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England and Wales High Court (Commercial Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Akciné Bendrové Bankas Snoras v Antonov & Anor [2013] EWHC 131 (Comm) (04 February 2013) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2013/131.html Cite as: [2013] EWHC 131 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| AKCINÉ BENDROVÉ BANKAS SNORAS (IN BANKRUPTCY) |
Claimant |
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| - and - |
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| (1) MR. VLADIMIR ANTONOV (2) MR. RAIMONDAS BARANAUSKAS |
Defendants |
____________________
(instructed by Linklaters LLP) for the Claimant
Ian Mill Esq, QC, James Lewis Esq, QC, Tom Hickman Esq, & Ms Rachel Scott
(instructed by Mishcon de Reya) for the First Defendant
The Second Defendant did not appear and was not represented
Hearing dates: 5th-7th November 2012
Further written submissions: 23 November 2012 and 27 November 2012
____________________
Crown Copyright ©
Mrs Justice Gloster DBE:
Introduction
i) the discharge of a worldwide freezing order granted by Teare J on 18 May 2012, on the application of the claimant, Akcine Bendrove Bankas Snoras ("the Bank"), as extended and amended on 15 June 2012 by Popplewell J (the "WWFO"), on the grounds of:
a) material non-disclosure;b) delay; and/orc) absence of any risk of dissipation to justify the making of the WWFO ("the Discharge Application");ii) a variation of paragraphs 9 and 10 of the original WWFO, and paragraphs 7 and 8 of the WWFO as subsequently amended, so as to provide that Mr. Antonov is no longer required to provide details of his assets acquired since 2003, when he first acquired a substantial shareholding in the Bank ("the Variation Application"); and
iii) a stay of the underlying civil proceedings brought by the Bank (including a stay of the Variation Application) until after the final determination of certain extradition proceedings currently pending against Mr. Antonov ("the Stay Application")[1].
The parties and other relevant entities
The Bank's claims in these proceedings
The Julius Baer Transactions (current value approximately €290 million)
i) The Bank contends that, in a series of transactions between September 2009 and March 2011, securities with a value of approximately €280 million[2], which were owned by the Bank and held in a custody account with Raiffeisen Zentralbank Osterreich AG were transferred into accounts at a Swiss bank, Julius Baer & Co ("Julius Baer"), which were beneficially owned by Mr. Antonov and Mr. Baranauskas. The Bank also alleges that cash deposits were also used to acquire securities credited to these accounts. Once transferred out of the beneficial ownership of the Bank, the Bank contends that the securities were used as collateral for loans made by Julius Baer to Mr. Antonov and Mr. Baranauskas, the proceeds of which were paid on to entities owned and/or controlled by them. The Bank also alleges that the Bank's transfer records were improperly manipulated in order to disguise the transfer of ownership to Mr. Antonov and Mr. Baranauskas from the Bank, and that the latter's books and records continued to record the securities as being owned by the Bank; the Bank alleges that no consideration or commercial rationale has been identified for the transfers, and that they appear to amount to a de facto misappropriation or theft of the Bank's property.
The HSBC Switzerland Transactions (value approximately €57 million)ii) The Bank contends that, in August 2009, a series of transfers of securities and cash owned by and held in the name of the Bank with HSBC Private Bank (Suisse) SA, Zurich were made to accounts owned and/or controlled by Mr. Antonov. The Bank alleges that the assets continued thereafter to be recorded in the books and records of the Bank as assets owned by it, but once transferred out of the beneficial ownership of the Bank, they were used as collateral for loans to third parties owned and/or controlled by Mr. Antonov. The Bank further alleges that, as with the Julius Baer transactions, no consideration or commercial rationale has been identified for the transfers, and that they appear to amount to a de facto misappropriation or theft of the Bank's property.
The Time Deposit Transactions (value approximately €128 million)iii) The Bank contends that, between December 2010 and October 2011, a series of transactions took place whereby assets of the Bank (largely cash, but also securities in one instance) were transferred to third party institutions; and that these were recorded as unencumbered time deposits, or other assets, in the accounting records of the Bank but, in reality, were used as collateral for loans (or loan funding) by the third party institution to other entities, many of which it appeared were owned and/or controlled by, or otherwise connected to, Mr. Antonov. The Bank contends that the third party loans secured on the collateral have subsequently defaulted, but the collateral provided by the Bank has been appropriated or remains encumbered by the outstanding loans; that the pledging of these assets appears to have had no genuine commercial purpose; and that the true nature of the transactions was not revealed in the Bank's books and records.
The "Overvalue" Transactions
iv) The Bank alleges that there are two transactions whereby it paid significantly over market price for real property assets, which were acquired from companies owned or controlled by, or otherwise connected to, Mr. Antonov, in circumstances where those entities had themselves acquired the property only days before the subsequent sale to the Bank. The Bank further contends that the transactions appear to have been structured to enable Mr. Antonov, indirectly, to extract value from the Bank.
Procedural chronology
i) On 14 November 2011 the Lithuanian public prosecutor ("the Lithuanian Prosecutor") initiated a pre-trial investigation of Mr. Antonov and Mr. Baranauskas.
ii) On 16 November 2011, the Lithuanian Prosecutor, based on an assessment of the data provided by the Central Bank, and "… of the nature of the acts in respect whereof the pre-trial investigation is being performed" concluded, pursuant to Article 116 of the Code of Criminal Procedure of the Republic of Lithuania (which obliged him to take measures "to secure a potential civil claim"), that it was likely that a civil claim would be asserted, or property confiscation would be applied, in the case, and therefore that it was appropriate that a temporary, or provisional, restriction of ownership rights should be imposed in relation to property held by Mr. Antonov and his family members, effectively restraining them from disposing of various assets. Accordingly, a criminal temporary provisional restraint order ("PRO") was made by the Lithuanian Prosecutor against Mr. Antonov and his wife, restraining any dispositions in relation to eight specific motor vehicles.
iii) On 17 November 2011 the Deputy Lithuanian Prosecutor general was reported on Bloomberg Businessweek as having said publicly that "the Prosecutor General's Office had started an investigation into Snoras's operations and froze Lithuanian and foreign assets of some people involved."
iv) On 17 November 2011, the Lithuanian Parliament enacted six laws which, according to Mr. Antonov's expert in Lithuanian law, were designed retrospectively to validate the nationalisation of the Bank.
v) On 22 November 2011, Mr. Antonov spoke over the telephone with Mr. Freakley, Mr. Huck, a member of the Forensic Litigation Support Service Team at Zolfo Cooper, and Mr. David Ereira, a partner in Linklaters, Zolfo Cooper's English solicitors. According to Mr. Antonov: during the call, he stated that he wanted to cooperate with the administrators; that he believed that all of his funds had been frozen apart from one outside the EU; and it was agreed that Mr. Freakley and Mr. Huck would send him questions by email, but in fact they chose not to contact him again.
vi) On 22 November 2011, Mr. Antonov was declared a suspect by the Lithuanian Prosecutor's office.
vii) On 23 November 2011, according to Mr. Antonov, his Lithuanian lawyers arranged to meet the Lithuanian Prosecutor but the latter did not attend the meeting.
viii) On 24 November 2011, the first European Arrest Warrant was certified ("the November EAW") and Mr. Antonov confirmed with the Metropolitan Police through his lawyers, Mishcon de Reya, his intention to cooperate with the authorities as to the execution of the EAW. An agreement was reached for arrest by appointment.
ix) On 25 November 2011 an initial extradition hearing took place before Westminster Magistrates' Court. Mr. Antonov was granted bail subject to certain conditions.
x) On 21 November 2011 the Economic Crime Department at the Chief Directorate of the Criminal Police of the Republic of Latvia initiated criminal proceedings regarding alleged criminal activity by certain officials of the Bank's Latvian subsidiary, Krajbanka. On 25 November 2011, Mr. Antonov, as a member of the Supervisory Board of Krajbanka, was declared a suspect in relation to that investigation. On 28 November 2011, a PRO was made by the Latvian investigator of the Economic Crime Department ("the Latvian Investigator") in relation to real property allegedly belonging to Mr. Antonov in Latvia. On the same date a further PRO was made by the Latvian Investigator against Mr. Antonov in relation to the eight vehicles the subject matter of the previous PRO made by the Lithuanian Prosecutor on 16 November 2011.
xi) On 30 November 2011, by various orders, the Lithuanian Prosecutor imposed PROs upon various assets alleged to be beneficially owned by Mr. Antonov or in which he allegedly had an interest. These included: a property at 36 Ladbroke Square, London W11; an HSBC account in London and two credit card accounts; two further residential properties in the UK; two further HSBC accounts; funds and securities in an account at Hambros Bank; funds and securities in an account attributed to Mr. Antonov at Julius Baer International Ltd in Guernsey; three further motor vehicles; shares in an Austrian private limited company, ANJET Handels- und Transport GMBH in the amount of €35,000; shares in Krajbanka, the value of which was stated to be LVL 6,175,000; real property in Jurmala, Latvia; and money, securities and other property held in a bank account with Julius Baer, Geneva.
xii) On 1 December 2011, the Lithuanian Prosecutor imposed further PROs upon various UK assets alleged to be beneficially owned by Mr. Antonov or in which he allegedly had an interest in the UK; these included: money and securities in Conversgroup Holding Ltd available in specified accounts with HSBC Bank; and shares in Conversgroup Holding Ltd.
xiii) On 2 December 2011, the Lithuanian Prosecutor imposed a PRO in relation to Mr. Antonov's rights of ownership in a UK company, Convers Sports Initiatives Ltd.
xiv) On 5 December 2011, the Lithuanian Prosecutor imposed a PRO in relation to Mr. Antonov's rights of ownership in money and securities at a further UK HSBC account.
xv) On 7 December 2011, the Lithuanian Prosecutor imposed a PRO in relation to Mr. Antonov's rights of ownership in certain Costa Rican assets, including money available in a bank account at Banco De Costa Rica SA and shares in various Costa Rican companies.
xvi) On 12 December 2011, the Lithuanian Prosecutor imposed a PRO in relation to Mr. Antonov's alleged ownership interests of monies in various Swiss bank accounts of various companies allegedly owned by him.
xvii) On 13 December 2011, the Lithuanian Prosecutor imposed a PRO in relation to Mr. Antonov's ownership interests in assets held in various specified Ukrainian bank accounts as well as monetary funds held in other Ukrainian banks, real estate, securities, vehicles and "any other assets" in the Ukraine.
xviii) On 14 December 2011, the Lithuanian Prosecutor imposed a PRO in relation to numerous accounts opened in Mr. Antonov's name at the Bank in Lithuania as well as debt securities and shares in Snoras Holdings.
xix) On 20 December 2011, the Lithuanian Prosecutor imposed a PRO in relation to Mr. Antonov's ownership rights in shares, securities and pecuniary funds in Pensions Bank Limited (UK).
xx) On 20 December 2011, the Public Prosecutor's Office for the Canton of Zurich, Switzerland, made an order, pursuant to letters of request from the Lithuanian Prosecutor, freezing all assets, safe deposit boxes and monies, in Bank Syz & Co, Niederlassung, Zurich, Bank Julius Baer & Co AG, Zurich, and HSBC Private Bank (Suisse SA) in the names of, or in which, Mr. Antonov or various named companies, appeared authorised formally or at least economically interested. The order included a provision that, if, prior to the order, there had been any dissipation of assets, the Swiss Public Prosecutor was to be immediately informed.
