JSC BTA Bank (Claimant) Mukhtar Ablyazov and Others (Defendants) Mukhtar Ablyazov and Others (Respondents)
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 08 August 2014 |
| Neutral Citation | [2014] EWHC 2788 (Comm) |
| Docket Number | Folio 2009-1099 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 08 August 2014 |
2014 EWHC 2788 (Comm)
The Hon. Mr Justice Popplewell
Folio 2009-1099
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
7 Rolls Building, Fetter Lane
London, EC4A 1NL
Stephen Smith QC, Tim Akkouh and Chris Lloyd (instructed by Hogan Lovells International LLP) for the Claimant
Charles Béar QC and Giles Robertson (instructed by Addleshaw Goddard LLP) for the First Defendant and First Respondent
Alain Choo Choy QC and Anna Boase (instructed by Clyde & Co LLP) for the Third Respondent
Jeffrey Gruder QC (instructed by Stephenson Harwood LLP) for the Fourth Respondent
Hearing dates: 28, 29, 30 July 2014
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.
Introduction
The main application before the Court is that of the Claimant ("the Bank") seeking disclosure from the First and Second Respondents ("Mr Ablyazov" and "Mr Shalabayev") of documents relating to their assets which would attract legal professional privilege unless falling within the iniquity exception to such privilege, and which are currently held by the Third to Fifth Respondents ("Clyde & Co", "Stephenson Harwood" and "Addleshaw Goddard" respectively) as their solicitors or former solicitors.
The disclosure sought is of "all documents provided to or produced for or by Clyde & Co LLP, Stephenson Harwood LLP and/or Addleshaw Goddard LLP as remain within their sole or joint control which (in whole or in part) concern or contain information about (i) the current and/or former assets of Messrs Ablyazov and/or Shalabayev and/or (ii) any prospective or actual injunction [in respect of such assets] against Messrs Ablyazov and/or Shalabayev."
There are ancillary applications by the Bank for declaratory and preservation relief. There are cross applications by Mr Ablyazov concerning evidence in the Bank's applications.
The Proceedings
The proceedings by the Bank against Mr Ablyazov have occupied the Courts in England extensively over the last five years. For present purposes the following summary is sufficient.
The Bank is a bank in Kazakhstan, of which Mr Ablyazov was Chairman from May 2005 until early February 2009. On 2 February 2009 the State of Kazakhstan, through a sovereign wealth fund, effectively took control of the Bank when, according to the evidence of the Bank, there was significant concern as to the ability of the Bank to continue as a going concern. Mr Ablyazov was removed from his position and fled to London. The Bank has remained majority owned by the State of Kazakhstan throughout the relevant subsequent period although Mr Ablyazov alleges that a sale to private interests closely associated with the government has recently been agreed.
Shortly after nationalisation of the Bank, in early February 2009, Mr Ablyazov and Mr Shalabayev (together with others) instructed Clyde & Co.
On 13 August 2009 the Bank commenced these proceedings against Mr Ablyazov and others, claiming that he had misappropriated US$295 million pursuant to a fraudulent scheme. Other proceedings followed in this Court and the Chancery Division. It was alleged that Mr Ablyazov had treated the Bank as if it were his own private source of funds. In all 11 sets of proceedings have been commenced by the Bank against Mr Ablyazov and others for defrauding the Bank of in excess of US$6 billion. Mr Ablyazov denied these claims, alleging that they are an attempt by the President of Kazakhstan, Nursultan Nazarbayev, to take control of his assets to support a politically motivated campaign designed to eliminate him as a political opponent of the regime. The Bank has obtained judgment against Mr Ablyazov for some US$4.6 billion in four of the actions and judgment for damages to be assessed (estimated at about US$120m) in another. The six further actions are in abeyance. In the Chancery Division claim which has been determined ("the AAA proceedings"), the judgment was given after rejecting Mr Ablyazov's defence on the merits. In the three actions in the Commercial Court judgment was given following Mr Ablyazov being debarred from defending the proceedings by reason of his contempt of court in lying about and concealing his assets pursuant to freezing and disclosure orders, for which he was sentenced by Teare J to 22 months imprisonment. Mr Ablyazov's conduct in concealing and lying about his assets, and dealing with them in breach of freezing orders, lies at the heart of the present application.
