Bank St Petersburg PJSC & Anor v Arkhangelsky & Anor

The civil standard of proof for dishonesty is the balance of probabilities. The seriousness of an allegation or its consequences does not increase that standard. A claimant need not exclude every plausible innocent explanation. Inherent probabilities depend on the circumstances, including established dishonesty and dishonest evidence. The court must assess the evidence as a whole and consider how earlier findings affect later inferences.

Appellate restraint over factual findings extends to evaluation and inference. Legal error nevertheless requires intervention unless the decision remains demonstrably safe. Excessive delay warrants careful scrutiny but does not alone justify allowing an appeal. Prior bribery does not necessarily bar a claim concerning a subsequent dishonest deprivation of property: the illegality defence requires a principled assessment of public policy and proportionality.

Bank St Petersburg PJSC sought repayment from Dr Vitaly Arkhangelsky under personal guarantees and a personal loan. Dr Arkhangelsky, his wife Julia Arkhangelskaya and their company, Oslo Marine Group Ports LLC, counterclaimed against the Bank and its chairman, Alexander Savelyev. They alleged a dishonest conspiracy to seize assets of their Russian businesses through enforcement arrangements and auction sales to connected parties.

Following a 46-day trial, Hildyard J gave judgment almost 22 months later. He upheld the debt claims and dismissed the counterclaims, while refusing declarations exonerating the respondents. The debt judgment was not appealed. The counterclaimants challenged the standard of proof and the evaluation of the evidence. Their surviving claim concerned the alleged loss of surplus asset value through dishonest enforcement, rather than the original claim for future business profits.

The appeal also concerned delay, the burden of proof under article 1064 of the Russian Civil Code, an illegality defence based on admitted bribery, and alleged inequality of arms. The central question was whether the dismissal of the surviving counterclaim remained safe.

Appeal allowed unanimously. The dismissal of the counterclaim was unsafe. The counterclaim was remitted to a different judge for a retrial within the scope identified by the court. The debt judgment remained undisturbed.

1. The civil standard for dishonesty was the simple balance of probabilities. Neither the seriousness of the allegation nor its consequences increased that standard. Inherent probabilities were relevant circumstances, rather than a separate legal requirement. The approach in In re B (Children) applied generally to civil proceedings. Established dishonesty and dishonest evidence could substantially diminish any initial assumption that further dishonesty was improbable (paras [44]–[48], [117]–[123]).

2. The judge repeatedly required facts incapable of innocent explanation, or rejected dishonest explanations because a plausible benign explanation remained. Those formulations imposed too exacting a standard. The question was which explanation was more probable on all the evidence. The pleading principles discussed in Three Rivers District Council v. Bank of England did not establish a contrary trial standard (paras [41]–[56]).

3. The evidence required assessment in the round. Earlier findings of dishonesty and unusual conduct had to inform the evaluation of later events. The judge's compartmentalised approach, coupled with inconsistencies between his conclusions and final misgivings, rendered the dismissal unreliable. Appellate restraint concerning primary facts, evaluation and inference did not prevent intervention where legal error affected a decision whose safety could not otherwise be demonstrated (paras [30]–[33], [59]–[73], [106]).

4. Under article 1064 of the Russian Civil Code, the counterclaimants had to establish harm caused by the alleged dishonest conspiracy. For the surviving claim, this required proof of dishonesty and realisation below market value. Some financial loss had to be proved, although precise quantification was unnecessary at that stage. Article 1064(2) did not shift the initial burden of establishing harm. The judgment contained no reliable independent determination of absence of loss that could preserve the dismissal (paras [35]–[38], [61], [85], [112], [124]–[130]).

5. The illegality defence failed under Patel v. Mirza. Denying recovery for a subsequent dishonest conspiracy would not discourage the earlier bribery. There was a strong public policy in allowing property rights to be vindicated, and denial would be disproportionate. Punishment for bribery was generally for the criminal courts (paras [87]–[92]).

6. The delay was inexcusable, but did not independently justify allowing the appeal. It warranted careful scrutiny and may have impaired the integrated assessment of findings. Judgments should generally be delivered within three months, including in complex cases. The inequality of resources had not prevented a fair trial (paras [78]–[84], [93]–[95]).

7. Safe primary findings were preserved, particularly those concerning forgery, the contractual arrangements and the absence of a moratorium. The new judge was to reconsider the remaining evaluations, Baltic Fuel Company's ownership or control, and harm. Further evidence might be necessary concerning auctions and valuation. The new judge retained discretion to admit evidence necessary for a fair determination (paras [97]–[105]).

• Court of Appeal (Civil Division): In [2020] EWCA Civ 408 , unanimously allowed the appeal against dismissal of the counterclaim and remitted it to a different judge, preserving safe primary findings and leaving the debt judgment undisturbed.
• High Court, Business and Property Courts, Business List (ChD): Following a 46-day trial, Hildyard J delivered judgment on 9 May 2018. The Bank succeeded on its debt claims. The counterclaims were dismissed, but the respondents' requested negative declarations were refused. No citation for that judgment is supplied.