xxi) On 5 January 2012, the Crown Prosecution Service ("CPS"), pursuant to a request from the Lithuanian Prosecutor, applied for and obtained an ex parte restraint order under the provisions of the Proceeds Of Crime Act 2002 (External Requests And Orders) Order 2005 against Mr. Antonov, his wife and a named company, from HHJ Marron QC, sitting in the Crown Court at Blackfriars. This restrained dealings with, or dispositions of, the following assets: Flat 12, 1-3 and part 5 Princes Gate, London SW7; 36 Ladbroke Square, London W11; credit balance in HSBC joint account no. 40-05-09 01512951; Saab 93 red convertible; credit balance in HSBC Private Bank (UK) Ltd current account no. 81131664; credit balance in Hambros account no. 40-48-48, 33570300; shares held in Convers Group Holding (UK) Ltd; shares held in Convers Sports Initiatives Plc; shares held in Pensions Bank Limited; Mercedes 280SL White convertible (ABW100F); and a Bentley continental GTC Auto (LJ08EDC) ("the UK Restraint Order").
xxii) On 27 January 2012, the Lithuanian Prosecutor imposed a PRO in relation to Mr. Antonov's ownership rights in an insurance payment due in respect of the funds which he held at the Bank.
xxiii) On 9 May 2012, a second EAW was issued ("the May EAW") on the basis of different facts surrounding the alleged Julius Baer transactions, in particular to remove reference to an intermediary account at Julius Baer.
xxiv) On 10 May 2012, HHJ Peter Clarke QC, sitting in the Crown Court at Blackfriars, ordered continuation of the UK Restraint Order on revised terms.
xxv) On 11 May 2012, at a hearing before the Westminster Magistrates' Court, Mr. Antonov was formally arrested under the May EAW and the November EAW was discharged, with costs awarded in favour of Mr. Antonov.
xxvi) On 18 May 2012 (i.e. approximately 5 months after the initial appointment of Mr. Cooper), as already referred to, an ex parte application was made by the Bank for the WWFO. According to the Bank's evidence, the delay in bringing proceedings was a consequence of the Bankruptcy Administrator's (i.e. Mr. Cooper's) need to initiate and conduct the required forensic investigation and prepare the claim. The cross-undertaking was fortified by the Bank by means of a payment into Court of Ł5 million.
xxvii) On 30 May 2012, a Parliamentary Commission in Lithuania published findings following an inquiry into the nationalisation of the Bank.
xxviii) On 1 June 20 12, a third EAW was issued which referred to new offences including ones relating to transactions connected with HSBC bank accounts ("the June EAW").
xxix) On 15 June 2012, as already mentioned, the WWFO was extended on amended terms by Popplewell J.
xxx) On 21 June 2012, the Particulars of Claim were served on Mr. Antonov in these proceedings.
xxxi) On 5 July 2012, the third EAW was certified by SOCA.
xxxii) On 27 July 2012, the Westminster Magistrates' Court discharged the May EAW following confirmation from the Lithuanian authorities that the June EAW was intended as a replacement warrant. Costs were awarded in favour of Mr. Antonov.
xxxiii) On 25 September 2012, an order was made by Field J, by consent as between the CPS and Mr. Antonov, whereby the application to continue the UK Restraint Order was stayed, provided that, in the event of the WWFO being varied or discharged, or the Bank's civil claim being compromised, withdrawn or discontinued, the application to continue the Restraint Order would no longer be stayed but should continue until a further inter partes hearing of the application to continue the UK Restraint Order.
"In summary, the defence submits that the attempt by the Lithuanian Prosecutor General to extradite Mr. Antonov and Mr. Baranauskas is politically motivated. The Lithuanian government took groundless steps to bring down a solvent, functioning bank for reasons of self-interest and, having done so, was compelled to make scapegoats of the bank's figureheads via unfounded allegations of fraud and financial mismanagement."
The Stay Application
i) It was appropriate to stay the hearing of Mr. Antonov's Variation Application pending the conclusion of the extradition proceedings, if, and to the extent that, in the context of the Variation Application, the Court considered it necessary to determine questions of Lithuanian fair trial procedures or the issues as to whether the criminal proceedings were politically motivated and whether the collapse of the Bank was brought about by the actions of Mr. Antonov and Mr. Baranauskas, or the politically motivated interference of the Lithuanian government. These issues should more properly be considered in the context of the extradition proceedings, where the evidential enquiry would be more extensive. Mr. Antonov would suffer prejudice in the event of the Commercial Court making potentially adverse findings on the basis of a less thorough evidential enquiry than that which would occur in the context of extradition proceedings; the District Judge hearing such proceedings would be likely to be influenced by any such judgment of the Commercial Court. Alternatively, there was a potential risk of conflicting judgments which might inhibit Mr. Antonov's right of appeal.
ii) Furthermore, the entirety of the proceedings in this action should be stayed pending the outcome of the extradition proceedings, including any appeal by either party to the High Court, and, thereafter, to the Supreme Court. In the light of the provisions of the 2003 Act, such stay would not be for a long period of time, as extradition proceedings had to be heard speedily.
iii) Once the extradition proceedings had been determined, the position would be crystallised. Either Mr. Antonov's resistance to the extradition proceedings would have succeeded, in which case there would be no objection to the Bank's civil proceedings continuing in this jurisdiction, since there would be no possibility of a criminal trial in Lithuania; or, alternatively, if his challenge to the extradition proceedings failed, different considerations would apply at that stage as to whether it was appropriate for the civil proceedings to continue in this jurisdiction pending Mr. Antonov's criminal trial in Lithuania, and, indeed, his possible detention there.
iv) The balance of competing interests in the case fell squarely in favour of a stay of the civil proceedings pending the conclusion of the extradition proceedings The key factors weighing in favour of a stay were as follows:
a) There was a real risk that information and evidence provided by Mr. Antonov in these proceedings would be used against him by the Lithuanian Prosecutor, in breach of his privilege against self-incrimination, both in the extradition proceedings and in the criminal proceedings in Lithuania. There were no adequate safeguards which could be put in place to protect him from this risk, other than a temporary stay of the civil proceedings. The reality was that any information provided to the Bank in the civil proceedings would be made available to the Lithuanian Prosecutor; that it was inevitable that that would happen was because of a number of reasons: first, there was a clear identity between the Bank and the Lithuanian state, given its recent nationalisation; second, in any event, the Lithuanian state was a substantial creditor of the Bank in its insolvency[4] and had effectively five seats out of nine on the creditors committee; third, this was not a situation where the prosecuting authority, i.e. the Lithuanian Prosecutor, was prepared to give, or was in a position to give, any undertaking not to use any information obtained as a result of the civil proceedings in the criminal proceedings; contrast the position in English proceedings, where the SFO or CPS was the prosecuting authority and was able to give an enforceable undertaking in this respect; and fourth, the evidence amply demonstrated that there had been a free flow of information from the Bankruptcy Administrator to the Lithuanian Prosecutor; for example, the evidence served on behalf of the claimant had clearly been provided to the Lithuanian Prosecutor. There was thus no possibility of any realistic or adequate ring fencing provisions that could be put in place to prevent the use in the criminal proceedings of materials disclosed in the civil proceedings. Mr. Antonov's expert evidence of Lithuanian law was to the effect that, as soon as the Bankruptcy Administrator was in possession of relevant information, he might be compelled to provide it to the Lithuanian Prosecutor and other investigating authorities in Lithuania and elsewhere.b) The provision of any such information would enable the Lithuanian Prosecutor to tailor his case both in relation to the extradition proceedings and also in relation to the criminal proceedings, as indeed he had already done to date in relation to the extradition proceedings.c) There was a very significant overlap not only between the subject-matter of the civil proceedings and the extradition proceedings (and indeed the criminal proceedings) against Mr. Antonov, but also the issues at stake in each; the extradition proceedings were clearly the more appropriate forum for determination of those issues. It followed that there was a risk of prejudice to Mr. Antonov by virtue of conflicting judgments if the civil proceedings were not stayed pending extradition proceedings.d) While the privilege against self-incrimination was very important, there was a basic fairness and justice point arising out of general prejudice; namely the prejudice to Mr. Antonov in having to disclose his hand and the unfair advantage which that afforded to the Bank; that was especially acute, in proceedings where, in effect, the Lithuanian state was behind both the civil proceedings and the criminal proceedings. Although counsel for the Bank had attempted to draw fine distinctions between the Bank and the state, so far as counsel for the Lithuanian Prosecutor was concerned, he had expressly said in the restraint proceeding that they were one and the same thing.e) The concurrency of the proceedings risked Mr. Antonov being placed in a position of being prejudiced in his ability properly to defend the extradition proceedings – with extremely serious consequences – by reason of the time and resources which would have to be devoted to defending the instant proceedings.f) An order for Mr. Antonov's extradition to Lithuania would overturn the sole basis upon which the High Court was presently a convenient forum to hear this claim, namely his residence in England. It followed that the outcome of the extradition request should take precedence over the civil claim in order that the question of forum non conveniens could properly be addressed in the event that Mr. Antonov was extradited. In those circumstances, a substantial issue would then inevitably arise as to whether Mr. Antonov could fairly defend proceedings in England from prison or detention in Lithuania. In the meantime it would be unfair on Mr. Antonov and disproportionate and unsatisfactory from a case management perspective for him to be required to take further steps in the proceedings and to disclose his defence, in circumstances where ultimately, if he failed to resist extradition, the civil proceedings in this country might be stayed.v) In further support of these propositions, Mr. Lewis submitted that:
a) Any disclosure by Mr. Antonov of details of the assets which he acquired after he acquired his interest in the Bank in March 2003, could potentially be self-incriminatory since theoretically identification of current assets could provide an audit trail back to original assets allegedly misappropriated from the Bank.b) Even if the court were to accede to the Variation Application, and to vary the disclosure provisions of the WWFO, so that Mr. Antonov was not required to disclose details of the assets which he acquired after he acquired his interest in the Bank in March 2003, because of the risk of self-incrimination in relation to the criminal proceedings, inherent in the compelled provision by Mr. Antonov of asset disclosure, nonetheless the risk of self-incrimination permeated every other procedural step which Mr. Antonov would have to take in order properly to defend the Bank's claim in the civil proceedings. Any written defence, any disclosure of documents, any witness statement and any answers given under cross-examination would all run the risk of exposing Mr. Antonov either to the real risk of self-incrimination or to that of judgment being entered against him.c) Such evidence, according to the expert evidence of Mr. Antonov's lawyers, could not only be used to inform the criminal investigation but also as evidence in any criminal proceedings which might in due course be brought against Mr. Antonov. It could also and importantly be used to assist in relation to the current extradition proceedings. In particular, an argument would be run on Mr. Antonov's behalf in the extradition proceedings to the effect that it could be inferred that the criminal proceedings were politically motivated, because of the weakness of the Bank's claim in the civil proceedings, and therefore, consequentially, the claim in the criminal proceedings. In this context, any provision of information in relation to Mr. Antonov's defence could potentially be damaging to Mr. Antonov.d) It was common ground between the Lithuanian legal experts, that in Lithuania itself no order for the disclosure of Mr. Antonov's assets could be made either in civil or in criminal proceedings, despite the fact that UK Restraint Orders in relation to numerous assets, located both within and without Lithuania, had been made. That was another reason for staying proceedings in the present case, or least for varying the disclosure order. The court should take into account the fact that the Lithuanian Prosecutor had requested the CPS to seek a disclosure order in respect of Mr. Antonov's assets, but that the CPS had declined to do so.e) The court should also take into account the fact that it was likewise common ground that, in Lithuania, civil proceedings would only follow after the conclusion of the criminal proceedings.
