Bank St Petersburg PJSC & Anor v Arkhangelsky & Anor

There is only one civil standard of proof: whether the fact alleged was more likely than not. The seriousness of an allegation and any inherent probabilities are evidential considerations, not a heightened standard. A court must not require a party alleging dishonesty to exclude every plausible innocent explanation.

Where findings of fact are interdependent, the court must evaluate their cumulative effect. A judgment may be unsafe if it treats allegations in separate compartments and fails to stand back and assess the evidence in the round. Excessive delay does not alone justify appellate intervention, but may help explain an unsafe evaluation.

The Bank succeeded at trial on its debt claims against Dr Arkhangelsky. There was no appeal from that part of the order. Dr Arkhangelsky, his wife and their company appealed the dismissal of their counterclaim.

The counterclaim alleged that the Bank and its chairman dishonestly conspired to acquire pledged Russian business assets through the enforcement process at an undervalue. The claim was brought under article 1064 of the Russian Civil Code. The appellants contended that the judge had imposed too demanding a standard for proving dishonesty and had failed to assess the findings cumulatively.

The appeal was from Hildyard J’s High Court judgment of 9 May 2018. The central issues were the civil standard of proof, the safety of the judge’s evaluation of the evidence, the effect of delay in producing judgment, the burden under article 1064, illegality, and the proper disposal.

1. Appeal allowed. The dismissal of the counterclaim was unsafe. The matter was remitted to a different High Court judge to determine whether the respondents were liable under article 1064 of the Russian Civil Code for a dishonest conspiracy and whether harm was caused.

2. The applicable standard was the ordinary civil standard: whether dishonesty was more probable than not. Re B (Children) [2008] UKHL 35 confirms that seriousness and inherent probability may inform the assessment of evidence, but do not create a higher standard. The judge erred by requiring the appellants to show facts incapable of innocent explanation, or to exclude explanations that were merely not implausible.

3. The error was material. The judge had found dishonest conduct and false evidence by the respondents, yet repeatedly treated dishonesty in the asset realisation as inherently improbable. The correct inquiry was which explanation was more likely on all the evidence.

4. The judgment was also unsafe because it compartmentalised the evidence. The judge needed to reassess, in the round, the implications of the repo arrangements, control of purchaser companies, state assistance, false evidence, auction arrangements, valuation and the respondents’ motives. His later misgivings conflicted with aspects of his earlier conclusions.

5. The appellants had to establish harm caused by dishonest conduct under article 1064. The reversal of burden in article 1064(2) did not remove that requirement. The judge correctly rejected the respondents’ illegality defence by applying Patel v Mirza [2016] UKSC 42: denying a claim for a later dishonest conspiracy would neither advance the purpose of prohibiting bribery nor be proportionate.

6. The 22-month delay was inexcusable but was not, alone, a ground for allowing the appeal. It was relevant because it may have contributed to the failure to integrate the factual findings. Primary findings on forgery, the conclusion of the repo arrangements and the absence of a moratorium were preserved. The new judge could reconsider the specified inferences and decide whether further evidence, particularly on auctions, valuation and harm, was needed.

• Court of Appeal (Civil Division) — Allowed the appellants’ appeal and remitted the remaining counterclaim issues to a different High Court judge: [2020] EWCA Civ 408.
• High Court (Business and Property Courts, Chancery Division) — Hildyard J allowed the Bank’s debt claims and dismissed the counterclaim. The debt judgment was not appealed.