submit that none of the judge’s
findings in relation to harm or loss are capable of
being questioned on this appeal, even with the queries
as to the standard of proof applied.  If one looks at
his findings on loss and I repeat the paragraph numbers,
Western Terminal, 1376 to 1378; bid-rigging causative of
loss, 1384 to 1386; Onega, 1413 and 1415 to 1418; expert
valuation, 1420 to 1422; Western Terminal, 1454,
Simonova rejected; Onega, 1476, Simonova rejected;
conclusion, 1525, paragraph (9).  Paragraph 1552
involves the judge acknowledging that he hasn’t found
any harm or loss and he’s not going in those
circumstances to find specific values where he doesn’t
need to.
Those are my submissions in relation to what the
judge found.  None of those, in my submission, are
actually challenged on appeal.  Those are factual —
primary factual findings that should stand, are not in
issue and the upshot of those, in my respectful
submission, is that the appellants have not proved they
have suffered any loss and therefore, whatever the other
concerns with this judicial process, it would inevitably
result in the dismissal of the counterclaim which is
premised on Article 1064.
Looking in Mr Stroilov’s note that he handed up to
your Lordship I think yesterday and starting at
paragraph 3, where he identifies some other parts, where
he tries to suggest that there is some finding of loss,
none of those paragraphs suffice for his purposes.  We
go to 1343 to 1344, those don’t comprise any finding by
the judge that there has been loss that would qualify as
harm under Article 1064.
Paragraph 1346, I don’t accept that the judge was
there finding — the word «likely» was being used in
a sense that my Lord Lord Justice Males suggested.  He
was using that phrase in the sense of «could have had».
He was saying obviously could have had some effect but
he went on, he has considered at length whether —
whether — these things have happened and whether there
has been evidence of any sort of bid-rigging or effect
upon the value.
Importantly, what he’s found, importantly for these
purposes, whatever the marketing and advertisement, he’s
found that was a matter for the auction house, not
a matter for the pledgee, the Bank, and no evidence to
suggest that the Bank interfered with that process.  Nor
there was any complicity by the auction house in the
conspiracy and therefore, whatever the marketing
inadequacy as Mr Stroilov identifies it or the judge
identified it, no basis at all to find that that had
actually grounded or led to any harm or loss.  So he
can’t get loss from paragraph 1346.
Paragraph 1372 —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
we’re coming to an adjournment time.
MR LORD:  Sorry, my Lord, I do apologise.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
we’ll resume at 2 o’clock.
(1.03 pm)
(The short adjournment)
(2.02 pm)
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
Mr Lord.
MR LORD:  May it please your Lordship.
I think I was dealing with the list of points that
Mr Stroilov is relying upon to suggest that the judge
found some loss or harm.  I think I was.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  You
were.
MR LORD:  Perhaps I have a faulty recollection but I think
I was.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  We’d
got to 1346.
MR LORD:  Thank you, my Lord.
I think I’d dealt with 1346.  If I may go to 1372,
that doesn’t ground any finding that there’s been some
loss or harm.  He explains why this process has been
undertaken, in order to generate the starting price for
an auction, but he goes on to hold that there’s no
evidence that wasn’t a fair market price in those
circumstances.  So 1372 doesn’t — can’t be
cherry-picked to ground loss and therefore harm.
1376 is relevant in this regard which is a complete
answer to that point of Mr Stroilov’s.
Then (d), paragraph 1418, it’s important to see that
what the judge is there describing is that there has
been some remuneration of Renord-Invest for their
assistance with this realisation of assets.  Nothing
improper about that.  It’s not suggested otherwise.
Their net remuneration is some 5 to 10 million roubles,
so that’s about US$200,000 to $300,000, and their gross
remuneration was some 55 million roubles, which is
something under US$2 million but reflecting some costs
that they had to incur.
But importantly, one has to read that subject to
1417 where the judge has found that full and actually
more than full value has been accorded to
Dr Arkhangelsky and OMG in relation to this enforcement
process.  He sets out in 1416 and 1417 the forgiveness
of loans, and the fact that overall there was a very
considerable net forgiveness to Dr Arkhangelsky and his
companies in relation to this realisation, to the tune
of hundreds and hundreds of millions of roubles.
So, again, there’s no basis to suggest that that
somehow grounds loss.
Paragraph 1525(3), the judge says in his conclusion
on the auction:
«The values achieved for the assets as sold were
low…»
He’s there saying «low» in the way that the
claimants, so the counterclaimants, submitted.  They
asserted they were low.  The judge has found elsewhere
in his judgment that they were not.  There was no
evidence that they were low in the sense of not
reflecting the fair market prices.  I’ve given your
Lordships the reference to that already for
Western Terminal and Onega.
Paragraph —
LORD JUSTICE MALES:  Just on that paragraph, can you help us
as to what the credible expert evidence is that he’s
referring to?  I thought he’d found essentially both
experts not very credible.
MR LORD:  He’d found that Ms Simonova was unreliable.  He
found that both experts were unreliable in relation to
Western Terminal and Onega.  He had accepted lots of the
other valuations of Mr Millard.  And there may have been
some other aspects that haven’t featured much in this
appeal —
LORD JUSTICE MALES:  That is on the minor assets.
MR LORD:  Yes, but they’d gone through the same process so
there was some — potentially at least some reassurance
to be derived in that regard.
He may have been referring to the fact there were
other valuations at the time, contemporaneously with the
realisation process, that were in the same broad area.
There were I think two different valuations from other
valuers than Lair that seemed to be around the same
amount as Western Terminal was actually sold for.
Then paragraph 1525(5), where he said the way they
were sold «does not seem likely to encourage third party
interest».  Again, he’s dealt with all that, he’s dealt
with the fact that there’s no evidence that the Bank
subverted the sale process or that lower values were in
fact yielded as a result or at all than should otherwise
have been derived.  So he’s dealt with that in the
substance of his judgment so, again, that is not loss.
1552 I’ve gone to, which was my submission that the
judge was really saying, well, having found that there
is no loss, we say ie harm and therefore 1064 liability,
the judge didn’t go on to make specific findings as to
the actual values he would have ascribed to the
Western Terminal and Onega Terminal.
Then 1635(1), this reference to a risk doesn’t
amount to a finding that in fact there had been loss.
He’s talking about the risk of — he’s talking about the
extra security rights that were actually given.  He’s
not there finding that there has been some loss as
a result of the exercise, still less that it’s loss
caused as a result of the wrongful exercise of the
security rights or the repo.  He’s not finding that at
all.
In paragraph 1635(7), the words over the page, the
bold words, and again he’s not here finding that there’s
been any loss or harm caused in a relevant sense.  He’s
saying that there may have been personal profit or there
may be personal profit but that’s not the same thing as
saying that there’s actionable harm or loss under 1064,
for the reasons I’ve submitted and the reasons the judge
has actually found.
So we respectfully submit that nothing Mr Stroilov
puts the other way is sufficient to dislodge the
submissions we make in relation to the fact that, on any
view of this case, the bottom line is that the 1064
claim must have been dismissed, whatever the process of
reasoning that one arrives up to that final bit of
analysis.
If I may go, please, to the time taken to deliver
the judgment.  I’ll put my hard hat on.  I need to make
some very short submissions on the delay point.  I refer
to our skeleton argument, paragraph 17 at page 8.  What
I submit in this respect is that the delay in itself is
not a ground to allow the appeal and I’ve set out in our
skeleton argument, starting at paragraph 17, what we say
is the conventional approach which I know your Lordship
will be familiar with.  In other words, delay in itself
can only be relied upon if it renders the judgment
unsafe.
We’ve quoted there from Cobham v Frett.  That’s at
authorities bundle 1, tab 11.  If I could ask
your Lordship to go to that briefly, and to go please
first to the headnote.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Paragra
ph?
MR LORD:  It’s the headnote, my Lord, because one can see
what happened, what the Privy Council were confronted
with in terms of relevant — of the delay.  There was
a twelve-month delay in giving judgment, from a decision
of the High Court in the BVI.
Then if your Lordship would be kind enough to read
the headnote, «The ratio…», starting at letter F.
Your Lordship will see that the delay was twelve months
but the judge’s notes were of a high quality, there
wasn’t any reason to doubt the correctness of his
conclusions or suppose that he had forgotten or
overlooked any material.
«The Court of Appeal had had no proper basis for
asserting the right to substitute its own evaluation of
the evidence and of the witnesses than that made by the
judge [as read].»
So that was what the Privy Council found and held.
If your Lordship would be kind enough, please, to go
to page 1783, where the judgment was delivered by Lord
Scott.  If you would just be kind enough to read the
paragraph starting halfway down:
«In their Lordships’ opinion, a legitimate basis on
which…» so it goes on.
If you would be kind enough to read just overleaf to
the end of the — down to the end of the highlighted
passage where Lord Scott said in relation to the delay:
«If it is to be relied upon, a fair case must be
shown for believing that the judgment contains errors
that are probably or even possibly attributable to the
delay.  The appellate court must be satisfied the
judgment is not safe and that to allow it to stand would
be unfair to the complainant [as read].»
So you can’t just have delay by itself, you’ve got
to show that there’s some error potentially attributable
to that delay.  And they go on to contrast their case
with the case of Goose further on down 1784 where they
identify the loss of notes and the material factual
errors in the judgment.
If I can go, please, then in the authorities
bundle 2 to tab 21.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Which
case?
MR LORD:  Sorry, my Lord.  It’s the case of Bond v Dunster
which was a decision of this court, including my Lord
Lord Justice Patten.  Sorry, I’ve got the wrong
reference there.  It’s 2/21.  My fault.
LORD JUSTICE PATTEN:  Sorry, I was just taking a note of
something.  Where is it?
MR LORD:  It’s tab 21, my Lord, in bundle 2.  Your Lordship
will see that the — there’s a judgment given by Lady
Justice Arden, and Lord Justice Longmore and the Master
of the Rolls were also on the panel.  Starting at
paragraph 1 with the heading:
«Everyone is entitled to a hearing within
a reasonable time.»
Your Lordship will see —
LORD JUSTICE PATTEN:  It’s not a case I had any involvement
in.
MR LORD:  No, it was my mistake, my Lord, I had gone to the
wrong tab.  I do apologise.  I was allocating
your Lordship to the wrong panel, I do apologise for
that.
LORD JUSTICE PATTEN:  No, no, not at all.
MR LORD:  Your Lordship will see from Lady Justice Arden’s
recitation of the facts that the delay was of 22 months
and there was no apology and no explanation of any
mitigating circumstances.  So that was the background to
this hearing.