On 13 August 2009, Blair J granted a worldwide freezing order against Mr Ablyazov limited to assets with a value of £175 million, with the usual provision for disclosure of assets on affidavit. It was subsequently amended from time to time, which amongst other things involved ultimately removing any limit on the value of assets frozen, and was on 23 November 2012 replaced by a post judgment freezing order made by Teare J which was also subsequently amended from time to time. I shall refer to the order as amended from time to time and replaced post judgment simply as "the Freezing Order".
Clyde & Co came on the record for Mr Ablyazov who swore his second affidavit dated 27 August 2009 purporting to give the asset disclosure required by the Freezing Order. It listed indirect interests in 25 offshore companies having assets estimated as reaching several billion dollars and two bank accounts. It was not served immediately, but following unsuccessful challenges, it was served on 30 September 2009 under cover of a letter from Clyde & Co correcting what were euphemistically described as "minor inaccuracies", which included reducing the value of three of the companies from "approximately US$250m to US$1.2 billion" each down to US$38,000 in total, deleting two of the companies from the list on the grounds that Mr Ablyazov had no beneficial interest, and identifying five additional companies in which he allegedly held an indirect interest, each of which was said to have an approximate value of US$250m to US$1.2 billion.
On 16 October 2009 Teare J ordered Mr Ablyazov to attend for cross examination on his asset disclosure, describing it as "extraordinarily inadequate": see [2009] EWHC 2833 (QB), at [5]. Mr Ablyazov was cross examined over two days on 27 October 2009 and 18 November 2009 in the course of which he told lies about his assets in an attempt to keep them from the Bank's reach. One such lie concerned his previous interest in Eurasia Logistics which owned a valuable storage and distribution park in North Domodedovo near the airport in Moscow, whose value is currently estimated at something between US$300 million and US$700 million. He said he had transferred his 75% interest in Eurasia Logistics to "management" meaning "mostly" Mr Volkov, pursuant to a written agreement in July 2009. When the Bank sought a copy of the agreement, Clyde & Co refused to provide it stating in a letter of 17 November 2009 that the document evidencing the "gift to Mr Volkov" of the 75% interest in Eurasia Logistics would not be provided because it was not an asset owned by Mr Ablyazov at the date of the Freezing Order. Clyde & Co were retained to advise on the transaction involving transferring the controlling interests, which involved Eurohypo as the lending institution. Documents subsequently obtained show that this occurred in November 2009; that the transaction was expected to close following an opinion letter written by Clyde & Co on 2 December 2009; that the transfer of interests was purportedly effected by a sale to a company called Keppel Land Ltd by Stepan Investments Ltd for $100 million, not a gift; and that the transfer documentation was falsely backdated to 31 July 2009 in order to support the lie told by Mr Ablyazov during cross examination oo his assets. It appears that Clyde & Co acted on behalf of Mr Ablyazov in relation to closing the transaction between March and July 2010, after they had come off the record in these proceedings. It is not suggested that Clyde & Co were aware of the fraudulent backdating, and there was room for uncertainty and confusion as to whether the transaction was itself a breach of the terms of the Freezing Order (which Clyde & Co advised it was not), given its then wording and limit of £175 million. Nevertheless the documents show that Mr Ablyazov's evidence when cross examined was a lie and that Clyde & Co's endorsement of it in their letter of 17 November 2009 was similarly untrue. The Bank places significance on this episode in the context of the present application as an example of documentation in the hands of Clyde & Co relating to Mr Ablyazov's assets which was not brought to the attention of the Bank or the Court at the time. The listing of the documentation scheduled to Clyde & Co's letter of 2 December 2009 suggests that the corporate structure was complex and the volume of documentation very substantial.
On 15 December 2009 Clyde & Co wrote on Mr Ablyazov's behalf making further disclosure of particulars relating to the previously disclosed assets. This was put forward as "voluntary" further disclosure, with the statement that no further questions would be answered.
On 19 February 2010 the Bank applied for the appointment of receivers over Mr Ablyazov's assets. In February and April 2010 Mr Ablyazov committed breaches of the Freezing Order by granting security in favour of a Russian bank, AMT Bank LLC, over certain loan repayment rights and land in Moscow. Meanwhile in March...
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