July 11, 2016 Day 46
1
- (10.30 am)
- Closing submissions by MR STROILOV (Continued)
- MR STROILOV: Good morning, my Lord.
- MR JUSTICE HILDYARD: Good morning.
- MR STROILOV: My Lord, as it happens, one does remember
- points over the weekend, so I would like to address
- your Lordship ‐‐ first I would like to make some points
- about the Morskoy Bank criminal case, then expand
- a little on other criminal cases in Russia and, more
- broadly, on what I might perhaps unscientifically term
- as «political aspects» of this case in view of the
- submissions made on behalf of the claimants in this
- respect. Then I will come to the prospects of
- refinancing of OMG and especially Mr Bromley‐Martin’s
- evidence, and then I will just draw the threads together
- in terms of the possible motivation of the Bank’s
- decisions and what would have happened if not for the
- fraud as we invite you to find.
- Then I hope to pick up all outstanding points as we
- go along.
- MR JUSTICE HILDYARD: That seems fine. I mean, obviously
- you can address me on them at least by identifying what
- you wish to say before elaborating, but I won’t
- encourage you to expand greatly on general political
1
- context.
- MR STROILOV: I appreciate, my Lord, why you are saying
- that. I will simply respond to the submissions made in
- that respect by the claimants.
- MR JUSTICE HILDYARD: Very good.
- MR STROILOV: I don’t expect it will take long. If you see
- I am beginning to say something irrelevant, obviously
- you will feel free to stop me.
- My Lord, just a few points on the Morskoy Bank
- evidence. I think a point is made rather vigorously in
- the claimants’ submissions that essentially both sides
- are at fault, and Mr and Mrs Arkhangelsky also did not
- explain the full extent of a repo transaction to
- the Russian authorities or Russian courts. I think that
- is incorrect as it appears from the evidence of their
- own witness, Mr Sklyarevsky. If we could look at
- {Day24/19:4}, that is in the context of ‐‐ if we could
- perhaps have on the other screen {Day24/18:1} to see the
- context. It is in the context of the discussion of
- Russian civil cases, and starting at line 5, I think,
- I ask:
- «Question: Now, Mr Sklyarevsky, I think the
- explanation you have given is not what the judgment
- says…»
- And then ‐‐ I beg your pardon ‐‐ and page 19, yes
- my Lord, I beg your pardon, I was looking at page 18.
- At page 19, at line 4 I ask:
- «Question: Now, I understand that
- Mrs Arkhangelskaya’s lawyers did not explain the factual
- context in their claim. They didn’t explain all about
- the repo transaction and all that, did they?
- «Answer: Well, as a matter of fact I seem to recall
- that this information was provided to the judge, except
- that the memorandum, the repo transactions are not legal
- documents under Russian law, and they were not accepted
- by the court.
- «But Mr Erokhin did adduce those materials. At
- least he showed those materials. He turned them up, he
- handed them up to the judge.»
- My Lord, it seems in this respect the position was
- fully explained to the Russian court, and of course
- there is nothing wrong and, indeed, nothing surprising
- in the fact that their straightforward claim was
- brought, focusing on one fact of the sale being at
- a nominal price, and that the OMG lawyer sought to set
- aside the transactions on that basis. So long as the
- court was not misled there is nothing strange bringing a
- simple claim rather than a complicated claim, such as
- the counterclaim here.
- MR JUSTICE HILDYARD: Well, on the basis of this evidence it
3
- may not much matter, but there is a world of difference,
- isn’t there, between a transaction at a nominal price
- with an existing and enforceable counter contract
- enabling re‐transfer back for a nominal price on the one
- hand, and a bare sale at a nominal price with no right
- of recourse on the other. They are very different
- things, aren’t they?
- MR STROILOV: Indeed, my Lord, and I accept it would have
- been open to criticism, the line taken by OMG lawyers,
- if not for what Mr Sklyarevsky explained to you.
- MR JUSTICE HILDYARD: Yes.
- MR STROILOV: Obviously on this evidence it is spotless.
- They explain the context to the court but the court
- resolved to focus on this one issue, rightly or wrongly.
- But any criticism would really be against the Russian
- court rather than OMG.
- MR JUSTICE HILDYARD: And, of course, I suspect you would
- emphasise that the Bank was there and knew these things
- and could always refer the court to them. It wasn’t
- an ex parte application or anything like that.
- MR STROILOV: Indeed, my Lord.
- MR JUSTICE HILDYARD: I’m not sure that further questions
- were asked as to the phrase between 9 and 12:
- «… except that the memorandum, the repo
- transactions are not legal documents under Russian law,
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July 11, 2016 Day 46
- and they were not accepted by the court.»
- That wasn’t taken up, was it?
- MR STROILOV: It was not, my Lord, that really is the end of
- the line. But of course whether or not they are legal
- documents, you are not bound by whatever view was taken
- by the Russian courts on that. You have heard the
- Russian law evidence and it is for your Lordship to
- decide, with respect.
- MR JUSTICE HILDYARD: Yes.
- MR STROILOV: My Lord, so there is no parallel between the
- way the matters were presented in these civil claims and
- in the Morskoy Bank loan criminal case.
- I think it is clear from the evidence which I have
- shown to relevant witnesses that the fact that the repo
- was fairly central to that criminal case. Just to
- summarise briefly, the allegation was that
- Mr Arkhangelsky caused Western Terminal to take a loan
- from Morskoy Bank without the permission of
- Sevzapalians, the original purchaser who was, at that
- time, formerly the shareholder of Western Terminal. Of
- course, Mr Arkhangelsky’s defence to this is that it was
- not a genuine shareholder; it was a security arrangement
- with the Bank. So he did not consider that
- Sevzapalians’ consent was required, especially in
- the light of the provisions of the memorandum whereby
5
- the purchasers undertook not to interfere in
- the day‐to‐day commercial ‐‐
- MR JUSTICE HILDYARD: Prior to default?
- MR STROILOV: Yes, my Lord. Well, it depends on whether or
- not there was a default, which in turn depends on the
- moratorium. Secondly ‐‐ and that is a side issue which
- clearly was not explored in the criminal case, in any
- event.
- Secondly, whether Mr Arkhangelsky had proper notice
- of the default, and that the Bank and the purchasers did
- not consider themselves bound by the memorandum anymore.
- Taking the Bank’s case at its highest, what they say
- they have done, it was formal notice of default to
- PetroLes, and Ms Mironova says that she phoned
- Mr Arkhangelsky to tell him that the extension of
- PetroLes loan was refused.
- It is not suggested that at any time Mr Arkhangelsky
- was told that: in the light of this default, the
- memorandum is no longer in force and we feel free ‐‐
- well, we are now the shareholders of the two companies.
- All these undertakings are no longer in place. He was
- never told that, on any view, even on the Bank’s view.
- MR JUSTICE HILDYARD: I do apologise, I am a bit rusty, but
- when the default is called on the PetroLes loan, was
- there a cross‐default called on the rest of
- the borrowing?
- MR STROILOV: Gradually, my Lord, well, it developed over
- some two months or thereabouts.
- MR JUSTICE HILDYARD: A sort of cascade. Yes.
- MR STROILOV: I could find the dates ‐‐ well, it might be in
- the claimants’ chronology, I imagine, in the one I think
- they attach to their opening.
- MR JUSTICE HILDYARD: But is it accepted that by the time of
- the Morskoy Bank loan, OMG was in default?
- MR STROILOV: Well, we don’t accept that because we say
- there was a moratorium, so there could be no default
- before that.
- MR JUSTICE HILDYARD: Subject to the six‐month moratorium.
- MR STROILOV: Subject to the six‐month moratorium, yes, well
- if you are against us on that then yes, PetroLes was in
- default and Vyborg Shipping was several days in default
- on one of its loans.
- MR JUSTICE HILDYARD: And if I am against you on the six
- months, does the fact of a default on PetroLes and
- Vyborg, do you accept that that knocks you out in terms
- of relying on the provisions which guaranteed you to be
- able to run the company in the meantime prior to
- default?
- MR STROILOV: Yes, in terms of contractual analysis, clearly
- the memorandum expressly provides that all these
7
- undertakings are only in force so long as the group is
- not in breach of its own obligations to the Bank.
- However, in the context of the criminal allegations
- in the Morskoy Bank case, the position is somewhat
- different, then it becomes very important what notice
- Mr Arkhangelsky was given, and whether he could honestly
- believe that moratorium ‐‐ or that memorandum was still
- in force. So long as there was a possibility of him
- taking an honest view that Sevzapalians was not
- a shareholder, the criminal case obviously must fail.
- So it was quite ‐‐ well, the whole context was
- enormously important, and presenting the whole
- transaction as a genuine sale of the shares was
- really ‐‐ well, was presenting the very opposite of
- the truth to the investigator.
- So on any view it is much more serious than
- concealing these elements in any other context.
- MR JUSTICE HILDYARD: But do you accept ‐‐ leaving aside the
- question of notice or knowledge, and all the ingredients
- which are relevant to the criminal process, as
- I apprehend, in Russia, do you accept that if I am
- against you on the six‐month moratorium, the nature of
- the default was such that the obligation not to
- interfere had fallen away prior to the date on which the
- Morskoy Bank loan was contracted?
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July 11, 2016 Day 46
- MR STROILOV: Yes, absolutely.
- MR JUSTICE HILDYARD: You do.
- MR STROILOV: It was the default ‐‐ on that view, if you are
- against us on moratorium, the default was 5 March,
- Morskoy Bank loan was 30 March.
- MR JUSTICE HILDYARD: And the relevant default was
- sufficient, is what I am getting at ‐‐ what date was the
- Morskoy Bank loan?
- MR STROILOV: 30 March 2009.
- MR JUSTICE HILDYARD: 30 March. Because my understanding
- was it was a default only on PetroLes and Vyborg, but
- you accept that that worked a sufficient cascade effect
- that they were entitled to intervene?
- MR STROILOV: Yes, well I accept that on the terms of
- the memorandum. I accept that.
- MR JUSTICE HILDYARD: Thank you.
- MR STROILOV: Now, my Lord, turning to the evidence given to
- you by the Bank’s witnesses in relation to the criminal
- case, you will recall that Mr Savelyev said several
- times: I didn’t pay much attention to this, it wasn’t
- our case, it was Morskoy Bank’s complaint. The Bank had
- nothing to do with it, we were simply witnesses. And he
- said the same in relation to explaining his own untrue
- evidence, and Mrs Malysheva.
- Now, that explanation is, I am afraid, untrue
9
- because the criminal case was initiated on a complaint
- of Mr Maslennikov, the new director general of
- Western Terminal appointed by Renord. That complaint is
- dated 27 August 2009, and it is at {D129/2085/1}.
- I don’t propose to read it, but simply a reference for
- your Lordship’s note.
- Whereas Morskoy Bank only made its own complaint in
- relation to the loan on 31 March 2010 and that complaint
- is at {D137/2282/1}. So that complaint was only filed
- after all six witnesses gave their evidence to the
- investigator. At that time it was a complaint made by
- the Renord director general of Western Terminal acting,
- obviously, in the interests of the Bank.
- MR JUSTICE HILDYARD: So in 2009 who is the actual
- complainant?
- MR STROILOV: It is the new director general of
- Western Terminal just appointed by Renord in the ‐‐
- well, not just appointed; it has been some time between
- he was formally appointed ‐‐
- MR JUSTICE HILDYARD: That’s in August 2009.
- MR STROILOV: Yes, August 2009.
- MR JUSTICE HILDYARD: And then in March 2010, by this time
- Morskoy is controlled by BSP.
- MR STROILOV: Morskoy Bank, I don’t think it is ‐‐
- MR JUSTICE HILDYARD: Sorry, that element of the claim is,
- but they have bought the right to the claim.
- MR STROILOV: Yes, that is something I think I need to check
- when they actually bought the right to the claim.
- I will find the date, my Lord, in a moment.
- I think not. I think it was some time later. I am
- looking at my own, paragraph 122 of my closing
- submissions. It doesn’t give the date, but it says the
- writ of execution was issued on 3 December 2010, and
- I understand that it was only after the writ of
- execution was issued that Sevzapalians actually bought
- the claim. Incidentally there is an error in this
- paragraph which was pointed out to me earlier as well.
- It wasn’t Sevzapalians who filed a claim.
- MR JUSTICE HILDYARD: You explained, it took over the claim
- filed by Morskoy Bank.
- MR STROILOV: Yes, it was filed by Morskoy Bank, but then
- Sevzapalians bought the loan and therefore took over the
- execution proceedings.
- MR JUSTICE HILDYARD: That’s where I’m becoming confused,
- because my understanding from what you have told me is
- that there were two events, as it were: the one occurs
- in 2009 and the second in 2010. My understanding from
- you was that the earlier 2009 was instituted by the
- director general.
- MR STROILOV: Yes.
11
- MR JUSTICE HILDYARD: Director general of which company?
- MR STROILOV: Of Western Terminal. It’s ‐‐ Renord appointed
- director general of Western Terminal.
- MR JUSTICE HILDYARD: Complaining that Western Terminal has
- been, as it were, defrauded because it has been
- committed to a loan without the proper organ of that
- company authorising it.
- MR STROILOV: Yes, my Lord.
- MR JUSTICE HILDYARD: Then the other side, as it were, the
- Morskoy Bank side, in March 2010, at that time
- instituted by independent directors of Morskoy Bank, do
- they adopt ‐‐ theirs is a separate claim, is it?
- A separate proceeding?
- MR STROILOV: Well, it was as it appears from the documents
- we have disclosed, the ones we have actually received
- from Mr Nazarov and disclosed in 2013, that the
- proceedings were actually united because it was the same
- criminal proceeding under two complaints, but the first
- one ‐‐ well, it was initiated under the first complaint
- of the director general of Western Terminal, and then
- the Morskoy Bank complaint was simply merged into the
- existing criminal investigation.
- MR JUSTICE HILDYARD: So where you say in 122,
- between July 2009 and December 2010 Sevzapalians took
- over the claim filed by Morskoy Bank, which is,
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July 11, 2016 Day 46
- I understand, how you now wish me to read it, which was
- the claim that was taken over by Sevzapalians: The
- director general’s or the Morskoy Bank claim?
- MR STROILOV: No, no, these are different proceedings, what
- I’m talking about are the criminal proceedings where the
- evidence of Mr Savelyev and Ms Malysheva and
- Ms Stalevskaya was given on which there was quite
- lengthy cross‐examination.
- Whereas the claim I discuss in 122 is the civil
- claim under the loan agreement, and that is material
- because it was used to enforce against Western Terminal
- assets and ‐‐
- MR JUSTICE HILDYARD: Well, when was the civil claim which
- Sevzapalians took over filed by Morskoy Bank?
- MR BIRT: There is a little passage in our closing which
- gives the facts, my Lord, I don’t want to interrupt.
- MR JUSTICE HILDYARD: Yes, could you give me the details?
- MR BIRT: It is paragraph 909 of our written closing which
- recites that Morskoy Bank commenced its proceedings
- against Western Terminal in December 2009, there was
- a judgment in favour of Morskoy Bank in December 2010,
- and then the claim was assigned by Morskoy Bank to
- Sevzapalians in February 2011. {AA3&4/14/480}.
- MR STROILOV: I am very grateful for this.
- MR JUSTICE HILDYARD: Right.
13
- I mean, it is a bit confusing on that footing, isn’t
- it, Mr Stroilov? What I thought you were telling me was
- that Mr Savelyev has misrepresented the position; has
- he?
- MR STROILOV: Indeed, of course. These are two very
- separate issues except that they relate to the same
- loan. There is a criminal complaint on the basis that
- Mr Arkhangelsky fraudulently caused that loan to be
- taken.
- MR JUSTICE HILDYARD: Mm.
- MR STROILOV: Separately there is a civil claim for the
- recovery of that loan, and these are two quite separate
- processes, if that makes sense.
- MR JUSTICE HILDYARD: Yes. I am sorry to make heavy weather
- out of it, but I just want to see exactly what you said.
- MR STROILOV: I actually ‐‐ in my closing I discuss this in
- quite different places. I talk about the Morskoy Bank
- criminal case evidence starting at paragraph 94.
- MR JUSTICE HILDYARD: And when you were saying that
- Mr Savelyev did not tell us the truth, in your
- submission, it all relates to the criminal case?
- MR STROILOV: It all relates to the criminal case, yes,
- my Lord.
- MR JUSTICE HILDYARD: So the confusion has been focusing on
- 122 rather than on 94, really?
- MR STROILOV: Well, it is just that it was really in answer
- to your Lordship’s question as to when the Morskoy Bank
- assigned its rights to Sevzapalians.
- MR JUSTICE HILDYARD: Yes, I see.
- MR STROILOV: As opposed to the chronology of the criminal
- case on which I was addressing your Lordship.
- MR JUSTICE HILDYARD: Okay.
- MR STROILOV: So the point I was making is that whereas
- Mr Savelyev sought to distance himself and the Bank from
- that criminal case, and essentially the burden of his
- evidence was: I did not pay much attention to this
- interrogation, to this interview, because the case had
- nothing to do with the Bank, it was a Morskoy Bank case,
- whereas in reality, at the time he was interviewed, the
- case was initiated on a complaint of the director
- general of Western Terminal acting in the interests of
- the Bank of St Petersburg, or controlled via Renord, and
- Morskoy Bank complaint to the criminal authorities
- post‐dates the evidence given by Mr Savelyev and
- Mrs Malysheva and others.
- MR JUSTICE HILDYARD: Yes.
- MR STROILOV: Now, there is ‐‐ further, I think there is
- more to it, there is significantly more to it than
- simply failing to mention the second element of the repo
- transaction and explain the context. If we could have
15
- a look at Mr Savelyev’s evidence at {D138/2304/1} ‐‐
- I beg your pardon, my Lord, I think I was wrong. In
- fact it is dated 21 May 2010, so it post‐dates the
- Morskoy Bank complaint. I beg your pardon, I confused
- the dates.
- MR JUSTICE HILDYARD: Well, I am sorry, I am getting
- confused again.
- MR STROILOV: I am sorry, my Lord, yes. Perhaps let me make
- it clear, it is my fault entirely. I got lost in
- the dates.
- MR JUSTICE HILDYARD: So Mr Savelyev may have been accurate
- after all, or …?
- MR STROILOV: No, he was not accurate because that was the
- criminal case initiated by their own servant,
- effectively, by the Bank’s own servant nonetheless ‐‐
- MR JUSTICE HILDYARD: Right.
- MR STROILOV: ‐‐ but by that time, Morskoy Bank had also
- joined, so to that extent, my submission was inaccurate
- for which I apologise.
- MR JUSTICE HILDYARD: Right. So by the time of May 2010,
- this might be a criminal proceeding adopted by
- Morskoy Bank?
- MR STROILOV: Yes, my Lord. So there were two complaints by
- that time.
- MR JUSTICE HILDYARD: Yes.
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July 11, 2016 Day 46
- MR STROILOV: But nevertheless, it was ‐‐ the criminal case
- itself was ongoing.
- MR JUSTICE HILDYARD: Was instigated in the first place?
- MR STROILOV: Yes, my Lord.
- MR JUSTICE HILDYARD: I see.
- MR STROILOV: My Lord, if we could scroll down to page 3 of
- this tab. So in the top paragraph, Mr Savelyev is
- recorded as saying that he refused to assist
- Mr Arkhangelsky in selling his assets {D138/2304/3} but,
- importantly, further on, you find in the third paragraph
- from the top, starting from the words:
- «During this meeting either beforehand …»
- An imperfect translation, but this is clearly
- a response to the allegations substantively similar to
- this counterclaim. Clearly he is responding to
- an allegation that this was in exchange for
- a restructuring of OMG loans.
- In the next paragraph he is responding to
- the allegations that he intimidated Mr Arkhangelsky, and
- then he is explaining the process of recovery, and
- finally he mentions in the third paragraph from the
- bottom, he refers to out of court settlement with SO
- Scandinavia, that’s the company we normally refer in
- these proceedings as «Scan», and he specifically
- mentions, also it is recorded that it was sold on
- could have ‐‐ let me start again.{D138/2304/2}. So that
- is Mr Savelyev’s evidence, and he explains in the second
- paragraph from the bottom, he starts from:
- «In November 2008 …»
- And he presents a coherent but false account of what
- happened, really directed to lead the investigation to
- believe that Mr Arkhangelsky genuinely intended to sell
- his companies and, indeed, did so.
- MR JUSTICE HILDYARD: Mm.
- MR STROILOV: If we could now look at the evidence given by
- Mrs Malysheva, which is at {D137/2278/1}, and that is,
- indeed, that appears to be March 2010. So several days
- before the Morskoy Bank complaint, but that is a matter
- of detail.
- Then if we scroll down to page 3 {D137/2278/3},
- again simply to remind your Lordship ‐‐ is that page 3?
- Could we have page 2 {D137/2278/2}. Again, I think the
- most material paragraph is the second one, starting
- from:
- «In December 2008 … «
- That’s where she essentially explains what allegedly
- happened.
- MR JUSTICE HILDYARD: You want me to read the last
- paragraph?
- MR STROILOV: Well, the second paragraph, really, starting:
17 19
- a public auction at the market price.
- So it appears that, among other things, he was
- confronted with allegations of sale at an undervalue.
- This cannot be a coincidence. Clearly he was commenting
- on the allegations substantively similar to this
- counterclaim, and his evidence is plainly untrue on any
- view and deliberately untrue, in my submission.
- Also, if we could quickly have a look at
- Mrs Malysheva’s evidence at D137 ‐‐
- MR JUSTICE HILDYARD: What do you say about, in the top
- paragraph, the phrase:
- «In January 2009 I found out from the employees of
- the bank, I cannot remember from whom, that both
- companies owned by Arkhangelsky were sold.»
- MR STROILOV: Yes, my Lord, it is plainly untrue. It was
- something that Mr Savelyev negotiated with
- Mr Arkhangelsky. That’s ‐‐ well, he admits it’s untrue,
- but he says in his witness statement, essentially all he
- says: I wasn’t paying much attention, it is inaccurate,
- I apologise.
- Clearly, again, he is misrepresenting it very
- substantially. It is directed ‐‐ if we could scroll
- down one page, simply to remind your Lordship.
- MR JUSTICE HILDYARD: Up or down?
- MR STROILOV: So the Savelyev part of it. Sorry, if we
- «In December 2008 …»
- MR JUSTICE HILDYARD: «In December 2008 …»?
- MR STROILOV: Yes, my Lord, to the end of that paragraph.
- (Pause).
- My Lord, that is really clearly an untrue account,
- but then in the next paragraph, and then in the last
- paragraph on that page, an important detail is that
- Mrs Malysheva names Mr Gavrilov, the nominal director of
- Sevzapalians, as the person with whom she negotiated.
- She avoids mentioning Mr Smirnov, she avoids mentioning
- Renord. She clearly ‐‐ and one may ask why she would do
- that, and in my submission the likeliest explanation is
- that she intentionally does not want to bring too many
- new names, too many potential witnesses, into something
- she knows to be a fraud, and that is for two reasons:
- firstly to avoid any risk ‐‐ well, any unnecessary risk
- of the fraud being discovered, and; secondly, to avoid
- the need, essentially to collude with more people in
- terms of giving false evidence. It is better to keep it
- in a relatively narrow circle, just so that you can
- agree what you tell the authorities if you are telling
- untruths.
- MR JUSTICE HILDYARD: Well, that’s conjecture, but your
- basic point is that both Mr Savelyev and Mrs Malysheva
- just didn’t tell the truth; or certainly what they said
L15/90/6
July 11, 2016 Day 46
- then was not what they say now?
- MR STROILOV: My Lord, they plainly did not tell the truth
- on any view of things. There is no question, neither
- side and no one is suggesting that they told the truth
- in these criminal proceedings. It’s just not suggested
- on any side, and they have admitted it is not ‐‐ well,
- Mrs Malysheva obviously hasn’t admitted to anything
- because she has disappeared, but Mr Savelyev has
- admitted that obviously it isn’t true, and we agreed
- with that, and in Russia it was plainly in dispute long
- ago.
- So that was a deliberately false account that we say
- that this alone destroys their credibility, but there is
- more to it. Obviously if you have six witnesses giving
- the same false account, that means there was collusion,
- that means they were in this together, and then you also
- have to ask why would they conceal the true nature of
- that deal, and the answer, in my submission, at least
- the likeliest answer, is that because they knew it was
- fraudulent.
- Another important detail in that evidence, if we
- could scroll ‐‐ we don’t need to scroll down. On the
- other screen you have page 3, and in the second
- paragraph of that interview, Mrs Malysheva suggests to
- the investigator that prior to the sale, as she calls
- respect to the six people singing the same song was that
- your submissions that that suggested collusion and
- conspiracy was a leap too far, and the explanation might
- have been, as it were, a single hand drafted their
- respective statements and followed along a sort of
- plotted course without any real intent on behalf of any
- one of them to consciously mislead. I think that’s what
- he told me, it is at transcript {Day44/60:1} or
- somewhere around there.
- MR STROILOV: Yes, my Lord. Well that would only be
- possible and that conjecture would only make sense if
- the investigator was intentionally trying to fabricate
- a case.
- Now, clearly, step one in the analysis of that case
- makes it plain that whether or not there was a repo is
- essential, and if she was told about the repo and then
- failed to record it, that would be ‐‐ that can only be
- understood as a deliberate fabrication of charges.
- Now, then the question is if it was effectively on
- the Bank’s own complaint, unless it was in the interests
- of the Bank, why would she want to fabricate charges in
- this way.
- MR JUSTICE HILDYARD: Why would she what?
- MR STROILOV: Why would she want to fabricate charges or to
- trump up charges in this way, the evidence?
21 23
- it, of Western Terminal shareholding to Sevzapalians,
- there was an independent valuation of the market value
- of the shares, and it was valued at RUB 12,000, so that
- is plainly inconsistent with what you are now told by
- both sides.
- Clearly the sale for RUB 10,000 was deliberately
- nominal price; it was not intended to be the market
- price, and obviously from everything you are told about
- the events of late December 2008, there was clearly no
- question of and no time for obtaining any independent
- valuation; indeed no need for that.
- That, my Lord, in my submission, undermines any
- contention you have heard from the claimants suggesting
- that they may have honestly believed in low valuations
- by various Russian valuers, believing that the assets
- may have been sold at what turns out to be something
- below market value, but we had valuations of Russian
- valuation companies which suggested it was right, we
- believed in that.
- It is clear from this evidence that the Bank was
- manipulating valuations in Russian proceedings, and that
- really undermines any notion of honest belief in
- valuations which we say are incorrect, if you agree with
- Ms Simonova.
- MR JUSTICE HILDYARD: Mr Birt’s submission to me with
- Not to mention the fact that it is quite unlikely ‐‐
- well, it may be that the investigator was trying to bend
- the evidence in this way to select bits. Even if that
- is possible, well it is quite impossible that six people
- were so much in a hurry and irresponsible as to sign it
- without correcting it. It is unlikely in the extreme.
- I think it also deserves mentioning that both
- Mr Savelyev and Ms Stalevskaya told you in
- cross‐examination, as they were shown these records of
- interview one by one, they eventually resorted to
- telling you that: well, we did tell her about repo, we
- probably did, she just didn’t record it. However,
- that’s not what either of them says in their witness
- statement. Both of them address this in witness
- statements, essentially they say simply that: well, this
- was wrong, we are sorry, and that’s all, but they don’t
- suggest that it was misrecorded rather than they gave
- a very seriously false account.
- So in my submission that is simply quite a desperate
- attempt, frankly, to wriggle out.
- My Lord, to continue on this, I think in terms of
- that alleged valuation report, to which you saw the
- reference in Mrs Malysheva’s evidence, it also, just
- very briefly, if we could look at {D131/2151/1}, it
- appears that the same report or a similar report
L15/90/7
July 11, 2016 Day 46
- featured in the defence to OMG civil claims in Russian
- commercial courts, known as Arbitrazh, or arbitration,
- courts.
