JSC BTA Bank v A
| Jurisdiction | England & Wales |
| Judgment Date | 19 October 2010 |
| Neutral Citation | [2010] EWCA Civ 1141 |
| Docket Number | Case No: A3/2010/1955 & A3/2010/2042 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 October 2010 |
[2010] EWCA Civ 1141
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN PRIVATE
The Honourable Mr Justice Teare
Before: The Right Honourable Lord Justice Maurice Kay (Vice President of the Court of Appeal, Civil Division)
The Right Honourable Lord Justice Longmore
and
The Right Honourable Lord Justice Patten
Case No: A3/2010/1955 & A3/2010/2042
Mr Duncan Matthews QC, Mr Lawrence Akka, Mr Thomas Grant & Mr Alexander Winter (instructed by Stephenson Harwood) for the Appellant
Mr Stephen Smith QC, Mr Philip Marshall QC & Mr Tim Akkouh (instructed by Hogan Lovells International LLP) for the Respondent
Mr Robert Miles QC (instructed by Freshfields Bruckhaus Deringer LLP) for the Interested Party
Hearing date: 16 th September 2010
The Appeal
This is the judgment of the court.
This is an appeal, heard in private, against the order of Teare J imposing a receivership on the assets of Mr A pending the trial of claims made against him for misappropriations allegedly made by him while he was chairman of the claimant bank in Kazakhstan (“the Bank”). The Bank was effectively nationalised in February 2009 when a national wealth fund compulsorily acquired 75.1% of the Bank's share capital.
Mr A denies these claims. He says that the claims are an attempt by the President of Kazakhstan, Nursultan Nazarbayev, to take control of his assets in support of a politically motivated action against him because he (the appellant) is a leading figure in Kazakhstan's democratic opposition. His evidence (which is not, of course, accepted) paints a chilling picture of life in Kazakhstan where power resides with the President and the members of his family and close associates, where the rule of law is not respected and where dissent is ruthlessly eliminated. In 2003 Mr A was arrested and imprisoned and his assets seized after what he and others have said was a politically motivated trial. Whilst imprisoned on what he says were “trumped-up” charges he says that he was subjected to mistreatment, torture and an unsuccessful plot to assassinate him and that his assets were “distributed to the President's coterie”. He says that political assassination is used in Kazakhstan as a means of silencing opposition and that there was a further attempt to assassinate him in 2004 in Moscow.
In late January 2009 Mr A was forced to leave Kazakhstan hurriedly. He arrived in London, speaking no (or very little) English, and now lives with his wife and three of his four children in a house in Bishop's Avenue. He is seeking indefinite leave to remain in this country. In August 2009 these proceedings were commenced by the Bank and a Freezing Order was issued against him together with an order restraining him from leaving the jurisdiction and requiring him to surrender his passport.
When he disclosed his assets pursuant to the Freezing Order they were said to be worth, in total, several billion US dollars. Since then, as a result of corrections and further evidence, he appears to value his assets in a somewhat smaller figure but the valuation is still in excess of one billion US dollars.
Mr A does not hold his assets in his own name. Rather, a nominee appears to hold shares in a holding company on his behalf and by that means controls the shareholdings in a chain of other companies at the bottom of which chain is an operating business. The use of a nominee and of companies registered in off-shore jurisdictions makes it difficult to trace his assets. He says that the elaborate scheme by which he owns his assets is necessary to protect him from unlawful depredations by the President of Kazakhstan.
The Bank has asserted that there has been non-compliance with the Freezing Order inasmuch as Mr A has been reluctant to disclose his assets and the methods by which they are held on trust for him, has probably still not disclosed all his assets and has broken the terms of the Freezing Order by disposing of some of his assets. The Bank also says further that he is still likely to continue to put his assets beyond the reach of the Bank if the Bank gets a judgment and the only way in which it is possible to preserve the assets, of which it is aware, is by the court appointment of receivers to hold those assets. The judge found (in Mr A's favour) that he did not breach the Freezing Order in the manner alleged because the dispositions relied on were made in the ordinary course of his business but he was persuaded that Mr A would in the future continue to try to put his assets beyond reach of any judgment and that a receivership order was therefore appropriate. Mr A appeals against the making of that order and the Bank cross-appeals against the finding of the judge that the dispositions were made in the ordinary course of business.
