Background and the establishment of the trusts

Following the collapse of Mezhprom Bank (Bank) in 2010, the Bank and its liquidators pursued Mr Pugachev (Pugachev), the founder of the Bank, for the misappropriation of large sums of money.

Pugachev fled Russia and between 2011 and 2013 established five irrevocable discretionary trusts governed by New Zealand law (which for all relevant purposes is the same as English law). The combined value of the trusts was estimated at USD95m and there is evidence that Pugachev took advice as to how to defend his assets from claims by Russian creditors.

Pursuant to the terms of the trusts (which were substantially the same) Pugachev and his minor children were included as beneficiaries, Pugachev was the Protector and his adult son was the successor Protector.

Extensive powers were conferred on the Protector, including consent powers in relation to the trust period, the distribution of income and capital, investment of the trust fund, the removal of beneficiaries, the variation of the trust instrument and the release and revocation of any powers conferred upon the Trustee. Additionally, the Protector had power to direct the Trustee to sell residential property, to add beneficiaries and to appoint and remove trustees with or without cause.

In the event of a Protector being “Under a Disability”, the definition of which was broad and included, importantly, being under a disability due to “coercion by operation of law”, that Protector would automatically and immediately cease to serve as a Protector.

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