- MR JUSTICE HILDYARD: Mm.
- MR STROILOV: So this is a claim of Mrs Arkhangelskaya
- against Sevzapalians, the appeal decision.
- If you look at ‐‐ if we scroll down to the second
- page, there is in the second paragraph from the bottom,
- there is a reference to Sevzapalians’ application to
- adduce a valuation report {D131/2151/2}, and then the
- court rejects that application.
- Then there is a further reference to that report at
- page 5. If we could have page 5 {D131/2151/5}. So in
- the third paragraph from the top you will see that the
- report is apparently dated 29 December 2008. So that it
- appears, and it is difficult to find any alternative
- explanation, that the report was actually backdated,
- because obviously there is no mention in the very
- detailed account which you have now had from the Bank
- about the events of late December 2008, there is no
- mention of any independent valuation and there is,
- frankly, no place for any independent valuation.
- But in these proceedings as they focused on the fact
- of the purely nominal price, Sevzapalians suddenly
- produces a report dated 29 December 2008, and valuing it
- MR STROILOV: It is, if we go back to {D135/2235/1}, I think
- the reasoning is actually at page 3 {D135/2235/3}. So
- I think these paragraphs in the middle:
- «A fictitious deal is a deal executed with failure
- of intention …»
- So I think these three paragraphs are really the
- reasoning of the Federal Arbitrazh Court.
- MR JUSTICE HILDYARD: Right. There it just says there is no
- sufficient evidence of undervalue?
- MR STROILOV: Yes, my Lord, yes.
- MR JUSTICE HILDYARD: But you say that must have been
- a misunderstanding at very best because the price had
- been agreed to be nominal?
- MR STROILOV: Yes, my Lord. Well, obviously we are not re
- arguing these cases; it was on a fairly technical and
- narrow point.
- MR JUSTICE HILDYARD: I am just trying to remind myself.
- Mrs says and wins twice: it’s at a grotesque undervalue.
- You add the rider, of course, that the attempt to
- justify it as being full value is absurd because it was
- always stated to be nominal because of the back repo
- provision.
- MR STROILOV: Yes, my Lord.
- MR JUSTICE HILDYARD: It gets to the Court of Appeal who say
- there is no sufficient evidence of it being at
L15/90/8
July 11, 2016 Day 46
- claim to reassess the Russian judgments, you are not
- an appeal instance from Russian courts, you are
- considering the facts and forming your own judgment.
- But that is ‐‐ well, the only element on which I do
- rely is, really, the evidential element and how ‐‐ and
- what evidence was presented and what it demonstrates in
- terms of the credibility or otherwise of each side.
- My Lord, obviously the criminal complaint in
- relation to Morskoy Bank loan was only one in a series
- of various criminal complaints which the bank filed
- against Mr Arkhangelsky, and you may recall the
- cross‐examination of Ms Mironova, who ‐‐ that’s at
- Day 34, starting at page 75, and moving on.
- {Day34/75:1}. I think it is, just for your Lordship’s
- reference, I don’t propose to read it in any detail now,
- but essentially the picture is that Ms Mironova ‐‐ and
- I think two of her employees ‐‐ were working quite hard
- in investigating various records of transactions via the
- Bank in search for material to bring various complaints
- of fraud against Mr Arkhangelsky. Many of them totally
- unrelated to the Bank’s interests in any way. It would
- concern things like suspicion of tax evasion, and
- matters like that.
- What we say about this is that this kind of strategy
- is quite inconsistent with their suggestion that the
29
- Bank was acting commercially and trying to reach
- an amicable settlement with Mr Arkhangelsky that
- Mr Sklyarevsky was desperately trying to reach out to
- Mr Arkhangelsky and agree on some mutually acceptable
- restructuring of his business which would allow to repay
- the loans. It was the Bank who in fact waged a war on
- Mr Arkhangelsky from that stage. They now had control
- of the shares, they had control of the assets, they
- wanted him out of the way. That is ‐‐ whether or not
- really there is anything in these criminal complaints,
- whether or not there is any substance, it’s not
- something you would expect a commercial bank to do so
- enthusiastically in circumstances such as the situation
- in 2009.
- I will be brief on that, but that connects, really,
- with the allegations we made in terms of the Bank’s
- political connections and how it was able to work
- together with law enforcement authorities.
- Indeed, there is, I note, a remarkable change of
- tune in the claimants’ submissions on this point,
- because for years, really, the claimants essentially
- kept telling your Lordship that the allegations we make
- against Mrs Matvienko, against Mr Piotrovsky and Russian
- authorities and law enforcement agencies are totally
- irrelevant to the entire counterclaim; it is simply
- a political campaign we are running in this court and it
- shouldn’t be allowed. It should be, at least,
- discouraged, and indeed, it has been discouraged by
- your Lordship and I hope we have taken it on board
- adequately.
- But what they say now in their closing submissions,
- it is suddenly the central element of the counterclaim
- which we have failed to prove.
- Well, it isn’t the central element. It is never
- said it is the central element. It is simply an aspect
- in the general train of events which explains some of
- the matters which require explanation.
- We have focused, rightly, on the commercial sides of
- the counterclaim and in my submission we have proven it,
- and that makes it, indeed, irrelevant, whether or not
- Russian authorities were part of the conspiracy and, if
- yes, what part they played.
- I do, however, say that significant elements of
- those allegations we make against Russian public
- officials have been proven.
- You will recall that some of the evidence at the
- trial concerned the public official called
- General Piotrovsky, who was at the time the head
- of St Petersburg’s police. Mr Arkhangelsky’s evidence
- was that Mr Savelyev, actually back in 2007 he
31
- influenced General Piotrovsky to protect Mr Arkhangelsky
- from various investigations he initiated into the group.
- Mr Savelyev denied that. Mr Savelyev did tell you that
- he knew General Piotrovsky, but no more than that.
- However, he was the head of St Petersburg’s police
- at the time. Most of the complaints, at least some of
- the complaints from the Bank against Mr Arkhangelsky are
- addressed personally to him.
- Examples ‐‐ I don’t propose to go through all of
- them, but examples are {D126/1995.1/0.1}, that’s the
- complaint dated 15 July 2009 in relation to the alleged
- personal loan specifically addressed to Mr Piotrovsky.
- Another example is {D129/2091/1}, and that’s
- a complaint from the Bank in relation to Vyborg Shipping
- Company, which is really a follow‐up to earlier
- complaints on the same subject. Again, it is addressed
- to Mr Piotrovsky, so clearly he was in some way
- supervising the investigation.
- Further, you will recall the video which
- Mr Arkhangelsky has shown you of riot police taking over
- physically Western Terminal on 20 June 2009. Again, it
- was clearly done by subordinates of Mr Piotrovsky. It
- was 20 June 2009, so you will recall what you were told
- by Mr Sklyarevsky about that period when the decision of
- the arbitration court was forthcoming any day now. That
L15/90/9
July 11, 2016 Day 46
- is when Mr Sklyarevsky expects that the repo transfer is
- going to be set aside by the court. In preparation for
- that a few days before the Bank takes the decision to
- authorise the transfer of Western Terminal assets to
- SKIF, and I think literally one or two days before the
- decision of the court, riot police come in to capture
- Western Terminal. That is unlikely to have happened
- without the orders of Mr Piotrovsky, and that is very
- unlikely to be a coincidence in terms of dates. That
- must have been part of the conspiracy.
- Then, my Lord, once Mr Piotrovsky retires from the
- police in 2013, he is immediately appointed the economic
- security adviser to the director general of
- Baltic Fuel Company. It’s not disputed. That in itself
- is a prima facie case of corruption; he has played his
- role in the takeover of Western Terminal, he received
- his reward.
- So that part, we say, is, insofar as any proof is
- required, proven on the balance of probabilities.
- My Lord, I think in the same context, just very
- briefly, as especially our pleading on that was
- criticised, so I am keen to show you what we meant, it
- is an odd reference, it may be somewhere ‐‐ it is part
- of the exhibit to the affidavit of Mr Balandin in
- support of the application for freezing order. So it
33
- will be in the bundle, the reference number I have is
- {N1,N2,N3,N4,N5&N6/3/1123}, if that makes sense at all.
- No, page 1123. So here you have a letter from the
- investigator, Levitskaya to Mrs Malysheva, dated
- 28 February 2011, which gives a very detailed account of
- the investigations ongoing against Mr Arkhangelsky one
- by one, what the allegations are, and what’s happening
- on each.
- MR JUSTICE HILDYARD: Who signs this?
- MR STROILOV: That’s the investigator, Levitskaya. So it
- goes on from this page, from page 1123 to page 1134, so
- that’s an 11‐page account. So that was the basis of our
- pleading that the investigator is reporting to the Bank.
- I don’t propose to read it in full, but if we could
- perhaps just slowly scroll it down just so your Lordship
- sees that it is a very detailed account. That is really
- all I am interested in.
- My Lord, to complete this general scene, as
- regards ‐‐ well, it is said that we haven’t proven the
- participation of Mrs Matvienko in the conspiracy, that’s
- the Governor of St Petersburg, well, I am prepared to
- accept that, we have not proven her direct role in
- the conspiracy as such. However, the finding which I do
- invite you to make is that the Bank is closely connected
- to Mrs Matvienko and her family in a number of ways.
- You will recall that there is a cross‐examination of
- Mr Savelyev on the shareholding in the Bank acquired by
- Mrs Matvienko’s son, and then passed on to her husband,
- about Mr Matvienko junior’s role as vice president of
- the Bank, about the fact that Mr Savelyev and
- Mrs Matvienko are old friends and business partners in
- the past and all those matters.
- My Lord, what I do invite you to find is that the
- Bank is perceived by public officials in St Petersburg
- as being sufficiently close to the Governor so that
- public officials would take that into account. It is
- what ‐‐ if your Lordship recalls the discussion we had
- in ‐‐ I think literally on the first day of the trial in
- the context of the pleadings, if I can respectfully
- plagiarise your metaphor, it is a bit of a Henry II
- situation, where the public officials, without being
- actually parties to the conspiracy, they are given to
- understand what the king, or in this case the Governor,
- wants to happen, where the Bank has a conflict with
- whatever other commercial party, the public officials in
- St Petersburg know that if they stand on the way of
- the Bank, the Governor won’t be pleased. That, in my
- submission, is clear enough from the evidence of the
- links between the Matvienko family and the claimants in
- this case.
35
- My Lord, I think without spending much time on it ‐‐
- I will simply make a point, as we have looked at ‐‐ and
- especially as all these criminal complaints and close
- cooperation between the Bank on one hand and the law
- enforcement authorities in Russia on the other hand in
- relation to Mr Arkhangelsky, in my submission that makes
- a remarkable contrast with how much the Bank would offer
- to this court to substantiate their allegations of fraud
- against Mr Arkhangelsky.
- You will have seen at the ‐‐ well, I think we went
- through this, unfortunately, rather superficially as
- well, but in cross‐examination of Ms Mironova, she
- translated to you some of the Russian complaints where
- very detailed investigation appears to have been made
- various OMG bank accounts and where the money went and
- in what way and what it was all meant and all that was
- given ready‐made to Russian law enforcement authorities.
- Whereas in this case you are given one suspicious fact,
- taken in isolation, or a few suspicious facts, well so
- much money was transferred to City Centre, we don’t know
- what City Centre is, it must be something to do with
- Mr Arkhangelsky. That really undermines the credibility
- of these allegations. They could have told you more if
- they were willing to.
- My Lord, in the same vein I now move to the issue of
L15/90/10
July 11, 2016 Day 46
- a court and Vyborg Port.
- MR JUSTICE HILDYARD: Is that a good moment for a break?
- MR STROILOV: I think it is, my Lord. I am rather
- disappointed as to my speed of progress.
- MR JUSTICE HILDYARD: Will you finish by the short
- adjournment, by lunch?
- MR STROILOV: I expect to be finished by 1.00, my Lord, yes.
- MR JUSTICE HILDYARD: Do you have any estimate for me,
- Mr Birt, as to how long you are likely to be?
- MR BIRT: My Lord, I am, as always at this stage, slightly
- in my Lord’s hands. There are a number of points I can
- deal with by way of references if we are running short
- of time. I would imagine that if I am on my feet at
- 2.00 pm we will finish today, my Lord.
- MR JUSTICE HILDYARD: We have to finish today, I am afraid,
- because I am booked elsewhere.
- MR BIRT: We can cut our cloth, my Lord, I’m sure, to
- achieve that aim.
- MR JUSTICE HILDYARD: Very good. Thank you.
- (11.49 am)
- (A short break)
- (11.58 am)
- MR STROILOV: So, my Lord, very briefly, in terms of Akort
- and Vyborg Port, and you will recall this whole matter
- of Vyborg Port shareholding being transferred to ‐‐
- and I will give your Lordship the reference in a moment.
- In correspondence, as I set out on Day 18, and
- I think it is simply easier for your Lordship to really
- read it, in correspondence the Bank was not candid about
- it. They actually appeared to put us on the wrong track
- about it. I think it was Day 26 where you find
- Mrs Kosova ‐‐ it must be Day 25, sorry, my Lord. I am
- afraid the system is slightly unhelpful on that.
- (Pause).
- Yes, I beg your pardon, my Lord, it is Day 26 after
- all, and starting at page 108, line 23 {Day26/108:23},
- where I cross‐examined Mrs Kosova about it, and
- essentially she admitted that the information was given
- to the Russian police investigator, the same resident(?)
- Colonel Levitskaya.
- Now, my Lord, in these circumstances I submit two
- things: firstly, this shows how the claimants have been
- unscrupulous with this court’s process and, indeed, in
- trying to persecute the Arkhangelskys in any way they
- could.
- Secondly, that they are, really, if they are to make
- good their various allegations of fraud and dishonesty
- against Mr Arkhangelsky, they could and should have
- given you a much fuller picture that, in fact, they
- have.
37 39
- MR JUSTICE HILDYARD: Akort, A‐K‐O‐R‐T?
- MR STROILOV: Yes, my Lord.
- On Day 18 I made an unsuccessful application to
- exclude that evidence, and I think it is ‐‐ I will find
- the exact correct reference.
- So that will be starting at page 54 {Day18/54:1}.
- Now, my Lord, I wonder if, to save time, perhaps
- I should simply give you a reference and leave it there.
- It includes all the references. What is helpful about
- it is it includes the reference to the relevant
- correspondence and how the issue arose between the
- parties. I would simply submit in summary that clearly
- the transfer is something that the Arkhangelskys
- disclosed to the Bank themselves, having learned about
- it. They did so pursuant to the disclosure obligations
- under the freezing order. It was, therefore, subject to
- the claimants’ undertaking not to use that information
- anywhere else except for the purposes of policing the
- freezing order. It has subsequently transpired that the
- information was passed on to the Russian police and the
- Russian police undertook an investigation and reached
- the conclusion that this court’s order was breached,
- which is a rather odd matter to investigate for the
- Russian police.
- There was cross‐examination of Mrs Kosova on this,
- My Lord, in terms of ‐‐ I will spend a few more
- minutes on the allegations of dishonesty, coming back to
- your Lordship’s point on Friday about where the
- RUB 4 billion have gone.
- Now, of course, there is a danger of, as these
- proceedings are naturally focused on Western Terminal
- and next on Scan assets, including part of
- Onega Terminal, and then the rest of the group is only
- looked at marginally and in much smaller context. So
- there is a danger of losing the perspective.
- So, of course, the 4 billion was spent on the
- operations of the whole group. There were loans to
- Onega, which were spent on the development of
- Onega Terminal, which your Lordship has heard has been
- quite considerable. There were loans to
- Vyborg Shipping, and that’s how the first three ships
- were financed, and also that accounts a considerable
- amount of money, obviously.
- There were also various forestry operations and wood
- processing plant which OMG was constructing, and a lot
- of other businesses which Mr Arkhangelsky describes in
- outline in his 16th witness statement.
- So the only money which are somewhat unclear, well
- the loans which may have been misspent, are the last two
- Vyborg Shipping loans, which were intended to purchase
L15/90/11
July 11, 2016 Day 46
- further ships. In fact, they were not purchased. Well,
- it is common ground that the money was paid to
- Land Breeze, as we say had been well known to the Bank
- from the start, and indeed Mr Arkhangelsky told you that
- the whole financial scheme of money going between
- companies was developed with the Bank’s participation.
- He also told you that the money was spent on paying
- outstanding interest towards the end of events and as
- the group was running into difficulties; a lot of this
- money was spent on paying interest to the Bank under the
- previous loans and that, as Mr Arkhangelsky told you,
- was under an agreement with the Bank.
- Other money went into further shipbuilding, which
- unfortunately collapsed and the contracts were not
- followed as Vyborg Shipping collapsed generally.
- So, generally speaking in outline, there are no
- black holes. Perhaps detailed analysis might provide
- further questions and then possibly further answers, but
- it is not the case that RUB 4 billion were provided and
- has gone nobody knows where. It is more complex than
- that.
- MR JUSTICE HILDYARD: What do I know about Land Breeze?
- MR STROILOV: You know that it was a Cypriot ‐‐ one of
- the Cypriot offshore companies ‐‐
- MR JUSTICE HILDYARD: Yes.
- is better to find one of the internal documents
- explaining this.
- MR JUSTICE HILDYARD: All right, well don’t waste your time
- now, but if at some point a synopsis of the various
- references. I felt that I don’t really know a lot about
- Land Breeze, beyond the fact that it is a Cypriot
- company where Mr and Mrs Arkhangelsky did seem to
- favour, and that they owned it, and that money in
- respect of the Vyborg loans does not appear to have gone
- where it was said to have gone.
- MR STROILOV: No, I don’t think that’s what is suggested.
- MR JUSTICE HILDYARD: Well, it didn’t go into the purchase
- of the three extra ships, or … I thought you accepted
- that.
- MR STROILOV: No, I didn’t accept ‐‐ I accepted that the
- three extra ships were actually never completed and
- never became operational.
- MR JUSTICE HILDYARD: Well, there is no evidence to suggest
- they were sort of half complete or anything else. There
- is just a silence, isn’t there? There is just
- an assertion that for one reason or another they never
- emerged onto the open seas, but there is nothing ‐‐ I’m
- given very little by way of any sort of evidence that
- there was sort of part payment or some disaster in
- building or commissioning or anything. There is nothing
41 43
- MR STROILOV: ‐‐ beneficially owned by Mr and
- Mrs Arkhangelsky.
- I believe the purpose of having this structure in
- Cyprus was, if I am not mistaken, I think
- Mr Arkhangelsky’s evidence was that that was the
- requirement of either KIT Finance project, or European
- Bank for Reconstruction and Development. It appears in
- the context of these refinancing projects. I wonder if
- I need to check, but it must be in the 16th witness
- statement. (Pause).
- If we go to the 16th witness statement of
- Mr Arkhangelsky at {C1/1/27}, I think in paragraph 106
- there is a reference to Land Breeze Holdings. That is
- immediately not very detailed and rather appears in
- the different context, but essentially I think he
- explains the Vyborg Shipping project there. I think if
- we go a little further to paragraph 113 {C1/1/29}, so
- this is where Mr Arkhangelsky sets out the
- Vyborg Shipping project.
- I think other than that, I think it was set out in
- the business plan and various internal documents of
- the Bank that the scheme was there; that it would be
- Land Breeze chartering vessels, and essentially it would
- be a coordinating company which would take care of
- the whole project, whereas the ‐‐ I will ‐‐ I think it
- of that, is there?
- MR STROILOV: Well, I think there is something, my Lord.
- MR JUSTICE HILDYARD: Oh, is there?
- MR STROILOV: I will show you that. I think the first thing
- I would like to show you is the general description of
- Vyborg Shipping project in the Bank’s internal
- documents. If we could go ‐‐ there are a lot of them
- essentially similar, but if we could go to {D1/2/4},
- that’s one of the loan reports. Well, the ‐‐ if we
- could go to page 1, just so that your Lordship sees what
- it is. It is one of these loan officer’s opinions,
- which we’ve turned quite a few of during the trial, and
- that’s the one on opening the credit line for the limit
- of RUB 2.1 billion for the Vyborg Shipping project.
- If we scroll down to page 4, {D1/2/4}, in this
- section, «Loan purpose», it is explained how it is meant
- to work, and that shows the place of Land Breeze in that
- structure.
- MR JUSTICE HILDYARD: So:
- «The purpose of the loan is to make advance payment
- under the vessel lease contract. Ten vessels are
- intended to be purchased monthly during the period
- between February and November. The average cost of …
- €9.5 million…»
- A total capital investment in the purchase of
L15/90/12
July 11, 2016 Day 46
- vessels, 3.5 million; is that right?:
- «Total number of container ships to be purchased ‐‐
- 10. …
- «100 per cent subsidiaries …
- «These companies to act as vessel mortgages are
- 100 per cent subsidiaries.»
- I mean, all this is sort of intent, but what
- actually happened?
- MR STROILOV: Yes, my Lord, I simply wanted to show you that
- first to demonstrate the place of Land Breeze in this
- and the fact that money went to Land Breeze is perfectly
- in line with the plan which was presented to the Bank.
- I hope to find something on that. There wasn’t a lot on
- that, but I recall that this matter was discussed in
- the context of the initial disputes over the freezing
- order. I am just trying to find it. There was some
- letter from shipbuilders I think outlining what happened
- with the project.
- MR BIRT: I don’t want to interrupt. I think shipbuilding
- may be a red herring. One sees in the plan that the
- first stage is for purchase of second‐hand tonnage,
- which is what all these loans are meant to be about,
- my Lord.
- MR JUSTICE HILDYARD: I mean, a simple point is that
- I haven’t seen any evidence of any boat to show for it:
- envisaged that there would be separate companies for
- each ship, where there’s no evidence that any of them
- were set up. Are there any subsidiaries under
- Land Breeze?
- MR STROILOV: I think the companies are set up, and that’s
- in the assets disclosure under the freezing order.
- MR JUSTICE HILDYARD: Right.
- MR STROILOV: I think that is really the only context in
- which we …
- MR JUSTICE HILDYARD: So there were 10 companies, whatever
- it is, it may be 13 companies, I just don’t know, maybe
- someone could provide me with the references to those.
- MR STROILOV: I expect that will be in the first affidavit
- of Mr Arkhangelsky in response to the freezing order.
- MR JUSTICE HILDYARD: Right. Perhaps someone could just
- give me or send me various references.
- The point is Land Breeze is an area of ignorance for
- me, but we do know that a lot of money went there.
- MR STROILOV: Yes. My Lord, I will look it up, or perhaps
- I can e‐mail it during the short adjournment, ideally,
- if not later.
- MR JUSTICE HILDYARD: Yes.
- MR STROILOV: My Lord, in any event, really, all these
- points only go to credit; they don’t directly affect the
- counterclaim, really. All the points made about
L15/90/13
July 11, 2016 Day 46
- I haven’t been able to find where I put to Mr Belykh
- that the information memorandum was in disclosure, so
- I think I was probably wrong; I probably meant to but
- didn’t, so I withdraw that criticism of the claimants.
- Nevertheless, my Lord, I do submit that the evidence
- you were given about the Bank’s alleged ignorance of
- these refinancing negotiations is not credible at all.
- It is overwhelmingly inherently improbable, and indeed,
- there is simply no conceivable reason why
- Mr Arkhangelsky would have kept it secret from the Bank.
- On any view, it was not in his interest to conceal that
- from the Bank. He was trying to persuade the Bank that
- he had good prospects of restoring solvency. So it is
- inconceivable.
- Indeed, Mr Belykh, I think he in his second witness
- statement denied knowledge of that in rather strong
- terms, and that statement is at {B2/16/2}, starting at
- paragraph 7, essentially he denies. Then over the page
- essentially he denies any knowledge of this.
- I think he was not so sure when he was
- cross‐examined if we … that’s on {Day3/94:1} and then
- there I first asked him about the information
- memorandum, as my learned friend has correctly said on
- Friday, and then so page 94 and 95 is something
- I particularly look at, and at line 22 he says:
49
- «Answer: As I mentioned before, I had some very
- brief information that he has these negotiations, but no
- details were available to me.»
- Then there is further questioning on {Day3/96:1}
- about the alleged meeting they had with Mr Arkhangelsky.
- On the whole, in my submission, it appears that
- Mr Belykh was not as categorical in his denials as he
- was in his witness statement. In my submission it is
- simply implausible that this information was not given
- to the Bank. Well, frankly, on any view of
- Mr Arkhangelsky, one could rather believe that he would
- be exaggerating the progress of those negotiations, but
- not keeping it secret.
- My Lord, in terms of the business claim and the
- business valuation evidence, just to recap on the
- position that has been reached previously, I think the
- last time it was before the court was on Day 38 as part
- of the housekeeping, and there were written submissions
- made at that stage. Ours is at {I27/43/12}. I would
- like to take your Lordship through this as actually
- a number of points made there is something I would like
- to rely on as part of the closing submission.
- You can see in paragraph 1 what we were asking
- your Lordship to do at that stage in terms of
- the housekeeping problem of the difficulties in getting
- Mr Steadman to attend.
- Then further on I don’t think it is quite necessary
- to re‐read the whole thing, but if you scroll down to
- the next page, and several pages, really, we set out and
- quote, I think, everything that had been said on the
- issue in court previously {I27/43/13}.
- Finally, my Lord, it is ‐‐ unless your Lordship is
- minded to, I am not asking you to read it now,
- necessarily, just so that you know where it is. Then if
- we scroll down to page 20, we attempt some analogies of
- the relevance of that evidence, and in my submission it
- is helpful in terms of identifying the interrelations
- between issues and between the primary counterclaim and
- the alternative counterclaim in terms of quantum.
- And here, yes, perhaps I think I will ask
- your Lordship to read paragraph 18 {I27/43/20}.
- MR JUSTICE HILDYARD: Mm hmm.
- MR STROILOV: So, my Lord, in my submission that is pretty
- close to the starting point: there are two claims
- brought in the alternative, one is based on the
- hypothesis that if not for the Bank’s fraud, OMG would
- have avoided default, most likely but not necessarily
- through refinancing, and on that basis, that the
- business would have developed and reached such value as
- Mr Steadman indicates in his reports.
51
- Alternatively, if the default was inevitable on the
- balance of probabilities, then it is limited to
- the value of assets which should have been, and would
- have been sold at honest public auctions, the surplus
- would have been returned.
- So in that sense, I think if we scroll down one page
- more, we attempt some further analysis as to what
- affects the choice between these two alternative bases
- in paragraphs 22 and further {I27/43/21}. I think
- I will ask you to read paragraph 22 through to 24, and
- perhaps even further {I27/43/22}.
- MR JUSTICE HILDYARD: I’ve got to the end of 21.
- MR STROILOV: If we could scroll down, thank you. I will
- ask your Lordship to read through to paragraph 28. I’m
- sorry to …
- MR JUSTICE HILDYARD: That’s all right. {I27/43/23}.
- Yes? One more?
- MR STROILOV: One more, I’m grateful.
- My Lord, for completeness, just so that you see what
- was the latest you said about this, if we could go to
- the transcript of {Day38/70:1}. I think I haven’t shown
- your Lordship the claimants’ note on that, which is
- a bit of a discourtesy. Should I just give
- your Lordship the reference? I am not going to rely on
- anything in that, but their note will be in the same
L15/90/14
July 11, 2016 Day 46
- tab, page 2. It is just before ‐‐ so it is {I27/43/2},
- simply for your Lordship’s note.