Then at paragraph 7 she has a heading «Standard of
review on appeal against findings of fact in a seriously
delayed judgment».  She in effect repeats the approach
that we’ve just seen in the Cobham v Frett case.  Five
lines down:
«Findings of fact are not automatically to be set
aside because a judgment was seriously delayed.  As in
any appeal on fact, the court has to ask whether the
judge was plainly wrong [as read]».
That’s what she says.  She goes on to say:
«However, there is an additional test in the case of
a seriously delayed judgment.  If the reviewing court
finds that the judge’s recollection of the evidence is
at fault on any material point, then unless the error
could not be due to the delay in the delivery of the
judgment, it will order a retrial if, having regard to
the diminished importance in those circumstances of the
special advantage of the trial judge in the
interpretation of the evidence, it cannot be satisfied
the judge came to the right conclusion.  This is the
keystone of the additional standard of review on appeal
against findings of fact in this situation.  To go
further would be likely to be unfair to the winning
party.  That party might have been the winning party
even if judgment had not been delayed [as read].»
Therefore one can see that there can be an
additional test in the case of a seriously delayed
judgment, but that does require there to be effectively
a reasonable complaint of the judge’s recollection of
the evidence being at fault on any material point.  It’s
not really the case here.  It’s not really what’s said
on this appeal.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  It’s
not said at all, is it?  That’s not what’s said here.
MR LORD:  By the appellant?
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes.
MR LORD:  My Lord, I think I can take it very quickly.  I’m
not justifying the delay, I’m simply pointing here to
the fact that in itself, that can’t found the appeal.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  The
delay is obviously inexcusable but unless there is
something else wrong with the judgment, it will still be
upheld.
MR LORD:  I can take it very quickly.  I think I don’t need
to — those are my — your Lordship will see, just for
completeness, paragraphs 9, 10 and 13, the contrast with
the case of Goose which I’ve already made.
Lord Justice Longmore at paragraph 103 and the Master of
the Rolls at paragraph 119.
In my submission, if you like the Ground 5 complaint
cannot be a freestanding complaint.  Unless there is
something else under Grounds 1, 2, 3 or 4, Ground 5
can’t in itself allow the appeal.  I’m grateful.
So those are my submissions on Ground 5.
Ground 6 is the alleged inequality of arms.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Well,
you can take that very quickly as well.
MR LORD:  I’m grateful, my Lord.  Your Lordship knows how we
put it in our skeleton argument.  I can make my
submissions very simply.  Obviously I pray in aid the
points we set out from paragraph 40 in our skeleton
argument but I’ll summarise my submissions in this way.
The appellants clearly have no basis to complain
about the fairness of trial on the correct approach and
their real complaint is that they did not have
equivalent legal representation to that of the Bank.
That is not a ground for complaint on the authorities
where the trial is otherwise fair, as it plainly was.
In any event, such alleged inequality arose through the
appellants’ deliberate decision to conduct the case in
the manner they did and the appellants do not establish,
as they must, that they lacked the means to match the
claimants’ legal representation, there being no finding
in this case to that effect.
We’ve set out the law on fair trial under Article 6
in our skeleton from paragraph 40.  If your Lordship
looks in particular at the Perotti case in the Court of
Appeal at authorities bundle 2, tab 15, paragraphs 31 to
32, it may be worth just having that up, where Lord
Justice Chadwick sets out what is the key point here.
Paragraphs 31 to 32, if your Lordship would be kind
enough perhaps just to read those two paragraphs which
set out, in my submission, the relevant law for present
purposes.
As Lord Justice Chadwick set out there, it can often
be the case that the court would be assisted by
different representation.  I’m not inviting any
observations now.  But that’s not the test in terms of
fair trial.  The courts have to struggle with cases and
the test is not whether the court would find it easier
to reach the decision with representation; the test is
whether the court is in a position that it really cannot
do justice in the case because it has no confidence in
its ability to grasp the facts and principles of the
matter on which it has to decide.  That’s the key
touchstone.
So if the court is satisfied that it has been able
to grapple in that way, then you don’t get yourself
within the fair trial jurisprudence.  We say that that’s
the position here.  In other words, that the appellants
don’t get themselves within that jurisprudence.  Looking
at the decision of the learned trial judge in this case,
he addressed the matter in authorities bundle 3 at
tab 30.  We’ve actually picked it up in our skeleton at
paragraph 40, I think we quote that there.
Your Lordship will see in that report, the learned
judge is explaining his concern to make sure that there
was a fair trial.  In paragraph 24 he held, we say
rightly, that equality of arms doesn’t mean equal fire
power.  We say that he’s right about that.  Then in
paragraph 28 he refers to the case of R v Director of
Legal Aid Casework.  In paragraph 29 he refers to the
Perotti case I’ve taken your Lordship to.  In
paragraph 30 is where he applies that test, ie the
court’s ability to grasp the facts and principles of the
matter on which it has to decide and so on.
Then he says, basically in paragraphs 32 through to
36, and at 36, he concludes that a fair trial should be
possible.  Even the question whether it continues to be
so must be kept under continuous review.  So the judge
was alive to the representation issues and rightly held
that asymmetry in that regard wasn’t in itself an
Article 6 complaint.  The issue was whether the court
could fairly grapple with the facts and the principles.
He felt the court could but he would keep it under
review.
There was an appeal to the Court of Appeal which was
dismissed by Lord Justice Elias and that’s at the
supplementary bundle, tab 10, where he referred to the
learned judge’s acquaintance with this case and
therefore there should be — in effect that there should
be, there was no reason to allow an appeal from the
judgment of Mr Justice Hildyard that he could conduct
a fair trial.
So that was the background to the trial.  We submit
this was a case where the trial judge was keenly alive
to the need to ensure that there was a fair trial.  He
said he would keep it under anxious and careful ongoing
review.  The trial was adapted to cater for the
appellants’ position, see our skeleton argument at
paragraphs 45 and 48.  Then the learned judge said in
his judgment that he kept this matter under constant and
anxious review.  See his judgment of the trial at
paragraphs 35 and 37.
The judge undertook significantly extra work in
order to make sure that he has grasped the facts and
principles.  See his judgment, paragraphs 39 to 41.  And
he said in paragraph 41 of his judgment, it’s perhaps
worth going to that, that he was satisfied that there
had been a full and fair consideration and that his
conclusions had not been skewed in consequence of the
different resources of the parties.
We say that the proof of the pudding is very much in
the fact that the appellants compliment the judge on his
meticulous job.  They do not challenge his findings of
fact save in relation to Baltic Fuel and they submit
that the Court of Appeal is in as good a position as he
was to re-evaluate the matter.
We don’t agree with that.  However, for present
purposes, we say it makes it impossible for these
appellants to say with any substance that the trial
judge did not carry out a sufficiently fair trial for
Article 6 purposes.
It is worth noting the appellants I don’t believe
renewed their fair trial complaint during the trial
itself.  They reserved their right to do so afterwards
but they didn’t say at any stage during the trial,
I don’t think, that as far as they were concerned the
matter no longer could be tried fairly for some changed
factor.  We do respectfully submit that this Article 6
challenge savours of opportunism rather than merit.  The
appellants allowed the match to be played out and they
lost the match only to say they should have a rematch.
In terms of the appellants’ real complaint, it seems
to be that they have had a different and lesser legal
representation than the Bank.  This does bring in
Ground 3 of our respondents’ notice, in other words the
fact that we don’t accept that Dr Arkhangelsky is
impecunious.  We do submit that there was evidence
before the judge that showed that he did have
considerable assets in all likelihood and that he had
chosen to conduct this case in this way in order to
disguise the fact that he had that money.  He was doing
what borrowers often do and lie low while a host of
creditors try to get their money in different ways,
doubtless in the hope that once the dust settled, he may
be able to emerge and extract that money.  That is our
submission.
Your Lordship will have seen the judgment,
paragraphs 1584 to 1610, we invite careful study of
that.  And our skeleton, paragraphs 45(1) and 57 to 64.
The judge said it was plainly relevant to impecuniosity,
some of these matters, so he thought it would be
relevant certainly to a complaint made under the
Ground 6 on appeal and he found there was weighty
evidence.
In our submission, at the very least, there was
a prima facie case made out that the appellants were not
impecunious as they had alleged and for present purposes
it is sufficient, in my submission, that the appellants
have not actually discharged the burden that must be on
them to show they were impecunious in a way that led to
necessarily the representation in the case that they
actually deployed.  The appellants made no submission in
their skeleton argument at all on this point.
In our submission, the appellants chose Mr Stroilov
as their weapon of choice in terms of representation.
Very effective he has been.  There is no basis for the
Court of Appeal to uphold this appeal on Ground 6.
My Lord, those are my submissions on the six grounds
of appeal and we invite your Lordship — can I then deal
with illegality and then I’ll come back to the point
about the form of order if the court is minded to
interfere with the judgment.
I wonder if I may go to our respondents’ notice
point, the illegality in public policy.  I’m grateful,
my Lord.  If I could pick it up at paragraph 54 of our
skeleton argument, your Lordship will see how we put the
matter, that the appellants admitted and relied upon
having made corrupt payments or bribes of some
US$160 million to a Russian official to procure official
support and/or licences and/or permits for the
development of Western Terminal and for their other port
businesses including the Onega Terminal.
We submitted to the judge that in those
circumstances, this was a case where the public policy
called for the denial of this counterclaim on the basis
of these corrupt bribes and the judge — he’d already
rejected the counterclaim on other grounds but he held
that he would not have rejected it on this ground.
Your Lordship will know that the relevant test is
that in Patel v Mirza in the Supreme Court.  But the
Supreme Court by a six to three majority overruled the
Tinsley v Milligan line of authority or approach in
relation to illegality and held that a new test should
be applied.  There doesn’t seem to be any dispute as to
the contents of that.
If your Lordship looks at Mr Stroilov’s skeleton
argument at paragraphs 56 to 60, it doesn’t appear that
there is any material difference between the parties in
terms of the law.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  But is
that not a balancing exercise that the judge is best
capable of undertaking?
MR LORD:  Well, my Lord, that may be right but then if one
looks at what the judge did in this regard, if one goes
to where he dealt with the matter, it starts at
paragraph 1527, he sets out the factual complaints that
we make, he refers to Patel v Mirza in 1531.  In
paragraph 1532 he refers to the new approach in Patel v
Mirza.  In paragraph 1536 he correctly identifies the
significant factors set down by the Supreme Court in
Patel v Mirza for evaluating whether there is a public
policy reason why a claim should be disallowed, (a), (b)
and (c).
