Jsc Bta Bank v Roman Vladimirovich Solodchenko and Others Anatoly Ereshchenko (17th Defendant/Respondent)
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE HENDERSON,Mr Justice Henderson |
| Judgment Date | 05 April 2011 |
| Neutral Citation | [2011] EWHC 843 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC10C02462 |
| Date | 05 April 2011 |
[2011] EWHC 843 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr Justice Henderson
Case No: HC10C02462
Mr Philip Marshall QC and Ms Emily Gillett (instructed by Hogan Lovells International LLP) for the Claimant
Mr Paul Lowenstein QC (instructed by Stewarts Law LLP) for the 17th Defendant
Hearing dates: 14 and 15 March 2011
Approved Judgment on Cross-Examination Application
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.
Mr Justice Henderson:
Introduction
The question for the court on this application is whether the seventeenth defendant, Mr Anatoly Ereshchenko, should be ordered to attend for cross-examination in respect of his purported compliance with a disclosure order which I made against him on 3 November 2010. At the date of the disclosure order Mr Ereshchenko was not a party to the present action, although he has subsequently been joined and was due to serve his defence by 29 March 201Because Mr Ereshchenko was not then a party, the disclosure order against him was made under the Norwich Pharmacal and Bankers Trust jurisdiction: see CPR 31.18, Norwich Pharmacal v Customs & Excise Commissioners [1974] AC 133 and Bankers Trust v Shapira [1980] 1 WLR 1274 (CA).
The question may seem a short one, but like much else in the wider litigation of which this application forms part it has been hotly contested. The argument lasted for approximately a day, despite a half-day time estimate, with leading counsel deployed on each side: Mr Philip Marshall QC (leading Ms Emily Gillett) for the claimant JSC BTA Bank ("the Bank"), and Mr Paul Lowenstein QC for Mr Ereshchenko. I am grateful to both of them for their full and able submissions.
The wider background to the litigation has already been described in a number of judgments, and I will not repeat it. The present action in the Chancery Division ("the Chancery action") is one of six actions (the other five are proceeding in the Commercial Court in the Queen's Bench Division) by which the Bank seeks to trace and recover in England vast sums of money (amounting in total to some US$3.5 billion) allegedly misappropriated from it by its former chairman, Mr Mukhtar Ablyazov, and other senior managers, at times before the Kazakh government acquired control of the Bank through a national wealth fund in February 2009. Mr Ablyazov is the principal defendant in the Commercial Court proceedings. He was originally not a defendant to the Chancery action, but he has now been joined as the eighteenth defendant by an order which I made (without opposition, save on a question of costs) on 14 March 2011. The first and (until now) main defendant in the Chancery action has been Mr Roman Solodchenko, who was at the material times chairman of the Bank's management board and is alleged to have occupied a position in the Bank's hierarchy second only to Mr Ablyazov.
The nature of the claim advanced in the Chancery action is very briefly as follows. The Bank alleges that certain AAA-rated investment bonds ("the AAA Investments") that it held, worth about US$300 million, have been misappropriated. In January 2009, during the global financial crisis and at a time when the Bank was insolvent, the AAA Investments were transferred from the Bank to five companies incorporated in the British Virgin Islands which are now the fourth to eighth defendants ("the BVI Defendants"), upon the instructions of Mr Solodchenko. The Bank did not receive any payment or other consideration in exchange for the transfers of the AAA Investments, and it contends that they lacked any commercial purpose or justification. The Bank alleges that the BVI Defendants are owned and controlled by Mr Ablyazov, and that he is the ultimate beneficiary of the misappropriation of its assets.
In June 2008 the BVI Defendants had entered into a futures contract with a third party, Alfa Equity Investments Limited ("Alfa"), to sell identical AAA Investments to Alfa in return for an immediate payment by Alfa to the BVI Defendants of US$300 million. In some way which is not yet clear, it seems very likely that the AAA Investments which were transferred to the BVI Defendants in January 2009 must have been used as security for this obligation. In any event, once the AAA Investments had been transferred by the Bank to the BVI Defendants in January 2009, they were then used to satisfy the obligations of the BVI Defendants to Alfa. Meanwhile, most of the US$300 million had been transferred by one or more of the BVI Defendants to four further companies (three incorporated in the BVI and one in the Seychelles) by way of loans dated 9 June 2008. These further recipients are the ninth to twelfth defendants. The Bank alleges that the so-called loans were shams, or at any rate were uncommercial and not negotiated at arm's length.
