Business and Property Courts of England and Wales Ruled in Favour of National Bank Trust

Business and Property Courts of England and Wales Ruled in Favour of National Bank Trust

In the High Courts of Justice Business and Property Courts of England and Wales Commercial Court before, Mr. Justice Bryan ruled in favour of National Bank Trust (a Company Incorporated in Russia) in Russian law damages claims brought against three of its former majority shareholders, found that they had orchestrated an extensive fraud on the bank by (inter alia) causing the Bank to loan USD 1 billion to their own companies, and then transferring away much of that monies in artificial transactions; in this context, a number of issues of Russian law were considered.

Judgment was given in favour of the Bank. Bryan J found that the Bank was entitled to bring the claims under Russian law: (1) the Shareholders were the ultimate beneficial owners of companies receiving loans from the bank, as they had controlled and used companies for their personal benefit, and had lied in hiding those facts; (2) their lending practices had not been legitimate, reasonable or in the Bank's best interests, which had increased the Bank's indebtedness and caused it immediate loss leading to its collapse; (3) the Bank, as the claimant under Russian law, was entitled to recover outstanding sums due under the loans, less any recoveries made.

The Defendants raised a series of issues with the Bank's pleadings. Bryan J considered the applicable legal principles. He examined that firstly, fraud or dishonesty must be distinctly alleged (e.g by using unequivocal language such as "dishonestly" or "recklessly") and sufficiently particularised. The primary facts which should be relied on at trial to show that the defendant was dishonest must also be pleaded.

In this regard, the Bank sought to advance a case in oral submissions that certain fiduciary lending arrangements involving EWUB and Donau were "inherently dishonest": They were not entitled to advance this plea, because this contention had not been positively pleaded and particularised. This was not on the critical path of Bryan J's conclusions on the facts – "the inherent dishonesty of those lending arrangements was not a necessary requirement of any breaches of duty alleged." Secondly, to establish fraud, the claimant must prove it on the balance of probabilities: this takes into account the fact that that more serious an allegation, the less likely it is to have occurred. Therefore, more cogent evidence is normally required to prove fraud to counterweigh the inherent improbability. The Bank's evidence in this case was held to provide such cogent evidence.

Justice Bryan set out a number of propositions about how foreign law is treated before the English courts, in his judgment. Foreign law is a matter of fact and must be pleaded and proved, generally by expert evidence: without expert assistance, the court cannot interpret evaluate or interpret foreign books or decisions.

It was observed that, when faced with conflicting expert testimony on foreign law, it is appropriate to look at the relevant sources. Further, the task of the court is to apply the law in the same way that a court of the foreign country would do so: foreign judgments are to be given due weight in that regard, even if they are not formal sources of law. Finally, foreign law issues should be addressed from the perspective of the highest appeal court of that jurisdiction, not whichever first instance court would be seized of the dispute.