He rightly says I think in 1537 in the last line
there is a greater degree of judicial discretion.  But
then when one comes to his application of that test to
the facts, one can see he doesn’t actually complete the
task properly.  He sets out our submissions at 1539,
1540, 1541.  He sets out the counterclaimants’ responses
at 1542.  In paragraphs 1543 through to 1547 we say that
is not a proper or sufficient application of the factors
and approach in Patel v Mirza.
He doesn’t go through these three significant
factors, he appears to have a mixture of gut instinct
and, in 1545, he identifies the fact that the property
in question was not obtained illegally.
Then in 1546 he says:
«It may be that the decision would be less clear-cut
in the context of the claim to business values.»
But it is really not at all clear that he has
faithfully here followed the approach set out in Patel v
Mirza.  It’s clearly not an unfettered or untrammelled
discretion, the Supreme Court laid down some relevant
factors which do not appear to have been properly or
sufficiently applied.
We do say this is a case where your Lordships can
and should intervene in order to ensure that the test is
properly and faithfully applied to these facts.
Your Lordship knows what the law is and what these
three important factors are.  It would be important to
read what the judge records about the bribes themselves.
If your Lordship would be kind enough please to go
to paragraph 176 and read 176 through to 182 of the
judgment.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  We
don’t need to read that again now, we will read it again
later.
MR LORD:  I am obliged, my Lord.
We’ve set out, my Lord, our submissions in
paragraph 55 of our skeleton argument, picking up — and
the important parts of Patel v Mirza, if your Lordship
wishes to find that, just for your Lordship’s reference,
Patel v Mirza, the case itself is behind tab 36 of
bundle 3.  We can see what the facts were from the first
six lines:
«The claimant paid a large sum of money to the
defendant pursuant to an agreement… [as read]»
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
you don’t need to go through the facts of Patel v Mirza,
we’re really very familiar with it.
MR LORD:  I’m grateful, my Lord.  It was really just that
there would be obviously — that there is — yes.  One
can see the headnote your Lordship knows, the reasoning,
then I won’t — your Lordship knows —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
we’ve probably all read those judgments quite a lot.
MR LORD:  At page 499, paragraph 99, Lord Toulson sets out
the two broad discernible policy reasons for this
doctrine at common law.  One is that a person should not
be allowed to profit from his own wrongdoing.  The other
linked consideration is that law should be coherent and
not self-defeating, condoning illegality by giving with
the left hand what it takes with the right hand.  Then
he sets out obviously the three important factors in
paragraph 101.
We make our submissions at paragraph 55 of our
skeleton and we say, my Lord, that put very
straightforwardly, for the law — for this court to
allow the counterclaim would be to allow the
counterclaimants to recover the fruits of their bribery.
It would in effect amount to an award of damages that
would reimburse Dr Arkhangelsky for the $160 million
that he’s paid in bribes to the port official in Russia
in order to be able to develop and exploit these two
port assets and for him to go on and claim additional
damages to reflect what he says is the enhanced value
and lost business revenue which he would have derived
from that exploitation.
We say that this must be the paradigm case where
this court, on public policy grounds, should hold that
it would be offensive to allow recovery of damages as
the counterclaimants seek.
It would be, we say, extraordinary if
Dr Arkhangelsky could actually in effect get back from
the Bank St Petersburg the $160 million bribe that he’s
paid to a Russian port official via this counterclaim.
We do say, my Lord, that this counterclaim in very large
measure depends upon the alleged enhanced value of these
two assets as a result of the payment of these vast
bribes.
We do respectfully submit this is a very, very clear
case where Patel v Mirza calls for the intervention by
the court on public policy illegality grounds for the
reasons that we set out in paragraph 55.  Bribery is
obviously a serious wrong, both here and in any
jurisdiction.  It was conducted on a huge scale.  There
was no relevant public policy which rendered it
ineffective or less effective by denying that claim,
certainly not one which trumps the prohibition on
bribery.  Without the bribery the counterclaimants
couldn’t have profited.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Does it
matter that there’s no causative link between the
bribery and the matters in issue here?
MR LORD:  Well, my Lord, the counterclaim itself is for —
the counterclaim is under 1064 for harm which equals
loss and within that claim, the counterclaim in effect,
it’s pregnant with —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Well,
not under the third conspiracy anyway.  It’s really —
the claim is for loss caused by the conduct of the Bank
and its allies.
MR LORD:  No, my Lord, the claim under 1064, as I’ve sought
to explain, is for harm, in other words loss.  So you
start — the claim is —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
but what loss?  I mean, the loss that is claimed is the
claim caused — is the loss caused by your conduct, not
the loss caused by paying 160 million of bribes, is it?
I mean, they’re not going to get the 160 million back,
that’s just not the claim.  They may have asked for
business loss but they’ve not really contested that
finding.
MR LORD:  No, my Lord.  The claim under 1064 starts with
a claimant having to prove harm and harm equals loss.
It means compensatable —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
I’ve got that point.  What I’m putting to you is that
the loss claimed is the loss caused by the alleged
conspiracy.
MR LORD:  No, but the loss that is claimed here is the
loss — the loss by the claimants is the loss of their
valuable assets.  That is their claim.  So they are
claiming compensation for those valuable assets.
There’s an issue about whether they can claim — there’s
an issue on Russian law, there’s an issue, we say
they’ve got to show they can only claim the loss through
the pledge process.  But their claim is for the damages
to reimburse them for the loss of these valuable assets.
Two bits of real estate, two port terminals and business
losses.  But what they’re claiming for —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  But
that under the third conspiracy, which is the one the
subject of this appeal, is unsustainable?
MR LORD:  No, my Lord, it’s not just for the business loss,
it’s for the value.  I haven’t got the figures — the
figures are in the judgment somewhere that they claim,
but they claim hundreds of millions of dollars for the
value of the real estate plus hundreds of millions for
the business.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I
understand that they claim it but I’ve just put to you
that actually that must be unsustainable under the third
conspiracy.
MR LORD:  Sorry, my Lord.  Under the third conspiracy, the
claim is for…
My Lord, the complaint is that they’ve lost the
pledged assets themselves and the alleged income
generation from those businesses, and those assets are
going to be valued on an income basis.  Paragraph
1453(1) of the judgment.  But, my Lord, the value that
they’re claiming of these businesses reflects — of the
real estate, they’re saying these two port assets are
valuable assets in themselves because they are
business-generating assets, but that business generation
value can only come from their development and that
development can only come from the licences and permits
and authorisations that they bribed someone to give
them.
So they don’t get to the value of the asset, this
business-generating bit of real estate, on their income
approach or on any approach, any approach — their
approach anyway, their claim is pregnant with their
effectively recovering the fruits of those bribes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Okay,
I understand.
MR LORD:  Because absent those bribes, you’ve got little mud
heaps and jetties that aren’t worth very much at all.
So the whole point is they could have developed it with
a bribe to make it a very valuable functioning port and
that yields a $500 million claim.  Pregnant within that
figure must be the 160, must be the enhancement and the
added value of the bribe payment.  So effectively the
court is rewarding the briber in this case and further,
probably, reimbursing the briber for his bribe making my
clients, the Bank, pay for a bribe paid to a corrupt
Russian official.  We say that there’s no licence at all
for that.
Whatever happens in relation to the other issues on
this appeal, we do say this is a freestanding point that
this court should resolve in our favour, whatever other
findings this court comes to on the six grounds,
because, on public policy reasons, this court should
intervene in order to prevent this claim going any
further given those public policy matters.  Whatever
happens, that should be upheld by this court.
In paragraph 56, we make the point that this is
a defence in relation to the counterclaim, insofar as it
reflects the alleged loss of the business value and/or
the value of the real estate dependent on the
development of the plot.  But that in substance is the
vast majority of this $500 million claim, as you’ll see
from the judgment where it sets out the various claims
and counterclaims and so on.
My Lord, I’m conscious of the time, I think I’ve got
maybe another one minute to finish off.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Well,
I want you to take enough time to deal with the question
of how we should approach the matter if we’re against
you on the substance of the appeal.
MR LORD:  I will, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  And
illegality.
MR LORD:  On that point, we respectfully submit that this
court cannot substitute its own evaluation.  It’s not in
a position to do that.  Only the trial judge could do
that.  This court could hold that the judgment is not
unsafe in its result and uphold it but we say this court
isn’t in a position to go on to substitute its own
evaluative process in place of that of the trial judge.
It’s just not, for all the reasons set out in the cases.
In terms of an alternative approach, we make the
following suggestion.  The vast majority of the factual
findings following this very long and expensive trial
are not challenged.  So the trial judge is complimented
by the losing party for his meticulous approach to the
fact-finding exercise.  There is therefore, we say, no
warrant following this appeal for that exercise to be
undertaken again, to require the parties — particularly
my clients — to have to undergo effectively a retrial
of all the facts in this case.
The appeal is driven at the evaluation of those
facts by this trial judge.  This court has some concern
about the concluding paragraphs in the declaration
section.  I’ll come back to that.  If I can summarise
it, potentially, whether those concluding paragraphs
evince a concern on the judge’s part that hasn’t been
faithfully reflected in his evaluations such that his
ultimate conclusion on the counterclaim dismissal may
not be reliable.
We suggest in those circumstances the appropriate
course would be to consider remitting this matter back
to Mr Justice Hildyard with this court having identified
such paragraphs of this judgment as caused such concern,
and to direct the learned trial judge to consider such
concerns and to provide a supplemental judgment which
addresses them indicating whether his judgment needs to
be revised in the light of the direction that this court
has given him in terms of reconsideration.
We would suggest that there should be no further
evidence in this case because the trial has been
completed, without any complaint about the judge’s
fact-finding process.  So that there may be scope for
further submissions by the parties but there shouldn’t
be any fresh evidence.  It would be a case of the trial
judge in effect being directed by this court to
reconsider these matters because this court has concern
as to whether — whatever other direction the court
wants to give, the judgment is — the evaluation — the
judge is happy that he’s come to the right evaluation in
view of the concerns that this court might identify with
bits of his judgment.
We understand from Mr Stroilov’s submissions that he
wouldn’t take issue with the matter going back to
Mr Justice Hildyard and we would say that that would —
obviously no remission of the case is ideal but we would
say that that would be the least bad option.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  If not
and we ordered a retrial, what would we order a retrial
of?
