JSC Bta Bank v (14) Syrym Shalabayev
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE HENDERSON |
| Judgment Date | 27 October 2011 |
| Neutral Citation | [2011] EWHC 2903 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No: HC10C02462 |
| Date | 27 October 2011 |
[2011] EWHC 2903 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building
Fetter Lane
London
EC4A 1ES
Mr Justice Henderson
Claim No: HC10C02462
MR P MARSHALL QC and MS E GILLET (instructed by Hogan Lovells) appeared on behalf of the Claimant.
MR T OWEN QC and MR I SMITH (instructed by Clyde & Co) appeared on behalf of the Defendant.
I have before me an application by the claimant ("the Bank") for an unless order against the 14th defendant, Mr Syrym Shalabayev, and a cross-application by Mr Shalabayev against the Bank seeking the disclosure of certain documents which are said to be necessary before the court can rule on the Bank's application.
The Bank's application is made by an application notice dated 8 September 2011. The relief which it seeks is an order that, unless Mr Shalabayev, within seven days, firstly pays all outstanding costs orders made against him, and secondly, and for present purposes more importantly, complies with paragraphs 9, 10 and 11 of the order which I made on 3 November 2010, his defence shall be struck out, he shall be debarred from defending the claim against him, and the Bank shall be at liberty to apply for judgment in default.
The disclosure application is made by an application notice of 10 October, and seeks disclosure from the Bank of all information which the Bank holds in answer to the questions set out in schedule D of the freezing order of 3 November 2010, together with disclosure (followed by inspection) of all documentation which the Bank controls relating to the questions contained in that schedule.
The general background to these applications has already been described in a number of judgments in this Division and in the Commercial Court, and it is unnecessary for me to repeat it.
The nature of the Bank's claim against Mr Shalabayev was succinctly described by Mr Justice Briggs in his judgment delivered on 17 May of this year, when he said:
"The Bank's claim against Mr Shalabayev is, in summary, that he was centrally involved in a misappropriation of very substantial assets of the Bank, and in the dishonest concealment of the proceeds of their realisation for the ultimate benefit of his brother-in-law, Mr Ablyazov."
I should add that Mr Ablyazov is now the 18th defendant in the present action.
The involvement of Mr Shalabayev in the present proceedings began with the order which I made on 3 November last year, when he was joined as a defendant and a worldwide freezing order was made against him, with an upper limit of £200 million, that being the approximate sterling equivalent of the value of the AAA-rated and US dollar-denominated securities which the Bank seeks to trace and recover in the present action.
The order contained asset and information disclosure requirements of a type which has now become relatively familiar in large cases of alleged international fraud. I need to refer to some of the provisions of that order and I begin with paragraph 9, under the heading "Provision of information", which said that subject to a proviso relating to self-incrimination, Mr Shalabayev was obliged, within seven working days of service of the order upon him, and to the best of his ability after making all reasonable enquiries, to inform the Bank's solicitors in writing of all of his worldwide assets exceeding £10,000 in value, whether in his own name or not, and whether solely or jointly owned, and whether he was interested in them legally or beneficially or otherwise, giving the value, location and details of all such assets.
He was further obliged to supply to the Bank's solicitors copies of all documents in his control, broadly defined, which evidenced the matters to which I have just referred.
Paragraph 10 then dealt with tracing information and, again subject to a proviso relating to self-incrimination, obliged Mr Shalabayev, within the same period, to the best of his ability and after making all reasonable enquiries, to provide answers in writing to the questions set out in schedule D to the order, and to supply copies of all documents in his control evidencing those matters.
Schedule D was in the form of a questionnaire, and set out a number of interrogatories by reference to the payments identified in schedule C, and asked, for example, what monies were left in those accounts; when the money or securities in question left them, and in what amounts; who gave the instructions that they should leave the accounts; what was the identity and address of each recipient of the money or securities; and what form they now took and, if not in cash, what property now represented them; and so on.