i) The onus was on Mr. Antonov to prove that the hearing by the Commercial Court of the Variation Application (i.e. his application to dispense with the obligation to provide disclosure of his assets) prior to the hearing of the extradition application would give rise to a real risk of serious prejudice that might lead to injustice. In reality, there was no such risk.
ii) Mr. Antonov's application to stay the civil proceedings pending the conclusion of the extradition hearing was in reality, and with one exception, based on arguments that, if the civil proceedings continued, he would be prejudiced in the criminal investigation and criminal proceedings in Lithuania, rather than any particular prejudice in relation to the extradition proceedings.
iii) But, in any event, the grounds alleged by Mr. Antonov did not either separately or cumulatively provide a sufficient basis for staying the civil action particularly when balanced against the prejudice to the Bank and its creditors if the civil claims were stayed pending the conclusion of criminal proceedings in Lithuania, or indeed the conclusion of the extradition proceedings which, together with appeals, might extend into 2014.
iv) Given that there was no compulsion in the civil proceedings to provide incriminating information, since Mr. Antonov was not obliged in the civil proceedings to admit anything, and was entitled to resist disclosure, provision of further information and questions in cross-examination on the grounds that compliance with any such orders might tend to incriminate him, there was no basis for saying that injustice would be caused. In any event Mr. Antonov had already provided substantial details of his positive defence.
v) Moreover, there was no realistic basis for contending that Mr. Antonov would suffer any prejudice if the civil proceedings continued pending the determination of the extradition proceedings. No aspect of any judgment in relation to the current applications could in reality influence the judge on the extradition application. The issues which arose on the extradition application were entirely different from those which arose in the civil proceedings. Thus there would be no real risk of serious prejudice that might lead to injustice.
vi) And finally, even if the court were to conclude that there was a real risk of serious prejudice leading to injustice if civil proceedings were to continue, then the stay requested should nevertheless be refused on the grounds that adequate safeguards could be put in place to minimise the risk of injustice to Mr. Antonov. Thus:
a) The Bank would be willing to accept restrictions on the extent to which any document setting out or referring to the grounds of Mr. Antonov's defence was disseminated beyond the Bank's legal team in England and named individuals at Zolfo Cooper within England; see A-G for Zambia v Meer Care & Desai & Ors [2006] EWCA Civ 390 at [27] –[31].b) A restriction on the dissemination of such documents would ensure that they were not available within Lithuania, and thus could not, as a matter of fact, be used by the Lithuanian Prosecutor. Such an order would not however, as Mr. Zacaroli made clear in oral argument, prevent the dissemination of information contained in such documents, albeit in breach of a party's obligation only to use disclosed documents for the purposes of the civil proceedings in which they were disclosed.c) Any hearing in the civil action at which the merits of Mr. Antonov's defence were to be revealed (including the trial) could be ordered to be heard in camera; see Zambia v Meer Care & Desai at paragraph 32; andd) Any judgment on the merits of the civil claim could itself be embargoed pending conclusion of the criminal proceedings in Lithuania.
Relevant legal principles applicable to the grant of a stay of civil proceedings
i) The court has a discretion to stay civil proceedings until related criminal proceedings have been determined, but it "is a power which has to be exercised with great care and only where there is a real risk of serious prejudice which may lead to injustice"; see R v Panel on Takeovers and Mergers, ex p Fayed [1992] BCC 524, per Neill LJ at p.531E-F; cited with approval in A-G of Zambia v Meer Care & Desai & Ors [2006] EWCA Civ 390.
ii) The discretion has to be exercised by reference to the competing considerations between the parties; the court has to balance justice as between the two parties; a claimant has a right to have its civil claim decided; the burden lies on a defendant to show why that right should be delayed; see Panton v Financial Institutions Services Limited [2003] UKPC 8 (PC) at [11].
iii) A defendant must point to a real, and not merely notional, risk of injustice. As the Privy Council stated in Panton (supra):
"A stay would not be granted simply to serve the tactical advantages that the defendants might want to retain in criminal proceedings. The accused's right to silence in criminal proceedings was a factor to be considered, but that right did not extend to give a defendant as a matter of right the same protection in contemporaneous civil proceedings. What had to be shown was the causing of unjust prejudice by the continuance of the civil proceedings".iv) The fact that a defendant has a right to remain silent in criminal proceedings, and would, by serving a defence in civil proceedings, be giving advance notice of his defence, carries little weight in the context of an application for a stay of civil proceedings. There is no right to invoke the privilege against self-incrimination in relation to putting in a defence, as compared with the right in civil proceedings to invoke the privilege where a defendant is being interrogated, being compelled to produce documents or cross-examined; see per Waller LJ in V v C [2002] CP Rep 8, at paragraphs 37 and 38. In a civil trial there is no immunity against adverse comment or adverse inference from a failure to provide answers for the trial or to give evidence at the trial; a defendant does not have to put in a defence or give evidence at a civil trial but, if he does not, the court can draw an inference because in a civil trial it is not his "right" not to do so; that is important in the summary judgment context, because, if the claimant can establish his claim (for example on a summary judgment application) without interrogatories or disclosure, then a privilege against self-incrimination is not in fact relevant; see ibid at paragraph 37.
v) Moreover, today, even in criminal proceedings, at least in England and Wales, a defendant is expected to adumbrate a positive defence at an early stage. Thus the disclosure of a defence in civil proceedings is unlikely to disadvantage a defendant in criminal proceedings; see ibid at paragraph 38.
vi) It is also legitimate, when balancing the competing considerations between the parties, to take into account that a positive defence is likely to exculpate, rather than incriminate, a defendant; as Waller LJ said at ibid paragraph 39:
"Third, it is legitimate to start from the position that a positive defence is likely to exculpate rather than incriminate. It is legitimate to expect an explanation on oath as to the nature of the defence that the defendant has so that a court can see (a) whether there is a reason for a trial on the merits; and (b) whether the way in which having to fight the summary judgment application or the trial may impinge on the fair trial of the defendant in a criminal court. In this context, if it is obvious that a full trial must proceed and that an order for production of documents, for example, is going to be met [by] a claim of privilege against self-incrimination, postponement of the civil trial may be appropriate. But if a claimant can establish his case without compelling information or evidence from a defendant, the only relevant impact on the criminal trial to be considered is what the effect of entering a summary judgment will be. The onus is on the defendant at all stages to demonstrate that the civil process should not proceed, and the stronger the case against the defendant in the civil context the higher the onus on the defendant should be."vii) It is not enough, as Briggs J observed in FSA v Anderson [2010] EWHC 308 (Ch) at [19], that both the civil and criminal proceedings arise from the same facts, or that the defence of the civil proceedings may involve the defendant taking procedural steps such as exchanging witness statements and providing disclosure of documents which might not be imposed upon them in the criminal proceedings.
viii) As Mr. Zacaroli submitted, a defendant thus has a choice between remaining silent in the civil proceedings or risk giving an indication of his defence which may be used by the prosecuting authorities. The harshness of such a choice did not provide a good ground for staying civil proceedings in V v C (supra) or in Jefferson Limited v Bhetcha [1979] 1 WLR 898.
ix) In the event that the court were to be satisfied that there would be a real risk of serious prejudice leading to injustice if the civil proceedings continue, then the proceedings should nevertheless not be stayed if safeguards can be imposed in respect of the civil proceedings which provide sufficient protection against the risk of injustice: see e.g. Re DPR Futures [1989] 1 WLR 778, per Millett J at 790G; A-G for Zambia v Meer Care & Desai & Ors (supra) at paragraphs 30-33.
Discussion and determination
i) the hearing of the Variation Application; or
ii) the continuance of the civil proceedings generally, would cause a risk of serious prejudice, which might lead to injustice so far as Mr. Antonov is concerned in relation either to the extradition proceedings in this country, or to the criminal investigation or a possible criminal trial in Lithuania. Accordingly I am not prepared to grant a stay of the civil proceedings or the Variation Application. My reasons are set out below.
The application to stay the hearing of the Variation Application pending the conclusion of the extradition proceedings
i) is extradition barred by reason of extraneous considerations (i.e. is there a serious possibility that the EAW was politically motivated); and
ii) is extradition compatible with Mr. Antonov's Convention rights (i.e. is there a real risk that he will be denied a fair criminal trial in Lithuania).
Application to stay the entirety of the civil proceedings pending: (i) the conclusion of the extradition proceedings; and/or (ii) the conclusion of the criminal proceedings in Lithuania
i) that he did not transfer or arrange the transfer of securities belonging to Snoras Bank out of its account with Julius Baer for Mr. Antonov's benefit and that
"At no time have any Snoras Bank assets been stolen from its Julius Baer account and Mr. Antonov asserts that the bank statements of that account will show this to be true";ii) that nothing in certain accounts supported the allegation that the securities in question were ever out of the control of Bank Snoras, since:
"The treasury department of Bank Snoras at all times had control over the accounts in which the securities were placed in Bank Julius Baer";iii) that the allegedly misappropriated funds were in fact held in accounts at Julius Baer in the Bank's name or under the control of the treasury department, and they were under the day to day management and control of the Bank (although not managed by Mr. Antonov himself);
iv) that executives and officers at both the Bank and Julius Baer regularly met to discuss the details of the bank accounts at Julius Baer; and
v) that in connection with the Julius Baer account, offshore structures were put in place for the benefit of the Bank, set up upon advice received from Julius Baer, and the Bank retained complete control and visibility over all of the Julius Baer accounts and offshore structures.
"68. The Court recalls that, although not specifically mentioned in Article 6 of the Convention, the right to silence and the right not to incriminate oneself, are generally recognised international standards which lie at the heart of the notion of a fair procedure under Article 6. Their rationale lies, inter alia, in the protection of the accused against improper compulsion by the authorities thereby contributing to the avoidance of miscarriages of justice and to the fulfilment of the aims of Article 6.38 The right not to incriminate oneself, in particular, presupposes that the prosecution in a criminal case seek to prove their case against the accused without resort to evidence obtained through methods of coercion or oppression in defiance of the will of the accused. In this sense the right is closely linked to the presumption of innocence contained in Article 6(2) of the Convention.
69. The right not to incriminate oneself is primarily concerned, however, with respecting the will of an accused person to remain silent. As commonly understood in the legal systems of the Contracting Parties to the Convention and elsewhere, it does not extend to the use in criminal proceedings of material which may be obtained from the accused through the use of compulsory powers but which has an existence independent of the will of the suspect such as, inter alia, documents acquired pursuant to a warrant, breath, blood and urine samples and bodily tissue for the purpose of DNA testing. In the present case the Court is only called upon to decide whether the use made by the prosecution of the statements obtained from the applicant by the Inspectors amounted to an unjustifiable infringement of the right. This question must be examined by the Court in the light of all the circumstances of the case. In particular, it must be determined whether the applicant has been subject to compulsion to give evidence and whether the use made of the resulting testimony at his trial offended the basic principles of a fair procedure inherent in Article 6(1) of which the right not to incriminate oneself is a constituent element.
