Alliance Bank JSC (a company incorporated in accordance with the laws of Kazakhstan) v Baglan Abdullayevich Zhunus (formerly Baglan Abdullayevich Zhunusov) and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cooke |
| Judgment Date | 18 March 2015 |
| Neutral Citation | [2015] EWHC 714 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2014 FOLIO 887 |
| Date | 18 March 2015 |
[2015] EWHC 714 (Comm)
Mr Justice Cooke
Case No: 2014 FOLIO 887
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
C. Kinsky QC and N. Craig (instructed by Reed Smith LLP) for the claimants
M. Howard QC, A. HaydonandMiss A. Dilnott (instructed by Cleary Gottlieb Steen & Hamilton LLP) for the 2nd defendant
Hearing dates: 10th and 11th March 2015
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Cooke Mr Justice Cooke Introduction
On 14 November 2014 Flaux J:
i) gave the Claimant ("Alliance") permission to serve a Claim Form and Particulars of Claim out of the jurisdiction (by alternative means) on the Second Defendant ("Mr Arip"); and
ii) made a worldwide Freezing Order against Mr Arip in respect of assets up to the value of £206 million ("the Freezing Order").
In the claims underlying these applications, Alliance contends that in 2008 the Defendants devised and executed a scheme to acquire for their own benefit valuable assets (namely the shares and assets of two Russian companies which owned and operated oilfields formerly known as Krasnoleninskneftegaz-Dobycha ("KNG-D") and DinyelNeft LLC ("DinyelNeft")) and in so doing to deprive Alliance of the benefit of these assets as security for borrowing facilities and lending which totalled approximately US$316 million.
The following applications fall to be determined:
i) An application by Alliance for a continuation of the Freezing Order made by Flaux J on 14 November 2014 until trial or further order.
ii) Applications by Mr Arip:
a) To discharge the Freezing Order on the grounds that (i) Alliance does not have a good arguable case against him and (ii) there were material non-disclosures at the without notice hearing on 14 November 2014.
b) To set aside service of the Claim Form on the grounds that there is no serious issue to be tried and that there were material non-disclosures at the without notice hearing on 14th November 2014.
Other applications made in respect of the first and third defendants' positions were resolved by agreement between the parties. The evidence adduced by the parties took the form of affidavits and witness statements, including in particular evidence from Mr Bolgauov, (the senior banker of the legal services division of Alliance), Mr Arip, the solicitors acting for Alliance and Mr Arip respectively and the statement of a Russian lawyer in relation to the enforceability under Russian law of pledges given by Trendall then under the control of Mr Arip.
Proceedings were commenced in this country on 22nd July 2014 with details of the claim set out as follows in the Claim Form:
"1. Between 2006 and 2007 the Claimant ("Alliance Bank") lent the equivalent of approximately US$222,000,000 to Simons Holding BV, Argentan S.A., Barnard Commercial S.A. ("the Original Borrowers") in Kazakhstan to permit them to invest in, among other things, various oil companies ("the Original Loans"). The Original Loans were secured by, amongst other security, pledges in the shares in two of the oil companies, namely KNG-Dobycha LLC and DinyelNeft LLC ("the Original Pledges").
2. In about October 2008 the Defendants persuade Alliance Bank that the Original Loans should be replaced by new loans [the Replacement Loans] to Bolzhal Limited LLP, Commerce Business Centre Limited LLP, Caspian Minerals LLP and Holding Invest LLP ("the replacement Borrowers") and that the amount lend should be increased to the equivalent of approximately US$295,000,000 representing among other things, that the Replacement Borrowers were more reliable counterparties. The Replacement Borrowers were owned or controlled by the Defendants and/or were affiliated with them.
3. Under the terms of the Replacement Loans the Replacement Borrowers were to provide pledges of the shares in and assets of KNG-Dobycha LLC and DinyelNeft LLC, which were by then indirectly owned by the Replacement Borrowers. Alliance Bank released the Original Borrowers from their obligations under the Original Pledges.
4. The Replacement Borrowers drew down all of the loan monies. However, they did not provide the security agreed. Instead, the Defendants persuade Alliance Bank to accept as security for the Replacement Loans pledges of shares in OmskGeoTEK LLP, SibGeoTEK LLP and SibirGeoTEK LLP ("the GeoTEK companies") representing that these shares were more valuable than the shares in KNG-Dobycha LLC and DinyelNeft LLC.