MR LORD:  Your Lordship would have to consider whether it
was necessary to order a retrial of all the
counterclaim —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  What
I’m thinking of is obviously it’s not necessary because
the first and second conspiracies are unsustainable in
the light of the judge’s findings that are not
challenged.  So would it be a reasonable or possible
thing to do to order a retrial of the third conspiracy
and then what is the fairness to both sides really of
allowing them to have a second bite at the cherry when
they’ve previously produced quite critical evidence that
was not worthy of credibility, according to the judge,
to produce new evidence, for example a valuation, which
might be?  So what do we do about that issue?
MR LORD:  Well, it would be difficult, my Lord.  It would be
difficult when remitting it on that basis, if you like
on that partial basis, whilst I accept that the first
and second conspiracies — we say none of it is
sustainable but let’s assume the first and second
conspiracies your Lordship feels are not sustainable
under any challenge.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  They
can’t be sustainable, because it’s not challenged, all
the stuff about delay and six months and repo.  So all
that cannot stand.  But what can — if on putative
findings that we accept some of Mr Stroilov’s
submissions, what could theoretically stand would be the
third conspiracy for harm in the form of sales at
a depressed value.
MR LORD:  I see, my Lord.  The problem with that is the
judge, hearing that retrial, is very likely to have to
be apprised of and consider —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Well,
he would have to take the findings of the first judge at
face value on other matters that he wasn’t trying and he
would be entitled also to consider no doubt the evidence
that the first judge heard.  What I’m concerned about is
the normal situation is you say this judgment is unsafe,
there will be a retrial.  This is a far more complicated
situation because the bit that’s unsafe is discernible
but ordering a retrial of a bit is very different from
ordering a retrial of what happened before and that has
potential hazards for both sides.  So that’s why I’m
asking for these submissions.
MR LORD:  My Lord, even on the third conspiracy, the
appellants don’t challenge the primary findings of fact.
The challenge is only to the evaluation.  They don’t
challenge the findings of fact as to the way in which
the assets —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I
understand that point and I think that’s right.  So can
another judge, if we form the view — this is why I said
if not.  I understand the attractiveness of sending it
back to Mr Justice Hildyard but if we formed the view,
for whatever reason, we couldn’t, what then do we do?
Can another judge properly draw evaluative conclusions
from findings made by the first judge?  I think that’s
very difficult.
MR LORD:  We would say no, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  He
wouldn’t have seen the witnesses.
MR LORD:  Because that judge would be in no better position
than your Lordships.  He is effectively picking up — he
is picking up the judgment —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
we’re not lazy, Mr Lord.
MR LORD:  I didn’t suggest that, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  No.
I would be very happy to do the whole job myself if
I thought I could, you know, if this was necessary.
That’s my job.  But what I’m saying is I’m worried
about — if I’m worried about doing that myself because
I don’t think I’m in a sufficiently good position, what
sort of order can I make that puts somebody else in
a better position?
MR LORD:  My Lord, the options would seem to be either to
remit to Mr Justice Hildyard on that more limited basis
or there would have to be a retrial in front of a new
judge.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Of the
whole thing?
MR LORD:  Of the whole thing.
LORD JUSTICE MALES:  I suppose you could say that there
could be new expert evidence but from the same experts,
if they had further evidence to give.  That way the fact
that one or both experts were found to be unsatisfactory
would, as it were, remain in the case.  I’m only
thinking aloud but I just wonder whether that might
work, if we get to that position.
MR LORD:  I think, my Lord, the difficulty is that that
judge is going to have to be happy with the underlying
facts and how they feed into this assessment of value
which itself needs to be viewed through the 1064 prism
and so on.  In a multi-factorial approach that’s sounds
a rather hackneyed phrase, but in something that has
a number of different facets, it’s difficult to see how
you can compartmentalise that exercise as you might in
some other exercises.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  We can
decide the 1064 questions that have been raised before
us.  That’s something it seems to me we can decide and
we can put all that to bed so that it’s clear what the
exercise is going to have to be.  What I’m worried about
is the one my Lord refers to.
Just take the valuation evidence because that’s the
clearest example.  You’ve each had a bite at this
cherry, not a very successful one, and sending it back
is unfair to both sides because one of you may call
a different expert who will be believed when you failed
to do that on the first occasion.  So that may just be
a necessary function of having to order a retrial but
that’s why I’m asking for your views.
MR LORD:  I think, my Lord, the problem is that the way the
counterclaimants use the valuation evidence is to
support their claim for a conspiracy.  So it’s hard to
see how you can just confine the retrial to the
valuation approach.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I’m
sure you can’t but it highlights the problem in having
a retrial and whether it’s totally fair.  Because we may
just have to balance the unfairnesses.
MR LORD:  My Lord, I think it’s certainly not very clear
from the way the appellants put their claim as to how
this third version, as to what it comprises and how far
it stretches back in time and how far one could
compartmentalise it in any sort of meaningful way
really.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  No, I
agree.  And I think the problem is that actually what
they really say is that once you see what happened in
the enforcement process, you realise this had always
been in their plan, notwithstanding that the allegations
of forgery et cetera didn’t succeed.  I think you’re
right, I think it is difficult to split it up.
MR LORD:  And that’s why, my Lord, it’s hard to see how your
Lordship, in fairness to my clients, could find against
my clients on an evaluative process because substitute
your own bottom line — I could see — your Lordship
could find that for all the warts, as it were, in the
judgment, the bottom line was sufficiently reliable that
it shouldn’t be set aside but it’s hard to see how your
Lordship could find the other way.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  The
reason I’m asking is you might say we, the Bank, if you
reach these conclusions which we heartily disagree with,
we would invite you to actually do your best and not
send it for a retrial but to — because you can see that
the approach that has been discussed in argument before
this court would produce a very narrow decision in the
appellants’ favour.  It would only be this simple
question of what was the loss caused by what you might
call for want of a better word the dishonest enforcement
process.
MR LORD:  It wouldn’t be unfair to my client that this court
could not find dishonest enforcement.  It is not in a
position to find dishonest enforcement.  This court
couldn’t find that.  It can’t find dishonesty against my
client not having been the trial tribunal.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I
understand that submission.
MR LORD:  That would be a very very serious state of
affairs.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I
understand that submission, Mr Lord, which is why I’m
raising it.  Because it’s not always the case that even
in a fraud trial the Court of Appeal cannot overturn the
decision and replace it with its own view, but your
submission is we shouldn’t and it would be a very
serious state of affairs.  I understand that.
MR LORD:  It is.  And, my Lord, even on the third version of
conspiracy, that in my submission requires — that needs
the dishonesty finding because without the dishonesty
finding the claimant doesn’t establish —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  No, no,
it’s got to be a dishonesty finding.  It’s obvious, yes.
MR LORD:  On our view, under 1064, they can’t generate any
relevant harm —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I don’t
think that’s seriously disputed.
MR LORD:  For this court to — we would say that would
simply compound the unfairness because we are getting
even further away from the trial my clients won where
witnesses were called and there was cross-examination
and documents could be looked at and smoking guns could
have appeared.  All that is going to be lost.  That
would be profoundly unfair.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Okay,
I think I understand your position.
LORD JUSTICE PATTEN:  Can I ask you one short question about
your suggestion of sending it back to Mr Justice
Hildyard so to speak to clarify his judgment.  Do we
have jurisdiction to make that order?  Because it seems
to me that inherent in that is the idea that the judge,
so to speak, is continuing almost the trial process in
the sense of his judgment.  Well, we know the order has
been passed and entered, the judge is functus now.  Our
choice is either affirming his order because it’s an
appeal against his order, or setting his order aside.
If we set his order aside, then we can only do so on the
basis of an order for a retrial, can’t we?
I was just looking at 52.20 which sets out the Court
of Appeal’s powers and I’m not clear how it fits into
that.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Maybe
the best answer is two things.  Maybe if you think about
it whilst Mr Stroilov is replying because we don’t have
unlimited time although I’ve already curtailed
Mr Stroilov.  And then — I hate this but it may be
necessary to give you an opportunity to put something in
in writing in the very short future after the hearing on
the subject.  Because I would want you to have the
opportunity to think it through.  I think it’s
complicated and difficult and probably slightly
unprecedented.  So if there’s any authority about it, we
would certainly like to be alerted to it.
MR LORD:  We’ll do that, my Lord.
I’ve got two more minutes, I apologise for going on,
but relevantly to this, we would submit that the concern
we submit that’s emerging as to what Mr Justice Hildyard
said in paragraphs 834 to 835 of the declaration
section, we say that shouldn’t be allowed to upset the
whole applecart, as it were.  If one looks at
paragraphs 836 to 837 of his judgment, one can see that
in the declaration section, having gone through the
misgivings in 834 to 835, which obviously we’ve
traversed more than adequately, he does come back in
paragraph 1636 to 1637 to make it clear that he is, if
you like, standing by his dismissal of the counterclaim.
So within this section he’s alive to the misgivings
but he is repeating in this declaration section his
findings on the counterclaim.  He’s saying «I’ve
dismissed the counterclaim» and we say that that
provides further reassurance that this is not unreliable
and his observations in this section are aimed at an
application for declaration based upon the justification
for bringing the claim in the first place.
So there is reason why he would have set out his
misgivings even though he has concluded against the
counterclaimants.  It is important to remember the
binary approach to fact-finding, the 0 and 1, the two
options Lord Hoffmann set out in In re B, paragraph 2.
So the upshot of his findings of fact is that things
happened or did not happen.  So the fact that he’s set
out — he’s saying, «I had misgivings, there were points
for me to look at and that’s why I’m not going to say
this counterclaim was dishonestly brought».
But we say it would be going too far to elevate 1634
and 1635 at the back end of this judgment in this
context to being somehow — to be construed as the judge
indicating his own uncertainty that he’d come to the
right result dismissing the counterclaim, that bottom
line.
If you look at the factual findings which we’ve set
out at length, that must underpin what the
counterclaimants sought to establish, under
paragraph 901 of the judgment.  And if you look at what
the judge found in those regards, one can see that he
can’t be criticised.  It can’t be said that no
reasonable judge could have evaluated their way to this
bottom line.  We would actually say that it would have
been perverse, given all his findings that are not
challenged, for him to have found for the
counterclaimants.  There would have been no
justification at all for that.
So we do invite your Lordship ultimately,
notwithstanding the points of concern, to find that in
the result a dismissal of the three versions of the
counterclaim, including the third version for reasons
I’ve given, is not unreliable or unsafe.
