Bank St Petersburg PJSC v Vitaly Arkhangelsky
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE HILDYARD,The Hon. Mr Justice Hildyard,MR JUSTICE HILDYARD |
| Judgment Date | 09 May 2018 |
| Neutral Citation | [2018] EWHC 1077 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2012-000165 |
| Date | 09 May 2018 |
Neutral Citation Number: [2018] EWHC 1077 (Ch)
THE HONOURABLE Mr Justice Hildyard
Case No: HC-2012-000165
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
7 Rolls Building, Fetter Lane, London, EC4A 1NL
Tim Lord QC, Simon BirtQC, Richard Eschwege (instructed by Reynolds Porter Chamberlain LLP) for the Claimants
The Defendants appeared by their McKenzie friend, Mr Pavel Stroilov and on 12 April 2016, 4–5 May 2016 and 8 July 2016 by Alexander Milner (instructed by Withers LLP) on issues of Russian law and valuation
Hearing dates: 28–29 January, 1–4 February, 8–9 February, 12 February, 15 February, 17–19 February, 2225 February, 29 February–4 March, 7–8 March, 10–11 March, 16–18 March, 21 March, 23 March, 4–6 April, 8 April, 11–12 April, 14–15 April, 18 April, 4–5 May, 6–8 July and 11 July 2016
Further written submissions 25 July 2016, 29 July 2016
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.
| Outline summary of claim and counterclaim | 8 |
| Logistics of the trial and the disparity in legal representation | 11 |
| Parties and factual background | 13 |
| The Bank | 13 |
| Mr Savelyev | 13 |
| Key personnel within and witnesses of fact for the Bank | 15 |
| Other persons of primary relevance who were not called for the Bank | 17 |
| The Defendants/Counterclaimants and their witnesses of fact | 18 |
| Expert witnesses | 22 |
| The OMG companies | 24 |
| The Bank's relationship with OMG | 25 |
| Hierarchy within the Bank for credit approvals | 26 |
| The Bank's loans to OMG | 26 |
| Loans to Vyborg Shipping in 2008 | 28 |
| Pledged and unpledged assets at Western Terminal | 30 |
| Fourth Vyborg Loan | 31 |
| Other Vyborg Loans | 31 |
| Further loans in 2008 | 32 |
| Dr Arkhangelsky's plans for a vertically integrated cargo and shipping business | 32 |
| The Western Terminal site | 33 |
| The Onega Terminal site | 33 |
| Vyborg Port | 33 |
| Vyborg Shipping | 34 |
| OMG's development plans and funding requirements for Western Terminal | 34 |
| Dr Arkhangelsky's search for finance in 2008 | 36 |
| Basis on which finance was sought: Information Memorandum and Business Plan for Western Terminal | 36 |
| Inaccuracies in the draft IMs: the “enormous untruth” and unrealistic TEU figures | 37 |
| Dr Arkhangelsky's evidence that he paid bribes of about US$160 million | 39 |
| Efforts to raise finance for Western Terminal | 46 |
| Dr Arkhangelsky's alleged efforts to fund his expansion plans for Onega Terminal | 49 |
| Similar plans for expansion of Vyborg Port | 50 |
| Failure to obtain outside financing for development plans left OMG dependent on the Bank | 51 |
| The OMG business was built on sand | 51 |
| OMG's financial difficulties: autumn 2008 | 53 |
| OMG's need by the end of 2008 to reschedule its borrowings | 55 |
| Two disputed transactions | 56 |
| Tekno loan | 56 |
| The risk to the Bank in November 2008 | 57 |
| The Personal Loan | 58 |
| Context of discussions on rescheduling OMG debts: the Bank's wish to avoid reserves | 63 |
| Efforts to re-schedule debt in November through December 2008 | 66 |
| Crisis in December 2008 | 70 |
| Meeting on 25 December 2008 | 73 |
| The Memorandum and paperwork post the 25 December 2008 meeting | 77 |
| The provisions and effect of the Memorandum; Dr Arkhangelsky's assertion of a collateral moratorium | 79 |
| The (backdated) repo documentation in the context of the Memorandum | 82 |
| The Original Purchasers under the repo arrangements and the Renord-Invest Group | 83 |
| January and February 2009 and the restructuring documentation | 85 |
| Events immediately prior to the Bank calling OMG default | 88 |
| Reality by the end of 2008 was that there was no prospect of replacement funds | 89 |
| The accelerating deterioration in OMG's financial position | 90 |
| Request and refusal to extend PetroLes loans | 90 |
| Management Board refuse to extend PetroLes loans | 91 |
| Dr Arkhangelsky suspects an imminent ‘raid’ | 93 |
| The development of the Bank's concerns as to the value of its security | 95 |
| The Bank's decision to call in loans and post reserves | 97 |
| The Bank finds out about the arrest of Vyborg Shipping's vessels | 99 |
| The Bank's review of its security and the introduction of Mrs Malysheva as manager | 100 |
| Long-standing associations and the AVK connection | 100 |
| SKIF, Mr Sklyarevsky, Mr Smirnov and Renord-Invest: their connections with the Bank … | 102 |
| Associations in other entities of relevance in the later events | 102 |
| Events of March to April 2009: overall view | 103 |
