National Bank Trust v Ilya Yurov & Ors [2020] EWHC 100 (Comm)

Following an eight week trial in late 2018, the High Court has handed down judgment finding against the former majority shareholders of Russia’s National Bank Trust who were alleged to have misappropriated over $1billion of Bank funds via a sophisticated network of offshore companies.

The case has been widely reported including by the Financial Times and The Wall Street Journal.

The Bank brought a claim against its former majority shareholders, who were also members of the Bank’s Supervisory Board, and their wives in relation to approximately $1billion of loans which they were alleged to have procured over a period of ten years for the benefit of what were said to be their own companies. The Bank’s case was that this money was, in large part, transferred to an offshore network of further companies, also beneficially owned by the shareholders, for the purposes of servicing other loans from the Bank as well as for their own personal benefit.

The defendants’ position was notable insofar as while two of the defendant shareholders, Mr Yurov and Mr Fetisov, accepted that Bank funds had been transferred through a network of companies but maintained that this had been done legitimately and in the best interests of the Bank, the third shareholder Mr Belyaev denied all knowledge of and involvement in any such scheme.

The case, which was brought under Russian law, raised difficult legal questions in respect of which the Russian Courts’ position remains uncertain in many instances. It also involved complex accounting evidence that sought to trace through thousands of transactions involving hundreds of companies over ten years.

Although a fact heavy judgment decided on the basis of Russian law, it nevertheless provides a valuable summary and application of the English law principles governing, for example, what is required to properly plead and prove fraud, including the approach to be taken by the Court in determining inherent probabilities, as well as the role of documentary and circumstantial evidence. This was particularly significant in light of the nature of Mr Belyaev’s defence.

The judgment also provides a useful discussion of:

1. The application of foreign law by the English Court, including the weight to be attached to foreign judgments;
2. The circumstances, as set out by the Court of Appeal in Wisniewski v Central Manchester HA [1998] PIQR 324, in which adverse inferences may be drawn from the absence of a witness who might have been expected to have material evidence to give on an issue in the action;
3. The importance of adequately pleading one’s case, particularly in fraud claims and with reference to Part 16 PD para 8.2; in this case the Judge found that the Bank was not entitled to rely on its allegation that a particular fiduciary lending arrangement  was “inherently dishonest” in circumstances where it had not been positively pleaded and particularised.

Tim Penny QC and Tara Taylor acted for the second and fifth defendants (instructed by Fried Frank Harris Shriver and Jacobson LLP).

You can read the full judgment here.