(Granton Action) JSC Bta Bank v Mukhtar Ablyazov and Another
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr. Justice Teare,Mr. Justice Teare |
| Judgment Date | 19 March 2013 |
| Neutral Citation | [2013] EWHC 510 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2010 Folio 706, 2009 Folio 1099, 2010 Folio 93 |
| Date | 19 March 2013 |
[2013] EWHC 510 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr. Justice Teare
Case No: 2010 Folio 706, 2009 Folio 1099, 2010 Folio 93
Stephen Smith QC, Philip MarshallQC, Mr. Nigel Hood, Mr. Tim Akkouh, Ms Ruth den Besten and Ms Emily Gillett (instructed by Hogan Lovells International LLP) for the Claimant
Hugh Norbury QC (instructed by Peters & Peters Solicitors LLP) for Zhaksylyk Zharimbetov
Jeffrey Chapman QC and Mr. Simon Atrill (instructed by Olswang LLP) for Ildar Gayarevich Khazhaev
Cyril Kinsky QC and Mr. Peter Griffiths (instructed by Edwin Coe LLP) for Usarel Investments Ltd
Hearing dates: 7, 8, 13-15, 19-22, 26-29 November 2012, 36, 10-13, 17-20 December 2012, 14-18, 21, 22, 28-31 January 2013, 47, 11-14 February 2013
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.
The following note of the contents of this judgment may assist the reader:
Introduction
| Paras. 2–8 | Introduction |
| Paras. 9–29 | The Bank and its officers |
| Paras. 30–41 | The investigations of the AFN |
| Paras. 42–46 | The nationalisation of the Bank |
| Paras. 47–74 | Witnesses |
| Paras. 75–95 | The alleged fraud in Granton |
| Paras. 96–110 | The alleged fraud in Drey |
| Paras. 111–172 | The alleged fraud in Chrysopa |
| Paras. 172–244 | The claim against Mr. Zharimbetov in Granton |
| 171–204 | Knowing assistance |
| 205–207 | Liability under Kazakh law |
| 208–218 | Need for a shareholders' resolution |
| 219–242 | Limitation |
| 243–244 | Quantum |
| Paras. 245–266 | The claim against Mr. Zharimbetov in Drey |
| 245–260 | Knowing assistance |
| 261–266 | Causation and Quantum |
| Paras. 267–311 | The claim against Mr. Khazhaev in Chrysopa |
| 267–300 | Knowing assistance and "deliberate damage" |
| 301–311 | Causation and Limitation |
| Paras. 312–344 | The claim against Usarel for the shares as "dokhody" |
| Paras. 345–348 | The claim against Usarel for damages |
| Paras. 349–351 | Conclusion |
JSC BTA Bank, a bank in Kazakhstan ("the Bank"), has commenced 11 actions against its former chairman, Mukhtar Ablyazov ("Mr. Ablyazov"), and others in which it is alleged that the Bank has been defrauded of up to US$6 billion. This is the judgment of the court in 3 of those actions. They were selected for trial after a contested case management conference (the "CMC") on 29 March 2011 in which the many parties put forward different views as to which actions should be tried first. The Bank wanted only one to be tried. Mr. Ablyazov wanted five actions to be tried and there was a variety of other views. In the event, for reasons given at the CMC, three were selected for trial. They are known as the Granton action, the Drey action and the Chrysopa action. The material events in the Granton action span the period March 2006 — December 2008. The material events in the Drey and Chrysopa actions took place in 2008.
In essence the Bank claims that Mr. Ablyazov defrauded it by procuring the payment of the Bank's money to offshore companies which he owned or controlled. In the Granton action the Bank claims that sums approaching US$2.5bn. were paid away in this fashion. In the Drey action the Bank claims that some US$400m. was paid away and in the Chrysopa action the Bank claims that US$120m. was paid away. The Bank's claims have been pressed with notable vigour and were, until very recently, defended with equal vigour by Mr. Ablyazov. However, in the aftermath of contempt proceedings brought by the Bank against Mr. Ablyazov (see [2012] EWHC 237 (Comm)) the court made an order on 29 February 2012 (see [2012] EWHC 455 (Comm)) that unless Mr. Ablyazov gave full disclosure of his assets and surrendered to the Tipstaff his defence would be struck out. The operation of that order was suspended to permit an appeal by Mr. Ablyazov. But the Court of Appeal gave judgment on 6 November 2012 dismissing his appeal (see [2012] EWCA Civ 1411). On 21 February 2013 the Supreme Court refused permission to appeal. Since Mr. Ablyazov did not give any further disclosure of his assets and did not surrender to the Tipstaff his defence has been struck out. Anticipating that event Mr. Ablyazov had determined (by no later than the pre-trial review on 2 October 2012) that he would take no part in the trial. Thus it was that, having defended the claims brought against him for some three years, Mr. Ablyazov took no part in the trial and therefore gave no evidence. Mr. Ablyazov has complained of this but, as any reader of the contempt judgments at first instance and on appeal will appreciate, he has brought this situation on himself. He has fled to an undisclosed location.