In relation to the receivership order the judge summarised his conclusions in the following way:—
“126. In summary therefore the circumstances which give reason to believe that the Freezing Order may not provide the Bank with adequate protection against the risk that Mr A's assets will be dissipated prior to any judgment that the Bank obtains are as follows:
i) His initial disclosure of his assets can now be seen to have been seriously inadequate in that he failed to mention the crucial role of a nominee and the nature of the operating assets (save for one). There are grounds for believing that he wished to make it difficult for the Bank to enforce the Freezing Order.
ii) There are grounds to believe that his failure to mention the sale of Eurasia Tower to Clyde & Co was to avoid the Bank's solicitors learning of the sale and that $20m. had been received in part payment.
iii) There are grounds to believe that his failure to mention the sale of BTA Kazan to Clyde & Co was to avoid the Bank's solicitors learning of the sale and that the proceeds of the sale had been received, though this was unlikely to succeed in the light of a press release by BTA Kazan.
127. Those matters give rise to a real risk, in my judgment, that Mr A may use the structure by which he holds his assets to deal with them in breach of the Freezing Order. He has said that he will not do so and no breach has yet been proved but in the light of his prior conduct I am unable, on this application, to be sure that he will not do so in the future. There is therefore good reason for making the Receivership Order. It follows that I am unable to accept Mr Trace's submission that whatever the position may have been in November 2009 there is no longer a risk of dissipation of the assets.
128. The unexplained whereabouts of at least $40m. paid out to Drey provide good reason for making the Receivership Order in support of the Bank's proprietary claim.”
In para 161 the judge expressed his conclusion in this way
“Although Mr A has stated that he will obey the orders of this court that statement has to be considered in the light of his conduct in this action. He has stated that he can be trusted but I have to have regard not only to what he has said but also to what he has done. Consideration of his conduct with regard to disclosure of his assets in August/September 2009 and of his failure to inform Clyde & Co. of dealings in the Eurasia Tower and BTA Kazan has left me unable to trust him not to deal with his assets in breach of the Freezing Order.”
Mr Duncan Matthews QC on behalf of Mr A attacked this conclusion by saying:—
i) the judge misdirected himself in law and applied the wrong test for making a receivership order and should have held that such an invasive remedy should only be made if the judge was actually sure that Mr A would breach the Freezing Order when the receivership order was made. The order had to be an order of last resort and should only be made when it was “necessary” to do so;
ii) the judge was wrong to attach weight to the admittedly inadequate initial response to the freezing order in August 2009 when Mr A had by April 2010 disclosed everything there was to disclose;
iii) the judge was also wrong to say that Mr A had failed to mention the sale of his interests in Eurasia Tower and BTA Kazan to Clyde & Co because evidence unearthed after the draft judgment was distributed showed that he had done so.
The Legal Test
There can be no doubt that the court has power to appoint a receiver in support of a freezing injunction. The jurisdiction is conferred by s.37 of the Senior Courts Act 1981 in general terms:—
“(1) The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so.
(2) Any such order may be made either conditionally or on such terms and conditions as the court thinks just.”
An early instance of the exercise of the power was in Derby v Weldon (No. 3) decided by Sir Nicholas Browne-Wilkinson VC on 7 th November 1988 when freezing injunctions were known as Mareva injunctions. He said:—
“The first question of law, which does not give me much trouble but was very properly referred to by [counsel], is whether a Receiver can be appointed in aid of a Mareva injunction. In my judgment it plainly can be done. If the proper preservation of the assets frozen under the Mareva order requires the introduction of a Receiver to hold certain assets, I can see no reason why such a Receiver should not be appointed as a matter of law.”
He thought it right to appoint a receiver on the facts of that case.
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