- Then the transcript of Day 38, page 70 {Day38/70:1},
- and {Day38/71:1} as well. I think, really, the bottom
- line of that discussion, and perhaps my learned friend
- will take you into earlier parts of it, or your Lordship
- will want to read more of it later, but I think the
- bottom line in relation to that application starts at
- line 22 on page 70, and continues for several pages
- {Day38/70:22}, but I think the next two paragraphs to
- page 71, line 21 is essentially what your Lordship has
- decided on the last occasion {Day38/71:21}. It was
- before the court. Later on you also warned that you may
- need to order some limited cross‐examination of business
- experts before you make your judgment, and I don’t think
- that at any stage you give a clear indication that you
- rule out a split of the trial on quantum if the dispute
- between business valuation experts really comes to the
- fore.
- My Lord, we submit that this issue is still very
- much open. We say that we have proven the alternative
- counterclaim, based on the value of assets, as we have
- shown fraud, we say, and we have shown that the correct
- valuations are Ms Simonova’s, but that is not the end of
- the matter, because there was also loss of business, and
53
- that would be higher. That’s especially important in
- relation to the business of Onega as for rather formal
- reasons we have been unable to claim for the second half
- of that terminal, the one owned by LPK Scandinavia, so
- we cannot claim for the value of that asset even though,
- on the evidence you have heard, it was clearly part of
- the same plan which caused that loss. So that is where
- the difference between the value of the only asset which
- we can claim for, ie the Scan land, and the value of
- Onega business, of the business of the entire Onega
- Terminal, is particularly significant.
- Now, my Lord, it obviously depends on two things:
- firstly, is it likelier than not that if not for the
- fraud, the default would have been avoided? Then there
- is a second question of the actual value of the
- businesses, and I accept that if you are against us on
- the first question, if you decide that the default was
- inevitable on the balance of probabilities, that’s the
- end of the business claim, and there is no need to
- resolve the issue of value, but the converse is also
- true.
- Now, in terms of the prospects of refinancing,
- I submit that Mr Bromley‐Martin was a very credible
- witness. He is entirely independent of Mr Arkhangelsky
- for very many years now. He had no reason to distort
- the reality either way.
- By very nature of his business and the role he
- plays, he is able to look at the position, both from the
- point of view of the borrower and the lender, otherwise
- he would have never succeeded in his business. It was,
- with respect, a top class, vigorous cross‐examination
- which he passed very impressively. In particular, he
- defended his financial model very persuasively, it is
- a realistic model, and his evidence on that should be
- accepted.
- Then obviously a lot of cross‐examination concerned
- the several serious inaccuracies in the information
- memorandum, and the most sensational of them, as it
- were, is the one which Dr Arkhangelsky explained to you
- by the bribes he had to pay to Mr Matvienko.
- Now, my Lord, even though it has been rather
- fiercely criticised by the claimants, I don’t resile
- from my submission that the process of lending does not
- include a cross‐examination on oath. He told you this
- in court, and the only reason why he had to tell you
- this was because he had sworn to tell the whole truth.
- Bribes by their very nature is something you don’t tell
- everyone about. Obviously it is reprehensible, the fact
- that someone is paying bribes, but it is not a separate
- point of criticism that not only did you pay bribes, you
55
- have also failed to tell it to your lenders. Now,
- that’s ridiculous: if you are bad enough to pay bribes,
- you don’t tell about this to everyone.
- So without trying to be what I think
- Mr Bromley‐Martin described as «purist» about bankers,
- realistically it wouldn’t have come out and the lenders
- would have never learned about it.
- Indeed, the burden of ‐‐ well, to save time, but in
- any event, for a fuller picture to be seen by
- your Lordship, rather than taking you to specific points
- in Mr Bromley‐Martin’s evidence, I would recommend
- re‐reading the whole cross‐examination as you deliberate
- on your ruling on this issue. I submit that what
- follows from the evidence of Mr Bromley‐Martin and
- invite you to accept it is that few on the potential
- lender’s side would actually notice the inaccuracies in
- the information memorandum. The significance of
- the acquisition price, as Mr Bromley‐Martin explained,
- and is clear from his evidence, its significance is
- simply because it is indicative of the market value;
- nothing other than that.
- So once a valuation report would have been obtained,
- it would be quite easy to replace the acquisition price
- with the value given by an independent valuer, and
- that’s the figure at which the lenders would have
L15/90/15
July 11, 2016 Day 46
- looked. Even though much was made of these inaccuracies
- in cross‐examination and in submissions, in fact,
- Mr Bromley‐Martin is right: they could be kicked into
- the undergrowth, to use his phrase, with greater or
- lesser degree of embarrassment, but they could be kicked
- into the undergrowth.
- Indeed, my Lord, well obviously the lenders who lend
- to places like Russia, again, I think it is a point made
- by Mr Bromley‐Martin that if they walked away whenever
- there was a hint of bribery, there would be no lending.
- They don’t take this idealistic, purist view of
- business. Unless they are ‐‐ well, the reality is,
- unless they are faced with clear evidence of something
- as outrageous as what Mr Arkhangelsky told you about,
- quite frankly, they don’t walk away: they are quite
- happy to turn a blind eye to these things to an extent.
- MR JUSTICE HILDYARD: «To an extent».
- MR STROILOV: Indeed, my Lord, yes. But, of course, unless
- Dr Arkhangelsky becomes as frank with them as if he was
- in the witness box, it remains simply an inaccurate
- figure of limited relevance, no more than that.
- My Lord, I think Mr Bromley‐Martin told you that,
- really, again ‐‐ and it seems to be common knowledge in
- his business ‐‐ that businessmen in the emerging markets
- are prone to exaggeration, it is not seen as something
57
- extraordinary. It is important, my Lord, not to import
- the high standards which you rightly apply in judicial
- proceedings to parties which appear before you, and of
- course if someone tells you about things like bribery,
- well, you may give him some credit for candour, but you
- would obviously condemn this quite severely.
- That is not quite how lenders look at this. They
- do ‐‐
- MR JUSTICE HILDYARD: Yes. I mean, the problem, I think,
- with the elephant in the room to some extent, it’s very
- difficult for a court, isn’t it, on the one hand to say:
- I’m very cross about this bribery but, on the other
- hand, I’m going to give hundreds of millions by way of
- recovery on the footing that although the court has
- processes which enable it to be discovered, other people
- might not. I mean, it is a pretty unattractive kettle
- of fish, isn’t it? Even if I accepted, and I will
- re‐read as, you are quite right, I should,
- Mr Bromley‐Martin, but my recollection was that he
- thought that all lenders would perform very considerable
- due diligence and that due diligence, properly done,
- even without cross‐examination, would expose the gap,
- and once the gap was exposed, Mr Arkhangelsky had two or
- three answers: one to show that it had been spent, which
- would be difficult without a lie; the other was that it
- was a bribe, which would put everyone off, and the third
- that he had stolen it, in which case they would run
- a mile. Those are difficult points, aren’t they, for
- him?
- MR STROILOV: Well, I think what ‐‐ then it would not
- necessarily be a gap as such, really. It would expose
- an inaccuracy in the information memorandum,
- essentially.
- MR JUSTICE HILDYARD: I know. I know when an inaccuracy
- becomes a gap, but to my way of thinking, it is not
- unlikely it will come in the 100 million area.
- MR STROILOV: But my Lord, it’s not as ‐‐ there are gaps and
- gaps.
- MR JUSTICE HILDYARD: I agree.
- MR STROILOV: In this sense, well really the simplest way of
- kicking this into the undergrowth ‐‐ I’m slightly
- anxious of trying to embark on, really, inventing ways
- to do that.
- MR JUSTICE HILDYARD: Mm.
- MR STROILOV: But the simplest way is obvious: simply to
- tell the lender: sorry, it was a mistake, the real
- figure is different, and in any event, we now have
- a valuation report, so rather than go by the acquisition
- price, you have the market value in the report. It
- clearly appears from Mr Bromley‐Martin’s evidence that
59
- the only thing that is relevant, and to a limited extent
- for the lender, is really the market value, and other
- than that, acquisition price just does not come into
- play.
- While, obviously, the court takes a ‐‐ well, in
- a way, one of the big questions on which your Lordship
- focused and these proceedings focused, was simply how
- honest is Dr Arkhangelsky, whereas the lender would look
- at the commercial project first and foremost; they would
- not be passing moral judgment. The only way in which it
- would come into play is if he is so dishonest that we
- risk him running away with the money, and then we simply
- can’t trust him with anything.
- That’s a much higher standard, if you see what
- I mean. At the end of the day, my Lord ‐‐
- MR JUSTICE HILDYARD: But I asked Mr Bromley‐Martin, and
- I am not quoting because I haven’t got an accurate
- recollection of it, my recollection as it is is that
- I asked him whether the potential lenders identified
- were the sort of lenders who would have held their nose.
- My answer was ‐‐ my recollection of his answer was: no,
- they weren’t. They weren’t the sort of lender. They
- were main line lenders, fully conversant with the
- absolute rule of knowing their client, fully conversant
- with the need for due diligence, and not at all keen to
L15/90/16
July 11, 2016 Day 46
- be involved in something which might land them in all
- sorts of difficulties, including sort of prosecution in
- America, FATCA legislation and all the rest.
- MR STROILOV: My Lord, I think a lot of this, a big part of
- the cross‐examination, really, proceeded on the premise
- what would happen if the fact of these briberies would
- come out?
- MR JUSTICE HILDYARD: Yes, I accept that.
- MR STROILOV: And really the first step is for your Lordship
- to assess, realistically, how likely it is that they
- would have come out in those circumstances ‐‐
- MR JUSTICE HILDYARD: I see, okay.
- MR STROILOV: ‐‐ rather than in this court.
- My Lord, it is, perhaps unfortunately, the question
- for you is not what should have happened in a morally
- ideal world; it is what would have happened in this
- world if not for the fraud which we say we have proven.
- MR JUSTICE HILDYARD: Well, there are two aspects of this,
- which is why I wanted some guidance on this: one is the
- factual question, even if a hypothetical, as to what
- would have happened. Would it have been revealed,
- either to potential lenders or to the Bank itself, and
- I can sort of take a view on that.
- You urge the answer: no, it wouldn’t have been, and
- kicked into the long grass in ways which are difficult
61
- to define exactly how, but I shouldn’t assume that it
- wouldn’t have been, and on that footing I should take
- into account business potentiality and enormous figures
- which that is the gateway to.
- At that point there is a tremendous encouragement to
- the court, isn’t there, to see whether there is some
- legal objection to it rewarding someone it knows has
- paid these whopping great sums for purposes it doesn’t
- much like the look of. At that point, the question
- arises as to what is the law as to illegality. One
- can’t really sort of get away from this fact there is
- a bit of a crunch here. Naturally, I think I should
- confess, without asserting tremendous moral superiority,
- that I would find it counterintuitive both to sweep the
- matter under the carpet and then on that footing to give
- someone hundreds of millions by way of reward by my
- order. If the law is that I should, I will do that;
- I will apply the law, but all that you say focuses
- tremendous force, doesn’t it, on the issue as to what is
- the law with respect to an admitted illegality.
- MR STROILOV: Yes, my Lord, well, obviously these are two
- very different issues. There is a factual issue as to
- what would happen ‐‐
- MR JUSTICE HILDYARD: They are different, but they bring
- together, don’t they, they come ‐‐ I mean, we are now at
- a late stage in trial, Day 46, I’m beginning to work out
- how to resolve the issue.
- MR STROILOV: Yes, my Lord. Simply these two issues have to
- be kept separate on the factual issue of whether it
- would have been kept quiet, it is an unattractive but,
- in my submission, inevitable finding that unfortunately
- in this imperfect world it will have been kept quiet,
- otherwise there would never be any lending to Russia.
- MR JUSTICE HILDYARD: I think all you can say, you may say
- that short of cross‐examination, Mr Arkhangelsky would
- not himself have revealed it. I don’t think you can say
- it was inevitable it shouldn’t discover, I think it is
- highly debatable at the very best. My own slightly,
- I dare say, jejune faith in lenders asked to cobble
- together hundreds of millions of dollars is that they do
- go carefully. That might be absurdly innocent, but it
- is my initial response.
- MR STROILOV: My Lord, I think I would here simply rely on
- Mr Bromley‐Martin’s comment, I think to the effect ‐‐
- I’m not quoting directly, but realistically, if the
- lenders walked away at any hint of bribery, there would
- be no lending on the emerging markets.
- MR JUSTICE HILDYARD: Mm.
- MR STROILOV: And he drew quite a distinction between the
- situation where there was evidence of bribery and merely
63
- a suspicion or some inconsistency which perhaps pointed
- towards bribery.
- MR JUSTICE HILDYARD: Do I take the cohort of people who
- might or might not discover this as being the cohort who
- you say there was a realistic prospect of obtaining
- finance from? Or do I imagine a whole series of more
- unscrupulous lenders, possibly, who might be less
- worried about their directors being locked up in America
- or here? Which cohort should I envisage?
- MR STROILOV: Well, in a way it is rather complex. I think
- the question for your Lordship is simply: is it more
- likely that the group would have defaulted or not? That
- is the ultimate question you have to answer. Then
- within that question, what comes into play is the
- prospects of refinancing. It’s not even limited to
- refinancing. Again, we can look at Mr Arkhangelsky’s
- witness statement.
- MR JUSTICE HILDYARD: No, it isn’t. I have ‐‐
- MR STROILOV: It is not limited to this particular project,
- it is not limited to Oxus, it is not limited to
- BNP Paribas, it is not limited to refinancing at all; it
- could have been restructuring, it could have been
- selling part of the assets and, really, was the group
- able to survive, is the question for you.
- MR JUSTICE HILDYARD: Well, there are three means of
L15/90/17
July 11, 2016 Day 46
- survival, aren’t there? One is restructuring with your
- existing lender, right?
- MR STROILOV: Yes.
- MR JUSTICE HILDYARD: And I have to take a view as to
- the extent to which if I find that they were conspiring,
- if they had not conspired, what would have been the true
- situation.
- MR STROILOV: Yes.
- MR JUSTICE HILDYARD: The second is I have to look at the
- evidence of the potential funders if there was to be
- replacement finance.
- The third, and the question I am asking is am I
- entitled also to take into account the un‐evidenced
- prospects of some other lenders than EBRD and BNP and
- front‐runners of that kind holding their nose, darting
- in and saying: I know it looks a bit squiffy, but we
- will lend a lot of money. I am sorry to put it broadly,
- but it is just so that we know we are being quite candid
- about the situation.
- MR STROILOV: Indeed, my Lord, and I make this submission
- without pleasure but I think you have to take this into
- account.
- MR JUSTICE HILDYARD: The prospect of rather less particular
- lenders, I should, should I?
- MR STROILOV: I think Mr Arkhangelsky’s evidence in
- on searching for skeletons in the closet as, quite
- rightly, my learned friend focused on that day. It is
- just a totally different approach. It is not attractive
- and we may all be philosophically unhappy about it, but
- you have to find what the reality would be.
- MR JUSTICE HILDYARD: Then the crunch comes: if you feel
- philosophically unattracted by it, is that really the
- law, that you are compelled to accept the possibility of
- unscrupulous lending, therefore the possibility of
- a recovered business on the footing of something
- entirely unlawful, therefore lots and lots of money
- under the claim caught, in effect, the engine for,
- really a pretty awful situation.
- MR STROILOV: My Lord, we are back to the public policy
- defence.
- MR JUSTICE HILDYARD: Yes.
- MR STROILOV: In my submission it is clearly ‐‐ well,
- obviously a lot has been made of it, but it is quite
- remote from any issues in this claim. It is simply some
- unattractive fact in the history of Mr Arkhangelsky and
- Western Terminal. It’s no more than that. Certain
- bribes have been paid, but how does that affect the ‐‐
- I don’t ‐‐ well, I stand to be corrected if I am wrong:
- I don’t believe Mr Arkhangelsky has even said that he
- would have to continue to pay these bribes to develop it
65 67
- the witness statement is that he was talking to a lot of
- Russian banks as well as western banks, and I think it
- is right to assume that both categories really include
- unscrupulous or less scrupulous lenders in different
- proportions.
- MR JUSTICE HILDYARD: So what evidence do I have that they
- might be interested beyond a general sort of ‐‐ I would
- then be applying a rather idiosyncratic feel,
- wouldn’t I, as to what more ‐‐ less mainstream lenders,
- possibly more unscrupulous lenders might do? It would
- be a guess, wouldn’t it, on my part. It would either be
- an exercise in sort of slightly unrealistic piety, or it
- would be an exercise in: my goodness, anything goes in
- the commercial world.
- MR STROILOV: I see the difficulty, my Lord.
- In my submission, the bottom line is the market
- lives by the laws of the market.
- MR JUSTICE HILDYARD: Yes.
- MR STROILOV: If you have a phenomenally profitable project,
- as Mr Bromley‐Martin described it, then for the better
- or for the worse, there will be a financing for it. And
- that really resolves the issue.
- MR JUSTICE HILDYARD: So with Cole Porter, anything goes?
- MR STROILOV: My Lord, the skeletons, it is not ‐‐ the
- lenders focus, really, on the project: they don’t focus
- further. He simply explained that he did that in
- the past.
- My Lord, how would you look at it if, for instance,
- our defence to the Bank’s claim was based along these
- lines: well, the Bank only exists thanks to its corrupt
- relationship with Mrs Matvienko. Therefore, it wouldn’t
- be lending without it, and therefore it should not
- recover its loans.
- MR JUSTICE HILDYARD: I think, for clarity, the premise on
- which I am most stuck is the premise that though I know
- about this, I’m to assume that others would not have
- found it out, and on that footing I should grant huge
- damages. I think that’s the thing that I find most
- anxious‐making. Have I made myself sort of ‐‐ is that
- sort of …
- MR STROILOV: I think, my Lord, that is inherent in the
- extremity of the oath which every witness takes in
- the witness box. Well, you have to take into account
- that you are meant to know everything, but that’s not
- what happens in the world outside the court.
- MR JUSTICE HILDYARD: Mm. How are we doing on time,
- Mr Stroilov?
- MR STROILOV: Well, I think ‐‐ well, I don’t think I will
- need more than 10 minutes, probably after the lunch
- break is better because I will spend the lunch break ‐‐
L15/90/18
July 11, 2016 Day 46
- MR JUSTICE HILDYARD: Would 2.00 suit you all, then Mr Birt,
- you must finish by 4.15 pm; is that going to be all
- right?
- MR BIRT: My Lord, if I am up on my feet before 2.15 ‐‐
- MR JUSTICE HILDYARD: I will give you until 4.30, I have
- a meeting at 4.45.
- MR BIRT: I will do my best, my Lord. It may be that I have
- to skate over some points or give your Lordship some
- references, but I will do what I can to accommodate
- your Lordship.
- MR JUSTICE HILDYARD: Just one question: am I going to get
- some assistance on the legal point as to the illegality
- point, as I will call it?
- MR STROILOV: Well, you will recall that Mr Milner very
- kindly volunteered to provide a note.
- MR JUSTICE HILDYARD: Yes, will you discuss between you the
- mechanics of that. They need to know when you get it
- and they may need to reserve their position as to
- an answer and you as to any further things. Will you
- discuss that briefly?
- MR BIRT: We will discuss it between us, my Lord, yes.
- MR JUSTICE HILDYARD: Good. Thank you. 2.00 pm.
- (1.10 pm)
- (The Luncheon Adjournment)
- (2.00 pm)
- You would expect there to be some documentary record of
- chasing; there is none.
- You were told that the Bank learned about the arrest
- of Tosno, and that changed its view of OMG’s situation.
- In the Bank’s disclosure, there is no document
- mentioning the arrest of Tosno prior to 5 March.
- In my submission, the suggestion that having learned
- of the tax investigation back in 2006 or 2007 which
- resulted in Mr Arkhangelsky being cleared, that this may
- have affected the Bank’s decision, that is also not
- credible. The Bank would have considered the commercial
- prospects of OMG, and refinancing would have been high
- on the agenda.
- It clearly did not and the inference I invite is
- that because by that time the Bank was already
- determined to call a default so as to be able to seize
- the assets.
- My Lord, some references on the points which came up
- previously. It is our pleaded case that the transfer of
- shares to subsequent purchasers was a breach
- of December 2008 agreement. That’s paragraph 129 of our
- re‐amended defence and counterclaim.
- Coming back to my previous point, I’m sorry,
- my Lord, the cross‐examination of Ms Mironova on that
- was, in my submission, rather revealing: she was clearly
69
- MR STROILOV: My Lord, as I said, I will be brief now, just
- a couple of points and a few references to give you.
- First, the difficult, perhaps, issues which we have
- discussed just before the luncheon adjournment. Clearly
- whatever the position on the public policy and indeed on
- the facts is, they do only relate to the primary claim
- for the value of the business; they do not affect the
- alternative claim for the value of the assets, in my
- submission. So if your Lordship is minded at all
- possibly to split off that issue for a separate trial or
- some hearing later, and to order interim payment as
- a result of findings on this claim, there are obvious
- advantages in deferring these issues to that second part
- as well. The most obvious of which is getting rid of me
- and getting proper lawyers.
- My Lord, just very briefly on the facts I haven’t
- covered. The explanations given on behalf of the Bank
- for the decision to call a default in March 2009, are
- not corroborated by documentary evidence at all. You
- were told that Mr Arkhangelsky was chased for
- documentary evidence of outstanding timber payment.
- I stand to be corrected; there is apparently no written
- record of such chasing.
- You were told by Mrs Volodina that he was asked to
- come up with a recovery plan, but never provided it.
71
- not credible. That’s {Day32/59:18}.
- There is also, I think, one point on the moratorium,
- which I haven’t explored sufficiently in written
- submissions or in oral submissions, is that apart from
- Mr Savelyev’s BVI statement, there have been some other
- statements publicly made explaining the Bank’s position,
- which we say are inconsistent with the Bank’s present
- case.
- Again, I cross‐examined Ms Mironova on that in some
- detail on Day 32 {Day32/80:9}, and going on through to
- {Day32/89:1}.
- Further, my Lord, on references, I have promised
- Ms Mironova’s admission that the settlement agreement
- with VECTOR Invest was not meant to be implemented.
- That’s on Day 33, and then the cross‐examination on that
- settlement agreement starts at page 104, line 17, and
- continues for some pages {Day33/104:17}.
- I hope I am not galloping too fast, my Lord. If
- I am, tell me.
- MR JUSTICE HILDYARD: Thank you.
- MR STROILOV: The minutes number 1 of the auction sale which
- named Globus as a second bidder, that’s at
- {D161/2715/1}.
- Now, a couple of additional points. I think what my
- learned friend has submitted last week in response to
L15/90/19
July 11, 2016 Day 46
- your Lordship’s question on this spreadsheet exhibited
- by Ms Stalevskaya, naming various companies as belonging
- to the Bank, on our interpretation.
- Now, Mr Birt submitted that this column «belonging»
- was linked with projects. Perhaps it makes sense to
- have a look very quickly at the actual table at
- {D139/2329/21}, just so that you follow what I am
- talking about.
- So, my Lord, you look in the far right column you
- have «projects» and then «belonging», so it’s in
- the middle, it’s column 6, and I think the claimants’
- interpretation is that the «belonging» column being, as
- they say, the funder or the lender, corresponds to
- projects, whereas we say it corresponds to the share in
- charter capital and to column 5 which we say is
- a nominal shareholder.
- Now, that explanation is something Ms Stalevskaya
- has expressly rejected, and agreed with me that the
- projects column just gives you a list and does not
- correspond to other sub lines. That’s on {Day9/103:5}.
- Finally, my Lord, just a few words on Mrs Malysheva
- and her non appearance. It is, with respect, not
- correct that she was only named as a conspirator in
- the latest amendment to pleadings. The amendment was ‐‐
- well, she was named, I think the earliest time she is
- consistent in saying that Mrs Malysheva acted on behalf
- of the Bank with full authority; there was no attempt,
- really, to denounce her actions, no suggestion that she
- was acting outside her authority in any way.
- So whether she decided not to answer allegations of
- dishonesty in relation to these actions or the Bank
- decided that she shouldn’t answer, either way you are
- entitled to draw adverse inferences and, indeed, we
- invite your Lordship to do so.
- MR JUSTICE HILDYARD: Adverse inferences of what? Of
- conspiring?
- MR STROILOV: The inference is, well, really a refusal to
- answer these kind of allegations in these circumstances
- amounts to an admission, in my submission. She has
- nothing to say. Either she considered or the claimants
- considered that her cross‐examination on these issues
- would only make matters worse. That is the inference we
- invite.
- My Lord, unless I can assist you on any further
- specific points, I should, at last, give way to my
- learned friend.
- MR JUSTICE HILDYARD: Just hold on one sec. (Pause).
- You accept, do you, as regards Mrs Malysheva, the
- evidence that under Russian employment law she couldn’t
- have been required by contract to give evidence?
73 75
- named in the list of conspirators is in the version of
- our pleadings dated 21 January 2013. I will just give
- you the paragraph reference, my Lord. In the bundle
- that is {A2/11/42}, and then in paragraph 177 she is
- named expressly as one of the conspirators, and there
- are more detailed pleadings about the ownership or
- co‐ownership of Baltic Fuel company and Renord by her
- husband and son.
- The only thing that changed recently is that we
- expressly pleaded that the Bank was acting by ‐‐ the
- previous pleading was acting principally through or by
- Mr Savelyev, and now we have changed it into acting
- principally by Mr Savelyev and/or Mrs Malysheva. But
- she was named and very serious allegations of dishonesty
- were made against her.
- Whether it was her decision not to respond to them
- and to refuse to give evidence or the Bank’s decision
- not to call her depends on the credibility of
- Mr Savelyev. He told you that she was dismissed for
- reasons unrelated to this case, and he told you that he
- asked her to give evidence but she refused.
- We say Mr Savelyev is not credible at all, and very
- little weight can be given to his evidence. But
- ultimately it doesn’t matter very much because the
- claimants admit, and all claimants’ witnesses were
- MR STROILOV: No, my Lord. No. Well, it’s just what
- Mr Savelyev told you. Unless I have missed something,
- there was no Russian law evidence on this, and
- essentially it sounds rather incredible, the suggestion
- that in parting company and in making some payments to
- her, it was not possible to come to some arrangement
- where she would give evidence here.
- MR JUSTICE HILDYARD: So as regards that, you simply say
- that Mr Savelyev is not a lawyer and his opinion in that
- regard is worthless?
- MR STROILOV: Indeed, my Lord. If, indeed, he was
- truthfully giving his opinion. Well, we say his
- credibility is zero.
- MR JUSTICE HILDYARD: You stress the position of Mr Lokai in
- paragraphs 178 and onwards in your closing submissions;
- was there anything you wanted to say in that regard?
- MR STROILOV: Yes, my Lord, the position of Mr Lokai, well
- obviously the whole system of companies associated with
- Mr Lokai shows a number of points. It shows that there
- is, indeed, a system probably wider than Renord of
- various companies associated with Bank of St Petersburg
- and Mr Savelyev’s denials that BSPB stands for
- Bank of St Petersburg and all other similarities of name
- is really not credible.
- He is associated with Solo, he is the founder of
L15/90/20
July 11, 2016 Day 46
- Solo, and that’s obviously one of the crucial companies
- in this case and I would submit crucial, among other
- things, to the understanding of what Renord is.
- Essentially the picture which, in my submission,
- seems most likely from this vast investigation of
- various companies associated with the Bank, is that in
- the reorganisation of the Bank’s investment department,
- to which Mr Smirnov refers in his witness statement, it
- simply involved separating a number of companies, and
- people who worked within the Bank on investment,
- including Mr Lokai and Mr Smirnov and various employees
- who are now the management team of Renord, they became
- separated, they became essentially, in practice, BSP
- Capital, the bad bank, only for the reasons which
- perhaps Mr Savelyev and Mr Turetsky and a number of
- witnesses explained to you: the connection with the Bank
- was kept hidden, but essentially it became the bad bank
- associated with BSP, and both Mr Lokai and Mr Smirnov
- seem to be managers of that system.