As a result of his defence being struck out the Bank has now obtained judgment against Mr. Ablyazov in the Drey action for a sum in excess of US$400m.. It has also obtained judgment on the same basis against Mr. Ablyazov in what is known as the DCM action for a sum in excess of £1 billion with interest accruing on the judgment in a sum of in excess £225,000 per day. At the end of the trial the Bank sought judgment on the same basis against Mr. Ablyazov in the Granton action in a sum in excess of US$1 billion and in the Chrysopa action in a sum to be assessed. Judgment was also sought against Chrysopa (a Dutch company) and Lux (a Cypriot company) in a sum to be assessed on the basis that their defences had also been struck out. The court was asked to grant such judgments when handing down this judgment and so no formal order has yet been made. I merely record that there is no reason why such judgments should not be given at that time. Finally, judgment was sought in default of acknowledgment of service against Mr. Rybalkin, a Russian lawyer. Again, there is no reason why such judgment should not be given.
Notwithstanding the judgments which have been given or will be given against Mr. Ablyazov the Bank seeks judgment in the Granton and Drey actions against Mr. Zharimbetov (a 45 year old Kazakhstani citizen who now lives in London but who held office in the Bank under Mr. Ablyazov) and in the Chrysopa action against Mr. Khazhaev (a 31 year old Russian citizen who lives in Moscow and was employed by the Bank in Moscow) and Usarel (a Cypriot company). What prospect, if any, the Bank has of executing any judgment it obtains against Mr. Zharimbetov and Mr. Khazhaev is, at best, unclear. However, Usarel used the proceeds of the Chrysopa loan to purchase the Vitino port in the White Sea on the northern coast of Russia and the Bank asserts against that asset what it says is the Kazakhstani equivalent of a tracing claim in English law (dokhody). The Vitino port therefore appears to be a real and substantial prize in the Chrysopa action.
These proceedings arise out of events in Kazakhstan. They are being heard in the English Commercial Court because Mr. Ablyazov and Mr. Zharimbetov, having taken up residence in London, were sued in this jurisdiction and had no interest in suggesting that the forum conveniens for determining the disputes against them was Kazakhstan. They do not consider themselves safe in Kazakhstan. No other party sought a stay on the grounds of forum conveniens.
The opening skeleton arguments ran to some 240 pages plus appendices. The trial lasted 44 days. There was a vast amount of documentary evidence which could be accessed electronically and 10 witnesses of fact were called to give oral evidence. In addition, experts in Kazakh and Russian law, Kazakh banking practice, the oil and gas industry and handwriting gave oral evidence. The closing written submissions ran to some 500 pages plus extensive appendices. Despite the length of the trial, the array of evidence and the extensive and detailed written and oral submissions, the principal issues in the trial can be simply described, as follows:
Granton and Drey
a) Did Mr. Ablyazov commit a fraud on the Bank?
b) If so, did Mr. Zharimbetov know of that fraud and assist Mr. Ablyazov to commit it?
c) If so, is Mr. Zharimbetov liable to the Bank under Kazakh law?
Chrysopa
d) Did Mr. Ablyazov commit a fraud on the Bank?
e) If so, did Mr. Khazhaev know of that fraud and assist Mr. Ablyazov to commit it?
f) If so, is Mr. Khazhaev liable to the Bank under Russian law?
g) What liability, if any, does Usarel have to deliver up the shares in the White Sea port of Vitino and/or to pay damages under Kazakh law?
Before resolving those issues it is necessary to describe the Bank and its officers and to recount the investigations of the AFN, the regulator, into the Bank leading to the nationalisation of the Bank in February 2009.
The Bank and its officers
The Bank was formed by a merger of Turan Bank and Alem Bank in January 1997. Both banks had been plagued by financial problems in 1996 and 1997 and the merger was imposed upon them by the National Bank of Kazakhstan and by the Ministry of Finance of the Kazakhstani government. The merged company was initially known as Bank TuranAlem and was privatized by auction in March 1998. From January 2008 it was known as JSC BTA Bank or just "BTA".
In my judgment in the contempt proceedings, [2012] EWHC 237 (Comm), in which proceedings Mr. Ablyazov gave oral evidence through an in interpreter, I summarised Mr....
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