Akciné Bendrové Bankas Snoras (in Bankruptcy) v Mr. Vladimir Antonov and Another
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Gloster, DBE,Mrs Justice Gloster DBE |
| Judgment Date | 04 February 2013 |
| Neutral Citation | [2013] EWHC 131 (Comm) |
| Docket Number | Case No: 2012 Folio 690 |
| Court | Queen's Bench Division (Commercial Court) |
[2013] EWHC 131 (Comm)
Mrs Justice Gloster, Dbe
Case No: 2012 Folio 690
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Antony Zacaroli Esq, QC, Richard Fisher Esq & Louis Mably Esq (instructed by Linklaters LLP) for the Claimant
Ian Mill Esq, QC, James Lewis Esq, QC, Tom Hickman Esq, & Ms Rachel Scott (instructed by Mishcon de Reya) for the First Defendant
The Second Defendant did not appear and was not represented
Hearing dates: 5 th-7 th November 2012
Further written submissions: 23 November 2012 and 27 November 2012
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
By an application notice dated 4 July 2012 the first defendant, Vladimir Antonov ("Mr. Antonov"), sought the following relief:
i) the discharge of a worldwide freezing order granted by Teare J on 18 May 2012, on the application of the claimant, Akcine Bendrove Bankas Snoras ("the Bank"), as extended and amended on 15 June 2012 by Popplewell J (the "WWFO"), on the grounds of:
a) material non-disclosure;
b) delay; and/or
c) absence of any risk of dissipation to justify the making of the WWFO ("the Discharge Application");
ii) a variation of paragraphs 9 and 10 of the original WWFO, and paragraphs 7 and 8 of the WWFO as subsequently amended, so as to provide that Mr. Antonov is no longer required to provide details of his assets acquired since 2003, when he first acquired a substantial shareholding in the Bank ("the Variation Application"); and
iii) a stay of the underlying civil proceedings brought by the Bank (including a stay of the Variation Application) until after the final determination of certain extradition proceedings currently pending against Mr. Antonov ("the Stay Application") 1.
The parties and other relevant entities
The Bank was incorporated in Lithuania on 17 March 199Prior to its insolvency in November 2011, it had one of the largest retail branch networks and was one of the major deposit taking institutions in Lithuania. As a result, its insolvency has had a significant public impact in that country. One of the Bank's subsidiaries, AS Latvijas Krajbanka ("Krajbanka"), carried out banking business in Latvia; it is currently in administration pursuant to Latvian law.
On 16 November 2011 the Bank of Lithuania ("the Central Bank") announced that an analysis of information from the Bank, compiled for supervisory purposes, had revealed poor quality assets and that the Bank had not reduced its operational risk as the Central Bank had previously required, in alleged breach of the requirements of Part 2 of Article 47 of the Law on the Banks of the Republic of Lithuania ("the Law on Banks"). On the same date the Central Bank also announced that it had imposed a moratorium restricting temporarily the Bank's activities until 21 November 2011 and had appointed Simon Vincent Freakley ("Mr. Freakley"), Chief Executive Officer of,
and a partner in, Zolfo Cooper LLP ("Zolfo Cooper"), a United Kingdom firm specialising in restructuring, financial and corporate advisory work, as temporary administrator of the Bank pursuant to Article 76 of the Law on Banks ("the Temporary Administrator") to examine its financial situation and to assess the feasibility of the Bank resuming normal banking activities. In addition, on the same date, in accordance, or purportedly in accordance, with Articles 2, 3 and 8 of the Law on Financial Sustainability of the Republic of Lithuania ("the Law on Financial Sustainability"), the Government of the Republic of Lithuania ("the Lithuanian Government") announced that it had resolved to acquire compulsorily all of the shares in the Bank and to authorise the Ministry of Finance to manage, use and dispose of the shares as it saw fit, in essence nationalising the Bank.On 24 November 2011, the Central Bank applied to the Vilnius District Court to initiate bankruptcy proceedings against the Bank. The Central Bank contended that, based on the work that it had done previously, and the further investigations undertaken by the Temporary Administrator, it had become apparent that a significant proportion of the assets recorded in the Bank's balance sheet were not available to it and that, accordingly, the Bank was insolvent. On 7 December 2011, the Bank's moratorium and temporary administration came to an end, and the Vilnius District Court issued an order opening bankruptcy proceedings in respect of the Bank (the "Bankruptcy Proceedings"). Pursuant to the terms of the order, Neil Cooper, a Chartered Certified Accountant and a licensed Insolvency Practitioner, and partner in the firm of Zolfo Cooper ("Mr. Cooper" or "the Bankruptcy Administrator"), was appointed bankruptcy administrator of the Bank. Upon the making of the Order, Mr. Cooper, in his capacity as such, assumed control of the day-to-day running of the Bank pursuant to Article 85 of the Law on Banks. The Bank contends that its total deficiency amounts to approximately £1 billion.