38 See MURRAY v UNITED KINGDOM and FUNKE v FRANCE, loc. cit."
The proposed safeguards
i) without the permission of this court, as to which the parties are to be at liberty to apply, neither Mr. Antonov's defence, nor any document setting out, or referring to, any grounds of his defence, nor any subsequent pleadings served by him, nor any response by him to requests for further information in relation to such defence ("the relevant defence documents"), are to be disseminated beyond named members of the Bank's legal team, Mr. Cooper and named members of his staff in England, and necessary witnesses or experts in the civil proceedings and all relevant defence documents are at all times to remain in England; such restraint will apply to such documents notwithstanding they may be read to or by the court or referred to in any hearing held in public; neither the Bank, nor any members of its legal team, nor Mr. Cooper or any of his staff, will be entitled to provide any third-party with copies of any relevant defence documents; nor, without the prior permission of the court, will any third-party be entitled to apply to the court for a copy of such document;
ii) without prejudice to CPR 31.22, without the permission of this court, as to which the parties are to be at liberty to apply, no documents disclosed by Mr. Antonov to the Bank, including but not limited to any documents read to or by the court or referred to in any hearing held in public, ("Mr. Antonov's disclosed documents") are to be disseminated beyond named members of the Bank's legal team, Mr. Cooper and named members of his staff in England, and necessary witnesses or experts in the civil proceedings; and all copies of Mr. Antonov's disclosed documents in the possession of the Bank and such named parties are at all times to remain in England; neither the Bank, nor any members of its legal team, nor Mr. Cooper or any of his staff, will be entitled to provide any third-party with copies of Mr. Antonov's disclosed documents; nor, without the prior permission of the court, will any third-party be entitled to apply to the court for a copy of such document; this restriction will obviously not apply to documents disclosed by the Bank or obtained from third parties, notwithstanding that they may be the same documents, or copies of the same documents, as those disclosed by Mr. Antonov;
iii) without prejudice to CPR 32. 12 without the permission of the court as to which the parties are to be at liberty to apply, no witness statements served by Mr. Antonov, or on his behalf ("Mr. Antonov's witness statements"), are to be disseminated beyond named members of the Bank's legal team, Mr. Cooper and named members of his staff in England, and necessary witnesses or experts in the civil proceedings; and all copies of Mr. Antonov's witness statements in the possession of the Bank, or such named persons, are at all times to remain in England; neither the Bank, nor any members of its legal team, nor Mr. Cooper or any of his staff, will be entitled to provide any third-party with copies of Mr. Antonov's witness statements; nor, without the prior permission of the court, will any third-party be entitled to apply to the court for a copy of such document;
iv) without prejudice to the above procedure rules, without the permission of this court, as to which the parties are to be at liberty to apply, neither the Bank, nor any members of its legal team, nor Mr. Cooper or any of his staff shall be entitled to use the relevant defence documents, Mr. Antonov's disclosed documents, or Mr. Antonov's witness statements or the information contained in any such documents or witness statements (save to the extent that such information is known to the Bank from its own record or an independent source), save for the purposes of these proceedings, and in particular, but without limit to the generality of the foregoing, they shall not be permitted to use such information for the conduct of investigations and/or civil and/or criminal proceedings in Lithuania or any other country.
The Discharge Application
Introduction
Non-disclosure: the relevant legal principles
"In considering whether there has been relevant non-disclosure and what consequence the court should attach to any failure to comply with issues in these appeals appear to me to include the following.
(1) The duty of the applicant is to make "a full and fair disclosure of all the material facts:" see Rex v. Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac [1917] 1 K.B. 486, 514, per Scrutton L.J.
(2) The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers: see Rex v. Kensington Income Tax Commissioners, per Lord Cozens-Hardy M.R. at P. 504, citing Dalglish v. Jarvie (1850) 2 Mac. & G. 231, 238, and Browne-Wilkinson J. in Thermax Ltd. v. Schott Industrial Glass Ltd. [1981] F.S.R. 289, 295.
(3) The applicant must make proper enquiries before making the application: see Bank Mellat v Nikpour [1985] F.S.R. 87. The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.
(4) The extent of the inquiries which will be held to be proper, and therefore necessary, must depend on all the circumstances of the case including (a) the nature of the case which the applicant is making when he makes the application; and (b) the order for which application is made and the probable effect of the order on the defendant: see, for example, the examination by Scott J. of the possible effect of an Anton Piller order in Columbia Picture Industries Inc. v. Robinson [1987] Ch.38, and (c) the degree of legitimate urgency and the time available for the making of inquiries: see per Slade L.J. in Bank Mellat v. Nikpour [1985] F.S.R. 87, 92–93.
(5) If material non-disclosure is established the court will be "astute to ensure that a plaintiff who obtains [an ex parte injunction] without full disclosure … is deprived of any advantage he may have derived by that breach of duty:" see per Donaldson L.J. in Bank Mellat v. Nikpour, at p 91, citing Warrington L.J. in the Kensington Income Tax Commissioners' case [1917] 1 K.B. 486, 509.
(6) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application. The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.
(7) Finally, it '… is not for every omission that the injunction will be automatically discharged. A locus poenitentiae may sometimes be afforded' per Lord Denning M.R. in Bank Mellat v. Nikpour [1985] F.S.R. 87, 90. The court has a discretion, notwithstanding proof of material non-disclosure which justifies or requires immediate discharge of the ex parte order, nevertheless to continue the order, or to make a new order on terms.
"when the whole of the facts, including that of the original non-disclosure, are before [the court, it] may well grant … a second injunction if the original non-disclosure was innocent and if an injunction could properly be granted even had the facts been disclosed:" per Glidewell L.J. in Lloyds Bowmaker Ltd. v. Britannia Arrow Holdings Plc, ante, pages 1343H–1344A.
"The principle is, I think, a thoroughly healthy one. It serves the important purposes of encouraging persons who are making ex parte applications to the court diligently to observe their duty to make full disclosure of all material facts and to deter them from any failure to observe this duty, whether through deliberate lack of candour or innocent lack of due care.
Nevertheless, the nature of the principle, as I see it, is essentially penal and in its application the practical realities of any case before the court cannot be overlooked. By their very nature, ex parte applications usually necessitate the giving and taking of instructions and the preparation of the requisite drafts in some haste. Particularly, in heavy commercial cases, the borderline between material facts and non-material facts may be a somewhat uncertain one. While in no way discounting the heavy duty of candour and care which falls on persons making ex parte applications, I do not think the application of the principle should be carried to extreme lengths. In one or two other recent cases coming before this court, I have suspected signs of a growing tendency on the part of some litigants against whom ex parte injunctions have been granted, or of their legal advisers, to rush to the Rex. v. Kensington Income Tax Commissioners [1917] 1 K.B. principle as a tabula in naufragio, alleging material non-disclosure on sometimes rather slender grounds, as representing substantially the only hope of obtaining the discharge of injunctions in cases where there is little hope of doing so on the substantial merits of the case or on the balance of convenience."
"193 … The principal question is not whether the order was obtained as a result of the misrepresentation or non-disclosure but whether the information not disclosed was material to be taken into account in deciding whether or not to grant relief without notice and if so on what terms: see eg Dormeuil Frčres SA v Nicolian International (Textiles) Ltd [1998] 1 WLR 1362, 1368. Once that question is answered in the affirmative, once comes to the consequential question whether the order made ought to be discharged. The judge accepted the SFO's submission that the restraint order would have been made even if there had been disclosure of the Antiguan proceedings, but that was to go straight to the consequential question. There could only be one answer to the question whether that non-disclosure was material: it was. The judge did not address separately the treatment of urgency and the civil freezing order, but those too involved material failings of candour."
"The duty to disclose applies to matters known to the applicant or his agents, or matters which they would have known, had they made all the inquiries which should reasonably have been made prior to the application."
Thus the fact that a party or his legal adviser has forgotten a material fact affords no excuse for, or defence to, an allegation of non-disclosure: Dubai Bank v Galadari [1990] 1 Lloyd's Rep. 120; Clifton v Robinson (1853) 16 Beavan 355, 51 ER 816. There is a duty on an applicant to set out the "full story" and disclosure may be material, "whether or not deliberate" and irrespective of the existence of a good arguable case, where it gives "a seriously different flavour to the case"; see Dubai Bank v Galadari at 133b and. Gee, supra.
The allegations of non-disclosure
Extensive and detailed submissions were made in the evidence, in Mr. Antonov's written arguments, and in Mr. Mill's submissions at the hearing. At the request of the court, Mr. Mill summarised Mr. Antonov's complaints about non-disclosure in a bullet point document, which he amplified by oral submissions. Likewise, Mr. Zacaroli summarised the Bank's factual response in a similar document, likewise amplified by oral submissions.
i) The complaint
"The Lithuanian PROs were not put in evidence despite the fact that at least the Orders referring to Lithuanian assets were available through a search of the Register of Property Seizure Acts."
The response
Whilst it is correct that the Lithuanian PROs were not put in evidence, the Lithuanian PROs in relation to assets which were held within Lithuania were specifically mentioned to the judge in the context of an argument that could be made against the Bank to the effect that there was no risk of dissipation because they were already freezing orders in place. PROs were not publicly available documents in Lithuania and only the fact that they had been made was available on the Register. Although the relevant members of Mr. Cooper's staff were aware of the existence of Lithuanian freezing orders over Lithuanian assets, they were not aware that the Lithuanian Prosecutor had obtained Lithuanian orders that purported to have extraterritorial effect. As at the date that the Bank's evidence was completed, on or about 14 May 2012, no details of PROs referring to foreign assets were recorded on the Register. It was not updated until 16 May 2012 in this regard and the fact that it had been updated so shortly before the application was, unsurprisingly, not spotted by Mr. Cooper's staff. The evidence served by the Bank (which for present purposes I accept as truthful[6]) showed that, contrary to the assertions of Mr. Antonov, there was no free flow of information on a two-way basis between the Lithuanian Prosecutor and the Bankruptcy Administrator and his staff. According to the Bank's evidence, reasonable steps had been taken by Mr. Cooper and his staff to enquire precisely what steps the Lithuanian Prosecutor in relation to assets outside the Lithuanian jurisdiction, but they received no full or satisfactory response. Mr. Zacaroli frankly accepted that he could not have made the submission to Teare J that the Lithuanian PROs did not extend to assets outside Lithuania, had he known about the existence of the PROs applying to assets in other jurisdictions.
ii) The complaint
"The UK Restraint Order was not put in evidence despite the fact that it was known about; a copy was available through a request of the UK Land registry.
The response
Mr. Zacaroli accepted that the Bank could have found out about the UK restraint order and that (in fact) Linklaters (the Bank's solicitors) had known about it in March 2012 when the search was done of the property register. However as at the date of the ex parte application, the relevant solicitor at Linklaters had forgotten the fact that he knew about the English restraint order. Mr. Zacaroli also realistically accepted that the Bank should have done more, whether by way of a search in the Land Registry prior to the date of the ex parte application, or otherwise, for ascertaining whether any English restraint orders had been made although he pointed out that it was surprising, to say the least, that the Lithuanian Prosecutor had not informed the Bank of the fact that such an order had been obtained. But, in the light of the evidence served by the relevant partner at Linklaters, there was no basis for suggesting any deliberate misconduct on the Bank's part. Whilst the Bank was aware of the English extradition proceedings, which take place in public, the restraint order proceedings had not taken place in public.
iii) The complaint
The Latvian Freezing Order was not put in evidence despite the fact that it was known about and referred to in oral submissions before Teare J on the without notice applications. No evidence was adduced of any attempt to obtain a copy.