- MR JUSTICE HILDYARD: There was in the last substantive
- part, part 14 of the claimants’ closing submissions,
- focus on various aspects of the conduct of
- the litigation on behalf of the defendants with relation
- to disclosure, publicity given, bandstanding, I think
- they would call it; is there anything you wanted to say
77
- in that respect?
- MR STROILOV: Well, it is so enviably comprehensive that it
- takes some time to find it, my Lord.
- MR JUSTICE HILDYARD: Yes. It is paragraph 1186 and onwards
- is where the part begins.
- MR STROILOV: 1126.
- MR JUSTICE HILDYARD: 1186.
- MR STROILOV: I beg your pardon, my Lord.
- MR JUSTICE HILDYARD: It may well be you don’t wish to
- respond, but we haven’t looked at that and I just wanted
- you to …
- MR STROILOV: Yes, my Lord, I think obviously there has been
- a lot of dispute in relation to disclosure, and I’m
- grateful: I meant to draw your attention to the ‐‐
- pursuant to your Lordship’s order there was a disclosure
- statement with a very comprehensive appendix answering
- all the questions which the claimants asked in
- correspondence that will be in volume {P1/10/10}.
- Really, essentially there were two interrogatory
- letters, as it is, which we were directed to answer
- insofar as we can, and so we did at length. So in
- response to these criticisms, I would simply invite
- your Lordship to read this.
- MR JUSTICE HILDYARD: Yes, anything else on that section?
- MR STROILOV: Yes, my Lord. As regards the suggestion that
- V‐Bank did not withdraw from BVI proceedings because of
- pressure, well, you don’t have to resolve it because you
- did not ‐‐ a number of years ago you did not admit this
- part of the counterclaim, and essentially that depends
- on what has been ‐‐ on whatever you find generally about
- the parties and their credibility.
- On the so‐called media campaign, well, we reject the
- allegations of conducting a specific campaign. This was
- a case which attracted very considerable media attention
- in Russia. Both parties were briefing the media and
- essentially there is nothing wrong with that. That is
- only to be welcomed. Apart from a particular Facebook
- publication, which was unfortunate, for which
- Mr Arkhangelsky has apologised.
- I think the suggestion that we were distributing the
- cartoons of Mrs Matvienko, that’s also incorrect. That
- comes from some further re‐posting of our press release,
- and someone else added the cartoon; we were not
- producing any cartoons, my Lord.
- I think there are some criticisms of me which, with
- respect, I don’t think ‐‐ well, with no disrespect,
- I don’t think they deserve an answer.
- MR JUSTICE HILDYARD: Good. Thank you very much indeed.
- Have you agreed between you as to how you deal with
- the important point of progress with the issue as to
79
- illegality?
- MR BIRT: We had a discussion at the beginning and at the
- end of the short adjournment, my Lord. Mr Stroilov ‐‐
- he will speak for himself, but he suggested because he
- is reliant on Mr Milner really, here, and Mr Milner’s
- diary is not clear and is assisting pro bono, they need
- a little bit of time.
- Shortly before we started it was suggested that they
- might be able to produce anything in writing that they
- wanted to produce by two weeks today, which is 25 July.
- That would give us the balance of that week to produce
- any reply to that, if it is to be in before the long
- vacation. The difficulty if it doesn’t come that week
- is certainly I’m unavailable during the long vacation,
- but we will endeavour to get something in and, assuming
- that is what your Lordship has in mind, by Friday
- 29 July, and we would hope to be able to do that, if we
- do indeed get something in writing on 25 July, and we
- would say preferably 10.00 in the morning or lunchtime
- and then we would be able to find, Mr Eschwege and I, in
- the last crowded days of term that no doubt everybody
- experiences, we would endeavour to get something back to
- your Lordship then.
- If that suits. If your Lordship isn’t fussed until
- getting something much later, then more relaxed, but
L15/90/21
July 11, 2016 Day 46
- assuming your Lordship wanted to get that done and
- dusted, that’s what we would endeavour to deal with,
- my Lord.
- MR JUSTICE HILDYARD: I’m going to be candid about this.
- I had hoped that I would have the rest of the term to
- write or begin to write judgment, but that has all, or
- substantially all, been taken away from me, so it is
- unlikely that I would immediately make progress on the
- judgment. My real aim is to make sure that these sort
- of things which are fresh to the mind now, but may pass
- out of it, as the summer rolls on, don’t get forgotten.
- What I suggest is you keep, broadly, to that
- timetable, but if either one of you faces some
- difficulty, please keep me through my clerk updated,
- partly as a matter of my knowing what you are doing, and
- partly so that we keep this matter to the fore.
- MR BIRT: My Lord, very well, we will do our best, and if it
- looks like either Mr Stroilov or Mr Milner have needed
- a few more days which, in effect, runs us out of time,
- we may have to write to your Lordship with a proposal.
- MR JUSTICE HILDYARD: Yes.
- MR BIRT: The other potential unknown which may impact on
- this is if the Supreme Court does indeed hand down
- a judgment in a new leading case we may both to have
- a fresh look at that, but in which case we can both
81
- similarly e‐mail my Lord’s clerk and come up with a
- fresh proposal.
- MR JUSTICE HILDYARD: Well broadly speaking, I am fairly
- glued up in July, I am away in August, and then I’m here
- from at least the second week of September. Then I am
- applications judge in the last week, or the second to
- last week, I can’t remember, so I will be around
- in September.
- MR BIRT: I think we have a working plan and we would hope
- that if it looks like we’re not going to get the note on
- 25 July, then we would have an idea of when so we can
- plan our work accordingly, my Lord.
- MR JUSTICE HILDYARD: Very good.
- Submissions in reply by MR BIRT
- MR BIRT: First of all, my Lord, I am obviously going to
- pick up points that have emerged or been made by
- Mr Stroilov in his submissions or emerged in discussions
- between my Lord and Mr Stroilov over the last few days.
- I don’t intend to repeat the earlier oral submissions
- I made or, indeed, the written document that we have put
- in.
- As I mentioned earlier, on some occasions it may be
- a question of just giving my Lord references,
- particularly given the time.
- MR JUSTICE HILDYARD: Yes.
- MR BIRT: I was just going to start off by giving a few
- references arising out of some exchanges this morning,
- while those points are fresh in our minds.
- First of all, Mr Bromley‐Martin and his evidence
- about what could have been achieved given the
- information memorandum discrepancy, as one might put it
- kindly. We have dealt with those in our closing
- submissions in paragraph 478 and 479. I think my Lord
- remembered some of his evidence earlier in answer to
- your own questions, and I think there was first a short
- passage where my Lord asked a question as part of, or in
- the middle of, Mr Lord’s cross‐examination. That was at
- {Day20/41:1}. Then coming back to it after
- re‐examination my Lord asked some more questions, and
- that was {Day21/23:1} to {Day21/26:1} on the point
- I have in mind which demonstrates, in our submission,
- that his evidence as to the difficulties of getting any
- of these lenders really interested was not confined to
- the discovery of the bribe as such, or the alighting on
- that as the right characterisation, but it was
- effectively the discrepancy. I think my Lord at one
- point described the discrepancy itself as a «huge
- clunking skeleton» that would emerge from the closet on
- any degree of due diligence by any of the lenders.
- My Lord, I think those are the passages, I won’t go
83
- through them now but that, in our submission, was quite
- valuable evidence on this point.
- Insofar as Mr Stroilov went on today to make
- a submission that: well, there might have been some
- other Russian lenders out there, or perhaps some lenders
- with fewer scruples who might have held their noses or
- be prepared to go ahead and lend, we say it is just not
- open to him now to advance that sort of case based, as
- it is, entirely on speculation and not evidence. There
- is no evidence as to any particular lenders who would
- have gone ahead on that sort of basis, knowing what they
- inevitably would have come to know through any due
- diligence process.
- Indeed, once one moves beyond were there any
- lenders, the next question that would inevitably arise
- would be: well, on what sort of terms would those sorts
- of lenders lend, and the sort of lender who might lend
- on that basis might demand much more onerous terms than
- a western bank in terms of rates, in terms of covenants,
- in terms of security, and of course, none of that was
- explored and none of that was put into evidence,
- my Lord.
- Generally in relation to the prospects of
- refinancing, we have dealt with that comprehensively in
- the written submissions. I wasn’t intending to make any
L15/90/22
July 11, 2016 Day 46
- further points on that immediately.
- My Lord, just briefly on Land Breeze, my Lord made
- the observation this morning that there is not much that
- the court knows about it and, indeed, there is not much
- that the claimants know about it either. But what we do
- know in relation to the Vyborg Shipping business and
- Land Breeze we have set out in our closing submissions
- from paragraphs 222 onwards, and that describes it, we
- know, and the Vyborg Shipping scheme and, in particular,
- around paragraph 228, and then we note in footnote 666
- that we recently discovered that Land Breeze had been
- dissolved. We wrote to the Arkhangelskys about that and
- they said: we weren’t involved in that, but we found
- that slightly surprising {AA3&4/14/138}.
- Then there was another passage, again, just the
- reference, in our written opening at paragraphs 45 and
- onwards that dealt with the Vyborg Shipping scheme and
- Land Breeze and effectively there were time charters put
- up for vessels which didn’t exist, and it was money paid
- to Land Breeze under those time charters that went into
- what we would say was the black hole {AA3&4/14/32}.
- MR JUSTICE HILDYARD: Maybe I have misunderstood this, but
- do the Arkhangelskys not admit that they were
- shareholders in Land Breeze?
- MR BIRT: My understanding is they admit that they were
85
- certainly the ultimate beneficial shareholders. I’m not
- sure if they were the direct shareholders or whether
- that was through a network of Cyprus companies and a BVI
- trust. Some of the companies were held in different
- ways.
- MR JUSTICE HILDYARD: But ultimately they were the owners?
- MR BIRT: My understanding is they were ultimately owners of
- Land Breeze, my Lord, yes.
- MR JUSTICE HILDYARD: That is accepted, isn’t it,
- Mr Stroilov?
- MR STROILOV: Yes, my Lord, through the BVI trust which you
- will remember featured heavily in the freezing order
- proceedings. That’s, I think ‐‐
- MR JUSTICE HILDYARD: It just seems odd that they knew
- nothing of the dissolution if they were the ultimate …
- MR STROILOV: Yes, my Lord. I think it is explained in
- the letter which Mr Arkhangelsky sent.
- MR JUSTICE HILDYARD: Okay, where is the letter? 666,
- footnote 666.
- MR BIRT: It is footnote 666, so I think ‐‐ ah, we haven’t
- got a reference. It was a letter dated 9 June 2016.
- MR JUSTICE HILDYARD: Where can I find that?
- MR BIRT: I will ask somebody to find the reference.
- I expect that came in at around the same date as the
- submission went in, my Lord, so it will be towards the
- back end of bundle I.
- MR JUSTICE HILDYARD: Thank you.
- MR BIRT: Then, my Lord, some other references arising out
- of this morning. There were some submissions about the
- Morskoy Bank loan, and just to remind my Lord a little
- bit about that, we dealt with that story in various
- places, but in paragraph 808 of the written closing
- {AA3&4/14/432} we gave some explanation about some of
- the evidence about it.
- My Lord knows a number of the allegations about who
- the shareholder was and whether or not that was the
- right way of approaching it, but the story ‐‐ there was
- a part that wasn’t really gone through this morning, and
- going through to 808(4), and this ought not to be
- forgotten in the Morskoy Bank loan story, it was a loan
- taken out by Western Terminal, so Western Terminal
- assumed the obligation of repayment to Morskoy Bank, but
- the money was paid straight on by Western Terminal out
- to another OMG company, LPK Scan, which of course was
- outside the repo. That was contrary to the purpose for
- which the loan was advanced by Morskoy Bank, which was
- supposed to be for the purposes of Western Terminal’s
- working capital.
- So the loan itself was of no benefit to
- Western Terminal at all and Mr Arkhangelsky’s
87
- explanation was: ah, it was of benefit for the group,
- but, of course, that was rather contrary to the idea
- that Western Terminal itself would not, whilst subject
- to the repo arrangements, be the subject of action or
- conduct or manoeuvring which would be to its own
- financial disadvantage. Indeed, that was one of
- the terms of the memorandum that Mr Arkhangelsky relies
- on under clause 3, he was not, whilst still involved in
- Western Terminal, to act to its financial disadvantage
- in that way, to its detriment.
- So that is part of the story that will come up again
- later, because one of the claims against LPK Scan was
- then trying to get that money back that Mr Arkhangelsky
- had procured Western Terminal to transfer out.
- But at the moment, the loan itself was a breach of
- the memorandum. Obviously my Lord knows that we say the
- memorandum isn’t binding, but Mr Arkhangelsky does, he
- relies on it. We say even if it was binding then the
- action in relation to Morskoy Bank was a breach, whether
- or not there was a moratorium, because it was a taking
- out a loan which was obviously to the financial
- detriment of Western Terminal and for the advantage of
- a different OMG company.
- We return, just for completeness, it comes back in
- paragraph 962 of our written closing. I will come back
L15/90/23
July 11, 2016 Day 46
- to that later, but that’s then how it fits in with the
- claim against LPK Scan. {AA3&4/14/508}.
- My Lord, coming back to some points that were made
- last week, in going back to the conspiracy allegations,
- and in particular there were some submissions made by
- Mr Stroilov about the bailiffs or the other auction
- organisers, and we would say there was a fair amount of
- equivocation from him about what he says, those who were
- involved in those auctions in that sort of capacity
- knew, what their level of involvement was, and what
- their case is about it.
- His pleaded case, which we cite at paragraph 8821 of
- our closing, was that the defendants contend that the
- court bailiffs acted under the claimants’ direction
- and/or their co‐conspirators, and the direction of their
- co‐conspirators and/or were themselves co‐conspirators.
- He seemed to backtrack from that in his oral
- submissions, because he said it didn’t matter that much,
- perhaps the auctioneer was misled is what he says, but
- he never said what he thought the auctioneer might have
- been misled about or who had misled the auctioneer and
- it was certainly not suggested to any of the Bank’s
- witnesses that they had done any such thing.
- {AA3&4/14/468}.
- So in any event there is actually nothing to suggest
- they would have wanted to do their duty and ensure
- a fair auction to get the best price.
- Indeed, the evidence from the witnesses who talked
- about it was that so far as they knew, the rules were
- followed. It’s also important to note how the starting
- price at the auction is set, and we have dealt with that
- at paragraph 876 of the closing: it is either the amount
- set out in the mortgage contract itself, in other words,
- a previously agreed price between the pledgor and the
- pledgee, or by the court after an independent valuation
- report {AA3&4/14/466}, and in that situation the pledgee
- has no role in setting the price. That was
- Professor Maggs’ evidence, we have cited that
- at paragraph 876.
- So it’s not as if the Bank can rig how the auction
- starts: it has either been agreed in the mortgage
- contract or it is independently determined, and the
- evidence of the experts was that is the starting price
- and the only way to increase it is by people bidding.
- So we don’t understand how it is said, if it is
- said, that those conducting the auctions were either
- conspirators or were misled, or what the Bank is said to
- have done in that regard, and in fact, the evidence is
- that they were not.
- MR JUSTICE HILDYARD: I mean, that may well be a fair point,
89 91
- that the bailiffs or the auction organisers were
- co‐conspirators or were, in fact, misled. The evidence
- that we have set out on Russian law at 873(3) is that
- the auction organisers had a duty to comply strictly
- with all the requirements of the law governing the
- auctions and there is nothing to suggest that they would
- not have done their duty and invalidated the auction if
- they had apprehended a breach of the rules.
- It was certainly not suggested to anybody that they
- had procured any of the organisers or the bailiffs to
- breach their duty or, indeed, that they had misled them
- in any way. {AA3&4/14/464}.
- And we also have noted in the written closing
- submissions that the organisers of the auctions had
- their own incentive to get the best price: they got
- a percentage of the sale price, and that was the
- evidence of Ms Mironova, which we have cited at
- paragraph 865, and indeed, Ms Kosova as well at 931(2)
- {AA3&4/14/460} and Mr Turetsky, our banking practice
- expert, said that the range of fees payable was between
- 1 and 5 per cent of the selling price to the auction
- organiser. He said that in his report at paragraph
- 8.33, which can be found on the {E2/8/28}, so that is
- potentially quite an incentive on the organiser to get
- the best price, leading to the inherent probability that
- I will have to review it, but any sort of auction
- bidding or auction barring from interested people, or
- any curiosities in the valuations, will be unlikely to
- be known, still less within the remit of the bailiffs,
- who are really in a ministerial capacity just to see to
- it that the rules, which are fairly basic, are not
- themselves confounded.
- But your case is that so long as the sale takes
- place at an auction, it is protected from enquiry except
- by action against the bailiffs; is that really right?
- MR BIRT: My Lord, that is right. Absent proof of
- effectively dishonesty on behalf of another party, that
- was the gist of both Dr Gladyshev and Professor Maggs’
- evidence, that there was a set of rules and the bailiffs
- are responsible for adhering to them.
- My Lord is right that the bailiffs are the
- court‐appointed officials and, as one sees from the
- documents, quite often the actual auction process is
- sent to an auction organiser. The Russian Auction House
- was an independent one for the Onega properties, and
- that wasn’t through the court process, but the other
- ones were through different auction organisers on
- different occasions. There was one called Aurora,
- I think there is one called Tymen, and there are
- different companies that fulfil that function, and all
L15/90/24
July 11, 2016 Day 46
- those people have their own incentive in seeing that
- there is a fair auction, getting the best price from the
- market.
- The bailiffs have the responsibility of seeing that
- the rules are followed. Unless there has been a
- starting price agreed, or even if there has, they can go
- and get an independent appraisal. That’s what the
- bailiffs do, and then that’s the starting price, subject
- to the court’s approval, and in some cases there is
- a 80 per cent level to reflect the fact that it is
- starting in an auction, my Lord.
- So there’s not ‐‐ you would have to have all those
- people, or at least, a substantial number of those
- people, in on it, because if you ‐‐ first of all you
- have to get the starting price a long way down where you
- want it, so you have to somehow skew the independent
- appraisal, you have to get that ‐‐
- MR JUSTICE HILDYARD: Subject to it being in the mortgage,
- there is no actual ‐‐ all it has to be is an independent
- valuation of which the bailiffs have no control.
- MR BIRT: Well, we will have to check the evidence. I think
- the bailiffs or the auction organisers ‐‐
- MR JUSTICE HILDYARD: I know, but they wouldn’t be able
- to… what I’m getting at is that there must be all
- sorts of reasons why an auction which looks like
93
- an auction isn’t really an auction, but your case is
- that as long as it is something which takes place in
- accordance with the rules of an auction, so nominalistic
- rules, really, it is an auction.
- MR BIRT: My Lord, I don’t quite accept that. If it takes
- place within the rules of the auction, which are more
- than nominalistic rules, they are an auction, because
- the rules are set down there in long ‐‐ we took
- Dr Gladyshev to some of the parts of the law on
- mortgages and things and there is quite a lot of rules
- about it, and that is the process through which Russian
- law has dictated that a security holder is entitled to
- enforce his security, and that’s what he’s entitled to
- do.
- Just because a bank who is having difficulty with
- its borrower who is not repaying and having difficulty
- in selling the property in a difficult market chooses to
- exercise legal rights and says: I can’t get anywhere,
- I’m just going to have to press the button of putting
- this into the court auction process now and seeing what
- goes on. That’s where we are, my Lord. The rules are
- followed, the relevant people who are involved from the
- bailiffs and the auction organisers do their job, and
- the price is produced according to the normal rules.
- MR JUSTICE HILDYARD: It may be that there is no evidence on
- this and therefore you can’t answer, but what would be
- the recourse if there were an auction ring, for example?
- I mean, the bailiffs wouldn’t be able to tell that?
- MR BIRT: Well, if there’s an auction ring, my Lord,
- meaning …?
- MR JUSTICE HILDYARD: Meaning that there is a pre‐compact
- between bidders either not to bid or to stop at
- a certain amount or to yield to another at a certain
- level, or any of the other well known tricks of
- the auction trade.
- MR BIRT: My Lord, if dishonesty can be proved, then there
- is a claim, the expert said, under the relevant
- provisions of Russian law against those who are involved
- in it.
- But absent the proof of dishonesty, none of that
- goes anywhere.
- MR JUSTICE HILDYARD: Supposing the auction is a sham
- because there are two people with different names who
- happened to be controlled by the same person?
- MR BIRT: My Lord, there are different ways of approaching
- that and, first of all, we would say that wasn’t a sham,
- that’s an auction that’s been set up in accordance with
- the rules.
- MR JUSTICE HILDYARD: Really?
- MR BIRT: But there is a further point, which is that, just
95
- take a step back and look at the situation here. One
- says ‐‐ one looks at the situation and says: it has all
- been put up for auction and two companies come along to
- bid at the auction, and as we know, they are both
- associated with Renord. Well, what are people to do
- about it? Was the Bank to say at that stage: stop the
- auction, you can’t have this? Well, it is not in their
- gift to say that. They are not entitled to. Are they
- to say ‐‐
- MR JUSTICE HILDYARD: Who was saying that to the Bank?
- MR BIRT: Well, nobody was saying that to the Bank.
- MR JUSTICE HILDYARD: No, but if it had.
- MR BIRT: What was the Bank to do if no other bidders came
- forward? They put these assets up for auction in
- the hands of the court and its processes, and it has to
- be followed through. They are not then entitled to say:
- oh, there are not enough bidders come forward I want to
- call it all off. They are not entitled to say: oh,
- I don’t like starting price, it has to go higher. That
- was the evidence of the experts; they have to live with
- it.
- What happens if they say: Renord, you can’t do this,
- only one of you can come forward. Maybe they have
- a conversation with them, or maybe the bailiffs say:
- we’re not happy with this, invalid. Then what happens?
L15/90/25
July 11, 2016 Day 46
- Then what happens is that the price reduces and you go
- off for another auction some 7 or 14 or 21 days later,
- and it starts at a lower price, and you see whether
- anybody else comes forward.
- Now, nobody is going to come forward to bid higher
- than the first auction. You are inevitably going to get
- a lower price. So one asks where does all that go if
- there aren’t any bidders out there?
- Again, as my Lord knows, if it still fails, it goes
- down again, and ultimately, if nobody comes in to bid,
- the Bank can take the property at the last starting
- price and just write it off against the debit.
- Standing back, if the Bank had actually wanted to
- take these properties for the lowest possible price for
- itself, which is ultimately the defendants’ case, there
- was a much better and cleaner way for them to do it,
- which was to put it up for auction and have nobody
- attend, or have one Renord bidder attend and have it
- declared invalid and run it again at a lower price.
- MR JUSTICE HILDYARD: Prices were so low I shouldn’t think
- it was worth their while, even if you thought about
- that. The thing is, it is very, very odd that in none
- of the auctions did anyone other than a Renord Company
- or a Savelyev company ever attend, and in none of them
- does the price go more than one step up above the
- the spiral of going downward.
- MR JUSTICE HILDYARD: Do you have a list for me of
- references to marketing efforts?
- MR BIRT: My Lord, I have a list of references for you,
- which I am …
- MR JUSTICE HILDYARD: Well come to them in due course,
- Mr Birt.
- MR BIRT: Yes, my Lord, they are behind one of the sheets of
- paper.
- MR JUSTICE HILDYARD: That’s fine.
- MR BIRT: We noted Mr Stroilov’s position on Friday that he
- said it wasn’t essential to the alleged conspiracy that
- no independent bidder ever came forward. He said that
- {Day45/71:1}. In other words, he seemed to be wanting
- to accommodate in the conspiracy the risk of an
- independent bidder coming forward, no doubt because
- putting the properties up for auction did include that
- risk, if you want to put it that way, or that
- possibility. That seemed to be on his basis that
- because the theory that the money goes around in
- a circle, the Bank wasn’t actually fussed about what
- price they got it, as long as they got it below a price
- that was sufficient to discharge the loans.
- That seems to us actually to undermine the idea of
- the conspiracy because how then is the conspiracy going
97 99
- auction reserve, and one has never seen that. I have to
- say, I’ve never seen anything like it.
- MR BIRT: My Lord, first of all, none of these are Savelyev
- companies, we take issue with that: they are Renord
- companies.
- MR JUSTICE HILDYARD: I mean, that’s a debate, isn’t it?
- MR BIRT: Well, I just wanted to make that clear. My Lord,
- it may be the case my Lord has never seen it. It may be
- the case that one has never seen a market such as that
- which prevailed in St Petersburg over this period after
- many people will say in the financial market: we have
- never seen a financial crisis like 2008. We have
- Mr Millard’s evidence that nobody was buying property.
- Now, there is absolutely no reason to doubt that
- evidence: he is an expert, he has come to this court to
- give his honest professional view, and he gave evidence
- that they could not sell property over that period. It
- is not surprising that when it goes up for auction
- nobody really wants it. That was the reality of
- the market at the time. No other bidders came forward.
- So we do say that attaching some sort of label to
- this such as the bid‐rigging label that Mr Stroilov
- attaches, doesn’t really get you anywhere unless you can
- show that there is somebody else out there who would
- have paid a higher price. Otherwise you just end up in
- to work? If an independent bidder does come forward as
- was obviously possible, the price could go all the way
- up on Mr Stroilov’s case, to sort of Simonova levels, or
- at least substantially higher than the money
- outstanding. Then there would be no way ‐‐
- MR JUSTICE HILDYARD: No, because he says as long as it was
- lower than that, then there wasn’t very great risk on
- all that you say of that, the Bank, if he is right about
- the ownership of the companies, would be removing money
- from one pocket to stuff in another.
- MR BIRT: Yes, but that’s where I pause to say ‐‐ the
- trouble is once you allow the possibility of
- an independent bidder in, how is the Bank to say: that
- is okay, as long as we cap it at the levels of
- the outstanding debt. The Bank doesn’t have any control
- over it at that stage.
- MR JUSTICE HILDYARD: The question of risk analysis on your
- scenario the market was so feeble that there wasn’t even
- the prospect of anyone attending. Mr Stroilov then
- says: supposing it wasn’t quite that feeble, the Bank
- could have taken the risk of it not being so feeble so
- long as there was no realistic prospect of the money
- being paid in such an amount as would come close to
- discharging the loan. You say that is a real risk, do
- you? I thought your whole case was miles under water.
L15/90/26
July 11, 2016 Day 46
- MR BIRT: No, no, my Lord, I don’t say it was a real risk,
- but what I say is on Mr Stroilov’s case, if one takes
- the defendants’ case where these properties are worth
- stratospherically greater amounts than they were
- auctioned for, then these conspirators are acting at
- risk to their own conspiracy by putting these on the
- market, because if Mr Stroilov is right that these
- properties really were worth even in the range of
- Ms Simonova, then somebody would have come out of the
- woodwork and bid for them and destroyed the whole house
- of cards, my Lord.
- MR JUSTICE HILDYARD: I think he says at that point that
- while there might have been any risk they took steps to
- ensure that unless you are in control on both sides of
- the equation, you put something in like the Gunard
- lease, which cooled the thing so much that no one in
- their right mind would buy it.
- MR BIRT: My Lord, we have handled the Gunard lease in our
- written closing, and I won’t repeat all the points
- there, but the key point for present purposes is that it
- is nowhere to be seen when the property is put up for
- auction. It is long lost in time. It is not in any of
- the sales particulars, it’s not in the documents put
- into the auction house, we have put the reference there.
- So there is no suggestion that anybody had been
- low prices. They were sold for the best prices
- achievable in the market at that time.