I just want to finish with one final reference to
Three Rivers, the Three Rivers case, in authorities
bundle 1, tab 14, it’s paragraph 181 and 182.  This was
the House of Lords in the Bank of England case.  My
Lordship will — this is very notorious for litigation,
where misfeasance in public office was alleged against
the Bank of England in relation to the collapse of
BCCI —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  This is
another case we’re very familiar with.
MR LORD:  It is, my Lord, but paragraphs 181 to 182 is very
relevant in this context, because the House of Lords is
there identifying the inherent implausibility of these
sorts of allegations.  Now, admittedly that was the
Central Bank but there are parallels in terms of this is
a case that there is vast — this conspiracy
Dr Arkhangelsky alleges takes in a host of officials and
public officials as well as the Bank of St Petersburg
and auctioneers and so on.  What is said in 181 — in
182 is important, including in 182 the point I made
earlier, without referring to this authority, that the
scales of justice have to be balanced not just at the
beginning of the operation of fact-finding but they’re
going to move during the operation.  It was the point
I made earlier.  It’s 182, line D.
That’s why I said, as the judge went through his
fact-finding process, his scepticism as to the
counterclaim should have been being fuelled.  He should
have remained of the view that it was inherently
improbable, as he found unimpeachably the various
foundational matters not to be the case.  So once those
went away, the scales were actually tipping more against
Dr Arkhangelsky as the case went on.
If one goes to paragraph 901 and looks at his
findings as we’d explained them in paragraph 25 of our
skeleton argument, one can see that by the end of the
case the counterclaimants were right down — they’d
lost.  They had clearly lost the case.
My Lord, for all those reasons we respectfully
invite your Lordship to dismiss the appeal.  If
your Lordship is minded to intervene, we invite
your Lordship to uphold our illegality public policy
challenge so as to hold that the vast majority of this
counterclaim would offend public policy.
Unless I can help your Lordship further, those would
be my submissions.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Thank
you very much, Mr Lord.
Mr Stroilov.
Reply submissions by MR STROILOV
MR STROILOV:  My Lord, you will have noted that my learned
friend Mr Lord puts a lot of emphasis on the fact that
the counterclaim is pleaded in three versions, as he
puts it.  I think he presents this third version as our
last straw which we conjured up at a very late stage as
the first versions were collapsing and now that’s our
only hope.
My Lords, that is rather renewing with respect the
submission made to the learned judge when, as you would
expect, a limitation point was taken on this amendment.
May I show you what the judge says about this?  It
starts at paragraph 890 of the judgment.  890 and 891 is
a bit of introduction and procedural background.  892
sets out the claimants’ submission, then our submission
that it is no more than an alternative date of the
conspiracy but substantially the same claim.
Then he finds in paragraph 895 that this new plea
does not constitute a new claim or cause of action.  He
accepts our submission that the cause of action has
always been a conspiracy to raid, that the amendment
simply offers an alternative date.  At 896 he further
observes that it is still — well, that effectively this
remains the mirror image of the claim for declarations
advanced by the claimants anyway.
With respect, you have seen the pleadings of the
alternative versions and, with respect, I simply submit
that the significance of the difference between these
three versions has been rather overstated by Mr Lord.
Effectively, on my reading of Kuwait Oil Tanker case and
the jurisprudence on conspiracies, he actually doesn’t
have to plead a date at all, Mr Savelyev.  The important
thing is to plead the facts from which you say
conspiracy can be inferred.
But at the interlocutory stage, this pleading point
was taken against us.  Rather than fight and die in the
ditch over it we suggested an amendment whereby we would
provide a date to everyone’s satisfaction.  That is how
we ended up with the three alternative dates but this
does not mean there are three alternative counterclaims
in the way Mr Lord sees it.
However, it is important to appreciate that there
have been two materially different factual versions of
the counterclaim advanced in the court below.  That
difference is important because it’s important to
understand which findings and evaluations relate to
which version.
The primary counterclaim was for the loss of
businesses of Western Terminal, Scan and Onega, and that
was premised, firstly, on the contention that there was
a binding six-month moratorium and, secondly, on the
contention that before the moratorium would have
expired, by the end of June 2009, OMG would have
obtained the refinancing and therefore there would have
been no default and a bright future.
We accept that on the findings made by the learned
judge, that primary counterclaim is no longer
sustainable, and he deals with it at paragraphs 50 and
53 and following of his judgment.  Just if you are
minded to consider — to check what his approach would
be.
But then the alternative counterclaim was for the
loss of the assets rather than businesses.  Again,
I think you have seen the pleadings in relation to that.
The alternative counterclaim was premised on the
hypothesis that the default was inevitable, whether in
March or in June or whenever, but it would have been
inevitable, or at least that Oslo Marine Group would not
have been able to restore solvency without selling the
assets anyway.  And that is the counterclaim whose
dismissal we challenge in this appeal.  It does not
correspond to Mr Lord’s first, second and third versions
because that is a waste(?) of time, but that is the
counterclaim which we say is still alive or should be
alive.  I thought it’s important to make those
distinctions clear.
Now, Mr Lord has taken you to a number of factual
findings in the judgment and I suspect there is a bit
of — well, it is clear there is a bit of a disagreement
between us as to which passages — about whether a
passage constitutes a primary finding of fact or
a factual evaluation.  I don’t suggest it would be
fruitful for me to go through them paragraph by
paragraph and debate this at length.  I trust you will
form your own view and have formed your own view on
that.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  We
will.  We have not formed any view yet, Mr Stroilov.
MR STROILOV:  Yes.  I’m grateful, my Lord.
However, obviously you will have appreciated the
importance of Mr Lord taking you to those findings
because, as I said in my original submission, a proper
global analysis of circumstantial evidence as opposed to
piecemeal analysis, proper analysis in the round is all
about finding a coherent explanation which covers all
the facts.  There may be more than one and then you must
choose the probable one and it’s all about whether the
facts are consistent with the explanations offered for
them.
It follows that if Mr Lord can point to a primary
finding of fact which we don’t challenge which is
inconsistent with our case on conspiracy, then I am in
trouble.  I accept that.  That’s not necessarily
a knock-out blow because I can try and rescue my case by
showing that the finding is either — by explaining away
how it is consistent with my case or by persuading you
that it is plainly wrong.  But in principle he’s right
to highlight those findings because if he can
demonstrate inconsistency, then it is a knock down for
me.
With this in mind, you can be reasonably sure that
the facts he has given you are his best facts and so if
those are consistent with the conspiracy case, then
everything is consistent.  In that sense I accept this
challenge and I can show you that his best facts, each
of them, are entirely consistent with the counterclaim
and not because I say so but because the learned judge
thought so.
I think first of all he took you to several findings
to the effect that Oslo Marine Group business was built
on sand, or to be less metaphorical but hopefully more
precise, I think it’s fair to summarise the judge’s
findings as being to the effect that OMG had structural
weaknesses to the extent that it made it unlikely, on
the balance of probabilities, that it would survive the
financial crisis and restore solvency.
This is of course very important for any
counterclaim for business loss but that’s no longer
relevant.  As far as the counterclaim for assets is
concerned, this is background but it is important
background.
It is important to look at what, in my submission,
is the judge’s bottom line to this background and that’s
at paragraph 237 of the judgment:
«That then is the background of OMG’s rapidly
developing cash crisis, and its almost total dependence
on the Bank (and V-Bank), towards the end of 2008.  By
then, and probably throughout, the reality was that OMG
was substantially, if not completely, reliant on the
Bank for financial support; and the Bank was aware of
that, regarding it both as its exposure and its
opportunity.»
It is fairly obvious what «exposure» means here.  If
«opportunity» means anything at all here, that must
refer to the fact that this was an opportunity to lay
their hands on valuable assets.
I’m not — I don’t think I can go as far as to say
this is a finding of fact, one of the findings of fact
from which you can infer that he should have inferred
conspiracy.  What I’m saying is that the judge could and
in fact did reconcile his built on sand findings with
the case on conspiracy.  He did not see a problem there.
Then I think you were taken to paragraph 937, where
basically in that paragraph you see it starts at line 5,
you were shown the passage which says:
«… Dr Arkhangelsky made no secret of his intention
to use the full armoury of tactics available to
borrowers in Russia to delay or even defeat a lender.»
I just want to — it is important to avoid any
anachronistic interpretation of that because this is
a reference to Dr Arkhangelsky’s cross-examination in
these proceedings.  It’s not suggested anywhere in
evidence, and the judge did not find, that this is what
Dr Arkhangelsky made no secret of at the time and that
is why the Bank acted as it did.  So it’s important to
avoid any anachronistic analysis here.
As far as what happened at the time of the default
or just after the default is concerned, I have taken you
to the judge’s findings and they are quite to the
opposite effect.  They are that Dr Arkhangelsky was
trying to meet Mr Savelyev to sort it out and
Mr Savelyev was evading him.  What the Bank was looking
at at the time is not what the learned judge records now
based on Dr Arkhangelsky’s cross-examination.
Then I think I have to face the uncomfortable part
that in relation to the alleged forgery of personal
guarantees, the learned judge has found that this
allegation was false and it was dishonestly made.  Those
are the findings we have to live with.  However, in
terms of analysing consistency, my Lords, it’s important
to bear in mind his analysis as to why the allegation
was made.
I would ask you to look at paragraphs 755 and 756 at
page 197 of the judgment.  This analysis, in my
submission, is interestingly similar to the learned
judge’s later analysis of the respondents’ reasons for
their own dishonest conduct, such as the false evidence
orchestrated in Morskoy Bank criminal proceedings or
Gunard Lease, all those matters.  Basically his
perception is that this was a war and the parties
thought that all is fair in love and war.  He applies
this, the words.
Of course when this applies to the appellants, this
is extremely uncomplimentary.  We accept that.  But the
point in present context is this is also in complete
forensic harmony with the counterclaim.  He says, well,
it was a war and not always fought very scrupulously by
both sides.  Later on he says, I think in so many words,
that his findings on the forgery allegations are
consistent with our case on conspiracy.  That will be in
paragraphs 907 and 908.
My Lords, Mr Lord is also making much of the judge’s
findings to the effect that there was no binding
moratorium for six months.  It is important to bear in
mind that the judge first analysed the issue of
moratorium in the contractual context.  The question he
asked himself was: is it a defence to the Bank’s claim
under the guarantees?  And he says no.  Of course in
response to that question, there is a very clear answer.
However, in the context of fraud claim, it’s important
that his factual findings are rather nuanced on the
moratorium.