| Transfers of shares in Scan from the Original Purchasers to the Subsequent Purchasers … 104 Mr Sklyarevsky's participation and interests in the repo arrangements and transfers to Subsequent Purchasers | 105 |
| Mr Sklyarevsky's claims that Dr Arkhangelsky was not open to negotiation | 107 |
| No meetings with Mr Savelyev | 108 |
| Morskoy Bank loan | 109 |
| The Bank's reliance on Morskoy Bank loan to justify removing Dr Arkhangelsky | 110 |
| The decision to replace the management of Scan and Western Terminal and its aim | 112 |
| Mechanics of the removal of Dr Arkhangelsky and Mr Vinarsky as Directors-General | 112 |
| April to July 2009: the Bank calls in its loans and takes control of Scan and Western Terminal; Mrs Arkhangelskaya challenges the repos; the Bank seeks to insulate its position from adverse judgments and encourages criminal proceedings; and Dr Arkhangelsky leaves Russia | 113 |
| The Bank calls in its loans | 114 |
| First to Fourth Vyborg Loan defaults | 114 |
| 2008 LPK Scandinavia Loan | 115 |
| Dispute as to service of demands | 116 |
| OMG's response: its and Mrs Arkhangelskaya's proceedings in Russia | 118 |
| Dr and Mrs Arkhangelsky's marriage contract in May 2009 | 120 |
| Bank's proceedings in Russia to obtain judgment against OMG | 121 |
| Transfers procured by the Bank and its further steps to ‘protect’ pledged assets | 121 |
| Physical seizure of Western Terminal premises with the help of riot police | 122 |
| Other legal manoeuvres | 123 |
| The Gunard Lease | 124 |
| Dr Arkhangelsky's departure from Russia | 124 |
| Intensifying campaign of criminal investigations and proceedings | 126 |
| Western Terminal/Morskoy Bank criminal complaint: end of 2009 to 2010 | 126 |
| International Arrest Warrant issued re Dr Arkhangelsky | 128 |
| The Bank's enforcement proceedings and their result | 129 |
| First to Fourth Vyborg Loan proceedings | 129 |
| Onega Loans | 131 |
| Personal Loan: Russian proceedings | 132 |
| Other OMG loans | 133 |
| First and Second PetroLes Loans | 133 |
| 2007 LPK Scandinavia Loan | 133 |
| Second Onega Loan | 134 |
| Scandinavia Leasing loans | 134 |
| Enforcement of security | 134 |
| Realisations of vessels | 135 |
| Claims in bankruptcy of Vyborg Shipping | 136 |
| Scan and the Pravdy Street Assets | 136 |
| Sales of Onega Terminal assets and Sestroretsk Assets | 136 |
| Onega Terminal assets and Sestroretsk Assets | 136 |
| Real estate at Western Terminal | 138 |
| The Arkhangelskys' personal assets | 140 |
| The sums claimed by the Bank | 141 |
| The Banks' claims: have the Defendants a good defence? | 141 |
| Issue 1: Dr Arkhangelsky's case in respect of the alleged Personal Guarantees and the Personal Loan | 142 |
| Did Dr Arkhangelsky agree to provide and did he sign the Personal Guarantees? | 143 |
| The Claimants' case as to the authenticity of the documents | 146 |
| The Bank's practice as to personal guarantees | 146 |
| Direct evidence of signatures | 147 |
| Contemporaneous documentation | 149 |
| Evidence of direct debit agreements premised on Scan guarantee | 152 |
| No allegation of fabrication of the Personal Guarantees in the Russian proceedings | 159 |
| Falsity of Dr Arkhangelsky's assertion that he never gave guarantees to any banks | 160 |
| Specific points regarding the Personal Loan | 161 |
| Handwriting evidence | 162 |
| The experts and the process | 162 |
| Experts' findings as to authenticity | 164 |
| A Dr Giles | 164 |
| B Mr Radley | 167 |
| My findings and my conclusion that Dr Arkhangelsky did sign and was bound by the relevant documents | 168 |
| Spousal consents | 173 |
| Additional agreements and amendments to the Personal Guarantees | 176 |
| Issues if Dr Arkhangelsky did not sign Personal Guarantees or Personal Loan | 176 |
| Claims in respect of the Personal Guarantees and the Personal Loan under Article 1064 RCC | 177 |
| Article 1102 of the RCC: unjust enrichment in the amount of the Personal Loan? | 178 |
| Issue 2: Was a 6-month moratorium promised and agreed? | 179 |
| Did Mr Savelyev promise a 6-month moratorium? Was that the basis of the repo arrangements? | 179 |
| The lack of any reference to the moratorium in the Memorandum | 181 |
| Subsequent individual loan extensions not consistent with the general moratorium alleged 183 Relevance and effect of Russian law if (contrary to my primary conclusion) there was some form of agreement for the across-the-board moratorium alleged | 186 |
| Consequences of these findings for the Defence: there being no agreed or promised general moratorium as alleged, the Bank was entitled to call in its loans as and when it did and to enforce the repo arrangements | 189 |
| Issue 3: Claim to set aside the Defendants' Marriage Contract | 190 |
| Countercl... |
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