The High Court in London has issued a significant ruling in a case centred around the recovery of billions of dollars of assets belonging to an East European businessman who died in the UK.
Arkady Patarkatsishvili died 10 years ago at his mansion in Surrey. Patarkatsishvili, known as Badri, died without leaving a valid will and his death led to numerous legal proceedings over his estate, estimated to be worth several billion dollars.
The High Court has issued a judgment ruling that three men, including a prominent Georgian businessman and an English solicitor, took part in an unlawful conspiracy and breached ‘serious’ fiduciary duties to pursue the recovery of Badri’s fortune.
The decision means that legal proceedings will continue against the three men in an effort to recover fees and success payments they received while recovering Badri’s assets.
Following Badri’s death, a number of people including the Russian businessman, Boris Berezovsky, laid claim to his estate and legal proceedings ensued in a variety of jurisdictions.
The task of recovering Badri’s assets was initially entrusted by Badri’s family to Salford Capital Partners Inc (SCPI), which had been an adviser and partner to Badri for a number of years.
A number of senior SCPI employees, including CEO Eugene Jaffe, began to work to help Badri’s widow protect the estate. They also initially included Irakli Rukhadze, then director of SCPI and head of Salford Georgia, and now a prominent Georgian businessman, and subsequently Igor Alexeev and Ben Marson, an English solicitor based in London.
After three years of successful work, a dispute broke out between SCPI and Messrs Rukhadze, Alexeev and Marson, leading to a breakup in 2011.
Recovery Partners GP Limited and Revoker LLP, entities created by SCPI, undertook proceedings against the three men.
After nearly two years of litigation and a four week trial, in her judgment Mrs Justice Cockerill found that due to their actions the three individual defendants in the case had deprived the claimants of a maturing business opportunity. She found they conspired and took preparatory steps to split from SCPI and take for themselves the lucrative opportunity to pursue the recovery process. The judge stated: “In the circumstances I conclude that the requirements of conspiracy are made out as between the individual defendants.”[i]
The judge held that this was something they were not entitled to do and that they breached ‘serious’ fiduciary duties owed by them as senior employees of the claimants, stating: “There is no doubt in my mind that, in the context of the fiduciary duties owed these actions amounted to disloyalty, particularly when taken together with the actions which the defendants were taking to make themselves ready to continue the recovery services in a post-SCPI world. I conclude that each of the individual defendants breached their fiduciary duties.”[ii]
Mrs Justice Cockerill also noted that Mr Marson’s “casual approach to the erroneous use of Statements of Truth on the Defences … indicated that his conduct fell below the levels that one would expect for a qualified solicitor.” [iii]
Following the split from SCPI, the three defendants completed the recovery of Badri’s estate and created a new firm, Hunnewell Partners, for that purpose. In the last few years, they have made a number of high-profile investments, including through Hunnewell, in Georgia, including buying substantial stakes in Liberty Bank, Rustavi Steel, Magti and Heidelberg Cement Georgia, and have established a litigation funding business. Lawyers for the successful claimants are now preparing to take further legal steps to secure the money owed. It is estimated that they recovered over $2 billion for the estate and earned hundreds of millions of dollars for themselves in the process.
A spokesman for Recovery Partners said: “This is a significant High Court judgment which enables us to pursue our rights in recovering substantial sums of money that would have been paid to us but for the actions of those who conspired to deny the SCPI of its legitimate business opportunity.
“The proceedings will now move forward into a second phase in which the court will determine what Salford has lost as a result of the defendants’ actions, alternatively what the defendants have illegitimately earned. At the end of that second phase, the court will make an order requiring the defendants to compensate us either by way of damages or by way of surrendering the sums and other benefits which they have earned by taking the business for themselves.”
A spokesperson for Hunnewell Partners commented: “While certain points of law may have been found against Hunnewell and related parties in this first instance hearing, at which no costs were ordered against Hunnewell, Hunnewell will be appealing the findings of the court. Corporations associated with the principal claimant, two of which are in insolvency due to unpaid debts, including those ordered by the court, have been entirely unsuccessful to date in their numerous and at times frivolous attempts to prevail in manifestly overly-aggressive proceedings against Hunnewell and its clients. Hunnewell remains confident of the ultimate outcome of these proceedings.”
(Source: Recovery Partners GP Limited)