(1) Kazakhstan Kagazy Plc v (1) Baglan Abdullayevich Zhunus (formerly Baglan Abdullayevich Zhunussov)
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Picken,THE HON. |
| Judgment Date | 22 December 2017 |
| Neutral Citation | [2017] EWHC 3374 (Comm) |
| Docket Number | Case No: CL-2013-000683 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 22 December 2017 |
[2017] EWHC 3374 (Comm)
THE HON. Mr. Justice Picken
Case No: CL-2013-000683
IN THE HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Robert Howe QC, Jonathan Miller and Daniel Saoul (instructed by Allen & Overy LLP) for the Claimants
Andrew Twigger QC, Anna Dilnot and Adam Woolnough (instructed by Cleary Gottlieb Steen & Hamilton LLP) for the Defendants
Hearing dates: 25, 26, 27 and 28 April, 2, 3, 8, 9, 10, 11, 15, 16, 17, 22, 23, 24, 25 and 26 May, 12, 13, 14, 15, 16, 19, 20, 26, 27, 28 and 29 June, 3, 4, 5, 6, 17, 18, 19 and 20 July 2017
Judgment supplied in draft to the parties: 11 December 2017
Judgment Approved
Contents
| Introduction | ……………………………. | [1]–[3] |
| An outline of the Claimants' case | ……………………………. | [4]–[19] |
| An outline of the defences raised | ……………………………. | [20]–[23] |
| Procedural history | ……………………………. | [24]–[26] |
| Factual witnesses | ……………………………. | [27]–[59] |
| The Claimants' factual witnesses | ……………………………. | [28] |
| Mr Tomas Werner | ……………………………. | [29]–[41] |
| Mr Hugh McGregor | ……………………………. | [42]–[44] |
| Ms Viktoriya Gorobtsova | ……………………………. | [45]–[46] |
| Mr Yevgeniy Kuzmenko | ……………………………. | [47]–[50] |
| Mr Karim Khashimov and Mr Berik Nagashibaev | ……………………………. | [51]–[52] |
| Mr Ilkham Gafurov | ……………………………. | [53] |
| The absentees | ……………………………. | [54-[59] |
| The Defendants' factual witnesses | ……………………………. | [60]–[124] |
| Mr Arip | ……………………………. | [62]–[73] |
| Ms Dikhanbayeva | ……………………………. | [74]–[81] |
| Mr Alessandro Manghi | ……………………………. | [82]–[86] |
| Mr Vladimir Gerasimov | ……………………………. | [87]–[93] |
| Mr Nikolay Kosarev | ……………………………. | [94]–[95] |
| Mr Alexander Sannikov | ……………………………. | [96]–[102] |
| Mr Nurlan Sharipov | ……………………………. | [103]–[107] |
| Mr Igor Zhangurov | ……………………………. | [108]–[110] |
| Mr Erzhan Jumadilov | ……………………………. | [111]–[115] |
| Mr Mamed Mamedov | ……………………………. | [116]–[119] |
| Mr Rasul Khasanov | ……………………………. | [120]–[123] |
| Mr Vladislav Belochkin | ……………………………. | [124] |
| The expert witnesses | ……………………………. | [125]–[142] |
| Forensic accountancy | ……………………………. | [126] |
| Audit | ……………………………. | [127]–[130] |
| Kazakh law | ……………………………. | [131]–[133] |
| Land valuation | ……………………………. | [134]–[137] |
| Real estate practice | ……………………………. | [138]–[139] |
| Quantity surveying | ……………………………. | [140]–[142] |
| Kazakh law applicable to the claims | ……………………………. | [143]–[153] |
| The claims which are brought | ……………………………. | [145]–[147] |
| The claims under the JSC Law | ……………………………. | [148]–[149] |
| The claims in tort under Articles 917 and 932 of the KCC | ……………………………. | [150]–[151] |
| The unjust enrichment claims under Articles 953 to 960 of the KCC | ……………………………. | [153]–[154] |
| Proving fraud | ……………………………. | [155]–[165] |
| The PEAK Claim | ……………………………. | [166]–[304] |
| Introduction | ……………………………. | [166]–[171] |
| Arka-Stroy | ……………………………. | [172]–[195] |
| The US$ 49.1 million which Arka-Stroy did not pay out | ……………………………. | [196]–[202] |
| The monies paid out by Arka-Stroy | ……………………………. | [203]–[205] |
| Holding Invest | ……………………………. | [206]–[211] |
| Kagazy Invest, Kagazy Processing and Kagazy Gofrotara | …………………..………. | [212]–[218] |
| Bolzhal and CBC | ……………………………. | [219]–[223] |
| Lotos | ……………………………. | [224]–[230] |
| Kontakt Service Plus | ……………………………. | [231]–[233] |
| TEW | ……………………………. | [234]–[236] |
| HW | ……………………………. | [237]–[239] |
| Trading Company | ……………………………. | [240]–[244] |
| The ‘Kazakh/Construction LLPs’ | ……………………………. | [245]–[250] |
| The construction work which was carried out | ……………………………. | [251]–[257] |
| Akzhal-1/Akzhal-2 | ……………………………. | [258]–[260] |
| Warehouses: Akzhal-1 | ……………………………. | [261]–[265] |
| Other Buildings: Akzhal-1 | ……………………………. | [266] |
| Earthworks: Akzhal-1 and Akzhal-2 | ……………………………. | [267]–[282] |
| Aksenger | ……………………………. | [283]–[284] |
| Earthworks | ……………………………. | [285]–[293] |
| Roads | ……………………………. | [294]–[295] |
| Drainage | ……………………………. | [296]–[297] |
| Centralised locking system | ……………………………. | [298]–[299] |
| Other railway work | ……………………………. | [300] |
| Relevance of Aksenger work | ……………………………. | [301]–[302] |
| Work paid for by the Claimants direct | ……………………………. | [303] |
| Overall conclusions in relation to the PEAK Claim | ……………………………. | [304] |
| The Astana 2 Claim | ……………………………. | [305]–[339] |
| Interest and penalties | ……………………………. | [339]–[357] |