The response
Mr. Zacaroli accepted that the Latvian freezing order had not been put in evidence on the ex parte application. However it was clear from Schedule 1 to an affidavit, which the judge had been invited to pre-read, that details of the assets subject to the Latvian order were before the court and that some sort of freezing order had been made in Latvia. At the hearing, Mr. Zacaroli told the judge (see page 82 of the transcript):
"There have been freezing orders made in Lithuania, which has extended to Latvia, and in Switzerland"
and whilst this was not a precise description (since the order had originally been made in Latvia rather than having been "extended" from Lithuania) nonetheless the existence of the order had been brought to his attention.
The complaint
"The Swiss Freezing Order was not shown to the Court. It was in an exhibit but not drawn to the Court's attention, other than by passing reference in oral submissions."
The response
Whilst it was correct that this Swiss freezing order was not shown to the court, its terms added little to the information which was brought to the court's attention at the hearing. Thus the existence of the Swiss order was disclosed in Mr. Cooper's first affidavit and its existence was referred to in the transcript of the ex parte hearing at pages 28 and 82. There was in fact an order in the files before the judge on the ex parte application, but it was not drawn to his attention. The order itself added little or nothing to the information.
iv) The complaint
"The court was not informed when the various orders had been identified/obtained by the Bank (or the fact that this had been many months before in the period November 2011 to January 2012)"
The response
It was correct that, in respect of the orders of which it was aware, the Bank did not inform the court of the dates of those orders or when it became aware of them.
v) The complaint
"There was no disclosure of the fact that Mr. Huck had been told on 6 December 2011 that the Lithuanian Prosecutor had obtained or was seeking orders freezing assets worldwide (and that minimal efforts had been made to inquire into the matter). As early as November 2011 and the Lithuanian Prosecutor was reported in the press as saying that he had frozen "Lithuanian and foreign assets of some people involved."
The response
It was correct that the court had not been told this, but it was not correct that only minimal efforts had been made to ascertain the true position. The Bank's evidence fully set out the efforts that had been made by the bankruptcy administrator and his staff.
vi) The complaint
"It was stated that the Lithuanian orders did not apply to overseas assets."
The response
It was so stated. However that was the position which the Bank, and the bankruptcy administrator and his staff, believed to be true at the time. Mr. Zacaroli also referred to the response at i) above.
vii) The complaint
"It was implied that orders of the Lithuanian Prosecutor could not have extra-territorial effect. For example, the evidence of Dr. Agne Tiknuite, Head of the faculty of Civil and Commercial law at Mykolas Romeris University in Vilnius, one of the Bank's experts in relation to Lithuanian law, stated in an affidavit that the Lithuanian freezing orders "… do not, as a matter of Lithuanian law, purport to have any extra-territorial effect." The evidence of Mr. Antonov's Lithuanian law expert Dr. Sulija (which had not been challenged) was to contrary effect."
The response
This was incorrect. Dr. Tiknuite's evidence was given in the context of a defendant outside the jurisdiction of the Lithuanian court. It was in that context that she stated that the orders did not purport to have extraterritorial effect. In other words she was saying no more than that such orders cannot be enforced unless either the person to whom they are addressed is in Lithuania or there is property in Lithuania against which such orders can be enforced. The point was that Mr. Antonov was not in Lithuania, nor were any of the assets, referred to in the orders as being outside Lithuania, by definition in Lithuania. The evidence of Dr. Sulija was not inconsistent with that of Dr. Tiknuite: the former's evidence in this respect was premised on personal jurisdiction being exercised over the person subject to the restraint order.
viii) The complaint
"The misleading impression was given that Dr. Tikniute had examined the Lithuanian orders (whereas her description and explanation of them was no more than a repetition of what she had been told by Eversheds and Linklaters). Although Dr. Tikniute stated in her affidavit that she had exhibited the materials that she had considered and the Lithuanian orders were not included, it is trite law that it is insufficient to refer to material adverse matters in an exhibit and these must be included in the body of an affidavit (more so an expert report): see Re Stanford at paragraph 188 (Hughes LJ)."
The response
Whilst it was correct that Dr. Tiknuite had said in paragraph 29 of her affidavit in support of the ex parte application, in a clumsily drafted sentence, that
"To my knowledge and from the publicly available information in the register of Property Seizure Acts …."
which might have suggested that she was saying that she knew something from her own knowledge - she had listed the documents which she had personally reviewed in an exhibit to her affidavit, and the list did not include the PROs. The fact didn't change the underlying nature of what she had said and did not add anything to the complaint that what she had said was wrong, and there were Lithuanian orders that purported to have extra-territorial effect.
ix) The complaint
"Likewise it was not disclosed that Mr. Cooper also had not examined the freezing orders but rather his account was hearsay (as it appears to have been – even now no proper account is given)"
The response
The only criticism that can be made of Mr. Cooper is that he failed to attribute the source of his knowledge. However, his evidence was submitted in conjunction with that of Dr. Tiknuite, and it was plain that he was reliant on her evidence in this regard.
x) The complaint
"It was implied that the Lithuanian orders were criminal and civil proceedings were not contemplated (which proceedings in Lithuania would be combined with criminal proceedings if pursued)."
The response
This was incorrect. Mr. Cooper correctly described the PROs and the other orders as criminal freezing orders: they were obtained by the prosecutor in the context of a criminal investigation. The orders merely stated that:
"… there are reasonable grounds to assume that in the context of this criminal case a civil claim might be lodged or confiscation of property ordered."
Mr. Cooper also referred to the possibility of civil proceedings in 44.5 of his affidavit.
xi) The complaint
"Failure to give a full and frank account of the true circumstances of the nationalization and insolvency proceedings."
This was said to go to: (a) the credibility of the Bank's case against Mr. Antonov and the merits of his defence; and (b) the circumstances and timing of the ex parte application. Complaints were made under this head to the effect that:
"a) Mr. Cooper had stated in his affidavit in support of the ex parte application that the Insolvency proceedings were based on a report of Mr. Freakley, but, in fact, Mr. Freakley's subsequent affidavit showed that Mr. Freakley had made no decision on solvency;
b) there was no disclosure of the fact that, as Mr. Freakley subsequently stated, the Central Bank was alleging fraud against Mr. Antonov from the outset;
c) there was no disclosure of the fact that, as Mr. Freakley subsequently stated, it was the Central Bank that made decisions as to nationalization and commencement of insolvency proceedings and he had no significant role:
d) there was no disclosure of the fact that Oliver Wyman and Central Bank had had a plan to nationalize the Bank as early as 27 October 2011; and that criminal proceedings against Mr. Antonov had commenced even before Mr. Freakley had been appointed;
e) there was no disclosure of the unlawful nature of the nationalization, which was subject to retrospective legislation."
The response
This complaint was without foundation. Paragraphs 15-19 of Mr. Cooper's affidavit provided a neutral description of the events leading up to his appointment as Bankruptcy Administrator. In paragraph 21 Mr. Cooper specifically referred to the Lithuanian criminal proceedings which had been begun by an arrest in London on 24 November 2011, the implication being that there had clearly been prior work done by the prosecuting authorities before that date. Then in paragraph 23 he gave an account in broad terms of the allegations made by Mr. Antonov of political motivation behind the nationalisation of the Bank. None of this was inconsistent with Mr. Freakley's evidence. Subsequently, on 16 May 2012, Mr. Huck, one of Mr. Cooper's staff, served a second affidavit in which he updated the position in relation to the commencement by Mr. Antonov of arbitration proceedings against the Lithuanian government and pointed out that such claim appeared to be 'supportive to claims by Antonov in the extradition proceedings that the criminal charges against him are politically motivated and the result of "anti-Russian xenophobia in Lithuania"'. As the skeleton argument and the transcript made clear, the court's attention was specifically drawn to the fact that Mr. Antonov was making such allegations. However there was no need for the Bank to go into any great detail about such allegations; the Bank's claim was based on core primary source materials which the Bankruptcy Administrator had collated from the Bank's records, from discussions with former employees and for documents obtained from third parties. It was not based on allegations made by the Lithuanian Prosecutor or the Lithuanian government in the criminal proceedings. Apart from the fact that the Bank was not aware at the time of the ex parte application that Mr. Antonov was going to allege that the Bank, the Lithuanian state and the Lithuanian Prosecutor were effectively one and the same, the allegations that the Lithuanian Prosecutor was politically motivated was no defence to the Bank's claim in the civil proceedings. Moreover nothing that Mr. Cooper said was inconsistent with what Mr. Freakley said about the commencement of the insolvency proceedings such as would affect the issue relating to the delay of commencement of proceedings. The court was well aware that allegations of misappropriation against Mr. Antonov had been made in November 2011 and that he had been arrested then. As Mr. Zacaroli had fairly said to the judge, the fact of Mr. Antonov's arrest in November had undoubtedly put him on notice that there were proceedings of some nature against him or were likely to be. But the point which the Bank had made to the judge that such notice wasn't necessarily sufficient to mean that there was not still a risk of dissipation of assets round the world.
xii) The complaint
"Inadequate explanation of reasons for non-disclosure; in particular:
a) No adequate explanation from Mr. Cooper for his previous statement;
b) no adequate explanation by Mr. Huck about his knowledge about the existence or terms of the Lithuanian PROs or as to what he was informed when; in particular, Mr. Huck did not say that Eversheds (Solicitor acting for the Bankruptcy administrator) only knew what was contained in a public register; there was no explanation as to what was known to relevant individuals at all material times; Eversheds clearly knew more than was on the public register;
c) Mr. Reid of Linklaters only submitted a statement after the discharge application was made as to his knowledge of the UK restraint order; Linklaters' position prior to that was in the letter of 12 June 2012; he implied that the constraint order had been forgotten until 9 July 2012 and failed to refer to its being brought again to Linklaters' attention on 18 May 2012; he failed to explain why nothing had been done about correcting the position until it was referred to in correspondence on 12 June 2012; in particular, he failed to explain why the Bank did not return immediately to Court pursuant to its ongoing obligation to give full and frank disclosure to inform the Court of the existence of the UK restraint order and to provide the Court with a copy."
The response
None of the matters raised, when properly analysed, added to the case for discharge: in particular:
a) Mr. Cooper's source of knowledge in relation to the Lithuanian PROs was plainly Dr. Tiknuite's affidavit which has already been addressed above;
b) although Mr. Huck's evidence in relation to the timing and manner of his awareness of the Lithuanian orders was potentially inconsistent, such inconsistency went nowhere; it was clear that the PROs were not publicly available and that the Bank did not know the true scope of the orders as at the time that the evidence for the ex parte application was settled as described above; there was no inconsistency about his evidence in relation to his awareness of the purported extra territorial effects of the Lithuanian orders and such other complaints as were made were immaterial; the allegation that Evershed's "clearly knew" more than was on the register was unsupported by the evidence; and the Bank acted wholly independently from the Lithuanian Prosecutor and other government entities;
c) it was only on 9 July 2012 that Mr. Reid became aware that he had discovered the existence of the UK restraint order in March 2012; that Mr. Reid's statement explaining that the land registry entry revealing the existence of the UK restraint order was known of by Linklaters, but subsequently forgotten about; that it was only submitted on 10 July 2012 reflects when Mr. Reid remembered that he had known that fact; it does not illustrate that he remembered that he had known of the UK restraint order any earlier; it had already been drawn to the court's attention in Mr. Huck's first witness statement on 14 June 2012; therefore no further information was required in circumstances where Mr. Antonov had already made his discharge application."
