JSC BTA Bank v Mukhtar Ablyazov & 16 Ors
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CHRISTOPHER CLARKE |
| Judgment Date | 04 July 2012 |
| Neutral Citation | [2012] EWHC 1819 (Comm) |
| Date | 04 July 2012 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2009 FOLIO 1099 |
[2012] EWHC 1819 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Christopher Clarke
Case No: 2009 FOLIO 1099
Stephen Smith QC and Tim Akkouh (instructed by Hogan Lovells) for the Claimant
Duncan Matthews QC and Charlotte Tan (instructed by Addleshaw Goddard) for the Defendants
Hearing dates: 4 th April 2012
On 21 August 2009 Teare J granted a freezing order in favour of JSC BTA Bank ("the Bank") against Mr Mukhtar Ablyazov ("Mr Ablyazov") among others. It was continued on 12 November 2009 and subsequently amended and remains in force. I refer to it as "the freezing order".
The freezing order provided, so far as now material, as follows:
"4. Until judgment or further order… [Mr Ablyazov] must not, except with the prior written consent of the Applicant's solicitors –
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 ….
5. 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.
…
EXCEPTIONS TO THIS ORDER
9.
a. 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.
b. This Order does not prohibit [Mr Ablyazov] from dealing with or disposing of any of [his] assets in the ordinary and proper course of any business conducted by [him] personally."
Mr Ablyazov is a party to four loan agreements ("the Loan Agreements") between Wintop Services Limited ("Wintop") and/or Fitcherly Holdings Limited ("Fitcherly") as Lenders. The amounts derived from these loans (£ 40 million in all) have been used to fund the enormous legal expenses of Mr Ablyazov and others and living expenses. The Bank contends that the Loan Agreements are shams. In my judgment of 26 October 2011 I said that there was good reason to suppose that these companies were ultimately owned by Mr Ablyazov.
If, however, the Loan Agreements are valid agreements, the Bank contends, and seeks a declaration, that Mr Ablyazov's rights under them are assets of his for the purposes of the freezing order and that any drawings under the Loan Agreements could only lawfully be made pursuant to paragraph 9 of the freezing order, subject to any further order that the court might make. For the purposes of this judgment I assume, without deciding, that the Loan Agreements were not shams or made with companies ultimately owned by Mr Ablyazov.
The Bank also seeks disclosure of all drawings which have been made pursuant to the Loan Agreements in order to ascertain whether there are any assets which represent the traceable proceeds of such drawings or whether grounds exist to make applications against the recipients on the basis that they knowingly received property transferred contrary to the terms of the freezing order.
The point at issue was raised at the hearing of an application, issued by the Bank on 13 May 2011, for the disclosure of the ultimate beneficial owners ("UBOs") of Wintop, Fitcherly and a further funder, Green Life International SA ("Green Life"). Prior to the hearing of that application the UBOs of Wintop and Fitcherly became known by other means and the application proceeded in relation to Green Life only. I handed down judgment on that application on 26 October 2011. I declined to decide the point now in issue then since it had only been raised in the course of oral argument on the first day and it seemed to me that Mr Ablyazov was entitled to more time to consider it.
Pursuant to an order made by me on 9 February 2012 Mr Ablyazov filed his 16 th witness statement for the purposes of this application. In that statement his address is given as "C/o Addleshaw Goddard".
In a judgment dated 16 February 2012 Teare J found Mr Ablyazov guilty of three deliberate and substantial contempts of court for which he was sentenced to 3 concurrent 22 month prison terms. He failed to attend Court on that date, although he had said that he would do so. He is in breach of an order made on 29 February that he should surrender himself to the UK authorities. His current whereabouts are unknown and it would appear that he has fled the country. In those circumstances his failure to state his address other than care of his solicitors has a heightened significance. Knowledge of his true address might enable the Tipstaff and those to whom the warrant is addressed to take steps to secure his apprehension.
The Bank does not suggest that Mr Ablyazov should not be heard because he is in contempt (whilst reserving its right to do so in respect of future applications). It takes this stance because it considers that the value of the declarations sought might be reduced if they are made without full argument. But the Bank invited me to disregard Mr Ablyazov's 16 th witness statement on the ground of non-compliance with the Practice Direction to CPR 32 which requires, at paragraph 18.1(2), that a witness statement should state the witness' "place of residence or, if he is making the statement in his professional, business or other occupational capacity, the address at which he works, the position he holds and the name of his firm or employer". The Court has a discretion pursuant to para 25.1 of the Practice Direction to refuse to admit a non-compliant witness statement.
I do not intend to take that course for a number of reasons. Mr Ablyazov is in contempt. But a contemnor is not to be precluded from defending himself in the action itself: see Hadkinson v. Hadkinson [1952] P 285, at 289–290, 296; and Midland Bank v. Green (No.3) [1979] Ch 496 at 506 per Oliver J. Nor is a fugitive from justice precluded from bringing and defending proceedings through our courts; or from giving evidence in relation to those claims: Polanski v. Conde Nast Publications Ltd [2005] 1 WLR 637 ("Our law knows no principle of fugitive disentitlement"); JSC BTA Bank v. Solodchenko [2011] EWHC 2163 (Ch) at [18]. The administration of justice will not be brought into disrepute if he is allowed to adduce evidence in this way. I can see no prejudice to the Bank in admitting his evidence. Lastly it seems to me illogical to admit argument in order that the judgment may not be regarded as wanting authority for the lack of it; but to exclude evidence when such exclusion might be said to have the same consequence.
The Loan Agreements
Mr Ablyazov entered into four loan agreements with Wintop and Fitcherly as follows:
a) Loan Agreement dated 1 September 2009 with Wintop;
b) Loan Agreement dated 1 April 2010 with Wintop;
c) Loan Agreement dated 17 August 2010 with Fitcherly; and
d) Loan Agreement dated 1 December 2010 with Fitcherly.
Each of the Loan Agreements provided for a £ 10 million facility available from the Lender to Mr Ablyazov for two years from the date of the Loan Agreement and contained the same highly favourable terms. Sums up to a maximum of £ 10 million per Loan Agreement were to be disbursed at the written request of Mr Ablyazov whether in one or several tranches (clause 1.2). Interest, at the rate of 5% per annum, was not to be payable until repayment of the principal sum (clause 1.3). The Lender was not entitled to demand repayment until four years after the commencement of the facility (clause 1.4). The agreement was expressed to create "legal, valid and binding obligations of the Borrower" (clause 1.8). No security was required to be given in support of the borrowings. The Agreements contained an English choice of law clause (clause 1.18).
They also contained a clause entitled "Binding Effect for the Lender" which stated that the agreement was "enforceable against the Lender in accordance with its terms" (clause 1.11). Clause 1.12 provided:
"Use of Proceeds. The proceeds of the Loan Facility shall be used at the Borrower's sole discretion. The Borrower may direct the Lender to transfer the proceeds of the Loan Facility to any third party."
The Loan Agreements also included the following two terms:
"1.6 Cancelation of the Loan Facility. Notwithstanding section 1.1 hereof, any undrawn portion of the Loan Facility may be cancelled upon delivery to the Borrower of a written cancellation notice by the Lender.
…
1.16 Assignment. …The Borrower may not assign or transfer any of its rights under this Agreement without the prior written consent of the Lender."
The argument for the Bank, which I consider in more detail below, is shortly stated. A right to borrow money from a lender under a loan facility is a chose in action. By directing the lender to pay money to a third party the borrower either disposes of or deals with that chose in action. He may be said to dispose of it in the...
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