If I can ask you to look at paragraph 823, and the
second sentence of that paragraph, the learned judge
says:
«Alternatively, it may be that matters were left so
fluid at the 25 December meeting and thereafter that the
two sides had different views as to what had been
agreed.  Mr Savelyev struck me as someone adept at
leaving an interlocutor feeling that he had agreed
something without in fact committing himself.»
Then at paragraph 921:
«I do not consider that the fact that
Dr Arkhangelsky did, under financial pressure, but
without improper threats or coercion, agree to the repo
arrangements without securing the moratorium he wanted,
is definitive about the objectives of the Bank and
‘connected parties’.  Further, I think it entirely
possible that by the end of December 2008 the Bank had
measured Dr Arkhangelsky to be a character who was
unfocused on detail and who could be strung along by
vague but unenforceable assurances.»
And then paragraph 922.  So clearly, once again,
this finding is not only reconcilable but has been
reconciled to our case on the conspiracy.  I’m not
suggesting that he made a positive finding that this is
what happened, that he was tricked into it, but nor does
he rule it out.
Then I think it has been suggested, building upon
these two points really, but it has been suggested by
Mr Lord that there can possibly be nothing wrong with
the repo arrangements on this basis because this means
they were consensual.  There is of course also a finding
that there have been no threats personally by
Mr Savelyev against Dr Arkhangelsky and his family.
Because I think we’ve looked at — we probably
looked at the repo section about five times in the
course of this hearing, so let me just summarise what
I’m saying about that and then we may go there if
necessary.
He did find that the terms of the deal whereby there
is no provision as to what should happen to income and
any potential surplus recovery were extraordinary, and
the fact that they are not recorded in the agreement if
it was intended that there is no need to replace the
surplus on default.  It is most unusual that this is not
provided for in the written agreement.
The fact that Dr Arkhangelsky consented to repo in
principle does not mean that he gave his free and
informed consent to those most unusual terms.  At least
on his findings, as I submitted earlier, the Bank’s
intention was effectively to pocket any surplus because
the judge rejected the proposition that they did not
think about it and he rejected the proposition that it
would have been repaid, and he found that they expected
some surplus on the basis of Lair valuations.
So even if these terms were express terms of the
contract but hidden somewhere in the small print, it
would be legitimate to ask questions about the Bank’s
honesty in imposing those terms on Dr Arkhangelsky.
There is absolutely no evidence that there has been any
warning, express or implied, to Dr Arkhangelsky that in
the event of default, on the Bank’s view he would lose
any rights whatsoever in relation to Western Terminal
and Scan companies or to any surplus recovery.  On the
contrary, all the evidence, all the findings are that
this was presented as a means of strengthening the
Bank’s existing security.
I don’t think there is any need for me to go through
all the other points made in Mr Lord’s skeleton,
paragraph 25, not least because we’ve gone through those
findings in some detail more than once in the course of
this hearing.  I would say and I think I have — I hope
I have shown and my very point was that each of those —
whenever he comes to conclusions, basically he finds
that the facts as found by him are consistent with our
case on conspiracy.  However, this does not mean that
they prove conspiracy.
In a way I would venture to say that this is why the
judgment makes such an enjoyable read, as my Lord the
Chancellor suggested at the start of this hearing.  It
is, with the greatest respect, a suspense novel where at
the end of every chapter you basically have conclusions
to the effect, well, this is consistent with the
conspiracy but does this necessarily mean there was
conspiracy?  Not necessarily.  And then there is —
sometimes there is a rather elegant hint that you may
find out the truth if you read on until the next
chapter.  That is really the way the judgment is
structured.  And I’m not being frivolous here or ironic
in any sense.  I’m making a serious point because this
structure both illuminates the error of piecemeal
analysis but also is quite revealing as to what a proper
analysis would have been.
After a three-month trial — it was actually longer
than three months but — because there were some big
gaps.  But after a three-months plus trial, all the
facts found by the learned judge, without exception, are
consistent with our case.  Of course the next question
in any proper global analysis is whether there is an
alternative explanation which also covers — an
alternative explanation, benign or malign, that doesn’t
matter, which also covers all the facts.
The first question in the search for any such
alternative explanation is to what extent were the
events under the respondents’ control?  That is
obviously important.  Of course the answer on the
judge’s findings is clearly that the respondents
controlled everything.  Their starting position was that
they had pledges over all the real estate involved in
this case in the first place and these pledges are the
most reliable form of security because Dr Arkhangelsky
can’t flee Russia and go to Nice, he can’t take his
terminals with him, so it’s a fairly reliable form of
security.
Then to fortify their control over the events, the
respondents insist on repo, change the management of the
two companies, transfer the shares to some other
companies, subsequent purchasers, they devise all sorts
of schemes to protect the assets further, and whereas
there are ostensibly a large number of independent
companies doing something, on the judge’s findings, all
those companies, all those Renord and SKIF companies
were under the respondents’ control.  So their control
over the events was about as great as it can be.
Then a related question is whether all those events
we rely on in 2009 and further years, was it a series of
disconnected developments, a chain of coincidences,
perhaps a sporadic reaction to the developing situation,
or was it a strategy by the respondents?  Again his
findings are clear.  There has always been a strategy
developed and implemented by Mrs Malysheva, who chose
not to come to the trial and explain herself, with her
colleagues Mr Sklyarevsky, Mr Smirnov, all this under
the ultimate direction and control of Mr Savelyev.
There have been a number of findings to that effect in
relation to different periods of time.
Then the ultimate question is were the objectives of
that strategy honest or dishonest?  Here the most
obvious problem for the Bank’s case is the auctions.
Mr Lord made a point, I think several times in the
course of his submissions, that his clients were under
no obligation to run around and devise a clever strategy
to realise all the synergy value of the assets, to do
the marketing and to go through this complicated
process.  They only had the obligation to start the
auction process and they have complied with it and
that’s all that can be reasonably required from them.
In principle, I agree.  There are two broad factual
scenarios of realisation of security which would have
been consistent with honesty.  One is something I may
call a perhaps honest and clever scenario where the
Bank, being a bank who wants its money back, who wants
to maximise the recovery, analyses the assets, analyses
the market, appreciates the fact that it is the biggest
creditor of OMG empire which is collapsing, it has
pledges over most of things, it can’t participate in
bankruptcies of other companies, it is in a position to
package the assets for sale in the most attractive way,
it is in a position to market them.  It’s not their
obligation under the Russian law but no one can stop
them inviting people to come to the auction.  And they
have control over the pledgers so they can make whatever
agreement they like and do all that in order to maximise
the recovery.  That is the honest clever scenario.
Alternatively, there is an honest stupid scenario
where you’ve got a rather formalistic bank clerk sitting
there with a loan file and just looking there, saying
«Well, what is the security?  Well, it is a quarter of
Onega Terminal.  Okay, and what should I do with it?
What’s the procedure?  I put it for an auction.  Am
I responsible for marketing?  No.  Well, very good, one
thing off my mind».  And then there is an auction and
there is no third party interest probably and then the
price is reduced and that’s not very clever but
consistent with honesty.
However, that is not what the Bank’s evidence at any
stage suggested has happened and that’s not what the
judge has found has happened in this case.  On his
findings, the process has been choreographed by the
respondents in most extraordinary ways with this large,
large number of Renord companies posing as independent,
rigging a large number of auctions, and it was
synchronised in a way which did maximise the benefit for
the ultimate users of these assets by realising the
synergy value.  That at the same time minimised the
recovery for which the credit would be given because
they were sold either in unattractive packages or
subject to the pledge to the Bank and in all cases
without any marketing.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Can you
just give me the paragraph numbers where he says, to use
an abbreviation, that the process was choreographed?
MR STROILOV:  Yes, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I don’t
think he used that word, that’s why.
MR STROILOV:  Yes, my Lord, I am paraphrasing of course.
There are a few, if I may —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes, he
does use that word.
LORD JUSTICE MALES:  I think that was in relation to the
false evidence, wasn’t it?
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Paragra
ph 1398, but it’s your submission.
MR STROILOV:  Yes.  I think firstly I would rely on
paragraph 1159 where he finds that Renord companies
participating in the auctions were not doing so as
independent third parties.  He accepts in paragraph 1195
that for the purposes of the events we rely on
Renord Group as a store of SPVs at the Bank’s disposal.
Then in paragraph 1347, that concerns intention of
course and we’ve looked at this paragraph a number of
times.  That obviously concerns intention but of course
it needs to be read in context of what he had found
about Renord and the auction process and that leaves no
doubt that his findings are that the respondents were in
control.  Taking them together, there is simply no other
logical possibility.
Then paragraph 1370, he describes part of the
transactions in relation to Western Terminal as
contrived and obviously he also described the complex
process and the number of entities involved in that.
1370 — 1373 is also clear:
«Once the fact that all the actors apart from the
Bank were Renord companies is known…»
Then he makes findings to this effect.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Yes,
thank you.
MR STROILOV:  Yes, my Lord.
Having made those findings, perhaps not in the best
organised way as far as the structure is concerned,
having made all those findings, of course the judge has
to look back.  Effectively his findings on auctions are
not consistent in any way with the innocent explanation
advanced by the Bank that they were trying to maximise
the recovery and that they took all the extraordinary
steps earlier to protect the assets in order to be able
to maximise the recovery.  That’s not — they had
complete control and that is the opposite of what they
did.
Having established that, you obviously need to look
back at the earlier events where the judge properly
found that there are alternative possible explanations.
We say he was wrong to choose the innocent explanation,
at least the explanation unfavourable to the
counterclaimants in relation to that.  If you look at
those earlier events, repo, the default, replacement of
management and so on, all these steps by the Bank,
I think there are two things which the judge says about
them repeatedly.
Firstly he makes the point that the Bank pursued its
own commercial interests, perhaps ruthlessly, without
regard to the appellants’ interests.  With respect, this
is not saying very much about honesty or dishonesty.
You can say that about a more straightforward theft,
ruthlessly pursuing your interests without regard to the
victim’s interests.  What he had to decide is whether it
was honest or dishonest.  Of course another thing he is
saying is basically the point he’s making, well, it was
war from the parties’ point of view and in that light it
is understandable.  Of course this comment is not only
consistent with a finding of dishonesty, I would rather
say it seems to be a bit of a euphemism for a finding of
dishonesty which the learned judge uses.
He says they lied in Morskoy Bank case because it
was war.  Now, that doesn’t make it honest, does it?