Discussion and determination of the Discharge Application
Issues to be determined
i) whether any information was not disclosed, or any misleading account was given by the Bank of any matter, in the course of its ex parte application, as complained of by Mr. Antonov;
ii) whether any non-disclosed information, or misleading account, was, on an objective basis, material enough to be taken into account in deciding whether or not to grant relief without notice and if so on what terms;
iii) whether, if there had been any material non-disclosure or misrepresentation by the Bank, the WWFO should be automatically discharged, or whether, taking into account all the relevant circumstances, including the gravity of the non-disclosure/ misrepresentation, the excuse or explanation offered, and the severity and duration of the prejudice occasioned to the defendant, and the need for proportionality, the order should be continued, or alternatively re-granted as from the date of the hearing of the Discharge Application or some other specific date;
iv) whether, irrespective of issues of non-disclosure or misrepresentation, the WWFO should be continued, given Mr. Antonov's submissions as to the absence of risk of dissipation and delay.
Was there any non-disclosure or any misleading account given by the Bank of any matter, in the course of its ex parte application, as complained of by Mr. Antonov?
i) Complaint i): I conclude that there was no non-disclosure in relation to the Lithuanian PROs, notwithstanding that the orders themselves were not put in evidence. The Lithuanian PROs in relation to assets which were held within Lithuania were specifically mentioned to the judge in the context of an argument that could be made against the Bank to the effect that there was no risk of dissipation because they were already freezing orders in place. PROs were not publicly available documents in Lithuania and only the fact that they had been made was available on the Register. Although the relevant members of Mr. Cooper's staff were aware of the existence of Lithuanian freezing orders over Lithuanian assets, I accept that they were not aware that the Lithuanian Prosecutor had obtained Lithuanian orders that purported to have extraterritorial effect. As at the date that the Bank's evidence was completed, on or about 14/16 May 2012, no details of PROs referring to foreign assets were recorded on the Register. It was not updated until 16 May 2012 in this regard and the fact that it had been updated so shortly before the application was, unsurprisingly, not spotted by Mr. Cooper's staff. I do not consider that they failed in their duty of disclosure in not checking the Lithuanian register again immediately before the application. Whilst I accept that the Lithuanian state, both as creditor and as shareholder, has a substantial economic interest in the Bank, and that the Bank and the Lithuanian Prosecutor have a common interest in the establishment of Mr. Antonov's liability for misappropriation, whether in the civil or in the criminal proceedings, I do not accept that, for the purposes of these applications, the Bank and the Lithuanian Prosecutor can be regarded as one and the same entity. I accept, for the purposes of these applications, the evidence served by the Bank[7] which shows that, contrary to the assertions of Mr. Antonov, there was no free flow of information on a two-way basis between the Lithuanian Prosecutor and the Bankruptcy Administrator and his staff, and that, despite the fact that reasonable steps had been taken by Mr. Cooper and his staff to inquire what steps the Lithuanian Prosecutor in relation to assets outside the Lithuanian jurisdiction, they had received no full or satisfactory response. Accordingly I accept that, whilst incorrect, the statements made by Mr. Zacaroli to Teare J, to the effect that the Lithuanian PROs did not extend to assets outside Lithuania, did not amount to a failure on the Bank's part to disclose information which, had it made proper enquiries, it should have disclosed.
ii) Complaint ii): I conclude that, as rightly accepted by Mr. Zacaroli, there was non-disclosure in relation to the UK Restraint Order; it was not put in evidence despite the fact that it was known about at the time, because the relevant partner at Linklaters had genuinely forgotten about its existence. It clearly should have been disclosed and the Bank was clearly under a duty to take reasonable steps to ascertain whether or not any such order had been made. Again as Mr. Zacaroli accepted, a search could have been made of the UK Land registry or other enquiries made to establish whether such an order had been made. However, I do not accept Mr. Mill's submission that there was anything unsatisfactory or inadequate about the subsequent explanation as to why there had been no disclosure; nor do I accept (insofar as the suggestion was made) that there was anything sinister or deliberate about such non-disclosure.
iii) Complaint iii): So far as the Latvian freezing order was concerned, given the fact that details of the assets subject to the Latvian order, and the fact that an order had been made in Latvia were in evidence which the judge had been asked to pre-read and the fact that Mr. Zacaroli told the judge that there had been freezing orders "extended to Latvia", I conclude there was no non-disclosure as such.
iv) Complaint iv): Similarly so far as the Swiss order was concerned. Whilst the actual order was not shown to the court, its terms added little to the information which was brought to the court's attention, both in the evidence which he was asked to pre-read and at the hearing itself. In fact, the order itself was in the files before the judge, although his attention was not expressly directed to it. In those circumstances I conclude there was no non-disclosure as such.
v) Complaint v): I conclude that there was no disclosure of the dates when the various orders had been identified or obtained by the Bank.
vi) Complaint vi): I conclude that the Bank did not disclose the fact that Mr. Huck had been told on 6 December 2011 that the Lithuanian Prosecutor had obtained or was seeking orders freezing assets worldwide. I do not accept that the Bank had only made minimal efforts to ascertain the true position.
vii) Complaint vii): I have already dealt with this at i) above.
viii) Complaint viii): I accept Mr. Zacaroli's submissions that there was nothing in this complaint and that, on analysis, there was no misrepresentation of the position in relation to the extraterritorial effect of the Lithuanian PROs.
ix) Complaint ix): I accept Mr. Zacaroli's submission that no misleading impression was given by Dr. Tiknuite.
x) Complaints x) and xi): Again, I accept Mr. Zacaroli's submissions that there was no non-disclosure or misrepresentation in relation to these complaints.
xi) Complaint xii): I do not accept that there was a failure to give a full and frank account of the true circumstances of the nationalisation and insolvency proceedings or that there was any non-disclosure in this respect. In my judgment, Mr. Cooper's evidence before Teare J on the ex parte application, and Mr. Zacaroli's submissions to the judge on that date, adequately referred to the history of the matter and sufficiently referred to the allegations made by Mr. Antonov of a political motivation for the nationalisation and the criminal proceedings.
xii) Complaint xiii): None of the complaints raised under this head, in my judgment demonstrated non-disclosure, inconsistency or misrepresentation.
Was any information which was not disclosed, or in respect of which a misleading account was given, on an objective basis, material to be taken into account in deciding whether or not to grant relief without notice and if so on what terms?
Whether, if there had been any material non-disclosure or misrepresentation by the Bank, the WWFO should be automatically discharged, or whether, taking into account all the relevant circumstances, the order should be continued, or alternatively re-granted, and, if so, from which date?
i) The court had well in mind at the ex parte hearing that there were freezing orders in existence as against Mr. Antonov, freezing particular assets in particular jurisdictions. If it had been told about the UK Restraint Order, it would have known, additionally, that there were specific assets in England that had been frozen.
ii) Although the court clearly needed to know the extent and terms of the UK Restraint Order, given its limited materiality, and on any objective basis, once the court had been informed of its terms, it could not have made a difference to its decision that a WWFO should be granted.
iii) Each of the Lithuanian orders and the UK Restraint Order were asset specific. In other words, they related only to known and listed assets of Mr. Antonov and were not of more general extent and application. The orders did not relate to assets held by Mr. Antonov in the relevant jurisdictions which were not known about, nor did they relate to assets in other jurisdictions.
iv) The extensive and detailed evidence provided in support of the WWFO explained the flow of funds misappropriated from the Bank and revealed that funds were paid to, or passed through, a great number of entities owned or controlled by, or connected with, Mr. Antonov, in a number of jurisdictions around the world. These included Austria, the Bahamas, Belize, British Virgin Islands, Cyprus, Denmark, the Dominican Republic, France, Latvia, Panama, Russia, the Seychelles, Saint Lucia, Switzerland and the UK. In addition, details of Mr. Antonov's assets, of which the Bankruptcy Administrator and his staff were currently aware, were set out in the evidence before the judge. It is clear from that evidence that the assets owned or controlled by Mr. Antonov included property located in numerous jurisdictions, as was subsequently confirmed in correspondence with his solicitors. So the fact that the court was not told of UK Restraint Orders that had been made in respect of one jurisdiction was not, in context, that significant.
v) Moreover, the value of the known assets of Mr. Antonov covered by the existing freezing orders in respect of assets within Switzerland, Lithuania, Latvia and the UK was relatively modest, compared to the volume of funds allegedly misappropriated from the Bank. Thus, for example, although the Bank contends that a significant value of the assets, which were allegedly misappropriated from the Bank, passed into Switzerland, the funds from these assets flowed onwards to multiple jurisdictions and would not therefore be caught by the terms of any Swiss restraint order.
vi) The emphasis of the application before Teare J was on the worldwide nature of the freezing order, not on the UK assets. The assets in the UK, Lithuania, Latvia and Switzerland, were, in one respect, of minimal importance; the Bank's case was that, given the nature of the Bank's case, a man who had transacted business around the world and directed the transfer of funds around the world, the necessary injunctive relief was a WWFO.
vii) In particular, in such circumstances the disclosure requirements of the order were of particular importance. For example, the UK Restraint Order did not attach any other assets in the UK owned directly or indirectly by Mr. Antonov. Subsequent to the order made by Teare J, the Bankruptcy Administrator and his staff discovered that Mr. Antonov owns at least two assets in the UK not covered by the UK Restraint Order, namely the "The Firs" in Bromley, Kent, and, via a Jersey registered company, Meadow Cottage Farm, Kings Lane, Englefield Green, Egham, with an approximate value of Ł5.4 million; neither of these properties were captured by the UK Restraint Order.
viii) The existing restraint orders were obtained by the Lithuanian Prosecutor in the context of the criminal proceedings. The Bank, as I accept, has no means of policing or enforcing those orders.
ix) For all the above reasons I am satisfied that the failure to disclose the UK Restraint Order does not require the court to discharge the WWFO. Although the existence and terms of such order were objectively material to the exercise of the court's discretion at the hearing of the ex parte application, the fact that such an order had been made, on the date which it had been made, would have had no material effect on the judge's decision that there was a risk of dissipation, which required the imposition of a WWFO. Likewise, even if he had been informed of the existence of the UK Restraint order, it would not have persuaded him that the Bank's delay in bringing the proceedings were such as to require him not to make any such order.
Whether, irrespective of issues of non-disclosure or misrepresentation, the WWFO should be continued, given Mr. Antonov's submissions as to absence of risk of dissipation and delay?
Risk of dissipation
"some situations … cry out – as a matter of justice to plaintiffs – for disclosure orders and Mareva injunction type injunctions covering foreign assets of the defendants even before judgment."
and Parker LJ in Derby & Co Ltd v Weldon [1990] 1 Ch 48 at 57: there is every justification for an injunction where:
"… the defendants are clearly sophisticated operators who have amply demonstrated their ability to render assets untraceable and a determination not to reveal them."
