Jsc Bta Bank v Mukhtar Ablyazov and 16 Other Defendants
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CHRISTOPHER CLARKE,MR JUSTICE CHRIS CLARKE |
| Judgment Date | 26 October 2011 |
| Neutral Citation | [2011] EWHC 2664 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2009 FOLIO 1099 |
| Date | 26 October 2011 |
[2011] EWHC 2664 (Comm)
Mr Justice Christopher Clarke
Case No: 2009 FOLIO 1099
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Stephen Smith QC and Tim Akkouh (instructed by Hogan Lovells International LLP) for the Claimant
Duncan Matthews QC and Thomas Grant (instructed by Addleshaw Goddard LLP) for the First Defendant
Hearing dates: 6 th and 7 th October 2011
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.
JSC BTA Bank, the claimant, (hereafter "the Bank"), applies for an order that Mr Ablyazov should state the ultimate source of the funds which are being used to pay his legal expenses.
This is extraordinary litigation on a huge scale. The details are well known to the parties and have been referred to in several judgments. I do not propose to set them out again. It is sufficient to record that the Bank has commenced nine actions against Mr Ablyazov, in which it claims in respect of defalcations said to have been committed by him and others over the years, and particularly in the months leading up to his removal as Chairman in 2009, by which the Bank is said to have been defrauded of more than $ 4.5 billion.
In February 2009 Mr Ablyazov fled to England where he lives in a very valuable property–Carlton House in Bishop's Avenue–in London. The Bank contends (but he denies) that he owns that property and an estate in the country as well as several other English properties, as well as many valuable assets throughout the CIS and over 600 offshore companies, administered for him by trusted friends or close relations, which have been obtained, in whole or in part, by the misappropriation of the Bank's money. Typically this is said to have been done by the making of unsecured so called loans to companies which he secretly owns or controls.
Mr Ablyazov contends that he is the victim of a vicious political persecution by the President of Kazakhstan, his political enemy, and that these proceedings are part of that persecution. He has obtained political asylum in this country. He contends that, as a result of the campaign against him, anyone who renders assistance to him is a target for aggressive action by the Kazakh State in several different countries.
The present action ("the Drey proceedings") was begun on 13 th August 2009. It includes a claim to trace the proceeds of $ 400 million paid to what are said to have been Mr Ablyazov's companies. When it was launched the Bank sought and obtained a worldwide freezing order against him and others. An interim Receivership Order over his assets was made by Teare J in August 2010.
The Freezing Order
Paragraph 4 of the Freezing Order orders Mr Ablyazov not to:
"a. Remove from England & Wales any of [his] assets which are in England & Wales…up to the value of £ 451,132,000….
b In any way dispose of, deal with or diminish the value of any of [his] assets in England and Wales up to the value of…. £ 451,132,000….
c In any way dispose of, deal with or diminish the value of any of [his] assets outside England and Wales up to the value of…. £ 451,132,000…."
Paragraph 5 provides:
"Paragraph 4 applies to all the Respondents' assets whether or not they are in their own name and whether they are solely or jointly owned and whether or not [Mr Ablyazov] asserts a beneficial interest in them. For the purpose of this Order the Respondents' assets include any asset which they have power, directly or indirectly, to dispose of, or deal with as if it were their own. The Respondents are to be regarded as having such power if a third party holds or controls the assets in accordance with their direct or indirect instructions".
Paragraph 9 (a) contained a provision in relation to living expenses and legal fees in the following form:
"Paragraph 4 of this Order does not prohibit [Mr Ablyazov] from spending up to £10,000 a week towards [his] individual ordinary living expenses…, nor does it prohibit [Mr Ablyazov] from spending a reasonable amount on legal advice and representation. But before spending any money on legal advice and representation [Mr Ablyazov] must notify the Applicant's legal representatives in writing where the money to be spent is to be taken from."
Mr Ablyazov sought to vary the disclosure provisions in the order. That application was dismissed by Teare J, and an appeal was dismissed by the Court of Appeal. Mr Ablyazov purported to comply with the provisions but his disclosure was found by Teare J to have been "extraordinarily inadequate". He was ordered to attend for cross examination as to his assets and the whereabouts of monies to which the Bank made a proprietary claim. In the course of his cross examination Mr Ablyazov said that he had made an agreement with a third party called Wintop Services Ltd ("Wintop") to borrow money for his legal expenses. He said that Wintop was owned by a citizen of Kazakhstan who had family, brothers and sisters there and who was a friend of his. He said that he himself had no interest in Wintop.