And he says that they were manufacturing bogus
transactions with assets between connected companies to
protect — to put the assets outside the reach of the
Russian court who might give — because they thought the
judgment would go against them.  That may be war but
that’s hardly honest.
So the fact there was a war does not explain things
away.  The questions are whether the respondents — now
we focus on the respondents’ conduct — have fought that
war by lawful and honest means.  An important forensic
question is, who started that war?  Of course the
respondents have relied heavily at the trial in their
evidence on the Morskoy Bank loan taken by
Western Terminal and their version of the events was
that everything we did was our response to Morskoy Bank
loan.
The judge found that explanation to be false because
the dates don’t match.  He finds, and I’ve taken you to
this earlier in this hearing, he finds that the date
when Mrs Malysheva and others on the respondents’ side
decided to start the process of removing the directors
of the two companies was 10 March 2009, five days after
the actual default and before the appellants did
anything at all.  That was the first shot.
Shortly after, there was a transfer of Scan
shareholding to subsequent purchasers, ostensibly
independent companies, now established to be part of
Renord and SKIF.
Then there is a finding that Dr Arkhangelsky was
trying in this situation, was trying to get to meet
Mr Savelyev and discuss the situation, find out what’s
happening.  Mr Savelyev was evading that meeting and
then lied about it in evidence to the court below.  Only
then — in parallel to trying to find a meeting, well,
then Dr Arkhangelsky and his colleagues took some steps
which can — well, which are described as war on our
side I suppose.  It’s important to understand what these
steps include.  Those are, firstly, the claims in
Russian courts aimed at setting aside the repo
transaction.  I think the respondents have tried to
argue and contend that this claim was based on
misleading the Russian court and that case rather
collapsed when their own witness volunteered to the
court that the OMG lawyer actually tried to draw the
court’s attention to the context of the repo transaction
and the court thought it was irrelevant.
The judge does make some comments about the claim
being artificial but in principle there is nothing
particularly outrageous about challenging a particular
transaction on some formal and straightforward grounds
rather than running a complex fraud case of the kind the
learned judge was considering, especially in Russia
where I think, as the expert says, there is a procedural
rule whereby you can’t plead different claims in
alternatives.  You have to choose from the start.  So it
is understandable.  It’s not anything particularly
outrageous.
But in any event, the fact that court proceedings
are brought against you are not quite an explanation for
the extraordinary steps you go to for the war, you fight
back.  If your opponent takes you to court and misleads
the court, there are easier ways to put it right.  You
will have your say at some point.
I understand the judge’s and I don’t quarrel with
the judge’s findings that both sides proceeded as a war
but it is also an inevitable consequence of his findings
that the Bank was the aggressor in that war and that the
Bank’s means in fighting that war were dishonest.
Then, having established that, frankly I can only
submit that we have established our case on conspiracy
in all three versions, as I think Mr Lord would have
described it.  Our case is the only possible explanation
which covers all the facts.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Your
case is that they acted dishonestly so as to cause you
harm.  Do you now accept that under Russian law, in
order to show harm under 1064, you do actually have to
show that they acted dishonestly causing that harm as
opposed to simply enforcing their legal rights?
MR STROILOV:  No, my Lord, I don’t accept that.  I’m not
proposing to take you to Russian law expert evidence
again but you have been taken to it.  The Russian law
experts’ view seems to be that dishonesty is part of the
lawfulness issue or unlawfulness issue of the tort on —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Okay,
I just wanted to be clear.  I thought I’d detected
a slight change in your approach but you contest
Mr Lord’s submissions on that basis?
MR STROILOV:  I do.  Well, I’m not — to be honest and I’m
sure it is my fault, I’m not sure I completely
understand Mr Lord’s submissions.  I think insofar as he
suggests that we have to prove loss and perhaps even
quantum of loss before the court even starts asking
questions about dishonesty, I submit, well, I’m not sure
that’s what he said, but —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I think
you’re confusing, Mr Stroilov, two things.  The question
of proving quantum of loss is one thing but the other
thing is simply his case that where you have a bank
enforcing its legal rights in relation to security, you
don’t get off the ground under 1064 until you can show
that it was doing something dishonest.  So the burden of
proof remains on you, even though 1064(2) would prima
facie reverse the burden of proof, but it only does so
after you’ve proved dishonesty.
MR STROILOV:  Yes.  My Lord, what I say on this is, if this
was right, that would mean that the provisions of
Article 1064 which place the burden of proving
lawfulness on the defendants would be dead letters.
They wouldn’t mean anything.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  This is
a special situation, isn’t it, where a bank is enforcing
its legal rights under contractual documentation and,
more than that, it is what was apparently the
substratum, the basis of the argument in the court
below.  You never suggested in the court below that they
had to disprove dishonesty, the whole case was 46 days
of you trying to.
MR STROILOV:  Well, my Lord, of course this — the question
of burden of proof only becomes important if the learned
judge below was right at the end of a three-month plus
trial to say, «Well, actually I can’t make ultimate
findings about what happened, I have to decide this case
on the burden of proof».  And of course neither side
ever — well, speaking for myself — ever envisaged that
might be the outcome.  The whole purpose of having
a three-month trial is, well, you rather expect that in
the end the judge will tell you what has happened.  And
here his answer effectively, well, with reference to
Lord Nicholls, is «Well, I don’t know, I am in as good
a position to tell you as if there had been no evidence
at all and therefore I decide this on the basis of
burden of proof».  And that alone —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Okay.
While I’m asking you questions, Mr Stroilov, because
we’re very short of time, you will leave time to just
tell us what you say about what happens if you win.
MR STROILOV:  Yes.  Well — yes.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Because
you’ve heard the debate that I had with Mr Lord and
certainly from my own point of view I regard that as
a very difficult question, if you were to win, and
I would value your submissions on that.  I know you made
some submissions before and you suggested we could do it
ourselves but I want to know what you say if we don’t
think we can.
MR STROILOV:  Yes, my Lord.  This is probably a convenient
moment, my Lord, as I think I have tried, I’ve had
a last attempt at persuading you that you can substitute
your findings on fraud because on the judge’s findings
this is the only explanation of the facts which any
reasonable judge would have to accept.  That’s my
primary submission.
Alternatively, if you agree with me that the judge
has decided the case on the burden of proof and if you
agree with him that he is entitled to do that on the
facts of this case, then I submit you should reverse his
decision because the burden of proof is plainly on the
respondents to this appeal, not on the appellants.  If
you are not persuaded by either of those submissions,
and of course I roll my Ground 3 and my point on
piecemeal analysis into this, you should I think in the
first instance try to reconstruct, as it were, what
a proper judgment should have been.  Simply correct the
errors.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Well,
I understand all that.  I’m asking you what happens if
we feel we can’t and we have to make some order as to
what should happen as a result of our decision that
there were errors in the judgment but we can’t redecide
it?
MR STROILOV:  If you can’t, it has to be a retrial.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Of the
whole thing or on the basis of the evidence that was
called before or what?  And by whom?
MR STROILOV:  Well, I suspect, given that the learned judge
starts his judgment by the words «This awkward case…»,
I suspect he would have wanted me to jump on the idea of
him being kept out of it.  But, as I said, I remain
neutral on this.  We are not suggesting he was biased or
anything of that kind.  You may consider, my Lords,
given your experience and wisdom, that in terms of case
management a new broom might be more efficient, but I’m
not saying that —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  It’s
not a question of new brooms, it’s a question of
justice.  But let’s assume for the moment, I think it’s
quite easy if we send it back to the judge, subject to
what my Lord said about having jurisdiction to do so,
but if we feel we can’t send it back to the judge, what
do you say we should order?
MR STROILOV:  Really I did not look it up, and of course if
Mr Lord is invited to make written submissions, I would
request a right to do the same as well in response.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  You
may.  We’ll give directions about that but it will be
very soon that we’ll need them, immediately after the
weekend.
MR STROILOV:  Yes, my Lord.
My understanding of the position is this is
effectively a binary choice.  If you can’t make
conclusions, it has to be a retrial.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Of
everything?
MR STROILOV:  Well, of things you can’t reach conclusions
on.  You are entitled of course to uphold parts of his
judgment and —
LORD JUSTICE PATTEN:  Can we just be clear?  There’s no
question of a retrial of the claim?
MR STROILOV:  Subject to my Ground 6, my Lord.
LORD JUSTICE PATTEN:  Yes, but if we’re not persuaded by
that, then the judgment on the claim stands.  So the
only thing that would go back to a judge to be retried
would be the counterclaim?
MR STROILOV:  The counterclaim.
LORD JUSTICE PATTEN:  So what you’re being asked is, is it
the whole of the counterclaim as pleaded by you and
presented to the judge at the trial or is it just one or
other version of the conspiracy?  And if so, is it every
factual aspect that feeds into that or only a limited
section of that?
MR STROILOV:  Well, frankly, I don’t think there is
a realistic way of carving any substantial parts of the
counterclaim off this.  I think it is — well, except
perhaps you may consider that the judge’s dismissal of
the claim for the loss of business values is safe, and
you decide not to disturb this, again I think it’s fair
to say that we have not challenged it, challenged those
conclusions in this appeal.
LORD JUSTICE PATTEN:  So it’s just the claim for loss based
on the value of the assets, the loss of the assets.
MR STROILOV:  Yes, my Lord.
And I think as I said when I was finishing my
original submissions, I don’t think that — even though
it may seem tempting, I don’t think that the moratorium
issue can be carved out because that would be
artificial, you can’t reanalyse repo without looking
into it and then perhaps —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  So you
say all the terms of the repo agreement and the
circumstances in which it was entered into have to be
retried?
MR STROILOV:  Yes, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  And the
moratorium.  Right.
MR STROILOV:  Indeed, my Lord.  So it would have — I think
the extent in which — what you can carve out is
a rather big bit.  It is the alternative counterclaim
based on the value of the assets and then I think the
distinction between the three versions is in truth
a distinction without a difference.  It’s just the three
dates.  If you are persuaded by my arguments on
piecemeal analysis, that means that you have to take the
correct approach and look at everything afresh.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  That’s
very unappealing, isn’t it?  It’s a very unappealing
prospect for us to order another three-month trial which
is what —
MR STROILOV:  That’s why, my Lords, I urge you for
an assiduous search of a solution where you are able to
substitute your own findings.  That is the right
approach.  If you can, you have to.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Okay.
MR STROILOV:  Under the overriding objective et cetera.
My Lords, a few further points in reply to points
made by Mr Lord.  You have been taken to Russian law
evidence, I don’t propose to spend any time on it.