Mr. Antonov, who is (or was) a Russian banker and entrepreneur, now lives in the United Kingdom with his wife and two children, pursuant to indefinite leave given to him to remain in this country. In 2003, with the support of the Central Bank, he acquired 68.1% of the Bank, which he retained until its nationalisation in 2011. He became Chairman of the Supervisory Board of Bank.
In these proceedings, the Bank contends that one of the principal causes of its insolvency was the misuse and misappropriation of its assets by Mr. Antonov and by the former president of the Bank, the second defendant, Raimondas Baranauskas ("Mr. Baranauskas"), who owned 25.31 per cent of the ordinary shares in Snoras Bank prior to its nationalization in late 2011. The Bank contends that a considerable amount of forensic accounting work, completed since the appointment of Mr. Cooper, demonstrates a large scale abuse by Mr. Antonov of his position as Chairman and the apparent misappropriation or misuse by him and by Mr. Baranauskas, in breach of their duties under Lithuanian law, of assets totalling (to date) €492 million.
The Bank's civil claims for breach of duty have been brought in England on the basis that Mr. Antonov resides and is domiciled here. Mr. Antonov has served an acknowledgment of service and is not contesting the jurisdiction of this Court. The Bank did not apply to make Mr. Baranauskas subject to the WWFO, on the basis that his assets were located mainly in Lithuania and therefore covered by the freezing order in place in that country. Mr. Baranauskas has been served with proceedings in this case and has indicated that he intends to challenge jurisdiction.
A European arrest warrant ("EAW") has been issued against Mr. Antonov and Mr. Baranauskas, and the Lithuanian prosecuting authorities are seeking their extradition to Lithuania in connection with a criminal investigation taking place there into the conduct of the affairs of the Bank. Both men are resisting extradition.
The Lithuanian Government acting through the Deposit Insurance Fund ("the DIF"), a state owned entity, has guaranteed deposits in the Bank of up to €100,000 (Latvian Lira ("LTL") 345,280), per depositor. DIF has compensated depositors in amounts totalling in excess of LTL 4 billion, thereby making the Lithuanian Government the largest creditor in the Bank's bankruptcy by a considerable margin.
The Bank's claims in these proceedings
The Bank's claim against Mr. Antonov and Mr. Baranauskas for misappropriation and breach of duties owed to the Bank under Lithuanian law is for a total of approximately Euros 500 million. The claim is based on four principal allegations:
The Julius Baer Transactions (current value approximately €290 million)
i) The Bank contends that, in a series of transactions between September 2009 and March 2011, securities with a value of approximately €280 million 2, which were owned by the Bank and held in a custody account with Raiffeisen Zentralbank Osterreich AG were transferred into accounts at a Swiss bank, Julius Baer & Co ("Julius Baer"), which were beneficially owned by Mr. Antonov and Mr. Baranauskas. The Bank also alleges that cash deposits were also used to acquire securities credited to these accounts. Once transferred out of the beneficial ownership of the Bank, the Bank contends that the securities were used as collateral for loans made by Julius Baer to Mr. Antonov and Mr. Baranauskas, the proceeds of which were paid on to entities owned and/or controlled by them. The Bank also alleges that the Bank's transfer records were improperly manipulated in order to disguise the transfer of ownership to Mr. Antonov and Mr. Baranauskas from the Bank, and that the latter's books and records continued to record the securities as being owned by the Bank; the Bank alleges that no consideration or commercial rationale has been identified for the transfers, and
that they appear to amount to a de facto misappropriation or theft of the Bank's property.The HSBC Switzerland Transactions (value approximately €57 million)
ii) The Bank contends that, in August 2009, a series of transfers of securities and cash owned by and held in the name of the Bank with HSBC Private Bank (Suisse) SA, Zurich were made to accounts owned and/or controlled by Mr. Antonov. The Bank alleges that the assets continued thereafter to be recorded in the books and records of the Bank as assets owned by it, but once transferred out of the beneficial ownership of the Bank, they were used as...
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