- One has to remember, for example, I know I made this
- point already, but Mr Arkhangelsky acquired the
- Western Terminal for around a billion roubles at a point
- where the market had increased, or was increasing, to
- its unsustainable levels. There was then a crash, and
- whether you say it is a 30 per cent loss or as
- Ms Saltykova said a 50 per cent loss in the property
- market, you get quite close to the price that it
- achieved at auction.
- MR JUSTICE HILDYARD: Assuming nothing was spent on it to
- improve it?
- MR BIRT: My Lord, yes, of which there is no evidence apart
- from Mr Arkhangelsky’s say‐so that he spent a few
- million putting some concreting down.
- MR JUSTICE HILDYARD: There were some buildings, weren’t
- there? I’m not indicating whether I thought it was
- a lot of improvement or a little improvement, but it
- wasn’t quite just the asphalt, was it? It was a new
- building, we saw that picture of him in an office, sort
- of low rise office.
- MR BIRT: I’m not sure that was at Western Terminal,
- my Lord.
- MR JUSTICE HILDYARD: Wasn’t it? Where was that? Onega?
101 103
- frightened off by the Gunard lease, it is just not part
- of the piece at that stage, my Lord, so I come back to
- the point that if this was a conspiracy it was a risky
- one to put them up for auction, and going back to
- my Lord’s points about the sale price was low and so on,
- and we have given the references in paragraphs 857 to
- 858 of the closing, and that was Mr Millard’s evidence,
- and my Lord will remember I think I referred to this as
- well last week, about the crash in real estate prices in
- Russia and that bank lending for commercial development
- dried up. We have Ms Simonova saying that the prices
- increased during 2007 and the early part of 2008 to a
- sort of unsustainable level and then crashed again, and
- we have Mr Arkhangelsky’s chief accountant,
- Ms Saltykova, giving her statement in the French
- proceedings on Mr Arkhangelsky’s behalf saying as
- a result of the 2008 crisis prices for real estate
- dropped by almost half, and Mr Millard explaining there
- was a complete lack of buyers in the property market …
- MR JUSTICE HILDYARD: You have given me the references.
- MR BIRT: Yes, my Lord, I have given you the references
- already.
- So, my Lord, that is the context through which one
- has to see the prices that were obtained and we simply
- don’t accept the premise that these were sold for very
- MR BIRT: I think that may have been the main OMG offices,
- which were neither at Scan or at Western Terminal, but
- was an office closer in St Petersburg. The problem with
- that video, one of the problems was, it wasn’t clear
- where each of the extracts was taken.
- Certainly the buildings where the outside was shown,
- they looked rather like sort of portacabin type
- structure, rather than anything perhaps more permanent
- or solid, my Lord.
- Just going back, again, a last point on the auctions
- and how various points that have to be remembered, is
- that the sales of some assets were undertaken not at the
- behest of the Bank in enforcement of its pledge rights
- or even enforcement of a judgment, but by the bankruptcy
- receiver of Scan for the benefit of creditors generally.
- And so there again ‐‐ the Bank is even one step further
- removed there and there has been no even allegation,
- I think, that the bankruptcy administrator has been
- party to a conspiracy and there would be no basis for
- that. There were other real creditors of Scan who had
- an interest. My Lord may remember that the Pravdy
- Street offices which were owned by Scan were sold by the
- bankruptcy administrator in August 2012. We have given
- the reference at paragraph 953 of our written closing.
- MR JUSTICE HILDYARD: Are the bankruptcy receiver sales
L15/90/27
July 11, 2016 Day 46
- there mentioned as well?
- MR BIRT: They are, my Lord.
- MR JUSTICE HILDYARD: At 953?
- MR BIRT: Paragraph 953, there is a footnote there I think
- to 2723, to the reference to his receiver’s report,
- dating from October 2012, which is at {D162/2728/0.1},
- and with those offices they were sold for
- RUB 19.15 million which was distributed to Scan’s
- creditors, and we have given the references there in
- the closing.
- MR JUSTICE HILDYARD: What was that? D162 ‐‐
- MR BIRT: The reference is at footnote 2723 of our closing
- and it is at {D162/2728/0.1}. I was just going to
- finish the point that of the 19.15 million which was
- realised from the sale of those offices, and it was all
- distributed to Scan’s creditors, the Bank received about
- 3.745 million.
- MR JUSTICE HILDYARD: Which should I take, just for my note,
- as the conversion to dollars?
- MR BIRT: It changed over the course. In bundle AA we set
- out a table, I will have to get the reference, at the
- beginning of the trial we put it in there and over the
- period it is ‐‐ it has come up on screen {AA2/12/1},
- my Lord.
- MR JUSTICE HILDYARD: Thank you.
- LPK Scan is not a party and nor is it shareholder who,
- if there was even a claim for reflective loss, she might
- have it, but she is not a party, and the shareholder is
- Mr Arkhangelsky’s mother‐in‐law, Ms Tarasova. But there
- has never been any suggestion that she was going to
- bring a claim or could bring a claim and no claim has
- been brought for the LPK Scan land.
- The second general point about the land at Onega,
- the Scan land and the LPK Scan land, is it had no access
- to the sea. My Lord will remember, it had no berths of
- its own; it was entirely dependent upon its neighbour to
- grant those rights of access.
- My Lord, I think I mentioned last week, and we have
- given the references in our closing as well, that we
- think it is instructive to see the prices at which the
- land at Onega was acquired, which is around in total
- RUB 136 million, and that was late 2005 or 2006. We
- have given the references and the figures in our closing
- at paragraph 22(1)(a) and footnote 38 and also in
- paragraph 945(4) {AA3&4/14/20} and I think again,
- paragraph 1109 with footnote 3206, and those are prices
- which, as Ms Yatvetsky said in her evidence, we have
- cited that in that last paragraph, were really not
- a million miles away from the prices they ultimately
- realised at auction, and again, remembering the
105
- MR BIRT: So, standing back, we say that the auctions were
- all organised, actually, by different people: some of
- them were the Bank enforcing its pledge, of which some
- of them were done through the courts and some of them
- through an independent auction house. Some were in
- execution of their judgments, some were by the
- bankruptcy receiver. All of those people, we say, would
- have been seeking to discharge their duties faithfully
- and indeed, many of them had an incentive to do so in
- terms of their percentage take on the sale proceeds.
- My Lord, briefly in relation to Onega Terminal and
- the land there, my Lord knows that there are two
- separate plots of land at the Onega Terminal, one
- belonging to Scan Insurance and one to LPK Scan. In
- relation to the Scan land, first of all in terms of
- valuation, Mr Milner said a little bit, but not very
- much, about this on Friday, and we have dealt with it
- quite fully in our written closing, so I am not going to
- take up too much time on the detail. It is
- paragraph 1101 and following. For present purposes,
- I just want to note two points about it {AA3&4/14/580}.
- One is that it is not to be forgotten that it is only
- the Scan land at Onega that is in issue in terms of any
- claim in these proceedings. There is no claim for the
- LPK Scan land. My Lord may recall why that is, because
107
- intervening financial crash {AA3&4/14/583}.
- Mr Stroilov tries to get away from some of this and
- the difficulty he recognises he has with the acquisition
- prices by saying that Mr Arkhangelsky acquired these
- assets at an undervalue due to his connections in
- the criminal underworld, to which we say there is
- absolutely no evidence, apart from his own say‐so, that
- he acquired them at an undervalue, and one can’t trust
- that sort of thing from Mr Arkhangelsky.
- My Lord, one of the other aspects that comes out of
- the land at Onega Terminal is the LPK Scan land and
- my Lord mentioned at some earlier point in
- the submissions that you would just be helped by being
- reminded how the sale of that came about. Just to give
- the references and a brief summary, it is in our written
- closing starting at paragraph 960 and goes on for
- a number of pages there {AA3&4/14/507} and I should also
- give this reference, which is related to it, which is
- one of my Lord’s questions to Mr Stroilov, was whether
- there was any evidence when ROK Prichaly had become
- interested in acquiring the land at Onega.
- MR JUSTICE HILDYARD: Oh yes.
- MR BIRT: And I think Mr Stroilov wasn’t sure, but we have
- given a reference in paragraph 961(2) {AA3&4/14/508} to
- Mrs Yatvetsky’s evidence, and she remembered it as early
L15/90/28
July 11, 2016 Day 46
- 2011. That was her evidence at {Day39/55:21}.
- Coming back to the LPK Scan land, it’s also to be
- remembered that LPK Scan was not controlled by the Bank
- or the original purchasers. It wasn’t part of, or party
- to, the repo arrangements in terms of the shares in
- Western Terminal or Scandinavia Insurance; it was
- a company that Mr Arkhangelsky appears to have
- controlled through his mother‐in‐law, and its land at
- Onega had been pledged to the Bank in support of two
- different loans to the Bank: there was a second Onega
- loan and the 2007 LPK Scan loan.
- How the original enforcement against LPK Scan land
- came about goes back to a point I made earlier, my Lord,
- which was that the monies that Western Terminal had
- borrowed from Morskoy Bank had been sent straight on by
- Western Terminal at Mr Arkhangelsky’s behest to
- LPK Scan. That was RUB 56.5 million. We say that was
- all part of his scheme to get money out of
- Western Terminal, even though it was under the repo
- arrangements, but whilst he still had the chance.
- Obviously Western Terminal as a company had
- an interest in getting that back. So it sued LPK Scan
- for repayment, not surprisingly the Russian court agreed
- and ordered that it be repaid. So there was enforcement
- against LPK Scan by Western Terminal against its assets,
- way of ROK Prichaly, and we have given the explanation
- in 967 of the closing and following, 968 sets out the
- mechanics. 969 looks at the value for which it was
- transferred which was very close to the value at which
- the LPK Scan land had been included in the OMG accounts.
- It was transferred for 27 million and actually OMG
- accounts had recorded it as worth RUB 29 million. So
- that is definitely a valuable comparison.
- Then, importantly, the Bank wrote off the balance ‐‐
- MR JUSTICE HILDYARD: I don’t know whether it is or not.
- I have no idea the basis on which the OMG accounts were
- drawn up.
- MR BIRT: No, there isn’t much evidence about that figure,
- but it is one of those things to take into account if
- one ‐‐ the trouble is, in this case, if one starts with
- looking at things like Ms Simonova’s valuations and then
- you look at 27 million, you might think: oh, that’s
- a bit low, but then if you look at all the figures in
- context, you find that actually there’s quite a lot of
- figures, wherever they come from, which are similar to
- the price at which it was sold and this figure happens
- to come from OMG’s own accounts.
- MR JUSTICE HILDYARD: But in classical accounting you would
- normally include in the accounts the acquisition cost,
- and so it wouldn’t take you any further than the
109 111
- namely the land.
- So that land in support of that judgment,
- remembering that judgment only came about because of
- Mr Arkhangelsky’s channelling the Morskoy Bank loan to
- LPK Scan, through that judgment there was an enforcement
- against the land, it was put up for auction, and it was
- that auction at which Mercury bought the land, but
- obviously always subject to the pledges to the Bank
- because those pledges hadn’t been released. That first
- auction was nothing to do with the Bank’s pledges; it
- was to make good the debt. So a separate legal process.
- It is to be remembered that at this time we have
- given the reference in footnote 2756, the outstanding
- debts to the Bank secured by this land was some
- RUB 865 million.
- So naturally the price at which Mercury were able to
- acquire those assets at auction was low because the
- assets were always subject to that RUB 865 million debt.
- This is one of those auctions that was reported in
- the press shortly after the event, we have given the
- reference at paragraph 965 of the closing.
- Then what happens in the story of this land, there
- was the transfer of the loans and the pledge over the
- LPK land to Mercury. By this time, this is when it
- became apparent that there might be a final purchaser by
- acquisition price.
- MR BIRT: Well, I don’t know if we have the evidence to go
- into where it came from. But, my Lord, even if that is
- the case, then it is still a relevant factor to bear in
- mind and it goes back to the point I made just now about
- the acquisition cost, my Lord.
- An important feature of this, of course, is that the
- Bank entirely wrote off the balance of the debt, and
- Mercury, as Mr Sklyarevsky, I think it was, gave
- evidence, brought no claim. So the upshot was that the
- Oslo Marine Group, under these two loans, the second
- Onega loan and the LPK Scan 2007 loan, were forgiven the
- entirety of the 855 million debt.
- So it doesn’t actually matter whether the land had
- been sold for 3 per cent of that outstanding debt or
- 30 per cent of that outstanding debt or 90 per cent of
- that outstanding debt, because the balance was forgiven.
- The ultimate result is the same.
- In fact, the evidence is that it was sold for what
- was thought to be an appropriate value for the land at
- the time, but the credit ‐‐ or, rather, the relevant OMG
- companies get, makes the precise percentage write‐off
- slightly irrelevant because the entirety of the debt was
- written off, and they actually got quite a large benefit
- from that.
L15/90/29
July 11, 2016 Day 46
- Again, if this really was the sort of conspiracy
- theory that it is said to be when they are bankers
- intent on persecution and running people out of town and
- bankrupting them, it is not very consistent with a big
- write‐off of the debt in that amount.
- Another point was made in relation to another set of
- auctions, but this time in relation to
- the Western Terminal assets, and Mr Stroilov made
- something of the fact that the assets were separated
- into pledged on the one hand and unpledged on the other,
- before being sold, and that’s relied upon as something
- that artificially reduces the price, as I understand it.
- But one needs to unpack it a bit and put it in
- the context and ask how did they get there, because this
- wasn’t the Bank starting with a blank sheet of paper and
- making it up. It was a fact that some of the assets
- were pledged and some were unpledged.
- Now, the assets that were owned by Western Terminal,
- subject to the Bank’s pledges in respect of some of
- them, they came into the hands of Nefte‐Oil, but that
- is, again, a bit like the first sale of LPK Scan land;
- that was because of a different enforcement action.
- That wasn’t a process by which the Bank was seeking to
- realise a pledge. That was an attempt to pay off the
- Morskoy Bank debt.
- assets into some auction process that was being held
- pursuant to the rules of enforcing one’s pledge.
- They would have been now criticised if they hadn’t
- followed the rules on auctions and instead tried to do
- some sale outside the whole scope of it, and that would
- have led to another round of complaints.
- So that, really, is a bit of a red herring, we say.
- The Bank had to go through that process of auctioning
- the pledged assets because ‐‐ it is a circular thing to
- say, but those were the assets that were pledged and the
- others weren’t.
- We have put in our written closing that actually the
- unpledged assets themselves were worth little and they
- don’t really generate their own claim for loss because
- of the fact that Western Terminal had been encumbered by
- this debt by Mr Arkhangelsky to Morskoy Bank that had to
- be paid off in any event, so that was what the assets
- went to; to pay off that debt that Mr Arkhangelsky had
- lumbered Western Terminal with at the death.
- Just going back, briefly, to valuation. We were
- glad to hear the confirmation that it wasn’t said that
- Mr Millard had performed anything other than an honest
- and professional calculation. Obviously the other side
- say that there were certain flaws in his calculations,
- but we do say that that being the case, that it was
113 115
- Now, by the time the finalisation of the enforcement
- that debt had ‐‐ we looked at the chronology this
- morning ‐‐ been assigned to Sevzapalians, but
- Sevzapalians of course themselves had paid off the debt
- to Morskoy Bank to stop Morskoy Bank driving the
- process.
- So that first auction was simply an attempt to get
- some value out of the unpledged portion of the assets to
- repay Sevzapalians, who had in turn repaid the debt to
- Morskoy Bank. So there’s nothing very surprising or
- suspicious about that.
- But then the assets are held, as it turns out, by
- Nefte‐Oil, subject in part to a pledge to the Bank. So,
- again, some assets are pledged, some are not.
- What is the Bank to do? It only has security rights
- over the pledged assets. Nefte‐Oil now owns all of
- the assets, subject to that pledge, and those assets
- which weren’t pledged, it owns, having acquired them
- validly, at an auction that wasn’t to do with
- enforcement of the Bank’s rights. So it is difficult to
- see how the Bank could have done anything other than
- enforce its pledge over the assets which were pledged to
- it. It certainly couldn’t have enforced its pledge over
- the unpledged assets, that’s obvious, nor could it have
- compelled the auctioneer to somehow bring unpledged
- an honest and professional valuation, it is quite
- difficult for them to say that an auction price which
- comes within the range of or the region of his valuation
- can be redolent of fraud.
- Now, we dealt with Mr Millard’s valuations in oral
- submissions last week and in our written closing. The
- references, just for completeness, Western Terminal, it
- is paragraph 1041 onwards and the land at Onega 1106
- onwards, we’ve also dealt with other assets in part 11,
- and I don’t intend to go through the details now.
- A couple of points arising out of things that were
- said earlier in the submissions by Mr Stroilov, or
- probably Mr Milner. It was acknowledged, and
- acknowledged by Ms Simonova, that she didn’t perform any
- sensitivity analysis on her DCF calculations. We say
- that is an important point. Such an analysis may well
- indicate the range of numbers that would be generated by
- the calculation once one tests some of the assumptions.
- We say that would have been quite important in assessing
- what the relevant range of values might be.
- It would show how much slight difference in
- the input might make to the final calculation, and when
- you are asking to infer fraud from a valuation, it is
- quite important to know where the range is. Knowing
- where the centre point is is only, really, half the
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July 11, 2016 Day 46
- information that you need, because if slight changes in
- assumption actually lead to a hugely wide range, then it
- may well be that the price came within that range,
- albeit maybe towards the lower end, but that, again, we
- say, is not a safe basis on which to infer fraud from
- price.
- We noted that the Sestroretsk assets were something
- of an example here. I mean, Mr Milner noted that
- Mr Millard had performed an alternative cash flow
- analysis for the Sestroretsk houses. Without going into
- the detail, that is the plot where we disagree on
- whether it really was high value housing or as
- Mr Millard said, the plot next to the rusty ditch.
- Anyway, the two experts took different views on
- a number of assumptions, and Mr Milner fairly said there
- wasn’t any hard evidence to support the assumptions
- either way but it was just a matter of judgment, and of
- course he said he would prefer Simonova.
- We say that just shows that if you change the
- assumptions within the range of reasonable, professional
- valuation might happen, it shows the sale price was
- within the range; in other words, whether you are a bit
- lower or a bit higher just depends on professional
- judgment, and that’s certainly not in the realm of
- inferring fraud.
- of land that had exchanged hands, and trying to build up
- from there what a sensible figure would be.
- It wasn’t a bizarre or irrational way of doing it.
- MR JUSTICE HILDYARD: It was, slightly, in one sense, in
- that having accepted there wasn’t really a market so
- that you have to sort of homebake some add‐ons to some
- different market, one wondered why he had approached it
- in that way at all. I mean, if there is no
- market, market analysis is simply an exercise in
- comparing different and not comparable things. I think
- I should ‘fess up: I did find it rather odd.
- MR BIRT: Well, he recognise that direct comparables were
- hard to come by.
- MR JUSTICE HILDYARD: They weren’t hard to come by, they
- weren’t there: there was no market.
- MR BIRT: There was no direct comparable, and what he was
- trying to do was find the closest comparables and use
- a rational and sensible methodology to get to what this
- property might have been worth based on the closest that
- he could find, and we do say that at least it was
- grounded in actual figures for which property had
- changed hands, and as he recognised, it might not be
- ideal, but it had the virtue of being grounded in actual
- prices and, as he pointed out, was consistent with
- certain other valuations and prices, my Lord.
117
- My Lord, I won’t go back through all Ms Simonova’s
- points and the points I made the other day. I just did
- want to make it clear, because Mr Milner said it seemed
- we only really challenged her assumptions at
- Western Terminal in respect of the annual TEU figure,
- and that’s absolutely not the case: we challenge quite
- a few of her assumptions. We have set them out in
- closing at paragraph 1054, but the TEU was the one
- I picked out at oral submissions, both because of
- the constraints of time and because it is one that she
- was obviously wrong about, but we challenge the others
- that we set out there as well {AA3&4/14/552}.
- My Lord, I was going to come on to say something
- about Russian law, but I wondered if that was
- an appropriate moment for a short break.
- MR JUSTICE HILDYARD: I mean, on valuation the real
- criticism that was made was that there was simply no
- basis for assuming there to be a market.
- MR BIRT: My Lord, yes, it was as I said the other day,
- really, which is that Mr Millard was doing his best, and
- he had looked, as he said in his evidence, at doing
- a DCF calculation. He had said in respect of
- Western Terminal, for example, it was just too uncertain
- and the assumptions would be too wild and difficult to
- predict. So he did his best, based on looking at plots
- MR JUSTICE HILDYARD: Good. Right, well I shall look
- forward to Russian law.
- (3.21 pm)
- (A short break)
- (3.31 pm)
- MR BIRT: My Lord, one reference from earlier, I said
- I would get the reference to the Arkhangelskys’
- communication where they said they were nothing to do
- with the dissolution of Land Breeze.
- MR JUSTICE HILDYARD: Oh yes.
- MR BIRT: That’s an e‐mail that can be found at I28 ‐‐
- MR JUSTICE HILDYARD: Hold on, I am just going to … yes,
- thank you.
- MR BIRT: Yes, {I28/45/19}. They say they really don’t know
- anything about it.
- MR JUSTICE HILDYARD: I can’t remember where we had got to,
- and it is my sort of failings, but did we get to
- an agreed chronology as regards the Morskoy Bank loan
- sequence?
- MR BIRT: I think my Lord asked me this last Wednesday or
- Thursday.
- MR JUSTICE HILDYARD: Yes.
- MR BIRT: And I did address it. Perhaps the quickest thing
- for me is to find the bit of transcript where
- I addressed it rather than going back over things now,
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July 11, 2016 Day 46
- given the time.
- MR JUSTICE HILDYARD: Thank you. Russian law.
- MR BIRT: My Lord, really the main issue that I am just
- going to say one or two things about is reflective loss.
- MR JUSTICE HILDYARD: Yes.
- MR BIRT: And we have covered this in our written closing
- submissions starting at paragraph 985 and then going on
- from there {AA3&4/14/522} and Dr Gladyshev’s position
- appeared to be that it ought to be recoverable in any
- situation, but there was no case actually saying that
- and the boundaries were not known, particularly in
- the citation we gave at paragraph 995 of the closing.
- As we understand the position that Mr Milner was
- setting out on Friday, he did not go as far as to say
- that a claimant could always recover what might be
- characterised as reflective loss. In fact, he accepted
- that normally a claimant could not, and he said that at
- {Day45/29:12‐16}, he said that ordinarily claims for
- reflective loss would not be allowed in a Russian court.
- And that was also one of the ways he was able to
- accommodate the Fiona Trust decision in this
- jurisdiction, and that was {Day45/52:1}, but he said it
- could be recovered in particular circumstances, and he
- said in particular where a company has been disabled
- from bringing a claim by the wrongdoing in question.
121
- No, there is no Russian court guidance on that and
- we don’t accept it, but we also say that in any event it
- doesn’t actually help the defendants in situations where
- the point arises in this case. I will come on to
- explain that.
- The other piece of the jigsaw worth bearing in mind
- in terms of what the Russian law experts said is the
- evidence that that sort of claim could not be used to
- circumvent the insolvency process; we have given some
- references at paragraph 991 and 1016 of our written
- closing {AA3&4/14/525} but without being too technical
- about how one might look at Russian law, one has to
- remember how this point arises in relation to some of
- the claims.
- So first of all, the claim for Onega’s business
- loss, well that is Onega’s claim, we would say, and
- Onega, it is to be remembered, was not part of the repo,
- its shares weren’t transferred. The Bank has not
- prevented Onega from bringing any claim by some method
- of control. Onega went into consultancy about five
- years after the alleged wrongdoing, and we have set that
- out in paragraphs 1015 to 1016 of the closing
- {AA3&4/14/532}, so any claim that Onega might have
- belongs to its bankruptcy administrator, not to its
- shareholders.
- One also has to look at the claim for Scan’s loss,
- Scan Insurance, and that is a claim which, certainly in
- the first instance, would be for Scan to bring, and it
- is to be remembered that Scan also went into bankruptcy.
- So even if there was a principle, contrary to our
- submissions, allowing a shareholder in Scan Insurance to
- recover the loss in value of its shareholding in Scan,
- one must remember that that shareholder would be the
- company Group Oslo Marine, referred to generally in
- the parties’ submissions as GOM. GOM, of course, does
- not bring a claim in these proceedings.
- We have dealt with this a little bit further in
- paragraphs 991(3), 997, and footnote 2862
- {AA3&4/14/525}, and GOM, it is to be remembered, is also
- in bankruptcy, and that is not a bankruptcy at the suit
- of the Bank and not owing the Bank money {AA3&4/14/527},
- there are other creditors and the submissions set out
- some of the evidence about that ‐‐ yes, that is the
- footnote 2862, and we explain that:
- «No case has been advanced by the defendants as to
- how any loss to Scan would have been reflected in
- the loss value in the shares of its parent company, GOM,
- in particular where GOM was put into liquidation by
- a third party creditor…»
- Who is named by Mr Arkhangelsky as Mr Yuri
123
- Chichoyan, nothing to do with the Bank, and so there is
- no attempt to prove how, if at all the value of their
- shares in GOM would have been affected by anything done
- by the Bank as opposed to the enforcement by third
- parties of their debts against GOM.
- So that is not only a double reflective loss
- problem, but there is also a double bankruptcy problem
- and there would also be a causation problem.
- So, my Lord, really one doesn’t have to get into too
- much of a tangle on this, because in those sorts of
- situations you are outside even Mr Milner’s narrow
- principle, and in relation to Western Terminal, it
- depends in our submission, really, on what is the
- wrongdoing in question and what is claimed?
- Now, as we have accepted, if the wrongdoing is
- taking the shares and the loss is the loss of
- the shares, that is not reflective loss in the hands of
- OMGP; it would be a loss, namely the loss of their
- shares, although, of course, it wouldn’t be a loss
- claimable by Mr Arkhangelsky; it would be reflective in
- his hands.
- However, if the wrongdoing is said to be something
- else or ultimately turns out to be something else later
- in the chronology, like wrongfully selling the assets at
- an undervalue, then the loss is framed by reference to
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July 11, 2016 Day 46
- that. The loss is then felt by Western Terminal itself.
- That is not a loss of the shares but a loss to
- Western Terminal reflected in the value of its shares.
- So, in a sense, that comes back to what can the
- defendants prove about the wrongdoing, and if the repo
- itself is the wrongdoing, or at least if that is the
- point at which one says that was wrong, and there was
- a loss there, and the wrong was ‐‐ and the loss was the
- loss of the shares, that’s the first situation.
- If, however, the repo itself, there’s nothing
- actionable about it ‐‐ and I will make some more
- submissions about the repo shortly, but remembering it
- was something, we say, consensually entered into, and
- one is really looking at there was a wrongful sale of
- the shares which hit the company that owned ‐‐ sorry,
- a wrongful sale of the assets which hit the company that
- had owned the assets, and that’s a loss to
- Western Terminal and, therefore, if it reflects at all
- on Mr Arkhangelsky, it is, indeed, a reflective loss, or
- reflects at all on OMGP, it is reflective, my Lord.
- There was a discussion between my Lord and Mr Milner
- as well about the English law of reflective loss, and of
- course that doesn’t impact directly, but just because
- I know my Lord is interested in the point, there is what
- we would suggest is an useful discussion of the recent
- why it could not bring the claim, there was a deadlock
- situation imposed.
- That, in the judgment of Mr Justice Birss, based on
- the Kazakh case, was that that didn’t amount to
- an impossibility. That is his conclusion at
- paragraph 58.
- If any guidance is to be obtained from English law,
- that is where we say a useful recent summary and
- discussion of the authorities on that exception, which
- even in English law is extremely narrow and, indeed,
- Lord Millett, obviously sitting in the Hong Kong Court
- of Final Appeal is not binding in this jurisdiction, but
- he said it wasn’t really an exception at all.