I should finally mention paragraph 6 of the order which contained a wide definition of assets for the purposes of the order, providing that it included any asset which Mr Shalabayev had power, directly or indirectly, to dispose of or deal with as if it were his own, and further providing that he was to be regarded as having such power if a third party held or controlled the asset in question in accordance with his direct or indirect instructions.
The freezing order was served on Mr Shalabayev at a hotel in Cyprus on 5 November 2010, but he then promptly disappeared, and has been on the run ever since. His current whereabouts are apparently unknown, even to his solicitors, Messrs Clyde & Co. It may, however, be safely assumed that he is outside the jurisdiction.
One aspect of his fugitive existence has been the use of proxy servers for electronic communication, with the result that his location cannot be traced, although he is able, by such means, to maintain contact with his solicitors and to give instructions to them.
Mr Shalabayev took no steps whatever to comply with the obligations in the freezing order which I have set out. This led, in due course, to the institution of committal proceedings against him, which eventually resulted in a number of hearings before Mr Justice Briggs earlier this year.
On 17 May, at a time when Mr Shalabayev was still unrepresented Briggs J found the allegation of contempt against him proved to the criminal standard, that is to say beyond reasonable doubt. In paragraph 15 of his judgment, Briggs J said this:
"In my judgment, applying for this purpose the criminal standard of proof, the alleged contempt is proved beyond reasonable doubt. The evidence clearly demonstrates both personal service of the freezing order, endorsed with the appropriate penal notice, together with a covering letter warning of the consequences of breach, and proves the complete failure by Mr Shalabayev, without explanation or excuse, to provide the disclosure ordered, either in time or at all. The contempt is both serious and continuing. It is particularly serious because, on the evidence before the court, Mr Shalabayev played a central role in the concealment of the proceeds of the realisation of the Bank's assets and may be supposed to be likely to have disclosable information of the highest value to the Bank in tracing its property. Self-incrimination privilege has not, of course, been invoked by Mr Shalabayev."
Briggs J then decided to adjourn the proceedings for the purposes of sentence, rather than proceed immediately to sentence Mr Shalabayev in his absence. The matter came back, after at least one intermediate hearing, on 27 June. Mr Shalabayev was, by this date, represented by solicitors and counsel, although he was still not present in person, despite the fact an adjournment had been granted to enable him to be present.
In the course of the judgment which he delivered on 27 June, Briggs J quoted the passage which I have just read from his earlier judgment of 17 May, and continued:
"That conclusion, namely as to the vital nature of the information which Mr Shalabayev should have provided pursuant to the freezing order, arises in particular from the fact that Mr Shalabayev was one of the four holders of a power of attorney in relation to a number of offshore corporations, most of them in the BVI, one of them in the Seychelles, which the claimants claim have been used to launder its assets. The upper limit in the freezing order is some £200 million.
"Some of the documents which have been obtained by the claimants, in part from searching e-mails coming to and from Mr Shalabayev pursuant to an earlier order of the court, in part from the execution of an Anton Pillar order, and in part from the Land Registry, show Mr Shalabayev as being described as the ultimate beneficial owner of some of those offshore companies, whether or not that is true. They also show him giving instructions and taking a part in the administration of those companies' ostensible assets, which suggests that the plaintiffs need the valuable information to find out what has become of their property, not merely pursuant to compliance by Mr Shalabayev with paragraph 10 of the freezing order in answering the questions raised, but also by providing information as to the whereabouts of his assets, bearing in mind the great breadth of the definition of his assets in paragraph 6 of the order which I have summarised."
Briggs J then continued to say a little later on:
"This is an extremely serious case, in which Mr Shalabayev has not only made no attempt whatsoever to comply with the freezing order, he has not made any admission of being in breach; he has not attended court, despite having more than sufficient time in which to do so; and he has not put evidence in, in mitigation of his contempt, relying upon what I have already described earlier this...
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