Jsc BTA Bank v Mr Kythreotis
| Jurisdiction | England & Wales |
| Judge | Mr Justice Peter Smith |
| Judgment Date | 17 January 2011 |
| Neutral Citation | [2011] EWHC 4042 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 January 2011 |
[2011] EWHC 4042 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Royal Courts of Justice
The Strand
London WC2A 2LL
Mr Justice Peter Smith
Mr Gillett appeared on behalf of the Applicant
Mr Dhar appeared on behalf of the Respondent
Judgment re Part 18
Right, I will do it now then.
This is an application by the claimants, in this action ("the bank") against the second defendant, for an order seeking the answer to three questions under CPR18. Those questions are as follows: (a) upon what basis do Byrne & Partners (they are the second defendant's solicitors) understand that two separate sums of £85,000 and £50,000 has been received from Mr Sadykov?; (b) how were those two separate sums received by the second defendant/Byrne & Partners? In what form and from what source?; (c) what contact details does the second defendant have for Mr Sadykov?
In order to understand that request I must say a little about these proceedings. The Bank says it is the victim of a substantial fraud. In January 2009 certain triple-A related investment bonds with a nominal value of $292 million were transferred from the bank to the fourth-eighth defendants upon the first defendant's instructions. The fourth to eighth defendants are BVI companies, as I understand it.
The Bank did not receive any payment or other consideration exchanged for the transfer for those investments and they say had no commercial purpose. The Bank asserts that the transfer was done by the first defendant in breach of duties he owed as an employee and an officer of the bank.
The second defendant is a British national living in Cyprus. Although he has, apparently, undertaken various law courses he has not completed any professional qualifications. He was a director of the fourth and eleventh defendants, and he co-ordinated in the administration of the other four BVI defendants whose directors, the claimants assert, were at all material times associates or known to him.
The claimants assert that he assisted the grant of the June 2008 security and/or the January transfers in bad faith, dishonestly, and is liable for such actions under the law of the British Virgin Islands or, alternatively, Cypriot or Kazakh law. In essence, the claim against them is for dishonest assistance to a fraudulent transaction.
On 23 July of last year Henderson J granted an ex parte freezing injunction against, amongst others, the second defendant up to $US 68 million. That injunction contained various standard form provisions as well as a large number of ancillary tracing order inquiries because the Bank, not unreasonably, is anxious to trace the proceeds of sale of any of the bonds and to assert claims against any assets identified in the possession of third parties or any of the defendants which represent part of the proceeds of sale of the bonds.
There were issues over compliance with the orders, and substantial hearing before Mrs Justice Proudman. I need say nothing more about those in the present context, save to say that the second defendant acknowledged, he had not complied; ultimately he provided a large amount of material. But the interesting point is in relation to the present application and Mr Sadykov. In various of his affidavits, pursuant to the Order of Henderson J and in response to the committal application, the second defendant said he regarded Mr Sadykov as being the beneficial owner of the various BVI companies. The beneficial ownership of those companies is, of course, significant because, if the claimants establish their case, the beneficial owner of the company will be the ultimate beneficiary of the fraud, if they establish it. I refer to his second and third affidavits in that regard and I do not need to set that out in this judgment.
The basis for his belief, as I understand it (and I should say, of course, that the claimants do not accept this; but that is not for me at this stage), was a letter dated 7 May, 2010 which the second defendant says he received. I am not sure whether he set out in the evidence how he physically received this letter, whether it was the post or fax or whatever, but it comes addressed to him and it says this:
"Dear Mr Kythreotis, this is to confirm that since 18 April, 2008…"
"…I had been the beneficial owner of the following companies."
Then he lists BVI the companies. ( I observe that is a date before the occurrence of the alleged wrongdoings).
"I apologise that was not able to advise you on my title earlier as I could not do that for confidential reasons. Please call me if you have any questions with respect to the above. "Sincerely yours, Sacykov."
He gives no address, he gives no contact numbers and, as I understand it, the second defendant has not produced any communications in any form between him and Mr Sadykov, whether by e-mail or letter or otherwise, beyond these letters which do not provide an address.
In a later letter, in September of last year, Mr Sadykov wrote referring to indemnity that he was willing to provide for the second defendant. These proceedings have been expensive to all parties so far, and these monies that are referred to in the claimant's request are monies which the second defendant's solicitors have received for the purposes of reimbursing their costs.
The final point of materiality in relation to Mr Sadykov is the second defendant's defence, which was served today. I have not seen the defence, but I am told that the second defendant does not admit and makes no positive case about whether or not Mr Sadykov is the beneficial owner of the various companies. I can well understand why he might not wish to admit it, because there might...
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