- My Lord, I was just going to very quickly cover the
- limitation arguments which we heard briefly from
- Mr Milner on. Really by way of references to start
- with, we have covered those at paragraphs 998 to 1008
- and 1014 of the closing {AA3&4/14/528}, setting this out
- as well in paragraphs 505 to 511 and 705 in our opening.
- I will just very briefly summarise the points that
- arise. {AA3&4/14/531}, {AA3&4/14/286}.
- There are three points where this arises, and we
- have dealt with those one by one starting at 998
- {AA3&4/14/528}. I am going to deal with them in
- a slightly different order for reasons that will become
125 127
- authorities in a case called Peak v Tarek which is in
- the authorities bundle at {AUTH5/21/1}, and we’ve
- referred to that in our footnote 2860. Just to give
- your Lordship the references, this is a judgment of
- Mr Justice Birss dating from September last year, his
- discussion of the law starts at paragraph 29 and he goes
- on to discuss the so‐called exception of
- the Giles v Rhind case, which is something that
- Mr Milner relied upon which is where a company itself is
- disabled from bringing the claim.
- He goes on to explain how that has been rejected as
- an exception by Lord Millett sitting in the Hong Kong
- Final Court of Appeal in a case called Waddington, and
- then there has been subsequent confirmation that
- Giles v Rhind remains good law in England, subject to
- the Supreme Court saying otherwise.
- But he also refers to the judgment of the Court of
- Appeal in the Kazakh case, and this is paragraph 41 of
- Peak v Tarek, which characterises Giles v Rhine as a
- very narrow doctrine, very limited. It only applies
- where it would be impossible for the company to bring
- a claim, and as a result, the exception did not apply in
- that case, in the Peak v Tarek case, even though the
- company in question there was controlled by the
- conspirators themselves, which was no doubt the reason
- apparent. Starting with Article 179, which is a claim,
- obviously it is a contractual‐type claim but for
- invalidation of the alleged 2008 agreement. It is
- common ground between the experts that the limitation
- period under Russian law was one year and we pleaded
- that by way of defence at paragraph 42(h) of our
- re‐re‐amended reply, and the defendants never pleaded
- back to that, so they never actually pleaded or relied
- upon the Foreign Limitation Periods Act in relation to
- that defence.
- But in any event, we say that would not assist the
- defendants because whilst the court did apply that act
- and permitted the Article 1064 claim at an earlier
- stage, it is not as simple as saying: therefore it must
- also be applied now for a different and new claim under
- a different provision because much of the reasoning of
- this court and of the Court of Appeal when considering
- this issue in its previous judgments, in other words,
- considering whether the application of the Russian law
- limitation period was unduly harsh was centred around
- the circumstances in which this matter had come before
- these courts and, in particular, in light of the fact
- that claims had been pursued in the BVI and then there
- had been agreement to come here.
- The relevant factors were summarised by the Court of
L15/90/33
July 11, 2016 Day 46
- Appeal in paragraph 17 of its judgment at {K1/15/8}, and
- for my Lord’s note, also your judgment
- from November 2013 at paragraph 110, which is {K1/6/22}.
- As I say, the relevant factors largely related to
- the fact that claims had been brought in the BVI which
- the parties had then agreed would be brought here, and
- the defendants had encountered difficulty in serving
- their claim here in time.
- But in relation to the new Article 179 claim, the
- same factors aren’t present. Most importantly, that
- wasn’t a claim that was ever brought in the BVI or that
- the defendants sought to bring when they issued
- proceedings here in the Commercial Court, and it is no
- answer to say: ah, well, no representation, they don’t
- know what they are doing, because of course in the BVI
- they did have representation. I think they had leading
- counsel.
- So it just wasn’t in play, and there’s been no
- explanation why it wasn’t in play or why it wasn’t
- brought earlier. So when one is looking at: is there
- undue hardship here, one would expect at least to see
- an explanation why it is only now that it is brought.
- And there is no relation back for this claim, that
- was carved out my Lord’s order at {J1/16/2}, so the
- claim was only commenced in July 2015, so it would be
129
- time‐barred even if there was a 6‐year English law
- limitation period because this is a claim under 179,
- effectively, to invalidate the December 2008 agreement
- because of alleged threats. So that was a wrong that
- occurred and a claim that would have accrued, indeed,
- in December 2008.
- The second claim in relation to which it arises is
- the new claim for the loss of the Onega business. We
- deal with this at 1009 and following, and whether this
- is advanced under Article 179 or 1064 it is a new claim,
- it is not a mere head of loss, and we have dealt with
- this further at 1014. {AA3&4/14/530} {AA3&4/14/531}.
- It is not enough to say: new head of loss. That may
- be an answer if what you are talking about is simply
- further particulars of an existing claimed loss, but
- this is something entirely new; it is, effectively,
- a new ingredient and therefore, that turns it into
- a distinct cause of action.
- If, as they say, it is a conspiracy formed
- in December 2008, loss started to be felt once the
- shares in Scan were put into the repo transaction. So,
- my Lord, we say that it goes back all that way and is
- time‐barred on either basis.
- The other point we have considered in our
- submissions starting at paragraph 999 is the new
- conspiracy claim, in other words, the alternative
- conspiracy claim, only starting later {AA3&4/14/528}.
- We have put what we say in writing, I won’t develop it
- further because it is not really a case that has been
- advanced in oral submissions.
- I was just going to touch next, my Lord, on one or
- two points in relation to the repo. I’m not intending
- to go back over points made last week or repeat them, we
- have obviously made quite a lot of submissions as well
- in our written document, but we do say it is relevant
- and must not be forgotten that Mr Arkhangelsky and the
- OMG companies agreed to enter into those arrangements.
- He had time to consider them with his lawyers, and he
- decided to do it. It wasn’t something that the Bank
- unilaterally imposed upon him.
- Now, albeit he says he thought he was getting
- a six‐month moratorium when, in fact, he wasn’t, and we
- have made our submissions on the moratorium, we say it
- wasn’t understood to be part of the deal, but even if
- Mr Arkhangelsky thought it was, we say on the evidence
- it is clear, there was no prospect of his raising the
- finance or paying back the loans within that six‐month
- period but, nevertheless, he was willing to enter into
- the repo on that basis, or taking that risk. He knew he
- was risking his shares if he could not get the money in
131
- that sort of time period, even on his case. That was
- the deal he struck, and so the risk he was prepared to
- run. There was nothing wrong with the repo arrangements
- themselves, namely the agreement to transfer the shares
- with the quid pro quo of the agreement to transfer them
- back. Indeed, there has not actually been an attempt to
- invalidate those repo contracts themselves in this case
- at all.
- We made submissions earlier about the various points
- concerning what the parties might have thought about the
- legal mechanics or how it was going to work. Again, not
- to repeat those. But at the end of the day we say none
- of that really matters: the Bank had security rights
- over the various assets, and that’s not disputed. OMG
- defaulted, having not paid back its loans, and that is
- not, or really ought not to be, disputed, and the Bank
- had an entitlement to enforce those security rights. It
- did so in accordance with the law and the pledges were
- realised for whatever value they could be realised for,
- and all that is what the Bank would have been entitled
- to do regardless of the repo.
- We say questions about what might have happened to
- any surplus value are perhaps interesting but academic.
- There was no surplus value in the property that was
- auctioned, so at the end of the day it doesn’t really
L15/90/34
July 11, 2016 Day 46
- matter. Those, as I explained earlier, those parts of
- the Western Terminal property that were not pledged had
- to be sold in any event to clear the Morskoy Bank debt
- that Mr Arkhangelsky had saddled the Western Terminal
- with, so that can’t really be a matter of complaint.
- My Lord, I don’t intend to go back over the
- submissions on the finances and financial position of
- OMG and its various companies, but we do say that our
- submissions do not depend either on the Lair valuations
- being incorrect, or Mr Arkhangelsky embezzling the
- assets. Mr Stroilov suggested that it being a financial
- pyramid was dependent upon both those being right. We
- say, of course, that both of those are right, but even
- if they were not, for some reason, accepted by the
- court, that does not mean that the various businesses
- were real ones sustained by their operating profit and
- so on. For the various reasons set out in our closing
- submissions, that just was not how they were operated or
- what happened.
- Just to make one or two points about the
- 25 December 2008 meeting. It is important to remember,
- we say, that it is not the defendants’ case that
- a legally binding agreement was formed at the meeting.
- It is their case that an agreement was entered into on
- or around 30 December 2008, and that’s their pleading at
133
- paragraph 117(a), which is {I25/39/147}, and also at
- paragraph 180(a) at {I25/39/184}.
- The second of those references, one sees it clearly:
- they plead an agreement that was partly oral and partly
- in writing. The reason they say that is because they
- want to rely upon the written terms of the memorandum,
- and they tack on to that what they say is an oral part,
- namely the moratorium.
- But that does rather give rise to the question: when
- is it said that this agreement really was made? It
- appears that it must be, that it is when the memorandum
- is signed, and is that, we ask rhetorically, when the
- defendants say it became binding? Because otherwise it
- is difficult to see how the agreement could have been
- partly in writing. And if that is the case, then it
- coincides with our case, which is that the parties were
- happy to leave the meeting on 25 December without
- an agreement at the meeting.
- On the defendants’ case, it sounds like they say
- there may have been an oral agreement on a moratorium at
- the meeting, perhaps they say this, which only became
- binding once the memorandum was signed up to.
- We say that sounds very odd, because if that was the
- case, why was that not reflected in the memorandum,
- particularly given that the memorandum was listing the
- loans which they say a moratorium was being granted in
- respect of.
- Or, we wonder, do they say that there was a binding
- oral agreement for the moratorium at the meeting but
- without any agreement on the repo; in other words, the
- Bank just unilaterally agreed to grant them a moratorium
- at the meeting without a quid pro quo. We say that
- obviously wouldn’t make sense from the Bank’s point of
- view and there is no reason to think that the Bank would
- make or intend to make a legally binding agreement on
- those terms, a six‐month moratorium, all interest in
- capital, without getting anything in return.
- We also note that this six‐month moratorium is
- supposed to have been made in respect of loans to
- a number of different OMG companies. Those companies
- weren’t at the meeting: Mr Arkhangelsky was at the
- meeting and, actually, he wasn’t even director general
- of some of the companies. For example, he wasn’t
- director general or direct shareholder in PetroLes or,
- by this time, Vyborg Shipping. He couldn’t have bound
- them. So it is unlikely that people at the meeting were
- considering they were entering into that sort of binding
- agreement in relation to the loans to those companies.
- Mr Arkhangelsky’s position is that he didn’t make
- any agreement on his own behalf anyway. His evidence
135
- was that he only made an agreement on behalf of OMGP and
- GOM. That’s what he said. We have given the reference
- in our closing at paragraph 709 {AA3&4/14/384}. Again,
- we say that makes it less likely that he would be or the
- Bank would think he was entering into a binding
- agreement at a meeting on an oral basis.
- Now, as I say, OMGP and GOM were not even
- shareholders in PetroLes or in LPK Scandinavia or, by
- this point in time, Vyborg Shipping. By this point in
- time, Vyborg Shipping shares had been transferred, or at
- least 99 per cent of them had been transferred, to
- a Cyprus company called Alwildama, that was
- in October 2008, and we have given some references at
- footnote 213 of our opening, but those documents are at
- {D89/1156/1} and {D89/1157/1}. So as of December 2008
- OMGP and GOM were not shareholders in Vyborg Shipping
- and Mr Arkhangelsky was not general director of
- Vyborg Shipping. That was Ms Krygina.
- We have already LPK Scan of course was owned by
- Ms Tarasova and she was the general director so again,
- query whether it can really have been thought or
- intended that extensions to all of those companies’
- loans were really thought to have been granted in
- legally binding way when those companies were not, in
- a formal sense, at the meeting. We just say it is not
L15/90/35
July 11, 2016 Day 46
- likely and one just cannot infer that sort of intention,
- especially when one adds that a few days later they do
- write down the basic arrangement in an aide‐memoire of
- the memorandum, of course, without the moratorium.
- My Lord asked during the course of ‐‐ it was either
- my submissions or Mr Stroilov’s submissions, for some of
- the references in relation to the debate that was had on
- disclosure in September 2015. We have added, in case it
- is useful, to the bundle the skeletons exchanged for
- that hearing. The claimants’ skeleton is at
- {G4/103.1/1}, the defendants’ skeleton at {G4/103.2/1}
- and the passages dealing with disclosure from the
- original and subsequent purchasers in the claimants’
- skeleton start at 112 onwards, the section dealing with
- the disclosure application coming this way, having
- started at paragraph 90; and the defendants’ skeleton
- starts their argument on disclosure from ‐‐ I think they
- called it «Renord et al as custodians» that started at
- paragraph 38. My Lord may or may not remember now,
- because the passage of time, one has other things to
- remember, but there were heavy disclosure applications
- in both directions, and there were a number of points
- that had come both from the claimants, complaining about
- the defendants’ disclosure, and the defendants
- complaining about the claimants’ disclosure.
- be found at {K1/11/1} and the order that was
- subsequently made is the one at {J1/20/1}, paragraph 16,
- which was an order for letters to be sent to a listed
- number of individuals and companies and the letters
- themselves were settled by my Lord, set out at schedule
- D of that order.
- What informed that order was the need to keep in
- mind the distinction between Renord and its companies in
- a general sense and the original purchasers and
- subsequent purchasers specifically because the
- foundation of my Lord’s judgment was that it was the
- original purchasers and the subsequent purchasers that
- should be written to, not the whole of the Renord Group.
- Now, the Bank is entirely entitled to test the scope
- of its disclosure obligations in court, and once the
- court has ruled, it is entitled to fulfil those
- obligations but it doesn’t have to voluntarily go
- outside them at all. And among other things, and
- especially in this case, there is a proportionality
- issue, suggesting that all companies within the Renord
- Group ought to be searching through all their documents
- for anything to do with this case, we say would be, and
- always would have been, entirely disproportionate, and
- that was, indeed, one of the bases on which we resisted
- the order. Not just Renord; it was sought to be made
137 139
- One, but one of quite a large number of points, was
- whether the Renord Companies themselves were
- sufficiently within the control of the claimants, or at
- least whether their documents were sufficiently within
- the control of the claimants so as to give rise to
- a disclosure obligation upon the claimants for those
- documents.
- One will see from the skeleton argument of
- the claimants starting at 112 onwards, the principal
- objection was that the request was just far too wide and
- onerous and lacked any real definition. There had been
- no attempt to define which documents held by those
- companies were alleged to be within the Bank’s control
- and which were not {G4/103.1/32}. We say, for example,
- we said you can’t just ask for all documents held by the
- Renord Group, because even on your case about original
- purchases, for example, there are all sorts of companies
- in the Renord Group, nothing to do with this or the
- Bank.
- Now, the Bank did seek to be constructive in that
- skeleton and at paragraph 114 it offered to consider
- more focused requests for documents. None were
- forthcoming. There was, as my Lord knows, a hearing
- about it, it was argued out and my Lord delivered
- a judgment on it. Again, for the note, the judgment can
- anything held by Mr Sklyarevsky and Mr Zelyenov as well,
- I think.
- There were all sorts of other issues and these were
- all ventilated at the time: potential confidentiality
- points, difficulties in Renord tracking them down, costs
- for Renord or Mr Sklyarevsky, and obviously they
- wouldn’t just let the Bank go in and root around
- themselves.
- My Lord also considered the issue about working
- papers and invasion of rights, and that informed the
- particular formulation of the order and the draft
- letter.
- But at the end of the day, my Lord, we say that the
- court process was gone through and my Lord gave
- a judgment on it and formulated the approach that had to
- be followed, and that was followed. And I don’t think
- there has ever been any complaint, at least no
- articulated complaint or anything on a proper basis,
- that the Bank did not comply with its obligations under
- paragraph 16 and schedule D of that order.
- Once the boundaries of a particular disclosure
- obligation have been set in that way, it is not right to
- draw inferences against a party from choosing not to go
- beyond those obligations. It has, by definition,
- fulfilled its obligations. If Mr Stroilov wanted to
L15/90/36
July 11, 2016 Day 46
- invite my Lord to draw inferences from a failure to go
- beyond a disclosure obligation, then a further order
- should have been applied for and there could have been
- an argument about it and the Bank then would have known
- whether it ought or ought not to do anything else.
- But what you can’t do, we say, is make a disclosure
- application, lose it in part, and then say that because
- the other party did not go beyond what they had to do
- under the order that was made ‐‐ in other words didn’t
- carry out the stuff that they succeeded on and you
- lost ‐‐ what you can’t then say is an inference should
- be drawn about that.
- My Lord, in relation to disclosure, you probably
- have the references, but Mr McGregor dealt with what the
- Bank did in a series of witness statements, and in
- particular in relation to the September order and the
- searches that followed it, Mr McGregor’s fifth statement
- is at {H2/32/1}, Mr McGregor’s sixth statement is at
- {H2/33/1}, he sets out there all the details of the
- searches that were undertaken, the search terms that
- were included, the reasons for those. There was also,
- my Lord may remember, a further debate about those
- search terms and in the end my Lord decided that others
- did not have to be added.
- In the end, my Lord may remember that the Bank also
141
- added the search term «Renord», having completed all the
- other searches, Mr Stroilov of course saying that really
- should be a term, and that ended up producing no further
- disclosable documents. That was a letter at
- {I19/19/51}. So we do say the Bank had reached the end
- of any sensible disclosure process.
- There’s also Mr McGregor’s seventh statement, for
- completeness, which is {H2/35/1}, which sets out the
- fruits of the letters written under my Lord’s order, the
- schedule D letters.
- I have summarised the points, really, already, but
- there was an obvious proportionality point here, as
- explained by Mr McGregor, and the efforts that had
- already been made; and, as with any litigation on this
- scale, it was a question of getting the balance right
- and bearing in mind the fruits of the various searches
- and the cost of them, and that was the boundary my Lord
- drew and that the Bank stuck to.
- My Lord, on the forgery case, I think there is very
- little I want to say, save that on Friday Mr Stroilov
- propounded what seemed to be slightly new theories about
- it that hadn’t really been advanced or put before.
- We say there is no basis for them, and we still don’t
- understand what is really alleged to have happened or
- who is alleged to have forged what or when. It has
- never been suggested who it was that has actually
- committed the huge number of forgeries or who is even,
- in terms of the individuals, said to have known about
- them.
- The theories seem to be: well, nothing happened
- until December 2008 but, amongst other things ‐‐ and we
- rely on everything we have put in our written closing ‐‐
- that is entirely inconsistent with Mrs Arkhangelskaya
- having signed the first Onega loan spousal consent,
- which is dated from back in the middle of 2006, and on
- which the experts are agreed there is very strong
- evidence it was her signature. In a sense, that brings
- the whole house of cards crashing down.
- But it is not just that: there’s also the OMG
- internal debt schedules which refer to the guarantees,
- and they predate that period. We have dealt with those
- in our written closing at paragraphs 81 and following.
- One also has to remember that there are direct debit
- agreements with the other banks for the Scan guarantees,
- and they are completely inconsistent with the idea that
- the Scan guarantees were only drawn up and either
- backdated, or forged, or both, in December 2008.
- We have dealt with these in our written closing at
- paragraphs 99 and following {AA3&4/14/68}, and the
- various documents are referred to as we discuss each
143
- loan, starting at paragraph 89 {AA3&4/14/56}. But they
- were, my Lord, remember, contracts which referred to
- the Scan guarantees and were signed not only by the
- Bank of St Petersburg and Mr Arkhangelsky, but also by
- various third party banks at which Scan Insurance held
- accounts, and there is simply no explanation for those
- save that they were in support of valid Scan guarantees
- that had been entered into at the time they were made,
- inconsistent with this all just happening
- in December 2008.
- As a last point on this, there was a point that is
- sought to be made on the basis of Ms Volodina’s evidence
- in his witness statement. Mr Stroilov relied on her
- paragraph 63 {B1/5/13}.
- MR JUSTICE HILDYARD: Yes.
- MR BIRT: We say that is not fair and doesn’t work. It is
- not an obvious reading of her witness statement,
- particularly when one considers earlier paragraphs where
- she gave evidence of the need for guarantees. I think
- I pointed out paragraphs 7, 10 and 15, but if this was
- ever a point that was going to be run, and this reading
- put on paragraph 63 of Ms Volodina’s witness statement,
- it obviously had to be put to her and it was not. So,
- my Lord, that is, we say, an end of that.
- A few brief points, I think I am making just about
L15/90/37
July 11, 2016 Day 46
- sufficient progress, my Lord, on Mr Stroilov’s
- submissions about connections with Renord. An emphasis
- is placed on Mr Maleev and his role in what is said to
- be a nominee for Mr Savelyev. I think quite a lot of
- emphasis was placed on Mr Maleev and what was said to be
- a sort of habitual role as a nominee, but actually
- he wasn’t a nominee for Mr Savelyev; he was a director
- general of a number of companies, about which
- Mr Savelyev was asked questions, and we have listed some
- of those in our submissions at paragraph 671(2)
- {AA3&4/14/368}.
- But that is different: he was not, in fact,
- a nominee for Mr Savelyev. It was only put to
- Mr Savelyev, as far as we are aware, that Mr Maleev was
- his nominee, meaning holding shares on his behalf, in
- relation to a company called Teknopark, said to be
- a minor shareholding, that was {Day27/102:1}, and
- Mr Savelyev denied that he was holding it as his
- nominee, and he went on to point out the difference
- between a director general who is working in
- an administrative capacity and somebody who was
- a nominee. He said Mr Maleev did fulfil the role of
- director general because he was good at keeping the
- documents in order, paying the tax and so on and so
- forth, that was {Day27/107:1} but he was not a nominee.
- We have summarised the points at paragraph 877 of
- our closing {AA3&4/14/466} and, as I think Mr Stroilov
- accepted the other day, I noted down {Day44/91/16} and
- {Day44/92/7}. They don’t actually challenge that they
- were advertised according to the rules, but we have
- given references in our written closing to the adverts
- for the Western Terminal auction at footnote 2654
- {AA3&4/14/493} and for the auction for the Pravdy Street
- assets at footnotes 2724 and 2725 {AA3&4/14/504}
- We also rely on Ms Mironova’s evidence which we have
- cited at footnote 2511 {AA3&4/14/466} where she said the
- bailiffs had to publish the information in the media and
- advertise, et cetera, and also her evidence at
- {Day33/120:1} to {Day33/121:1} where she explained that
- the Bank took all possible steps and measure to
- advertise the auction of Western Terminal as widely as
- possible.
- She also said in relation to the Scan Onega land ‐‐
- MR JUSTICE HILDYARD: She gives no examples there.
- MR BIRT: My Lord, there is not a document reference I can
- give you for that.
- She also said at {Day34/29:1} and we have cited this
- in our closing at paragraph 944 {AA3&4/14/500} in
- relation to the Scan Onega land auction, that that was
- published in various media outlets and promotional
145 147
- My Lord also asked a question, and I owe
- a reference, for whether Ms Mironova’s shareholding
- arrangements are reflected in various of the Bank’s
- public documents.
- MR JUSTICE HILDYARD: Oh yes.
- MR BIRT: And the reference, I don’t suggest we look it up
- now, but in the 2014 annual report there are some
- references at {D210/3064/74} and {D210/3064/86}.
- My Lord, also ‐‐
- MR JUSTICE HILDYARD: Which was the first? D210?
- MR BIRT: I’m sorry {D210/3064/74} and {D210/3064/86}
- My Lord also asked me to revert on things like
- advertisements for the auctions and efforts that have
- been made to sell the properties. I’ve already
- referred, I think, to the various bits of the witness
- evidence saying that the auction rules were complied
- with and, indeed, nobody was challenged on the basis
- that they had been complied with, including that the
- appropriate adverts had been placed, and it repeats my
- earlier submission to say that there is no reason to
- believe that the bailiffs wouldn’t have ensured that
- they had been advertised properly, or they would have
- let the auctions go ahead without the proper adverts.
- So one has to assume the rules, including those as to
- advertising, were followed.
- publications. As before, my Lord, I do not have
- a document reference for that day.
- Various references in our written closing to
- the efforts to sell the properties, and they include
- evidence given by Mrs Yatvetsky, which we refer to at
- paragraphs 161, 916, and 917 {AA3&4/14/103}
- {AA3&4/14/485} and Ms Mironova at paragraph 924.
- I have already made, I think, submissions along the
- lines that one has to bear in mind that these were
- properties that the Bank was entitled to sell at auction
- in satisfaction of the pledges which were there as
- security for debts which had not been repaid.
- An auction in those circumstances does have the
- character of a forced sale. It is likely to raise less
- than a sale where there is a seller who does not have to
- sell unless he likes the price. One has to keep that in
- mind.
- There is no obligation under the rules for the Bank
- to conduct a lengthy marketing exercise. Yes, efforts
- were made to find buyers. That is the witness evidence
- that I have referred to: they were not successful. So
- the assets had to be realised through the enforcement
- process in what was, ultimately, the only way that the
- Bank was going to see any money out of their security,
- and I made submissions earlier as to what else were they
L15/90/38
July 11, 2016 Day 46
- supposed to do.
- My Lord, I think you also asked for what the rules
- were. I was going to give one example that the experts
- referred to, I don’t suggest we go to it now, but it is
- Article 57.3 of the law on mortgages, which is at
- {E2&E3/12/329}, and it has to be advertised under those
- rules in a periodical which is an official source of
- information and on the internet under a government
- procedure. We have seen examples ‐‐ some of
- the examples that I gave earlier, I think the Pravdy
- Street properties were advertised for sale in
- Kommersant, which is one of the publications that
- my Lord has been taken to. There were a number of
- articles and I think it is a publication with quite wide
- circulation.
- Mr Eschwege reminds me, it is the auction organisers
- who are responsible for making sure that the right
- adverts are placed in the right place at the right time.
- My Lord also asked for a reference as to where we
- deal in our written closing with Mr Savelyev’s BVI
- witness statement. We have dealt with that.
- MR JUSTICE HILDYARD: Have you given me within that ‐‐ I’m
- sorry, you are going quite a pace, I don’t criticise you
- for that ‐‐ have you given me within that whether there
- is any evidence of any ‐‐ any documentary evidence of
149
- any approaches to ROK Prichaly or its holding company
- with respect to sales at Onega?
- MR BIRT: My Lord, as far as I know, there is not in
- the trial bundle such documentary material. I have
- given you the references to what the witnesses say,
- albeit I’m not saying that if you look there you will
- find them referring to documents giving the references
- to the witness evidence.
- MR JUSTICE HILDYARD: I think my interest was that there was
- an obvious purchaser, possibly the only potential
- purchaser, so I was interested to know what feelers had
- been put out by the Bank, but perhaps that is
- undocumented.
- MR BIRT: My Lord, it is undocumented, yes.
- MR JUSTICE HILDYARD: Yes.
- MR BIRT: And I don’t think that specific question was asked
- of the witnesses either in cross‐examination or
- re‐examination, my Lord.
- I was going to give my Lord the reference, we had
- dealt with Mr Savelyev’s BVI evidence. You asked me for
- that reference at some point, we dealt with it briefly
- at paragraph 304(6) of our closing {AA3&4/14/181} where
- we also give the references to where he dealt with it in
- his witness statement, which is paragraphs 48 and 49,
- and in the transcript of {Day29/41:1} to {Day29/42:1}
- The gist of it was that the trial statement was put
- together with the benefit of a more detailed review of
- the documents and with the opportunity of the statement
- to make clear what Mr Savelyev’s recollection was as
- opposed to something being done in a rush in response to
- the freezing order, which is the circumstances in which
- the BVI statement was put in. My Lord, I think that
- is ‐‐ the explanation is in Mr Savelyev’s evidence in
- those two references.