Delay
i) the Application had, in the circumstances, been made as soon as reasonably practicable;
ii) whilst there was plainly a risk that Mr. Antonov would have dissipated assets, litigation in England involving a WWFO might well be unexpected; and
iii) it would assist in preventing any further dissipation and also provide a mechanism to identify Mr. Antonov's global assets.
The Variation Application
Introduction
The relevant legal principles
i) Asset disclosure is an integral and essential part of the relief granted to a claimant in order to ensure the effectiveness of a freezing order, without which the remedy is likely to be ineffective: see the cases cited in JSC BTA Bank v Ablyazov [2010] 1 All ER (Comm) 1029 at paragraph 5. The need for disclosure is particularly acute where, as here, the evidence relating to the underlying alleged fraud demonstrates the movement, in a short timescale, of very large sums of money among a large number of accounts or entities, in a variety of jurisdictions, which are owned by, or otherwise connected with, the defendant. As Steyn LJ (as he then was) said in Grupo Torras SA v Al-Sabbagh [1994] CA Transcript, page 159, without disclosure a freezing order would be a "… relatively toothless procedure in the fight against rampant transnational fraud".
ii) The standard form of Commercial Court injunction entitles a defendant not to provide disclosure on the grounds of the privilege against self-incrimination. This relates solely to the risk of incrimination in actual or threatened criminal proceedings in England. However, as referred to above, the decision of the Court of Appeal in C Plc v P [2007] EWCA Civ 493; [2008] Ch.1; E.R. 1034, CA establishes that a person could not, relying on the privilege against self incrimination, refuse to disclose documents which had a prior existence independent of the will of the person relying on the privilege. Moreover in cases of theft, or alleged misappropriation of property by fraud, section 31 of the Theft Act and section 13 of the Fraud Act abrogate the privilege against self-incrimination in civil proceedings, thereby removing the entitlement of defendants to answer questions relating to their assets, but on terms that no statement or admission made by a person in answering a question put or complying with an order, shall, in proceedings for an offence under either Act, be admissible in evidence against that person.
iii) There is no right to withhold disclosure of assets on the basis of a risk of incrimination in relation to actual or threatened criminal proceedings abroad. In such a case, the court instead has a discretion as to whether to grant protection against the risk of incrimination: see Ablyazov (CA) at paragraph 17; and also Brannigan v Davison [1997] AC 238, at 251 per Lord Nicholls of Birkenhead. English courts will therefore take into account the possibility of self-incrimination in respect of foreign criminal proceedings "… in deciding whether and, if so, in what terms a disclosure order should be made": see Arab Monetary Fund v Hashim [1989] 1 WLR 565, 574.
iv) The exercise of that discretion depends in part on the risk of prejudice to the defendant in the foreign criminal proceedings. Lithuania is an EU member state, a member of the Council of Europe and signatory state to the Convention. It is a category 1 territory for the purpose of the Extradition Act 2003. Article 6 of the Convention therefore guarantees the right of a defendant to a fair hearing.
v) The leading Strasbourg decision remains Saunders v UK (1996) 23 E.H.R.R. 313, (supra), in which it was held that the use, in criminal proceedings, of transcripts of the defendant's interviews which had been obtained under compulsion from the defendant in a separate Department of Trade inspection, constituted a breach of his Article 6 rights to a fair trial and not to incriminate himself. Likewise, any information provided by Mr. Antonov under compulsion in the English civil proceedings as to the location and details of his current assets, pursuant to the disclosure provisions of the WWFO, could not be used as evidence against him in his criminal trial because to do so would be in breach of his rights against self-incrimination.
vi) Saunders v UK did not address the somewhat different point as to whether the use by prosecuting authorities of statements compulsorily obtained in civil or regulatory proceedings (for example to inform the criminal investigation or the decision to prosecute), as opposed to any deployment in evidence at a criminal trial, would breach the Convention rights of a suspect or defendant; this is apparent from paragraph 67 of the ECHR's judgment. I was not referred to any authority where this issue was expressly considered, whether by the ECHR or by the English court. However, in Den Norske Bank ASA v Antonatos [1999] QB 271, at 289 A-B (a case in which Saunders v UK was referred to in the judgment), the Court of Appeal clearly considered that, at least so far as the common law privilege was concerned, a witness was entitled to claim privilege, not merely in relation to:
"… any piece of information or evidence on which the prosecution might wish to rely in establishing guilt",vii) but also in relation:
"… to any piece of information or evidence on which the prosecution would wish to rely in making its decision on whether to prosecute or not";in other words, the privilege applied not merely to prevent the deployment of self-incriminatory evidence in proceedings, but also the use of such information in the course of a criminal investigation. It may be that a similar assumption was made in Rottmann v Brittain [2010] 1 WLR 67 (CA) at paragraph 14, although, in that case the Court considered that the safeguards that had been put in place in the context of a private examination of a bankrupt, adequately protected the bankrupt's Convention rights in any German criminal proceedings.viii) The Court should assume that the court of another Member State which is a signatory to the Convention will comply with the requirements of the Convention: see Rottmann v Brittain (supra). In that case, the court rejected a claim to rely on the privilege against self-incrimination in the context of an examination of a bankrupt and parallel criminal proceedings in Germany; at paragraph 16, Ward LJ stated:
"14 Here the judge has sought to alleviate the possibility of harm to the bankrupt by directing that the hearing take place in private with a judge of the High Court having control over the release of the transcripts. The applicant contends that this is insufficient protection, because the biggest creditor in the financial fiasco in Germany is a trust company which is in fact a part of the German Finance Ministry, or at least has the closest possible links to the Finance Ministry, and it is the body which filed the complaint against him and provided the evidence upon which the German authorities had relied in bringing the criminal proceedings against him. He submits that this trust company will inevitably pass to the German prosecution all the material that is made available in the bankruptcy proceedings in England. Even if the prosecutor does not make use of the actual transcript, the nature of the questions that had been asked and the answers that had been given will enable the prosecutor to gain unfair advantage over him in those criminal proceedings, and that, he submits, works to his considerable disadvantage. I regret I do not agree. The bankruptcy court has control over the use to be made of these proceedings since they are proceedings in private. It will, I believe, be a contempt of court to reveal the information in chambers without permission of the court. The fears of the bankrupt are in my judgment unfounded.15 He submits that in this case the protection given under section 14 of the Civil Evidence Act of 1968 is incompatible now with the guarantee under Article 6. Section 14 provides:'(1) The right of a person in any legal proceedings other than criminal proceedings to refuse to answer any question or produce any document or thing if to do so would tend to expose that person to proceedings for an offence or for the recovery of a penalty-(a) shall apply only as regards criminal offences under the law of any part of the United Kingdom and penalties provided for by such law'16 In so providing the Act is reflecting the law which I have already recited. It seems to me to be fully in accord with the European Convention law, and therein lies what seems to me Mr Rottmann's greatest difficulty. It is in my judgment for the English court to control proceedings before the English court. It is for the judge dealing with the bankruptcy matter to exercise his discretion in allowing or not allowing incriminating questions to be put to and to be answered by Mr Rottmann. But such use as may be made of those answers in Germany is a matter for the German court to control. Germany is a signatory to the Human Rights Convention . The German court will, we must assume, and I assume it without any doubt at all, consider any objection to the use of the transcript which may be made by Mr Rottmann should he ever stand his trial in Germany. That consideration would be by reference to the case of Saunders v United Kingdom, of which Germany no doubt will take full and due and proper notice. It is for the German court to control its proceedings and not for this court to be further concerned about the hypothetical use that may be made in that jurisdiction. The judge, if I may so, bent over backwards to protect Mr Rottmann by acceding to his request that the examination should not be a public examination, that it should be conducted in private. In doing so the judge was exercising the discretion he had under rule 6.175(6). In order to upset his conclusion, Mr Rottmann has to show that he exceeded the generous ambit within which there is reasonable room for disagreement. Far from the judge making any error in the exercise of his discretion, I can see no fault made by him whatsoever."ix) As a general rule, principles of comity require cogent evidence before an English court can or will conclude that there is a risk that justice will not be done in a foreign court: see Altimo Holdings v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804 at paragraphs 89-102. This is particularly so where the foreign country is an EU member and signatory to the Convention: see the extradition cases of Ruiz Jaso v Central Court of Criminal Proceedings No5 of the National Court, Madrid [2007] EWHC 2983 (Admin), [2008] 1 WLR 2798; Symeou v Public Prosecutor's Office, Patras, Greece [2009] 1 WLR 2384 at paragraph 66; Targosinski v Poland [2010] EWHC 1820 (Admin) at paragraphs 5-11.
x) Even if the court concludes that there is a real risk of prejudice, that fact in itself should not necessarily excuse the defendant from providing disclosure of his assets. The Court is entitled to take into account whether measures can be put in place which will sufficiently reduce the risk of self-incrimination in practice: see, for example, Credit Suisse Trust v Cuoghi [1998] QB 818 at 830E-F (per Millett LJ) and 833E (per Lord Bingham of Cornhill CJ). In Ablyazov (where the submissions made by the Defendant regarding the risk to his interests if disclosure was ordered were similar to those made by Mr. Antonov), Teare J noted that, although there was a risk of self-incrimination and prejudice to the defendant, such matters were outweighed by the fact that:
a) disclosure was only to be made (at least until the return date) to the claimant's solicitors and counsel;b) the Claimant was seeking proprietary remedies;c) the Claimant had given undertakings not to use any information obtained as a result of the order for the purposes of civil or criminal proceedings in England or any other jurisdiction other than the claim;d) the Claimant was subject to the implied undertaking that it would not use documents received in the course of the action other than for the purposes of the action;e) there was a possibility of policing the undertaking by way of sequestration of the claimant's assets held in England; andf) the Defendant had not identified grounds for suggesting that the claim brought was not a good claim.It is to be noted that the Court of Appeal upheld the decision of Teare J on the basis that he considered the relevant factors and reached a decision that he was entitled to reach albeit that (in the absence of Particulars of Claim, and where there had been delay in making the application) the failure to identify any defence to the claims was thought to be a factor which was not entitled to much weight (per Pill LJ at paragraphs 27 and 28).Pill LJ noted at paragraph 27 that:"On the evidence available to him, he was entitled to attach considerable weight to the need for a disclosure provision to make this freezing order effective".