5. At the same time the Defendants procured that KNG-Dobycha LLC and DinyelNeft LLC should be transferred to subsidiaries of a company which became known as Exillon Energy plc ("Exillon"). The Defendants were shareholders in Exillon. … In December 2009 new shares in Exillon were the subject of an IPO on the London Stock Exchange which valued the company at about £186 million. That value reflected the value of its interest in KNG-Dobycha LLC DinyelNeft LLC. …
6. None of the money lent under the Replacement Loans has been repaid to Alliance Bank. The Replacement Borrowers are insolvent. The shares in the GeoTEK companies are worthless.
7. The Defendants conspired to deprive Alliance Bank of the valuable security which it held over the shares in KNG-Dobycha LLC and DinyelNeft LLC and to obtain the value of those companies for themselves."
The claim form went on to set out a series of actions which were said to be unlawful and to constitute wrongdoing under Kazakh law, with resultant harm to Alliance.
The allegations in the Particulars of Claim and the relevant facts relied on by Alliance
Under the heading of "the pledge of the KNG-D shares", paragraphs 4–7 of the Particulars of Claim ("POC") set out the pledge by Kausar Overseas of its 50% holding of the shares in KNG-D to Alliance as security for the obligations of Simons Holding under its loan from the bank. Under the heading "the pledge of the DinyelNeft shares" paragraphs 8–12 set out the pledge by two British Virgin Islands companies, Barnard Commercial SA and Argentan SA of their shares in DinyelNeft in respect of debts owed by them to Alliance under loan facilities. These companies were all linked to the Seisembayev brothers who at that time owned Alliance. The loans were therefore "shareholder-related loans".
Under the heading "the scheme to free the shares of KNG-D and DinyelNeft from the pledges", Alliance set out its case that, at or about the beginning of 2008, the defendants developed a plan to acquire for their own benefit the valuable assets represented by the shares of KNG-D and DinyelNeft and, in doing so, to deprive Alliance of the benefit of those assets as security for the borrowing of Simons Holding, Barnard and Argentan. In furtherance of that plan, it was alleged that the defendants took or procured the taking of steps set out in paragraphs 14–40 of the POC with, where necessary, the assistance of persons within Alliance, whose identity was not known to the present management of Alliance. Underlying this allegation is evidence that Mr Arip had stated that he had been in partnership with the Seisembayev brothers and that, prior to February 2009, when the structure of Alliance was changed, employees of Alliance acted at the behest of the brothers, to the detriment of the interests of Alliance.
At paragraph 16, reference was made to applications made in October 2008 by companies owned by Mr Arip for loans from Alliance. The companies in question were Bolzhal Limited LLP ("Bolzhal"), Holding Invest LLP ("Holding Invest"), Caspian Minerals LLP ("Caspian") and Commerce Business Centre ("CBC"). Details of the loan arrangements were then spelt out, albeit not entirely accurately. For present purposes, the more critical provisions of the Loan Agreements were these:
i) Caspian agreed to provide security for its loan in the shape of KNG-D shares.
ii) CBC and Bolzhal, by article 3.5 of the loan agreements agreed not to alienate assets held by them without the consent of Alliance. Those assets included, as appears from the following paragraph of this judgment, the 50% shareholding in KNG-D and the 100% shareholdings in DinyelNeft.
iii) Security was to be provided within a period of 1 month by all the Borrowers.
On or about 24th October 2008 Caspian purchased all of the shares in Kausar Overseas, CBC purchased all of the shares in Barnard and Bolzhal purchased all of the shares in Argentan, with resultant indirect ownership by Caspian, CBC and Bolzhal of Kausar's 50% interest in KNG-D and Barnard and Argentan's combined 100% interest in DinyelNeft.
On the same day, 24th October 2008, Barnard, Argentan and Kausar concluded a Memorandum of Understanding or Term Sheet with the company which was later to be named Exillon Energy PLC ("Exillon"), and to be the subject of an IPO on the London Stock Exchange. The Memorandum confirmed the intention of Exillon to acquire directly or through its affiliates the 50% shareholding in KNG-D and the combined 100% holdings in DinyelNeft for the price of $4.069 million. Exillon was also to discharge the indebtedness of those companies to Argentan, Barnard and Kausar. In a supplemental document dated November 28th 2008 the parties confirmed their intention that this indebtedness should be written off.
On 3rd December 2008 Alliance made a further loan to CBC which agreed to provide a 100% shareholding in DinyelNeft as security for fulfilment of its obligations.
On 29th December 2008 Alliance...
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