- I think this may be the last point, subject to
- anything else being handed up to me. Mr Stroilov, at
- the end of his submissions, made a point about the
- defendants’ disclosure, and they said that everything
- was answered in the annex to the disclosure statement
- that he referred to at {P1/10/1}, which was
- in October 2015.
- In fact, we say that does not answer everything, in
- fact, it raises more questions than it answered. We
- wrote a letter about that on 19 November that can be
- found at {I19/19/9} and that was explaining why that
- annex was not satisfactory and trying to follow up on
- some of the points without going into the detail.
- My Lord may remember, there were issues about what he
- had done with his laptop that he said had been ‐‐ there
- were inconsistent statements, let’s just leave it at
151
- that for now, about what had happened to it. There were
- memory sticks he said he had brought from Russia,
- containing documents, there were all sorts of things.
- So that was our letter then. We never got
- a response to that. There was a short summary of some
- of the ‐‐
- MR JUSTICE HILDYARD: That’s at I19/9, is it?
- MR BIRT: {I19/19/9}, it is one of those slightly difficult
- to read references if you haven’t got your teeth in.
- There is a short summary of some of the key points
- in our opening at paragraphs 755 to 756, and again
- a short summary in our closing at 1186 to 1188
- {AA3&4/14/623} where we also refer to Mr Nazarov’s
- documents, which my Lord will well remember, and there
- was always going to be a proposal for Mr Stroilov as to
- how those were to be reviewed, and my Lord gave a fair
- amount of licence to him about when he did that, and the
- position remains that we never had that proposal and as
- far as we know, they have never been reviewed, my Lord.
- Can I just check whether there is anything else that
- I ought to say to my Lord? (Pause).
- My Lord, I am sorry that has been a slight gallop
- through, I have done my best to stick to the allotted
- time, but obviously I’m still here if my Lord wants to
- pick up on any of those points or go back into them.
L15/90/39
July 11, 2016 Day 46
- Ah yes, sorry, there was one more point, I knew
- there would be one. My Lord asked where I dealt with
- the Morskoy Bank and the change of directors chronology.
- That was discussed on {Day44/53:1} to {Day44/55:1}.
- That’s when I set out my position on that.
- Unless there is anything else I can now help you
- with, my Lord, those are what we say.
- MR JUSTICE HILDYARD: At various points in your closing
- submissions you have made, or at least you have stated,
- that there were points now relied on not put to
- the witnesses. I shall have to comb through those, but
- do you say that the same rigour applies notwithstanding
- the somewhat different array of forces on each side of
- the court?
- MR BIRT: My Lord, I wasn’t trying to make, if you like,
- a technical not‐put point in a general sense, but ‐‐ and
- it may be that it carries a different character on the
- different occasions when I made it.
- I think the thrust of my points when I was saying
- that was really if there was a coherent case here it
- would have been suggested to this witness or that
- witness or the other witness.
- The point I came to at the end, I think, is
- potentially in a slightly different category, where
- Mr Stroilov is saying: read paragraph 63 of
153
- Ms Volodina’s witness statement, it means X, when there
- would at least be a debate about that. In my
- submission, one should really pause before accepting or
- going much further with that submission, because it is
- difficult to see why it would be fair to accept that
- submission without having heard the witness on it,
- my Lord.
- To complete that, I’m sorry to interrupt my Lord,
- that is, we say, something that arises in relation to
- the forgery case where, really, we say one can almost
- disregard it because the evidence is so one way,
- my Lord.
- MR JUSTICE HILDYARD: At some point my feeble recollection
- is that though Mr Lord cavilled against it I rather
- indicated that given the disparity in force of
- representation that if there were points on which the
- not‐put argument was going to be made, I would rather
- like them identified.
- MR BIRT: My Lord, which is why ‐‐ I’m not disagreeing that
- my Lord made that known. My recollection is that you
- asked Mr Lord to keep an eye on questions that might
- have been rolled up or ambiguous to avoid us having to
- pore over the transcript. My Lord may be right. As
- I say, I’m not trying to make a technical not‐put point.
- MR JUSTICE HILDYARD: No.
- MR BIRT: And, indeed, I don’t think any of the points
- I have made have really been: he can’t advance that
- because it is not put, rather than: this doesn’t really
- appear to have been the case that has been suggested.
- There is the forensic point, really, which is the
- meandering case theory, in a sense. You can’t assume
- a witness wouldn’t ‐‐ in a sense it comes to weighing
- the evidence as well. It is difficult for Mr Stroilov
- to say: ah, so‐and‐so didn’t say anything about it if he
- wasn’t asked about it. I’m not saying those sorts of
- points cannot be pursued to some extent but one has to
- sometimes weigh the witnesses’ evidence in the context
- of what they were asked.
- Then the Ms Volodina point may be slightly
- different, because it is quite difficult for us to stand
- up and say when she is giving evidence: you haven’t put
- that, when it is not actually part of their case. It
- only became part of Mr Stroilov’s case when he stood up
- to make the point last week. So I’m not sure we can
- really be expected to police a case that is not being
- met, my Lord.
- As I say, in the main we are not taking a technical
- rigour: you haven’t put it, you can’t advance it, but
- that’s not to say there is no point at all when one is
- trying to work out what the witnesses’ evidence was, and
155
- whether the case theory actually works or is coherent
- because of course, the case is being put on the
- instructions of Mr Arkhangelsky and certainly on matters
- where one would expect him to have some input, one would
- expect that to relate to his evidence at least to some
- extent, my Lord.
- MR STROILOV: In case it assists, actually my recollection
- is as my learned friend’s is, that your discussion with
- Mr Lord concerned rolled‐up questions rather than
- not‐put points.
- MR JUSTICE HILDYARD: That is very fair of you. I must have
- a misrecollection. Thank you.
- You seek declaratory relief. Is there anything you
- wish to add to that, or may I take it that I simply have
- to read with care the closing submissions again?
- It is unusual. I can understand that a bank or many
- claimants wish to have such vindication, but the
- ordinary rule is you either win or you lose, sort of
- thing?
- MR BIRT: My Lord, yes, I don’t think there is anything in
- detail I want to add to what’s in part 13 of our written
- closing. My Lord knows the gist of what is sought is,
- a declaration that the claimants haven’t committed the
- wrongs that Mr Arkhangelsky has been alleging for many
- years.
L15/90/40
July 11, 2016 Day 46
- We summarise there, we have given the citation to
- the case, the FSA v Rourke case, which can be found
- behind {AUTH1/2/8}, and what Mr Justice Neuberger, as he
- then was, said which is the court has an unfettered
- discretion and the question is whether it is an
- appropriate situation to make an order for
- a declaration, taking into account justice for the
- claimant and the defendants, whether it would serve
- a useful purpose, or whether there is another special
- reason.
- We have sort of summarised the reasons there, but
- effectively one can step back and say: these allegations
- have been made against the Bank and against Mr Savelyev
- over a long period of time in different jurisdictions.
- As we would characterise it, the war has been waged by
- Mr Arkhangelsky in various courts, and one hesitates to
- say: but is there anything to suggest that he does
- intend to stop here? It has been waged not only in
- the courts, but also in the press and on the internet.
- Again, that is a campaign that he has not said he is
- going to stop. We say it has been an all out attempt to
- stigmatise the name of the Bank and, indeed, personally,
- the name of Mr Savelyev. Indeed we would say it has
- become something of a vendetta. The allegations are
- serious ones and as we would say there is no evidential
- earlier. If there is a reference to give my Lord, could
- I send that in ‐‐
- MR JUSTICE HILDYARD: Yes.
- MR BIRT: ‐‐ because I don’t have it to hand?
- Housekeeping
- MR JUSTICE HILDYARD: I have photographs to bring back the
- witnesses to me, as I wrestle with the case. I’m not
- sure I have a photograph of Mr Turetsky. Perhaps you
- could provide me one.
- MR BIRT: My Lord, I’m sorry about that. We will seek to
- remedy that.
- MR JUSTICE HILDYARD: That’s all right. And so far as the
- defendants are concerned, I think I remember Mr and
- Mrs Arkhangelsky, and I do remember Mr Bromley‐Martin.
- MR STROILOV: Is it unnecessary, my Lord? I am afraid
- I forgot to take care of that.
- MR JUSTICE HILDYARD: I think I can remember. There were
- fewer.
- MR STROILOV: I’m grateful.
- MR JUSTICE HILDYARD: Good. Well, thank you both very much
- indeed. As I said, I have reserved the right to get
- back to you and, if necessary, reconvene. Obviously
- I will do everything I can to avoid that.
- I should say that it is always a rather sort of
- weird moment when you hand over the case to the judge,
157 159
- basis for them, the Bank has been forced to defend
- itself both inside and out of court against the
- allegations at great cost and as my Lord knows, has even
- paid effectively for both sides of this trial in some
- respects.
- My Lord has in mind as well the various press
- releases and media interviews in which the allegations
- have been propagated outside the courts. We have
- selected some for inclusion at paragraph 1184
- {AA3&4/14/621} and in fact, Mr Arkhangelsky has not
- shied away from publicity, he has rather courted
- publicity during the course of the trial. We say there
- can’t really be a complaint that the court sets clear in
- the record what the position is, and in terms of
- injustice to Mr Arkhangelsky, well, there obviously
- wouldn’t be, we say, if the declarations were sought but
- justice to the claimants given the history and the
- extent to which the allegations have been broadcast,
- my Lord. I think that is a rough summary of what is in
- the written document and our submissions on the point.
- MR JUSTICE HILDYARD: Did you want to say anything about the
- suggestion that you had improperly used information
- derived from the freezing order in these proceedings?
- MR BIRT: My Lord, my recollection is that we had this
- debate in court and I couldn’t find the reference
- and on this particular context it feels even more
- daunting than usual. There is a great volume of
- material, some considerable part of which has actually
- been referred to, which is not invariable, and it will
- take me, inevitably, some considerable time to get back
- to you, quite apart from the intervention of holidays,
- which I don’t intend entirely to ignore.
- As I will say, I’m extremely indebted to everyone,
- to you, Mr Birt, for taking over from Mr Lord whilst he
- is elsewhere in the building, but also to your entire
- team, Mr Eschwege and all the solicitors. I know the
- ferocious amount of work which is involved in any case,
- but in a case like this it must have been really quite
- staggering.
- MR BIRT: Thank you, my Lord.
- MR JUSTICE HILDYARD: And to Mr Stroilov, who has had to
- take on a very, very considerable burden, and whose
- conduct I think has been notable and much appreciated,
- and I hope that Mr and Mrs Arkhangelsky will see what
- I have said in this regard and have also been kept
- abreast of the proceedings over the last four days,
- which have been very useful to me. So thank you very
- much.
- The other thing is I do think that the transcription
- service and the whole Magnum product has been quite
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July 11, 2016 Day 46
A
A‐K‐O‐R‐T (1) 38:1 A2/11/42 (1) 74:4
AA (1) 105:20
AA2/12/1 (1) 105:23
AA3&4/14/103 (1)
148:6
AA3&4/14/138 (1)
85:14
AA3&4/14/181 (1)
150:22
AA3&4/14/20 (1)
107:20
AA3&4/14/286 (1)
127:21
AA3&4/14/32 (1)
85:21
AA3&4/14/368 (1)
145:11
AA3&4/14/384 (1)
136:3
AA3&4/14/432 (1)
87:8
AA3&4/14/460 (1)
90:19
AA3&4/14/464 (1)
90:12
AA3&4/14/466 (3)
91:11 147:2,11
AA3&4/14/468 (1)
89:24
AA3&4/14/480 (1)
13:23
AA3&4/14/485 (1)
148:7
AA3&4/14/493 (1)
147:8
AA3&4/14/500 (1)
147:23
AA3&4/14/504 (1)
147:9
AA3&4/14/507 (1)
108:17
AA3&4/14/508 (2)
89:2 108:24
AA3&4/14/522 (1)
121:8
AA3&4/14/525 (2)
122:11 123:14
AA3&4/14/527 (1)
123:16
AA3&4/14/528 (3)
127:18,24 131:2
AA3&4/14/530 (1)
130:12
AA3&4/14/531 (2)
127:21 130:12
AA3&4/14/532 (1)
122:23
AA3&4/14/552 (1)
118:12
AA3&4/14/56 (1)
144:1
AA3&4/14/580 (1)
106:21
AA3&4/14/583 (1)
108:1
AA3&4/14/621 (1)
158:10
AA3&4/14/623 (1)
152:13
AA3&4/14/68 (1)
143:24
able (15) 7:22 30:17 49:1 55:3 64:24 71:16 80:9,17,20 93:23 95:3 110:16 121:20 162:2,17
abreast (1) 160:21 absent (2) 92:11 95:15
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July 11, 2016 Day 46
162:23 average (1) 44:23 avoid (4) 20:16,17
154:22 159:23 avoided (2) 51:22
54:14
avoids (2) 20:10,10 aware (1) 145:14 awful (1) 67:13
B
B1/5/13 (1) 144:14 B2/16/2 (1) 49:17 back (45) 4:4 27:1,21 31:25 40:2 67:14 71:8,23 80:22
83:13 87:1 88:13 88:24,25 89:3,4 96:1 97:13 102:2,4 104:10 106:1 109:2 109:13,22 112:5 115:20 118:1 120:25 125:4 128:8 129:23 130:22 131:8,22 132:6,15 133:6 143:10 152:25 157:12 159:6,22 160:5 161:11
backdated (2) 25:17 143:22
background (1) 46:13 backtrack (1) 89:17 bad (3) 56:2 77:14,17 bailiffs (17) 89:6,14
90:1,10 92:4,10,14 92:16 93:4,8,20,22 94:23 95:3 96:24 146:21 147:12
balance (8) 33:19 52:2 54:18 80:11 111:9 112:8,17 142:15
Balandin (1) 33:24 Baltic (2) 33:14 74:7 bandstanding (1)
77:24
bank (172) 1:9 2:9 4:18 5:12,18,23 6:10 7:9 8:2,4,25 9:5,8,21 10:7,13,24 11:15,16 12:10,11 12:21,25 13:3,14 13:19,21,22 14:17 15:2,9,13,13,17,18 16:4,17,22 18:13 19:13 22:20 23:21 25:19 29:9,10,19 30:1,6,12 32:7,14 33:3 34:13,24 35:2 35:5,9,19,22 36:4,7 36:15 38:14 39:4 41:3,10,12 42:7,22 45:12 46:11 49:10 49:12,12 50:10 61:22 68:5 70:17 71:3,11,15 73:3 74:10 75:2,6 76:21 76:23 77:6,10,14 77:16,17 84:19 87:5,15,17,21 88:19 91:15,22 94:15 96:6,10,11 96:13 97:11,13 99:21 100:8,13,15 100:20 102:10 104:13,16 105:16 106:3 109:3,9,10 109:15 110:4,8,14 111:9 112:8 113:15 113:23,25 114:5,5
54:10,10,19 55:2,5 57:12,24 62:3 67:10 70:7 85:6 122:15 130:8
businesses (3) 40:21
54:16 133:15
businessmen (1)
57:24 button (1) 94:19 buy (1) 101:17 buyers (2) 102:19
148:20 buying (1) 98:13
BVI (11) 72:5 79:1 86:3,11 128:23 129:5,11,15 149:20 150:20 151:7
C
C1/1/27 (1) 42:12 C1/1/29 (1) 42:17 calculation (4) 115:23
116:18,22 118:22
calculations (2)
115:24 116:15 call (6) 69:13 70:18
71:16 74:18 77:25 96:18
called (10) 6:24,25 31:22 92:23,24 126:1,13 136:12 137:18 145:16
calls (1) 21:25 campaign (4) 31:1
79:7,8 157:20 cancelled (1) 46:16 candid (3) 39:4 65:18
81:4 candour (1) 58:5 cap (1) 100:14
capacity (3) 89:9 92:5 145:21
capital (5) 44:25 73:15 77:14 87:23 135:12
capture (1) 33:6 cards (2) 101:11
143:13
care (3) 42:24 156:15 159:16
carefully (1) 63:16 carpet (1) 62:15 carries (1) 153:17 carry (1) 141:10 cartoon (1) 79:18 cartoons (2) 79:16,19 carved (1) 129:24 cascade (2) 7:4 9:12 case (93) 1:9,12 5:12
5:15 6:7,12 8:4,10 9:19,21 10:1 14:18 14:21,22 15:6,10 15:12,13,15 16:14 17:1 23:13,14 28:16 33:15 35:18 35:25 36:18 41:19 59:2 71:19 72:8 74:20 77:2 79:9 81:24,25 84:8 89:11,12 92:8 94:1 97:15 98:8,9 100:3 100:25 101:2,3 111:15 112:4 115:25 118:6 121:10 122:4 123:20 126:1,8,13 126:18,23,23 127:4 131:4 132:1,7 133:22,24 134:15 134:16,19,24 137:8 138:16 139:19,22
142:19 153:20 154:10 155:4,6,17 155:18,20 156:1,2 156:7 157:2,2 159:7,25 160:12,13
cases (4) 1:10 2:20 27:15 93:9
cash (1) 117:9 categorical (1) 50:7 categories (1) 66:3 category (1) 153:24 caught (1) 67:12 causation (1) 124:8 cause (1) 130:18 caused (4) 5:17 14:8
28:19 54:7 cavilled (1) 154:14 cent (10) 45:4,6 90:21
93:10 103:8,9 112:15,16,16 136:11
central (5) 5:15 31:7,9
31:10 162:13
centre (4) 36:20,21
48:1 116:25 centred (1) 128:20 certain (5) 67:21 95:8
95:8 115:24 119:25 certainly (10) 20:25
80:14 86:1 89:22 90:9 104:6 114:23 117:24 123:2 156:3
cetera (1) 147:13 challenge (3) 118:6,11
147:4 challenged (2) 118:4
146:17 chance (1) 109:20 change (3) 30:19
117:19 153:3 changed (5) 71:4 74:9
74:12 105:20 119:22
changes (1) 117:1 channelling (1) 110:4 character (2) 148:14
153:17
characterisation (1)
83:20 characterise (1)
157:15 characterised (1)
121:16 characterises (1)
126:19
charges (4) 23:18,21 23:24,25
charter (1) 73:15 chartering (1) 42:23 charters (2) 85:18,20 chased (1) 70:20 chasing (2) 70:23 71:2 check (4) 11:2 42:9
93:21 152:20
Chichoyan (1) 124:1 chief (1) 102:14 choice (1) 52:8 chooses (1) 94:17 choosing (1) 140:23 chronology (6) 7:6
15:5 114:2 120:18 124:24 153:3
circle (2) 20:20 99:21 circular (1) 115:9 circulation (2) 149:15
161:20
circumstances (9)
30:13 39:16 61:11 75:13 121:23 128:21 148:13
151:6 162:16 circumvent (1) 122:9 citation (2) 121:12
157:1
cite (1) 89:12
cited (5) 90:17 91:13 107:23 147:11,22 City (3) 36:20,21 48:1 civil (6) 2:20 5:11 13:9
13:13 14:11 25:1 claim (72) 3:5,18,23 3:23 10:25 11:1,3 11:11,13,14 12:12 12:25 13:2,3,9,10
13:13,22 14:11 25:5 29:1 48:4,22 50:14 54:3,5,9,19 67:12,19 68:4 70:6 70:8,12 89:2 95:12 106:24,24 107:2,6 107:6,6 112:10 115:14 121:25 122:8,15,16,19,23 123:1,2,11 126:10 126:22 127:1 128:1 128:2,13,15 129:8 129:9,11,23,25 130:2,5,7,8,10 131:1,2
claimable (1) 124:20 claimant (3) 121:15 121:17 157:8 claimants (20) 1:13 2:4 22:13 30:21
35:24 39:17 49:4 55:17 74:25 75:15 78:17 85:5 137:23 138:3,5,6,9 156:17 156:23 158:17
claimants’ (12) 2:11 7:6 30:20 38:17 52:22 73:11 74:25 77:21 89:14 137:10 137:13,25
claimed (2) 124:14 130:15
claims (8) 5:11 25:1 51:19 88:12 121:18 122:14 128:23 129:5
clarity (1) 68:9 class (1) 55:6 classical (1) 111:23 clause (1) 88:8 cleaner (1) 97:16 clear (15) 5:13 16:9
22:20 35:23 53:16 56:19 57:13 80:6 98:7 104:4 118:3 131:21 133:3 151:4 158:13
cleared (2) 71:9 162:19
clearly (22) 6:7 7:24 17:13,15 18:4,21 20:5,11 22:6,9 23:14 26:1 32:17 32:22 38:12 54:6 59:25 67:17 70:4 71:14,25 134:3
clerk (2) 81:14 82:1 client (1) 60:24 close (6) 35:10 36:3
51:19 100:23 103:10 111:4 closely (1) 34:24 closer (1) 104:3
closest (2) 119:17,19 closet (2) 67:1 83:23 closing (52) 1:3 11:6
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July 11, 2016 Day 46
dollars (2) 63:15 105:19
double (2) 124:6,7 doubt (4) 80:21 98:14
99:16 126:25 downward (1) 99:1
Dr (7) 48:18 55:14 57:19 60:8 92:13 94:9 121:8
draft (1) 140:11 drafted (1) 23:4 draw (5) 1:16 75:8
78:14 140:23 141:1 drawn (3) 111:12
141:12 143:21 drew (2) 63:24 142:18 dried (1) 102:11 driving (1) 114:5 dropped (1) 102:18 due (9) 26:12 46:21
58:21,21 60:25 83:24 84:12 99:6 108:5
dusted (1) 81:2 duties (1) 106:8 duty (4) 90:4,7,11
91:1
E
e‐mail (3) 47:20 82:1 120:11
E2&E3/12/329 (1)
149:6
E2/8/28 (1) 90:23 earlier (21) 11:12,23
32:15 53:6 82:19 82:22 83:9 108:12 109:13 116:12 120:6 128:13 129:20 132:9 133:1 144:18 146:20 148:25 149:10 159:1 162:14
earliest (1) 73:25 early (2) 102:12
108:25 easier (1) 39:3 easily (1) 162:3 easy (1) 56:23 EBRD (1) 65:14 echo (1) 161:5
economic (1) 33:12 effect (5) 9:12 46:15 63:19 67:12 81:19 effectively (9) 16:15 23:19 83:21 85:18
92:12 130:3,16 157:12 158:4
efforts (5) 99:3 142:13 146:13 148:4,19
either (22) 17:12 24:13 42:6 55:1 61:22 66:11 75:7 75:15 81:13,18 85:5 91:7,16,21 95:7 117:17 130:23 133:9 137:5 143:21 150:17 156:18
elaborating (1) 1:24 element (7) 10:25
15:24 29:4,5 31:7,9 31:10
elements (2) 8:17 31:18
elephant (1) 58:10 embark (1) 59:17 embarrassment (1)
57:5
embezzling (1) 133:10 emerge (1) 83:23
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July 11, 2016 Day 46
fuller (2) 39:24 56:9 fully (4) 3:16 60:23,24
106:18 function (1) 92:25 funder (1) 73:13 funders (1) 65:10 funny (1) 28:13 further (34) 4:22
15:22 17:10 25:12 26:10,16 32:19 41:1,13,18,18 42:17 50:4 51:2 52:7,9,11 68:1 69:19 72:12 75:19 79:17 85:1 95:25 104:16 111:25 123:12 130:12,15 131:4 141:2,22 142:3 154:4
fussed (2) 80:24 99:21
G
G4/103.1/1 (1) 137:11
G4/103.1/32 (1)
138:14
G4/103.2/1 (1) 137:11 gallop (1) 152:22 galloping (1) 72:18 gap (4) 58:22,23 59:6