The exercise of the Court's discretion
i) Given the nature and amount of the Bank's claim, and the evidence relating to the manner of the alleged misappropriations by Mr. Antonov, I take the view that this is quintessentially a case where a disclosure order is clearly necessary to make the freezing order effective. The reality is that, in the absence of disclosure of current assets, it will be almost impossible for the Bank to take steps to ensure that any judgment it may obtain will be enforceable. In the absence of a defence from Mr. Antonov, however, I attach little weight to Mr. Zacaroli's submissions as to the strength of the Bank's claim or as to the fact that Mr. Antonov has not chosen to put forward in his evidence any detailed defence to the claim, other than the assertion that the nationalisation of the Bank and the criminal proceedings are politically motivated.
ii) In the absence of cogent evidence to the contrary, I am entitled to assume that Lithuania, as well as Latvia and Switzerland, will honour their obligations under the Convention.
iii) Notwithstanding the evidence adduced by Mr. Antonov, which I have carefully considered, there is no sufficiently cogent evidence before me to suggest that, in relation to this aspect of the matter, the Lithuanian state will not honour its obligations under the Convention to ensure that Mr. Antonov has a fair trial. Thus I am not prepared to assume that, in breach of his rights under Article 6 of the Convention, a Lithuanian court would allow his answers to the disclosure order to be used in evidence against him at any criminal trial in Lithuania. Like the Court of Appeal in Rottmann v Brittain, I consider that, even if the Lithuanian Prosecutor were to obtain any of the information disclosed by Mr. Antonov under the compulsory provisions of the WWFO, it is for the Lithuanian court to control such use as may be made by the Lithuanian Prosecutor in the context of the criminal proceedings, so as to ensure that Mr. Antonov's Article 6 rights are preserved. Similar conclusions apply in relation to Switzerland and Latvia because they are both Convention compliant countries. Moreover, as at present there is no evidence that there is any credible risk of Mr. Antonov's extradition to those countries.
iv) Mr. Antonov has not established on the evidence that the Bank should effectively be treated as equivalent to the Lithuanian Prosecutor and that the former can effectively be regarded as a conduit for passing information on to the latter. In this respect I refer to the evidence which I have summarised at paragraphs 82 - 84 below to demonstrate that the Bankruptcy Administrator acts independently of the Lithuanian government and the Lithuanian Prosecutor.
v) The Bank, its employees, agents and legal advisers, which necessarily includes the Bankruptcy administrator, his staff and agents, are necessarily subject to the standard undertaking that they will not, without the permission of the court, use any of the information disclosed under compulsion by Mr. Antonov pursuant to the terms of the WWFO, other than for the purposes of the current civil proceedings in England, and in particular that they will not use such information "for the purpose of any civil or criminal proceedings, either in England and Wales or in any other jurisdiction". This undertaking of itself should prevent any disclosure by any of the foregoing of the information disclosed by Mr. Antonov about his assets to the Lithuanian Prosecutor, the Lithuanian state, or indeed the prosecuting authorities in Latvia or Switzerland or indeed any other country.
vi) However, nonetheless, there is in my view, and despite such undertaking, a risk that information obtained from Mr. Antonov under compulsion as to his current assets, could, whether inadvertently or otherwise, be communicated to the Lithuanian prosecuting authorities and thus used by the latter for the purposes of the criminal investigation and, in particular, collating the necessary evidence to be used against him in the criminal trial to demonstrate misappropriation or informing their decision as to prosecution. That is so despite the fact that, under Article 6 of the Convention, Mr. Antonov's actual answers could not be relied upon as evidence at any criminal trial in Lithuania. Such a consequence might adversely prejudice Mr. Antonov in the criminal investigation, although I do not make any finding as to whether such prejudice will in fact occur, or whether it would be unfair.
vii) I mention, simply by way of illustration, four examples of how information might become available to be Lithuanian Prosecutor, notwithstanding the undertaking:
a) First, it could be the case that, at a meeting of the Bank's creditors committee, on which the Lithuanian state is represented, there might be discussion of information disclosed by Mr. Antonov as to his assets; if such information was disclosed, for example, for the purpose of obtaining the committee's sanction for continuing finance for the current English proceedings, such disclosure would not necessarily be in breach of the undertaking as it presently appears in paragraph (8) of Schedule B to the order.b) Second, any reference in a public hearing in the current civil proceedings to such information, might run the risk of the Lithuanian Prosecutor obtaining such information, if he or his representative were to attend court.c) Third, if permission were obtained to use the information in proceedings in another jurisdiction, in order to freeze Mr. Antonov's assets in such jurisdiction, information might come into the public domain as to the location and details of Mr. Antonov's assets which could be used by the Lithuanian Prosecutor for the purposes of his criminal investigation, and thereby give rise to a train of enquiry, notwithstanding that the answers actually given by Mr. Antonov could not be used in evidence at any Lithuanian criminal trial against him.d) Fourth, there is a risk, based upon the evidence of Mr. Antonov's Lithuanian law expert, albeit directly contrary to the evidence given by the Bank's expert, that Mr. Cooper, when in Lithuania, might be forced, by means of a compulsory order or requirement, to disclose the information provided by Mr. Antonov. Mr. Zacaroli accepted that such risk existed.viii) However, in my judgment, the risk that such information may come into the hands of the Lithuanian Prosecutor, and that secondary use may be made of information to assist in the criminal investigation is not a factor, which balancing the competing interests of the Bank and Mr. Antonov, in the exercise of my discretion outweighs the need and obligation for him to provide disclosure under the terms of the WWFO. Such risks can in my judgment be adequately addressed by imposing further safeguards, in addition to those which I have referred to above as the proposed safeguards. These further safeguards would be along the following lines.
a) First, I will make an order clearly setting out that none of the information disclosed by Mr. Antonov as to his current assets pursuant to the compulsory terms of the freezing order ("the current assets information") is, without the prior leave of the court, to be disseminated beyond a limited number of named members of the Bank's legal team, Mr. Cooper and named members of his staff in England. I include Mr. Cooper in the confidentiality ring notwithstanding that, on the basis of Mr. Antonov's evidence (albeit not on the basis of the Bank's), there is a risk that he might, in Lithuania, become subject to a compulsory requirement to provide information notwithstanding an express order of this court prohibiting him from disclosing it. I consider, on the basis of the expert evidence, that such risk is slight. I reach this conclusion notwithstanding the fact that, in a meeting, the Lithuanian Prosecutor orally declined to give a voluntary undertaking to the effect that he would not require the Bank to disclose to him the current assets information, on the basis that, constitutionally, he was unable to restrict himself in a voluntary fashion, because of his obligation to use all means to investigate crime. I take the view that it would be unrealistic, impractical, and prejudicial to the interests of the creditors for Mr. Cooper not to be involved in the litigation strategy for the Bank's claim, in particular since this might involve decisions as to whether to take steps to obtain further freezing orders or other relief in other jurisdictions.b) Second, I will make an express order (as opposed to accepting a mere undertaking) that the current assets information is only to be used by the Bank for the purposes of the English civil proceedings and not in connection with or for the purposes of any criminal proceedings whether in England, Lithuania, Latvia, Switzerland or elsewhere.c) Third I will make an express order that any application, whether on notice or without notice, to this court to obtain permission to use the current assets information for the purposes of existing or contemplated civil proceedings in any other jurisdiction, is to be made in private, as opposed to in public.d) Fourth I will make express order that, without prior agreement between the parties or the prior permission of the court, no reference is to be made in any public hearing to the current assets information.
Mr. Antonov's claim that the WWFO circumvents the 2003 mutual assistance regime
i) the Crime (International Co-Operation) Act 2003 sets out a comprehensive statutory regime for obtaining information for use in criminal proceedings abroad.[8] Lord Diplock In Rio Tinto Zinc Corporation v Westinghouse [1978] AC 547 at page 633 stated:
"The jurisdiction of English courts to order persons within its jurisdiction to provide oral or documentary evidence in aid of proceedings in foreign courts has always been exclusively statutory."ii) If the court is satisfied that evidence provided by Mr. Antonov can be obtained by foreign prosecuting authorities and used in foreign criminal proceedings, then it must consider whether an order requiring such disclosure would undermine the protections set out in the 2003 Act.
iii) The Divisional Court has recently held in the context of orders for disclosure based on the exercise of the Norwich Pharmacal jurisdiction (which often overlaps with the Mareva injunction jurisdiction):[9]
"… the power of the courts to use Norwich Pharmacal proceedings must, in our view, be developed within the confines of the existence of the statutory regime through which evidence in proceedings overseas must be obtained. Norwich Pharmacal proceedings are not ousted, but where proceedings, such as the present proceedings, are brought to obtain evidence, the court as a matter of principle ought to decline to make orders for the provision of evidence, as distinct from information, for use in overseas proceedings. It cannot permit the statutory regime, with the safeguards to which we have referred, and will refer in more detail, to be circumvented." (emphasis supplied)iv) Although the circumstances were different, the principle that the court must be vigilant to ensure that the exclusive statutory regime is not being circumvented is equally applicable to the present case. In the present case, it is clear that any asset disclosure provided by Mr. Antonov could be obtained by prosecuting authorities in Lithuania, Latvia and Switzerland. Ordering asset disclosure would therefore enable those prosecuting authorities to bypass the 2003 Act, and denies Mr. Antonov the numerous protections and procedures set out by Parliament in that Act to govern the obtaining of for use in foreign criminal proceedings.
v) Therefore, were the Court to order asset disclosure in this case, all of these protections set out in a comprehensive statutory regime would be undermined.
Discussion and determination of Mr. Antonov's further argument based on alleged circumvention of the 2003 Mutual Assistance Regime
i) The Bank remains an independently incorporated entity subject to applicable Lithuanian laws and regulations.
ii) Mr. Cooper retains power and control over the Bank, and his primary responsibility is to the creditors and the Lithuanian court.
iii) He has received no instructions or directions from the Lithuanian government, the Lithuanian Prosecutor or Central Bank in respect of the WWFO, the underlying claim or his role generally.
i) There is no two-way flow of information between the prosecuting authorities and the Bank. The Bank and the Bankruptcy Administrator's team have provided information to the investigating authorities where required to do so, but have received "very limited" information from the Financial Crime Investigation Service and nothing from the Lithuanian Prosecutor. As Mr. Zacaroli submitted, given that the Bank maintains that it has been a victim of a massive misappropriation of assets, it would be rather surprising if it had not contacted the police. The Bankruptcy Administrator is the custodian of the Bank's books and records.
ii) The Lithuanian prosecuting authorities were not party to any discussions regarding the strategy or preparation of the WWFO application and civil claim, and none of the Bankruptcy Administrator's team works with or for the Lithuanian Prosecutor.
iii) All information passed to the Lithuanian authorities has been information derived from the books and records of the Bank or information obtained voluntarily from third parties.
iv) As far as Mr. Huck and the Bankruptcy Administrator's team are aware, no information has been provided to the authorities in breach of any legal restriction, undertaking or court order and no request to provide information in breach of any such restriction, undertaking or order has been received.
Disposition
Note 1 The application notice also sought an order that, in the event that the Variation Application were dismissed, an extension of time for compliance with the disclosure obligations until after the final determination of the Discharge Application; however, as the applications were heard at the same time, this separate head of relief ceased to be of any practical relevance. [Back] Note 2 According to the Bank’s evidence, the value of these assets has risen by approximately €10 million since the date of the original transfer. [Back] Note 3 I was subsequently advised, by a letter dated 22 January 2013 that the extradition hearing had not taken place, and was now scheduled to start on 8 July 2013, with an estimate of ten day. [Back] Note 4 I was informed by Mr. Zacaroli QC that the Lithuanian state, in its capacity as provider of the compensation fund for depositors, amounted to approximately 45% in value terms of all creditors. [Back] Note 5 See also section 31 of the Theft Act 1968. [Back] Note 6 In adopting this approach I have taken into account these submissions made in Mr. Mill’s letter dated 23 November 2012 and Mr. Zacaroli’s reply dated 27 November 2012. [Back] Note 7 In adopting this approach I have taken into account these submissions made in Mr. Mill’s letter dated 23 November 2012 and Mr. Zacaroli’s reply dated 27 November 2012. [Back] Note 8 For foreign civil proceedings: The Evidence (Civil Proceedings in Other Jurisdictions) Act 1975. [Back] Note 9 Omar v Secretary of State for Foreign and Commonwealth Affairs [2012] EWHC 1737 (Admin) at paragraph 64. [Back]
