High Court rules on Fiona Trust fraud case

Claimants Fiona Trust and Holding Corporation and others launched their legal bid after parent company Sovcomflot Group (SCF Group), a Russian shipping business, uncovered irregularities in charterparties that had been entered into with various subsidiaries of the group. A charterparty is a contract between a shipowner and merchant for the leasing of a ship for the purpose of transporting goods.

The claimants subsequently alleged that the charterparties had been procured by bribery and that they contained terms highly favourable to the defendants, which include the former managing director of Fiona Maritime Agencies Limited (renamed Sovcomflot UK) Yuri Privalov. Ince & Co was instructed to act for the claimants with Brick Court’s Andrew Popplewell QC leading the barrister team.

In his ruling Mr Justice Smith said that defendant Yuri Nikitin, the principal of Standard Maritime who was represented by Essex Court Chambers’ Steven Berry QC, was liable for conspiring to injure the SCF Group. It is understood that the defendant will be asked to hand over $65m in compensation to the claimants.

Nikitin was found to have been involved in fraudulent conduct between 2001 and 2004, including the bribery of Privalov, and of collaboration and conspiracy with Privalov and certain individuals at two leading London ship brokers.

As a result of those conspiracies ’commissions’ on various sale and purchase and new build transactions were wrongly diverted away from the brokers’ principals for the benefit of Nikitin.

Claims pursued against Dimitry Skarga, the director general of Sovcomflot between 2001 and 2004 who was represented by Graham Dunning QC of Essex Court, for dishonest breach of duty were dismissed by the court.

Joint proceedings launched by Russian marine company Novoship  Group against its former director general Tagir Izmaylov, represented by Essex Court’s Simon Bryan QC, also for dishonest breach of duty, were also dismissed.

Stephenson Harwood partner Louis Flannery led proceedings for the pair.

Several claims against other parties, including Privalov, were subject to settlements agreed prior to trial totalling approximately $80m.

Timeline

Fiona Proceedings

2005: Fiona Trust and Holding Corporation and its subsidiaries within the Sovcomflot Group launch claims against Yuri Nikitin, principal of Standard Maritime; Yuri Provalov, former managing director of Fiona Maritime Agencies (later Sovcomflot UK); and Dimitry Skarga, director general of Sovcomflot between 2001 and 2004. Ship brokers H Clarkson and Company and ship broker Richard Gale added to the list of defendants at a later date.

Late 2005: Claims against Privolv settled.

June 2008:Claims against Clarkson and Gale settled.

Novoship proceedings

2007: Intrigue Shipping and its sister companies within the Novoship Group launch claims against Privalov; Nikitin and companies controlled by him, namely Milmont Finance and Amon International; Clarkson; Gale and ship brokers Galbraith’s.

2008: Tagi Izmaylov, the director general of Noviship between 2001 and 2005, added as a defendant.

Late 2009: Claims against Galbraith’s settled.

June 2008: Nikitin and Milmont Finance launch part 20 claim against Clarkson in relation to alleged unpaid commissions.

July 2008: The Fiona proceedings and Novoship proceedings are joined.

October 2009: The trial begins in the High Court against principal defendants Nikitin and Skarga in the Fiona proceedings and Izmaylov as principal defendant in the Novoship proceedings.

December 2010: Mr Justice Smith rejects claims of dishonest breach of duty by Skarga and Izmaylov but Nikitin liable for conspiring to injure the SCF Group.