| The Land Plots Claim | ……………………………. | [358]–[361] |
| CBC and Bolzhal | ……………………………. | [362]–[401] |
| Holding Invest | ……………………………. | [402]–[405] |
| Limitation | ……………………………. | [406]–[539] |
| Applicable Kazakh law | ……………………………. | [406]–[418] |
| The Claimants' state of awareness | ……………………………. | [419]–[539] |
| The PEAK and Astana 2 Claims: whether the Claimants “became aware” by 1 August 2010 | ……………………………. | [423]–[499] |
| The PEAK and Astana 2 Claims: whether the Claimants “should have become aware” by 1 August 2010 | ……………………………. | [500]–[517] |
| The Land Plots Claim: whether the Claimants “became aware” by 27 August 2012 | ……………………………. | [518]–[530] |
| The Land Plots Claim: whether the Claimants “should have become aware” by 27 August 2012 | ……………………………. | [531]–[538] |
| Overall conclusion on limitation | ……………………………. | [539] |
| Restoration under Kazakh law | ……………………………. | [540]–[546] |
| ……………………………. | [547]–[563] | |
| Conclusion | ……………………………. | [564]–[566] |
Introduction
This case has been very hard fought, culminating in a trial which spanned some thirteen weeks and which entailed written submissions (opening and closing) running, in total, to almost 1,100 pages (not including all the appendices). It involves very serious allegations of fraud made by the claimant corporate group against three of its former directors (two of whom were also previously substantial shareholders). The Claimants allege that the Defendants (I include in this description all three of the Defendants despite the fact that, as I shall come on to explain, the Claimants have settled with the First Defendant) have misappropriated company assets by way of several complex and elaborate frauds involving construction projects and land acquisitions, which have caused the Claimants to suffer losses of in excess of US$ 250 million. The Defendants strenuously deny these allegations, maintaining that they have at all times acted in good faith. The Defendants have also raised a limitation defence.
The dispute involves Kazakh parties (or in the case of one of the Claimants, KK Plc, an Isle of Man company operating in Kazakhstan), is concerned with events which took place in Kazakhstan and is subject to Kazakhstan law. Mr Andrew Twigger QC (leading Ms Anna Dilnot and Mr Adam Woolnough) drew attention to these aspects (as well as a timing point) during the course of his opening submissions, suggesting that the Court “is being asked to travel to a distant time and place” and, specifically, “to look at a large number of complex transactions conducted many years ago in the unfamiliar environment of an emerging country”. Memorably described by Mr Robert Howe QC (leading Mr Jonathan Miller and Mr Daniel Saoul) as the ‘ Star Wars’ defence, this, Mr Twigger submitted, makes it necessary to adopt a cautious approach which avoids viewing transactions carried out in Kazakhstan prior to 2010 in the same way as commerce is conducted in London in 2017. I bear this point in mind when considering the evidence in this case, together with Mr Howe's inter-galactic inspired riposte (although whether acts before 2010 do properly qualify as “a long time ago” or whether Kazakhstan, or anywhere else, counts as “a galaxy far, far away” are not issues which, thankfully, I am required to resolve). What matters for present purposes is simply the point that the case, like so many which become before the Commercial Court, is truly international in nature; indeed, it is litigation which, in truth, has nothing to do with this jurisdiction other than the fact that it has been commenced here.
As is common with fraud cases, there was a substantial dispute as to the underlying facts. In addition, both sides levelled accusations of dishonesty against the other, including accusations of deliberate destruction/deletion of documents (alleged by both sides), and intimidation by way of threats of physical violence (again, alleged by both sides). There were, therefore, a great number of factual and evidential issues to be resolved. I shall in this judgment try to deal with the main points rather than every point since to do that would make the judgment even longer than it is. Similarly, although I confirm that I have considered every submission which has been made and have taken into account all the evidence which was deployed before me, in what follows my aim is not to address everything but to focus on what seems to me to matter most and to seek to set out sufficient detail to enable the reader (including, most importantly, the parties) to see what I have decided and why I have decided it.
An outline of the Claimants' case
I start with an outline of the Claimants' case. Inevitably much of what follows is tendentious but it is...
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