On 18 th March 2011 Stephenson Harwood, Mr Ablyazov's then solicitors, wrote to Hogan Lovells, the Bank's solicitors, to tell them that a company called Fitcherly Holdings Ltd ("Fitcherly") was now funding Mr Ablyazov's defence.
The funds provided by these two companies have not only been used to fund Mr Ablyazov's defence but some of his co-defendants as well. The number of lawyers so paid is large (over 10 leading counsel, more than 20 juniors and 75 other lawyers from at least 8 different firms) and the amount paid runs into millions of pounds.
The Receivership Order
In July 2010 Teare J made a Receivership Order. In the course of his judgment he said the following:
"there are…substantial grounds to believe that Mr Ablyazov wished to make enforcement of the Freezing Order difficult" (see [2010] EWHC 1779 (Comm), [85]; "I am not persuaded that Mr Ablyazov has indeed 'bared his soul'. The most I can say is that there is a reasoned suspicion that he has not disclosed all his assets" (at [99]); and "consideration of his conduct…has left me unable to trust him not to deal with his assets in breach of the Freezing Order" (at [161]).
The Court of Appeal upheld the order and said that it was "impossible to conclude that Mr Ablyazov had been doing his best to comply with the orders of the court" and that there was "a measurable risk that Mr Ablyazov will, if he is able to do so, act in breach of the Freezing Order".
In late 2010 and early 2011 the Bank obtained a very substantial amount of documentation from search orders executed in this jurisdiction and abroad and from Norwich Pharmacal orders made against email service providers. That enabled it to secure, in the first half of 2011, extensions to the Receivership Order covering shares in 636 companies.
In 2009 and 2010, Mr. Ablyazov had claimed that the vast majority of his assets were ultimately held for him by a [….] businessman named [Mr X] pursuant to declarations of trust, and that it was [Mr X] who administered the chains of offshore companies through which assets of real value were held. The information obtained pursuant to the search orders disclosed that the companies were administered by Mr. Ablyazov's brother-in-law, Syrym Shalabayev who had until recently been working alongside Mr Ablyazov in London. In his 13 th witness statement Mr Ablyazov accepted that Mr Shalabayev worked for him together with Mr X providing asset management services.
The companies added to the Receivership in April 2011 included Wintop and Fitcherly. The evidence which led to them being added included the following:
i) A string of 12 emails prepared for Mr Shalabayev to be sent by Mr Batyrgareyev which refer to "my company, Fitcherly". The preparation was done by personnel at Euroguard Assets Ltd, a company which managed some of Mr Ablyazov's assets and with which Mr Shalabayev was associated. The significance of these–says the Bank–was (that they were prepared for Mr Ablyazov's brother-in-law, who Mr Ablyazov accepted had been involved in the administration of his assets, (ithey were to be sent by Mr Batyrgareyev, […], 1 and (ii[…..].
ii) Loan agreements executed in early 2011, pursuant to which a company called Vaida Trading Limited (incorporated and operated by Mr Shalabayev, which has also been added to the Receivership) would advance an aggregate of US$40 million to Wintop and Fitcherly. These agreements purport to record loans on highly favourable terms, including (i) a provision that no interest would be payable until the end of the loan and (no requirement that any security be provided.
No application was made by Wintop or Fitcherly to be excluded from the Receivership. (Mr P, (who is said now to be the beneficial owner of Wintop and Fitcherly: see paragraph 22 below) is said to have hired solicitors in the UK and to have hired lawyers in Cyprus in order to prove that those two companies should not be included in the Receivership). Instead on 3 rd May 2011 Stephenson Harwood wrote to Hogan Lovells to say that Mr Ablyazov was arranging for his legal fees to be paid
by another company–Green Life International SA, registered in Belize ("Green Life"). They informed Hogan Lovells that the ultimate beneficial owner ("UBO") of Green Life was a businessman from the former Soviet Union who did not want his identity to be revealedThe Bank is not privy to the activities of the Receivers other than by receipt of their reports. These reveal, inter alia, the following:
i) Paragraph 245 of the Receivers' March 2011...
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