You will have seen my note where I identify the
passages which I rely on to say the judge has made no
finding of no loss and that he effectively found the
fact of loss, even though obviously not a quantum of
loss.  In addition to that, may I take you quickly to
paragraph 1428 of his judgment?  There he is discussing
valuation evidence and there he quotes the agreed
definition of «market value», taken obviously from the
International Valuation Standards Council:
«… as the estimated amount for which an asset
‘should exchange on a valuation date between a willing
buyer and a willing seller in an arm’s length
transaction, after proper marketing and where the
parties had each acted knowledgeably, prudently and
without compulsion’.»
So by definition of the «market value», by this
agreed definition, the judge had no reason and you have
no reason to suppose that any of the auctions achieved
the market value.  It might coincide with market value
for some reason but because it was not an arm’s length
transaction, none of them was an arm’s length
transaction, none of them was done with proper
marketing, that means it was not market value.  And it’s
not for us to prove that there would have been third
parties.  It’s just you have to accept that there is
simply no reliable evidence of market value and these
auctions are not any such evidence.
Further to that I submit that, well, in the ordinary
course of events and frankly without exceptions, sale of
assets in unattractive packages without marketing, all
this causes at least a loss of chance that they would be
sold at a higher price.  As I am on the fact of loss,
not on the quantum of loss, I don’t need to show more
than that and that is self-evident.  There has been
a loss.
I refer in my note to the witness statement of
Mrs Yatvetsky and you can look at it.  It has been added
to the bundle.  Again I’m not saying this is
particularly sensational but, in terms of the fact of
loss, it is important that it is acknowledged by Renord
that there has been — well, they’re buying the asset at
auction for which credit was given and then selling them
to someone else later on at a transaction which did not
result in any credit being given, they have made
a profit.  The judge of course is sceptical about the
figures given and Mrs Yatvetsky, as you will see from
her statement, is not very firm about given figures.
She says that’s after deducting and then there is a long
thing of vague descriptions of what she has deducted
from that.
So that is another indication and I would say, read
together with what the judge has said, this is proof
that there has been profit and the appellants
effectively say «This is our profit, we have lost it, we
should have had it».
A very brief point, you were taken to the learned
judge’s findings dismissing our expert valuation
evidence.  I trust you are also aware of what he said
about their valuation expert and I leave it there.
Although of course what he says about their valuation
evidence in terms of establishing the fact of loss is
more important because he seems to suggest that the real
value would have been higher than their valuation and
that rather suggests, well, then the assets were sold at
an undervalue.
Very quickly on Ground 3, I think just one point
I want to address.  You heard Mr Lord’s interpretation
is that the counterclaim was inherently improbable
because there has been a large number of conspirators
alleged.  If we can look just at the pleaded list of
those conspirators, that’s core bundle 2, tab 10,
page 532, paragraph 177, of course this forensic point,
this is not the first time I hear it in the past
six/seven years, that many conspirators make it
inherently improbable.
The list of conspirators is in our paragraph 177:
(a) the Bank, (b) Mr Savelyev, (c) Mrs Malysheva, vice
president of the Bank, (d) two further senior employees
of the Bank, and then (e) the original purchasers’
companies, seven companies I think, the subsequent
purchasers, six companies, vehicles for dissipation of
assets, a number of them, (h) a number of further
companies and nominees, and then in (i) and (j) you have
the four allegedly corrupt officials in Russia.
So the point about the large number making it
improbable rather loses at least some of its force after
the judge’s finding that all those companies, numerous
companies, were all Renord companies controlled by the
Bank.  So that we have overcome this inherent
improbability that all those companies can’t all come
together in a conspiracy because the judge found that
they did.
Very quickly on my Ground 6, I think Mr Lord has
said I made no complaint about fairness of the trial
during the trial.  That’s not quite so.  I made a — it
was four years ago so people forget things.  I also
forgot some details.  I made quite a detailed complaint
as early as in my opening submission but at that point
the judge said basically, «Well, I have said I’ll keep
it under review, leave it alone, leave fairness to me
and just focus on proving your case» and that’s where we
left it.  We are entitled to argue now that his
expectations about fairness of the trial have been
proven wrong.
On the illegality public policy defence, I simply
submit that for the reasons — that basically the
mischief in this case is far too remote from our cause
of action for this issue even potentially to arise.  The
judge has exercised his discretion for the reasons he
has given in paragraphs 1527 to 1547 and, in my
submission, he was plainly right.
Further, or alternatively, this argument should be
dismissed for the reasons given in our skeleton
argument, paragraphs 52 to 73.  I don’t want to leave
this point without acknowledging by way of — if only by
way of full and frank disclosure that this section of
the skeleton is about 100% plagiarised from the written
submission prepared for the learned judge on this point
by Mr Milner of counsel.  And if memory serves, pro
bono.  So if you find it impressive please don’t be
surprised.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Don’t
blame you!
MR STROILOV:  Yes, my Lord.  That’s all I have to say on
public policy.
I think Mr Lord asked whether he could have five
minutes to reply on public policy.  I’m not sure I have
said quite enough to warrant a five-minute reply.
Let me just mention, I think you have mentioned —
I suspect you aren’t going to give the judgment now, you
are going to reserve it and you’ve mentioned that one of
the possible outcomes may require a further hearing of
consequential matters.  If that happens, please bear in
mind that the appellants are likely to have the same
difficulties in terms of attendance and/or
representation as here so you may want to consider
giving notice so that Dr Arkhangelsky can make travel
arrangements if his attendance is required.
You may also consider whether to extend my rights of
audience to represent the appellants at that hearing
too.
On that note, I will mention very briefly before
I sit down that of course for someone in my position, it
is a great honour to be allowed to appear before such
a tribunal as this, my Lords.  And this is my
submission.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Thank
you very much.
Reply submissions by MR LORD
MR LORD:  My Lord, just two minutes.  Just one point I need
to correct in Mr Stroilov’s responsive submissions.  He
said in relation to paragraph 937 that there was an
anachronistic error because that was a citation by the
judge from the trial rather than the contemporaneous
events.  If your Lordship turns to 1135 of the judgment,
this is in relation to Dr Arkhangelsky’s making it clear
that he intended to obstruct the Bank about its
enforcement steps.  In paragraph 1135, if your Lordship
looks at the last three or four lines and in particular
the last few words in parenthesis in the last sentence
in the last line.
LORD JUSTICE MALES:  Do you mean 1135?
MR LORD:  I think so.  It’s the last —
LORD JUSTICE MALES:  Oh, yes.
MR LORD:  He’s dealing with there initially us and then he
says, in effect, «(as he had made clear he intended to
do)».  I think that’s how that’s to be read and that’s
obviously back at the time of the events in question and
the enforcement.
Then in terms of the order, we don’t invite notes,
my Lord, as to the follow-up order.  We would invite
your Lordship’s attention to the notes in the
White Book, which your Lordship has, at Volume 1, page
1817.  The notes of 52.20.2.  It’s the note at 52.20.2
at page 1817 of Volume 1 of the White Book.  I confess
we’ve not had time to look up the case there that’s
referred to in the second paragraph, but the —
LORD JUSTICE PATTEN:  What, the MV3 case?
MR LORD:  That’s right, my Lord.  It’s the reference to
52.20.2(b) I think is the relevant bit of the rules:
«The appeal court has power to… refer any claim or
issue for determination by the lower court.»
So obviously an issue can go back from this court.
Then your Lordship will see it looks as if this
court must have remitted a matter or referred a matter
back to Mr Justice Arnold and he looks like he queried
the basis for that.  Then it reads on as it does.  But
it does suggest from that that there is that
jurisdiction, albeit it’s the note, the note suggests
that it should be used circumspectly and that in effect
such an order would set aside any issue estoppel to the
extent necessary to enable the judge to perform that
task.
LORD JUSTICE PATTEN:  I do know, because I was a member of
the court, I certainly remember in a family case
sending — during the course of an appeal we simply
adjourned the appeal and remitted back to the trial
judge in a rather complicated children’s case a couple
of issues which the judge had simply not dealt with at
all.  It wasn’t that he’d misdealt with it, he just
simply hadn’t dealt with it.  Because it was germane to
the arguments in the appeal, we thought that it was
appropriate to get the judge to decide those issues
before we determined the appeal.  So it’s a slightly
different situation and of course the trouble with
family cases is that it’s always a continuing — the
jurisdiction is always a continuing one in children’s
cases to review the situation.  So it’s not — it
doesn’t have quite the finality that we’re talking about
here.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Normall
y the situation is the Court of Appeal is faced with an
application based on an error of law and sends it back
and says «Decide the case on the correct law rather than
on the law that you said was the law», and that in one
sense is what could happen here, because if he has
applied the wrong standard…  But I think we’ve got to
consider these matters.  Did you say, Mr Lord, that you
didn’t want to make further submissions in writing?
MR LORD:  If there is the jurisdiction there appears to be,
we commend the remission to Mr Justice Hildyard to
clarify and tidy up to save an awful lot of bother and
if not, we fear there will have to be a retrial of the
counterclaim.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  Well,
you both agree about that really, so, okay, no need for
further submissions Mr Stroilov.
MR STROILOV:  Yes, my Lord.  I’m not sure we do agree
because what I suspect my learned friend wants is you
send the judgment back to Mr Justice Hildyard so that he
can belittle this misgivings bit.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I don’t
think we need to get into all that.
MR STROILOV:  I’m not —
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  I’m not
seeking agreement, Mr Stroilov.  I’m just directing that
there will be no further submissions.
MR STROILOV:  I’m grateful, my Lord.
THE CHANCELLOR OF THE HIGH COURT, SIR GEOFFREY VOS:  We will
reserve our judgment, surprisingly perhaps, but at 4.20
on the last day of a four-day hearing I’ve decided with
reluctance not to deliver an ex tempore decision.  When
we deliver our judgments, perhaps you can agree the
consequential orders.  If you’re unable to do so,
I would expect the argument to be in writing, not
orally, unless something very exceptional needs to be
determined.  So that will deal with your problem,
Mr Stroilov.
It only remains for me to thank both parties and
their solicitors, insofar as there are any, and counsel
for the argument which has been succinct in the
circumstances of the length of the judgment and
extremely helpful to the court.  Thank you.
(4.24 pm)
(The hearing concluded)

INDEX
Submissions by MR LORD (continued) ……………….1
Reply submissions by MR STROILOV ……………….142
Reply submissions by MR LORD …………………..177