59:10
gaps (2) 59:12,13
Gatchina (1) 46:4 gateway (1) 62:4 Gavrilov (1) 20:8 general (27) 1:25 10:2
10:12,16 11:24 12:1,3,20 15:16 31:11,23 32:1,4 33:13 34:18 44:5 66:7 107:8 135:17 135:19 136:17,20 139:9 145:8,20,23 153:16
general’s (1) 13:3 generally (6) 41:15,16
79:5 84:23 104:15 123:9
generate (1) 115:14 generated (1) 116:17 genuine (2) 5:22 8:13 genuinely (1) 19:7 getting (13) 9:7 16:6
50:25 70:14,15 80:25 83:17 93:2 93:24 109:22 131:16 135:12 142:15
gift (1) 96:8
Giles (3) 126:8,15,19 gist (3) 92:13 151:1
156:22
give (32) 11:7 13:17 26:22 38:8 39:1 47:16 52:23 53:16 58:5,13 62:15 69:5 69:8 70:2 74:2,17 74:21 75:20,25 76:7 80:11 98:16 108:14,18 126:3 134:9 138:5 147:21 149:3 150:19,23 159:1
given (44) 2:23 8:6 9:17 13:7 15:19 19:10 35:17 36:17 36:18 39:13,24 43:23 49:6 50:9 56:24 70:17 74:23 77:24 82:24 83:5 102:6,20,21 104:23
105:9 107:14,18 108:24 110:13,20 111:1 121:1 122:9 134:25 136:2,13 147:6 148:5 149:22 149:24 150:5 154:15 157:1 158:17
gives (5) 13:16 34:5 46:13 73:19 147:19
giving (9) 20:19 21:14 28:17 76:12 82:23 83:1 102:15 150:7 155:16
glad (1) 115:21 Gladyshev (2) 92:13
94:9
Gladyshev’s (1) 121:8 glaring (1) 28:11 Globus (1) 72:22 glued (1) 82:4
go (38) 1:21 27:1 32:9 42:11,17 43:12 44:7,8,10 46:9 47:24 52:20 59:23 63:16 83:25 84:7 93:6 96:19 97:1,7 97:25 100:2 112:2 115:8 116:10 118:1 121:14 131:8 133:6 139:17 140:7,23 141:1,8 146:23 149:4 152:25 161:21
goes (14) 34:11 66:13 66:23 94:21 95:16 97:9 98:18 99:20 108:16 109:13 112:5 126:6,11 130:22
going (44) 33:2 41:5 52:24 58:13 69:2 69:11 72:10 81:4 82:10,15 83:1 87:14 89:4 94:19 97:5,6 99:1,25 102:4 104:10 105:13 106:18 107:5 115:20 117:10 118:13 120:12,25 121:4,7 127:14,24 131:6 132:11 144:21 148:24 149:3,23 150:19 151:22 152:15 154:4,17 157:21
GOM (10) 123:10,10 123:14,22,23 124:3 124:5 136:2,7,16
good (15) 1:4,5 2:5 37:2,19 39:22 49:13 69:22 79:23 82:13 110:11 120:1 126:15 145:23 159:20
goodness (1) 66:13 governing (1) 90:5 government (1) 149:8 Governor (4) 34:21
35:10,18,22
Gradually (1) 7:2 grant (3) 68:12 107:12
135:6 granted (2) 135:1
136:23 grass (1) 61:25
grateful (7) 13:24 52:18 78:14 159:19 161:4 162:12 163:1
great (4) 62:8 100:7 158:3 160:2
greater (2) 57:4 101:4 greatly (1) 1:25 grotesque (1) 27:18 ground (2) 41:2 128:4 grounded (2) 119:21
119:23
group (14) 8:1 32:2 40:8,12 41:9 64:12 64:23 88:1 112:11 123:9 138:16,18 139:13,21
guaranteed (1) 7:21 guarantees (6) 143:15 143:19,21 144:3,7
144:19 guess (1) 66:11
guidance (3) 61:19 122:1 127:7
Gunard (3) 101:15,18
102:1
H
H2/32/1 (1) 141:18 H2/33/1 (1) 141:19 H2/35/1 (1) 142:8 habitual (1) 145:6 half (5) 43:19 54:3 102:18 116:25
161:3
hand (10) 4:5 23:4 36:4,5 58:11,13 81:23 113:10 159:4 159:25
handed (2) 3:14 151:11
handled (1) 101:18 hands (7) 37:11 96:15
113:20 119:1,22 124:17,21
happen (4) 35:19 61:6
62:23 117:21 happened (15) 1:18
19:6,22 33:7 45:8 45:17 61:15,16,21 95:19 132:22 133:19 142:24 143:5 152:1
happening (2) 34:7 144:9
happens (8) 1:6 26:3 68:20 96:22,25 97:1 110:22 111:21
happy (3) 57:16 96:25 134:17
hard (4) 29:17 117:16 119:13,14
hardship (1) 129:21 harsh (1) 128:20 head (4) 31:23 32:5
130:11,13 hear (1) 115:21 heard (8) 5:6 22:13
28:16,18 40:14 54:6 127:15 154:6
hearing (3) 70:11 137:10 138:23 hearsay (1) 28:17 heavily (1) 86:12
heavy (2) 14:14 137:21
held (9) 60:20 84:6 86:4 114:12 115:1 138:12,15 140:1 144:5
help (2) 122:3 153:6 helped (1) 108:13 helpful (2) 38:9 51:12 helps (1) 26:23
Henry (1) 35:15 herring (2) 45:20
115:7
hesitates (1) 157:16 hidden (1) 77:17 high (3) 58:2 71:12
117:12
higher (7) 54:1 60:14 96:19 97:5 98:25 100:4 117:23
highest (1) 6:12 highlighted (1) 162:5 highly (1) 63:13 HILDYARD (211) 1:5
1:22 2:5 3:25 4:11 4:17,22 5:9 6:3,23 7:4,8,13,18 8:18 9:2,6,10,16 10:14 10:20,22,25 11:14 11:19 12:1,4,9,23 13:13,17,25 14:10 14:14,19,24 15:4,7 15:21 16:6,11,16 16:20,25 17:3,5 18:10,24 19:9,23 20:2,23 22:25 23:23 25:4 26:3,6 26:14,19,24 27:8 27:11,17,24 28:8 28:11,15,20 34:9 37:2,5,8,15,19 38:1 41:22,25 43:3,12 43:18 44:3,19 45:24 46:3,14,18 46:21,24 47:7,10 47:15,22 51:17 52:12,16 57:17 58:9 59:9,14,19 60:16 61:8,12,18 62:24 63:9,23 64:3 64:18,25 65:4,9,23 66:6,18,23 67:6,16 68:9,21 69:1,5,11 69:16,22 72:20 75:10,22 76:8,14 77:20 78:4,7,9,24 79:23 81:4,21 82:3 82:13,25 85:22 86:6,9,14,18,22 87:2 91:25 93:18 93:23 94:25 95:6 95:17,24 96:10,12 97:20 98:6 99:2,6 99:10 100:6,17 101:12 102:20 103:12,17,25 104:25 105:3,11,18 105:25 108:22 111:10,23 118:16 119:4,14 120:1,10 120:12,16,22 121:2 121:5 144:15 146:5 146:10 147:19 149:22 150:9,15 152:7 153:8 154:13 154:25 156:11 158:21 159:3,6,12 159:17,20 160:16 161:14 162:7,10,21 162:25
hint (2) 57:10 63:21 history (2) 67:20
158:17
hit (2) 125:15,16 hmm (1) 51:17
hold (3) 75:22 120:12 162:20
holder (1) 94:12 holding (4) 65:15
145:15,18 150:1
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July 11, 2016 Day 46
Holdings (1) 42:13 hole (1) 85:21 holes (1) 41:17 holidays (1) 160:6 homebake (1) 119:6 honest (7) 8:9 22:22
52:4 60:8 98:16 115:22 116:1
honestly (2) 8:6 22:14 Hong (2) 126:12
127:11
hope (7) 1:20 31:4 45:13 72:18 80:17 82:9 160:19
hoped (1) 81:5 hour (1) 161:3 house (5) 92:19
101:10,24 106:5 143:13
housekeeping (4)
50:18,25 159:5 164:5
houses (1) 117:10 housing (1) 117:12 huge (3) 68:12 83:22
143:2 hugely (1) 117:2
hundreds (3) 58:13 62:16 63:15
hurry (1) 24:5 husband (2) 35:3 74:8 hypothesis (1) 51:21 hypothetical (1) 61:20
I
I19/19/51 (1) 142:5 I19/19/9 (2) 151:20
152:8
I19/9 (1) 152:7 I25/39/147 (1) 134:1 I25/39/184 (1) 134:2 I27/43/12 (1) 50:19 I27/43/13 (1) 51:6 I27/43/2 (1) 53:1 I27/43/20 (1) 51:16 I27/43/21 (1) 52:9 I27/43/22 (1) 52:11 I27/43/23 (1) 52:16 I28 (1) 120:11 I28/45/19 (1) 120:14 idea (5) 82:11 88:2
99:24 111:11 143:20
ideal (2) 61:16 119:23 idealistic (1) 57:11 ideally (1) 47:20 identified (2) 60:19
154:18 identifying (2) 1:23
51:12 idiosyncratic (1) 66:8 ignorance (2) 47:17
49:6
ignore (1) 160:7 II (1) 35:15
illegality (4) 62:10,20 69:12 80:1
imagine (3) 7:6 37:13 64:6
immediately (4) 33:12 42:14 81:8 85:1
impact (2) 81:22 125:23
imperfect (2) 17:13 63:7
implausible (1) 50:9 implemented (1)
72:14 import (1) 58:1
important (14) 8:5,12
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July 11, 2016 Day 46
80:16,23,24 81:1 81:20 126:4
Lordship’s (7) 10:6 15:2 29:14 40:3 53:2 73:1 78:15
lose (2) 141:7 156:18 losing (1) 40:10
loss (36) 53:25 54:7 103:8,9 107:2 115:14 121:4,16,19 122:16 123:1,7,21 123:22 124:6,16,16 124:17,18,18,19,25 125:1,2,2,8,8,9,17 125:19,22 130:8,11 130:13,15,20
lost (4) 16:9 26:21 101:22 141:11 lot (17) 40:20 41:9 43:5 44:7 45:13
47:18 55:11 61:4 65:17 66:1 67:18 78:13 94:10 103:19 111:19 131:9 145:4
lots (2) 67:11,11 low (8) 22:14 28:2
97:20 102:5 103:1 103:22 110:17 111:18
lower (6) 97:3,7,19 100:7 117:4,23
lowest (1) 97:14
LPK (24) 54:4 87:19 88:12 89:2 106:14 106:25 107:1,7,9 108:11 109:2,3,11 109:12,17,22,25 110:5,24 111:5 112:12 113:21 136:8,19
lumbered (1) 115:19 lunch (3) 37:6 68:24
68:25 luncheon (2) 69:24
70:4
lunchtime (1) 80:19
M
Maggs’ (2) 91:13 92:13
Magnum (2) 160:25 161:7
main (4) 60:23 104:1 121:3 155:22 mainstream (1) 66:9 making (5) 15:8 76:5 113:16 144:25
149:17
Maleev (4) 145:3,5,14 145:22
Malysheva (13) 9:24 13:6 15:20 19:11 20:8,24 21:7,24 34:4 73:21 74:13 75:1,23
Malysheva’s (2) 18:9 24:23
management (1)
77:12 managers (1) 77:19 manipulating (1)
22:21 manipulation (1) 26:1 manoeuvring (1) 88:5
March (10) 9:4,5,9,10 10:8,22 12:10 19:12 70:18 71:6
marginally (1) 40:9 Marine (2) 112:11
123:9
L15/90/49
172
July 11, 2016 Day 46
obligations (7) 8:2 38:15 139:15,17 140:19,24,25
observation (1) 85:3 observed (1) 162:1 obtained (3) 56:22 102:24 127:7 obtaining (2) 22:10
64:5
obvious (7) 59:20 70:12,14 114:24 142:12 144:17 150:10
obviously (44) 1:22 2:7 4:12 8:10 10:13 21:7,9,14 22:8 25:18 27:14 29:8 40:18 46:2 48:2 54:12 55:11,23 57:7 58:6 60:5 62:21 67:18 76:18 77:1 78:12 82:15 88:16,21 100:2 109:21 110:8 115:23 118:11 127:11 128:2 131:9 135:8 140:6 144:23 152:24 158:15 159:22 161:6
occasion (1) 53:12 occasions (3) 82:22 92:23 153:18 occurred (1) 130:5
occurs (1) 11:21 October (3) 105:6
136:13 151:16 odd (7) 28:1 33:23
38:23 86:14 97:22 119:11 134:23
offer (1) 36:7 offered (1) 138:21 office (3) 103:21,22
104:3 officer’s (1) 44:11
offices (4) 104:1,22 105:7,15
official (2) 31:22 149:7 officials (6) 31:20 35:9 35:11,16,20 92:17
offshore (1) 41:24 oh (7) 44:3 96:17,18 108:22 111:17 120:10 146:5
okay (4) 15:7 61:12 86:18 100:14
old (1) 35:6
OMG (23) 1:15 3:20 4:9,16 7:9 17:17 25:1 36:15 40:20 51:21 71:12 87:19 88:23 104:1 111:5 111:6,11 112:21 131:12 132:14 133:8 135:15 143:14
OMG’s (2) 71:4 111:22
OMGP (5) 124:18 125:20 136:1,7,16
once (10) 33:11 56:22 58:23 84:14 100:12 116:18 130:20 134:22 139:15 140:21
one’s (1) 115:2
Onega (28) 40:8,13,14 54:2,10,10 92:20 103:25 106:11,13 106:23 107:8,16 108:11,21 109:9,10 112:12 116:8
122:17,19,20,23 130:8 143:9 147:18 147:24 150:2
Onega’s (2) 122:15,16 onerous (2) 84:18
138:11
ones (4) 12:15 92:22 133:16 157:25 ongoing (2) 17:2 34:6
onwards (8) 76:15 78:4 85:8,17 116:8 116:9 137:14 138:9
open (4) 4:9 43:22 53:21 84:8
opening (6) 7:7 44:13 85:16 127:19 136:14 152:11
operated (1) 133:18 operating (1) 133:16 operational (1) 43:17 operations (2) 40:12
40:19
opinion (2) 76:9,12 opinions (1) 44:11 opportunity (1) 151:3 opposed (3) 15:5
124:4 151:5 opposite (1) 8:14 oral (11) 72:4 82:19
89:17 116:5 118:9 131:5 134:4,7,20 135:4 136:6
order (29) 33:25 38:16 38:19,22 45:16 47:6,14 53:14 62:17 70:11 78:15 86:12 127:25 129:24 139:1,3,6,7 139:25 140:11,20 141:2,9,16 142:9 145:24 151:6 157:6 158:23
ordered (1) 109:24 orders (1) 33:8 ordinarily (2) 121:18
161:17
ordinary (2) 156:18
161:25 organ (1) 12:6
organise (1) 161:7 organised (1) 106:2 organiser (3) 90:22,24
92:19 organisers (9) 89:7
90:1,4,10,14 92:22 93:22 94:23 149:16
original (8) 5:19 46:3 109:4,12 137:13 138:16 139:9,12 Oslo (2) 112:11 123:9 ought (9) 87:14 121:9 132:16 139:21 141:5,5 152:21
161:17,24 outlets (1) 147:25 outline (2) 40:22
41:16 outlining (1) 45:17
outrageous (1) 57:14 outside (8) 68:20 75:4 87:20 104:6 115:5 124:11 139:18
158:8 outstanding (10) 1:20
41:8 70:21 100:5 100:15 110:13 112:15,16,17 161:14
overruled (1) 26:11 overwhelmingly (1)
49:8
owe (1) 146:1 owing (1) 123:16 owned (9) 18:14 42:1
43:8 54:4 104:22 113:18 125:15,17 136:19
owners (2) 86:6,7 ownership (2) 74:6
100:9
owns (2) 114:16,18
Oxus (1) 64:20
P
P1/10/1 (1) 151:15 P1/10/10 (1) 78:18 pace (1) 149:23 page (34) 2:25 3:1,2
17:6 18:23 19:15 19:16,17 20:7 21:23 25:8,13,13 27:2 29:13 34:3,11 34:11,11 38:6 39:11 44:10,15 49:18,24 51:4,10 52:6 53:1,3,9,11 72:16 164:2
pages (4) 51:4 53:9 72:17 108:17 paid (11) 41:2 62:8
67:22 85:19 87:18 98:25 100:23 114:4 115:17 132:15 158:4
paper (2) 99:9 113:15 papers (1) 140:10 paragraph (79) 11:6
11:12 13:18 14:18 17:7,10,18,21 18:11 19:3,18,24 19:25 20:3,6,7 21:24 25:8,14 42:12,17 49:18 50:23 51:16 52:10 52:14 71:21 74:3,4 78:4 83:8 85:10 87:7 88:25 89:12 90:18,22 91:7,14 104:24 105:4 106:20 107:19,20 107:21,23 108:16 108:24 110:21 116:8 118:8 121:7 121:12 122:10 126:6,18 127:6 128:6 129:1,3 130:25 134:1,2 136:3 137:16,19 138:21 139:2 140:20 144:1,14,22 145:10 147:1,23 148:7 150:22 153:25 158:9
paragraphs (19) 27:3 27:6 52:9 53:10 76:15 85:8,16 102:6 122:22 123:13 127:17,19 143:17,24 144:18 144:20 148:6 150:24 152:11
parallel (1) 5:10 pardon (6) 2:25 3:1
16:2,4 39:10 78:8 parent (1) 123:22 Paribas (1) 64:21 part (36) 18:25 31:16
31:17 33:10,18,23 40:7 43:24 50:17 50:22 54:6 61:4
L15/90/50
173
July 11, 2016 Day 46
111:1 150:1 prima (1) 33:15 primary (2) 51:13 70:6 principal (1) 138:9 principally (2) 74:11
74:13 principle (2) 123:5
124:12
prior (5) 6:3 7:22 8:24 21:25 71:6
pro (3) 80:6 132:5 135:7
probabilities (4) 33:19 48:14 52:2 54:18 probability (1) 90:25
probably (7) 24:12 49:3,3 68:24 76:20 116:13 141:13
problem (6) 50:25 58:9 104:3 124:7,7 124:8
problems (1) 104:4 procedure (1) 149:9 proceeded (1) 61:5 proceeding (3) 12:13
12:18 16:21
proceedings (20)
11:18 12:17 13:4,5 13:19 17:24 21:5 22:21 25:23 40:6 58:3 60:7 79:1 86:13 102:16 106:24 123:11 129:13 158:23 160:21
proceeds (1) 106:10 process (18) 8:20
17:20 39:18 55:18 84:13 92:18,21 94:11,20 110:11 113:23 114:6 115:1 115:8 122:9 140:14 142:6 148:23
processes (3) 14:13 58:15 96:15 processing (1) 40:20 procured (2) 88:14
90:10
produce (3) 80:9,10 80:11
produced (1) 94:24 produces (1) 25:25 producing (2) 79:19
142:3
product (1) 160:25 professional (5) 98:16
115:23 116:1 117:20,23
Professor (2) 91:13
92:13
profit (1) 133:16 profitable (1) 66:19 progress (5) 37:4
50:12 79:25 81:8 145:1
project (11) 42:6,16 42:19,25 44:6,14 45:18 60:9 64:19 66:19,25
projects (5) 42:8 73:5 73:10,14,19
promised (1) 72:12 promotional (1)
147:25 prone (1) 57:25
proof (3) 33:18 92:11 95:15
propagated (1) 158:8 proper (5) 6:9 12:6 70:15 140:18
146:23
properly (2) 58:21 146:22
properties (9) 92:20
97:14 99:17 101:3 101:8 146:14 148:4 148:10 149:11
property (11) 94:17
97:11 98:13,17 101:21 102:19 103:9 119:19,21 132:24 133:2
proportionality (2)
139:19 142:12 proportions (1) 66:5 proposal (4) 81:20 82:2 152:15,18
propose (4) 10:5 29:15 32:9 34:14
propounded (1)
142:21 prosecution (1) 61:2 prospect (5) 64:5
65:23 100:19,22 131:21
prospects (8) 1:14 48:23 49:13 54:22 64:15 65:14 71:12 84:23
protect (1) 32:1 protected (1) 92:9 prove (3) 31:8 124:2
125:5 proved (1) 95:11
proven (7) 31:14,20 33:19 34:19,22 53:21 61:17
provide (4) 41:17 47:12 69:15 159:9
provided (3) 3:8 41:19 70:25
provides (1) 7:25 provision (2) 27:22
128:16
provisions (3) 5:25 7:21 95:13
public (17) 18:1 31:19 31:22 35:9,11,16 35:20 52:4 67:14 70:5 146:4 161:15 161:18,24,25 162:6 162:14
publication (3) 79:13 149:14 162:19
publications (2) 148:1
149:12
publicity (3) 77:24 158:11,12
publicly (1) 72:6 publish (1) 147:12 published (1) 147:25 purchase (4) 40:25
43:12 44:25 45:21 purchased (3) 41:1
44:22 45:2 purchaser (4) 5:19
110:25 150:10,11 purchasers (9) 6:1,10 71:20 109:4 137:13
139:9,10,12,12 purchases (1) 138:17 purely (1) 25:24 purist (2) 56:5 57:11 purpose (6) 28:25
42:3 44:16,20 87:20 157:9 purposes (5) 38:18
62:8 87:22 101:20 106:20
pursuant (3) 38:15
78:15 115:2 pursued (2) 128:23
155:11
put (37) 39:5 49:1 59:1 65:17 82:20 83:6 84:21 85:18 96:3,14 97:17 99:18 101:15,21,23 101:24 102:4 105:22 110:6 113:13 115:12 123:23 130:21 131:3 142:22 143:7 144:22,23 145:13 150:12 151:1,7 153:10 155:3,16,23 156:2
putting (4) 94:19 99:17 101:6 103:16
pyramid (1) 133:12
Q
quantum (2) 51:14 53:17
query (1) 136:21 question (31) 2:22 3:3
8:19 15:2 21:3 22:10 23:19 54:15 54:17 61:14,20 62:9 64:11,13,14 64:24 65:12 69:11 73:1 82:23 83:11 84:15 100:17 121:25 124:14 126:24 134:9 142:15 146:1 150:16 157:5
questioning (1) 50:4 questions (12) 4:22 41:18 60:6 78:17 83:10,14 108:19
132:22 145:9 151:18 154:21 156:9
quickest (1) 120:23 quickly (3) 18:8 73:6
127:14
quid (2) 132:5 135:7 quiet (2) 63:5,7 quite (47) 8:11 13:7
14:12,17 24:1,4,19 28:10 29:17,25 40:15 44:12 51:2 56:23 57:15,15 58:6,7,18 63:24 65:18 67:1,18 84:1 90:24 92:18 94:5 94:10 100:20 103:10,20 106:18 111:19 112:24 116:1,19,24 118:6 131:9 138:1 145:4 149:14,23 155:15 160:6,13,25
quo (2) 132:5 135:7 quote (1) 51:5 quoting (2) 60:17
63:20
R
raise (1) 148:14 raises (1) 151:18 raising (1) 131:21 range (10) 90:20
101:8 116:3,17,20 116:24 117:2,3,20 117:22
rates (1) 84:19 rational (1) 119:18
L15/90/51
L15/90/52
175
July 11, 2016 Day 46
superiority (1) 62:13 supervising (1) 32:18 supplied (1) 161:8 support (5) 33:25
109:9 110:2 117:16 144:7
supposed (3) 87:22 135:14 149:1
supposing (2) 95:17
100:20
Supreme (2) 81:23 126:16
sure (10) 4:22 37:17 49:20 81:9 86:2 103:23 108:23 149:17 155:19 159:8
surplus (3) 52:4 132:23,24
surprising (4) 3:17 85:14 98:18 114:10
surprisingly (1) 109:23 survival (1) 65:1 survive (1) 64:24 suspect (1) 4:17 suspicion (2) 29:22
64:1
suspicious (3) 36:18 36:19 114:11
sustained (1) 133:16 sweep (1) 62:14 sworn (1) 55:21 synopsis (1) 43:4 system (4) 39:8 76:18
76:20 77:19
T
tab (2) 17:7 53:1 table (2) 73:6 105:21 tack (1) 134:7
take (29) 2:6 5:17 26:16 35:11 42:24 46:6 50:20 53:6 57:11 61:23 62:2 64:3 65:4,13,21 68:18 96:1 97:11 97:14 98:4 105:18 106:10,19 111:14 111:25 156:14 159:16 160:5,17
taken (12) 4:9 5:2,5 13:2 14:9 31:4 36:19 81:7 87:16 100:21 104:5 149:13
takeover (1) 33:16 takes (8) 33:3 60:5 68:17 78:3 92:8
94:2,5 101:2 talk (1) 14:17 talked (1) 91:3 talking (4) 13:5 66:1
73:8 130:14 tangle (1) 124:10 Tarasova (2) 107:4
136:20
Tarek (3) 126:1,19,23 tax (3) 29:22 71:8
145:24
team (2) 77:12 160:11 technical (5) 27:15
122:11 153:16 154:24 155:22
teeth (1) 152:9 Teknopark (1) 145:16 tell (15) 6:15 14:20
20:21,25 21:2 24:11 32:3 55:20 55:21,22 56:1,3 59:21 72:19 95:3
L15/90/53
176
July 11, 2016 Day 46
99:18 100:2,5 111:1 117:17 119:3 119:8 127:16 128:6 130:22 136:24 137:15 140:22 148:23 154:11
ways (6) 34:25 59:17 61:25 86:5 95:20 121:20
we’re (2) 82:10 96:25 we’ve (3) 44:12 116:9
126:2 weather (1) 14:14
Wednesday (1)
120:20
week (12) 72:25 80:11 80:13 82:5,6,7 89:4 102:9 107:13 116:6 131:8 155:19
weekend (1) 1:7 weeks (1) 80:10 weigh (1) 155:12 weighing (1) 155:7 weight (1) 74:23 weird (1) 159:25 welcomed (1) 79:12 went (12) 36:10,15
41:13 45:11 47:18 84:3 85:20 86:25 115:18 122:20 123:4 145:19
weren’t (10) 60:22,22 85:13 103:17 114:18 115:11 119:14,15 122:18 135:16
western (54) 5:17,20 10:3,12,17 12:2,3,4 12:20 13:11,20 15:16 22:1 32:21 33:4,7,16 40:6 66:2 67:21 84:19 87:16 87:16,18,22,25 88:3,9,14,22 103:5 103:23 104:2 109:6 109:14,16,19,21,25 113:8,18 115:15,19 116:7 118:5,23 124:12 125:1,3,18 133:2,4 147:7,16
whilst (5) 88:3,8 109:20 128:12 160:9
whopping (1) 62:8 wide (3) 117:2 138:10
149:14 widely (1) 147:16 wider (1) 76:20 wild (1) 118:24 willing (2) 36:24
131:23 win (1) 156:18 wins (1) 27:18
wish (5) 1:24 13:1 78:9 156:14,17 withdraw (2) 49:4
79:1
witness (31) 2:16 18:18 24:13,14 40:22 42:9,11 49:15 50:8 54:24 57:20 64:17 66:1 68:17,18 77:8 141:15 144:13,17 144:22 146:15 148:20 149:21 150:8,24 153:21,22 153:22 154:1,6 155:7
witnesses (14) 5:14
9:18,22 10:10 20:14 21:14 74:25 77:16 89:23 91:3 150:5,17 153:11 159:7
witnesses’ (2) 155:12 155:25
wonder (3) 38:7 42:8 135:3
wondered (2) 118:14 119:7
wood (1) 40:19 woodwork (1) 101:10 word (2) 48:8,9 words (9) 17:11 73:21
91:8 99:14 117:22 128:18 131:1 135:5 141:9
work (9) 30:17 44:17 63:1 82:12 100:1 132:11 144:16 155:25 160:12 worked (3) 9:12 77:10
161:7 working (5) 29:17
82:9 87:23 140:9 145:20
works (1) 156:1 world (6) 4:1 61:16,17
63:7 66:14 68:20 worried (1) 64:8 worse (2) 66:21 75:17 worth (7) 97:21 101:3
101:8 111:7 115:13 119:19 122:6
worthless (1) 76:10 wouldn’t (15) 56:6
61:24 62:2 66:9,11 68:6 93:23 95:3 111:25 124:19 135:8 140:7 146:21 155:7 158:16
wrestle (1) 159:7 wriggle (1) 24:20 writ (2) 11:8,9 write (5) 81:6,6,20
97:12 137:3 write‐off (2) 112:22
113:5
writing (5) 80:9,18
131:3 134:5,15 written (31) 13:18
50:18 70:22 72:3 82:20 84:25 85:16 87:7 88:25 90:13 101:19 104:24 106:18 108:15 112:24 115:12 116:6 121:6 122:10 131:10 134:6 139:13 142:9 143:7 143:17,23 147:6 148:3 149:20 156:21 158:20
wrong (13) 3:17 16:2 24:16 39:5 48:25 49:3 67:23 79:11 118:11 125:7,8 130:4 132:3
wrongdoing (7)
121:25 122:21 124:14,15,22 125:5 125:6
wrongful (2) 125:14 125:16
wrongfully (1) 124:24 wrongly (1) 4:14 wrongs (1) 156:24 wrote (4) 85:12 111:9
112:8 151:19
X
X (1) 154:1
Y
Yatvetsky (2) 107:22 148:5
Yatvetsky’s (1) 108:25 year (2) 126:5 128:5 years (5) 30:21 54:25
79:3 122:21 156:25 yield (1) 95:8
Yuri (1) 123:25
Z
Zelyenov (1) 140:1 zero (1) 76:13
0
1
1 (6) 44:10 50:23 72:21 90:21 161:22 164:3
10 (4) 45:3 47:10 68:24 144:20
16th (3) 40:22 42:9,11 17 (2) 72:16 129:1
179 (4) 128:1 129:9 130:2,10
18 (4) 3:1 38:3 39:2 51:16
180(a) (1) 134:2
19 (3) 2:25 3:2 151:19
19.15 (2) 105:8,14
2
2 (3) 19:17 53:1 161:22
- (4) 37:14 69:1,22 69:25
- (1) 44:14
2.15 (1) 69:4
20 (3) 32:21,23 51:10
102:12,17 128:3 130:3,6,20 133:21 133:25 136:13,15 143:6,22 144:10
82:11 133:21 134:17
3 (8) 11:8 17:6 19:15 19:16 21:23 27:2 88:8 112:15
3.21 (1) 120:3
L15/90/54
3.31 (1) 120:5
3.5 (1) 45:1
3.745 (1) 105:17
4 (5) 3:2 40:4,11 41:19
42(h) (1) 128:6
5
5 (7) 2:20 9:4 25:13,13
6
6 (1) 73:11
6‐year (1) 130:1
63 (3) 144:14,22 153:25
666 (4) 85:10 86:18,19 86:20
671(2) (1) 145:10
7
7 (3) 49:18 97:2 144:20
70 (2) 53:3,9
705 (1) 127:19
709 (1) 136:3
71 (1) 53:11
75 (1) 29:13
755 (1) 152:11
756 (1) 152:11
8
8.33 (1) 90:23
80 (1) 93:10
808 (1) 87:7 808(4) (1) 87:14
81 (1) 143:17
82 (1) 164:4
855 (1) 112:13
857 (1) 102:6
858 (1) 102:7
865 (3) 90:18 110:15 110:18
873(3) (1) 90:3
876 (2) 91:7,14
877 (1) 147:1
8821 (1) 89:12
89 (1) 144:1
9
9 (2) 4:23 86:21
9.5 (1) 44:24
90 (2) 112:16 137:16
909 (1) 13:18
916 (1) 148:6
917 (1) 148:6
924 (1) 148:7 931(2) (1) 90:18
94 (3) 14:18,25 49:24
944 (1) 147:23 945(4) (1) 107:20 95 (1) 49:24
L15/90/55