The thirteenth defendant, Eastbridge Capital Limited ("Eastbridge"), is an English company which the Bank believes was used by Mr Ablyazov to give instructions for the transfer and disposal of the misappropriated assets. Mr Ereshchenko was a director of Eastbridge from its incorporation in September 2003 until May 2010. The Bank now claims, among other things, that Mr Ereshchenko dishonestly assisted in the transfer of the AAA Investments to the BVI Defendants in January 2009. Mr Ereshchenko's former fellow directors of Eastbridge were Mr Alexander Udovenko, the fifteenth defendant, and a Mr Anuar Aizhulov, neither of whom can now be found either within or outside the jurisdiction.
The present sole director of Eastbridge is a Mr Ramil Burganov, who was appointed in rather mysterious circumstances in or about September 2010, at a monthly salary of £4,000. By his own account, Eastbridge is now dormant, with no employees or continuing business and no assets of any significance. He says that he knows nothing about its former activities, and his present role is simply to wind up its affairs. For its part, the Bank alleges that the business formerly carried on by Eastbridge has been transferred, in whole or in part, to another English company, Park Hill Capital Limited, which is the sixteenth defendant.
The fourteenth defendant, Mr Syrym Shalabayev, is Mr Ablyazov's brother-in-law, and he is one of the persons who according to the Bank gave instructions at the material times in the name of Eastbridge. He appears to have gone into hiding, and the Bank has been unable to trace him since he was served in Cyprus on 5 November 2010 with a freezing and disclosure order which I made on 3 November 2010.
To complete the main cast of characters, I must also refer to the second and third defendants, Mr Paul Kythreotis and Mr Jason Hercules. Mr Kythreotis is a British citizen who lives in Cyprus. He owns and operates the Starport Group of companies which provide nominee and other corporate services. Mr Hercules works with him and is the company secretary of Starport Secretaries Limited, a company within the Starport Group. Mr Kythreotis has filed extensive evidence, explaining how he and his group received and implemented instructions from Eastbridge in relation to the BVI Defendants and the further recipients. For reasons which I need not go into, the Bank believes that much of his evidence is untruthful, and he has already been the subject of one protracted set of committal proceedings.
In August 2009 the Bank obtained a world wide freezing order over the assets of Mr Ablyazov, Mr Solodchenko and others in one of the Commercial Court actions known as the "Drey Proceedings". The disclosure eventually provided by Mr Ablyazov was described by Mr Justice Teare in a subsequent judgment as "extraordinarily inadequate", and Mr Ablyazov was ordered to attend court to be cross-examined on two occasions. The cross-examination failed to alleviate the Bank's concerns, and it therefore took the unusual step of applying for receivers to be appointed over Mr Ablyazov's assets, in advance of any trial or judgment, on the basis that he could not be trusted to comply with the freezing order. Following a contested hearing, receivers were appointed by Teare J, and an appeal by Mr Ablyazov to the Court of Appeal was dismissed, as was a subsequent application by him to the Supreme Court for leave to appeal. The appointment of the receivers finally took effect from 9 November 20After that date, the Bank obtained significant new evidence that Mr Ablyazov had sought to conceal his ownership of a further 200 or so companies, and on 26 January 2011 the Bank applied for, and obtained, an extension to the receivership order to include Mr Ablyazov's alleged beneficial interest in those companies and their assets.
It will be apparent from what I have already said that the wider litigation brought by the Bank against Mr Ablyazov is of very great size and complexity, and is proceeding on several fronts simultaneously. It is important not to lose sight of this broader picture when focussing on the particular role of Mr Ereshchenko in relation to Eastbridge, and the question whether he has indeed given disclosure to the best of his ability in response to the order which I made last November. It is also worthy of note, as Mr Marshall QC submitted, that not one of the first to sixteenth defendants in the Chancery action has yet advanced any positive case that the transactions involving the AAA Investments were commercially justified or otherwise legitimate.
The Chancery action: procedural history
On 26 July 2010 I granted personal and proprietary freezing orders,...
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