JSC BTA Bank v Mukhtar Ablyazov (1st Defendant) Salim Shalabayev and Another
| Jurisdiction | England & Wales |
| Judge | Sir Ross Cranston |
| Judgment Date | 17 November 2017 |
| Neutral Citation | [2017] EWHC 2906 (Comm) |
| Docket Number | Case No: CL-2009-000212 and CL-2011-000510 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 November 2017 |
and
[2017] EWHC 2906 (Comm)
Sir Ross Cranston
Case No: CL-2009-000212 and CL-2011-000510
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Stephen Smith QC (instructed by Hogan Lovells International LLP) for the Claimant
Applicant James Sheehan (instructed by Cripps LLP) for the First Respondent
Hearing dates: 3–5 October 2017
Approved Judgment
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.
I Introduction
This is a trial directed by the Court of Appeal in an order dated 7 October 2016. The issue is the beneficial ownership of a flat in the St John's Wood area of London known as 17 Alberts Court, Palgrave Gardens ('Alberts Court') and of the shares in its registered proprietor, the second respondent, Bensbourogh Trading Inc ('Bensbourogh'). The first respondent, Mr Salim Shalabayev ('Mr Shalabayev'), is the sole shareholder in Bensbourogh, which has never held other property. His wife is Mrs Shiray Shalabayeva.
The claimant, JSC BTA Bank ('the Bank'), is a Kazakhstan bank. The first defendant, Mr Mukhtar Ablyazov ('Mr Ablyazov'), is the former chairman of the Bank. The Bank has pursued him for what are said to be misappropriated funds whilst he was chairman, totalling some US$ 5 billion. Mr Ablyazov is Mr Shalabayev's brother-in-law, being married to his sister, Alma. Mr Shalabayev has an older brother, Mr Syrym Shalabayev ('Syrym'), whose wife is Aigul. The brothers are close: they spoke to each other during the course of the trial and Mr Shalabayev's evidence at the hearing was that he trusted his brother more than anyone else.
The Bank's case is that Bensbourogh and Alberts Court are beneficially owned by Mr Ablyazov, and it seeks a final charging order over Alberts Court as a means of enforcing judgments entered in its favour against him in November 2012, amounting to over £1 billion. The Bank has the burden of establishing Mr Ablyazov's beneficial ownership.
Mr Shalabayev's case is that he is the legal and beneficial owner of Bensbourogh and the ultimate beneficial owner of Alberts Court. In other words, the formal position in relation to the property is the true position.
II PREVIOUS PROCEEDINGS
An outline of previous proceedings
This trial has a lengthy procedural background. There is no need for a detailed account of that background in light of Popplewell J's helpful account in JSC BTA Bank v Ablyazov [2014] EWHC 2788 (Comm); [2014] 2 C.L.C. 263, [4]–[39]. However, some history is necessary so that references later in this judgment to previous proceedings, and the documents and evidence adduced in them, are more easily understood.
The procedural background begins in August 2009, when the Bank commenced proceedings in the Commercial Court against Mr Ablyazov and others alleging the misappropriation to which reference has already been made. Mr Shalabayev was not a party to those proceedings. The Bank obtained a freezing order against Mr Ablyazov, which became an unlimited worldwide freezing order in November 2009. In February 2010 the Bank sought a receivership order in respect of Mr Ablyazov's assets, which was granted by Teare J in August 2010. Mr Ablyazov appealed that order without success. The order has been amended over the following years.
In the course of the proceedings against him, Mr Ablyazov explained in his third witness statement in April 2010 how he held his assets:
"'229. … the bulk of my assets are held through nominee arrangements. …
237. The typical way this operates is as follows: an asset (for example a piece of real estate) is recorded as being owned by a company situated in an offshore jurisdiction, for example, Cyprus. That company's shares are owned by a further company or companies located in one or more other jurisdictions, for example, the Cayman Islands and the Seychelles. The shares in those companies are in turn registered in the name of an individual in whom I repose my trust and confidence, Mr X, and with whom I have a mere oral agreement.
238. That means that, if the Kazakhstan Government instructs someone to follow the 'paper trail' underlying the assets, that trail will, hopefully, never reach me. Indeed, if all goes according to plan the chain of nominee companies will provide sufficient protection (particularly in jurisdictions where there is no requirement to disclose shareholder identity) so that the trail will not even reach Mr X. Even if it does, though, there can be no connection established between myself and Mr X because our agreement is often a purely verbal one, and Mr X is loyal to me."
As Popplewell J noted in JSC BTA Bank v Ablyazov [2014] EWHC 2788 (Comm); [2014] 2 C.L.C. 263, it subsequently emerged that one of his main nominees for such purposes was Mr Syrym Shalabayev, through whom Mr Ablyazov held beneficial interests in a very large number of companies whose existence and assets he wished to conceal from the Bank and the court: at [13].
In May 2011, the Bank sought to commit Mr Ablyazov to prison for contempt of court for failing to disclose his assets in breach of court orders ('the Committal Hearing'). Mr Shalabayev was not a party to the committal application. However, at the trial in November and December 2011 he gave evidence, along with Mr Ablyazov and his brother, Syrym. Mr Shalabayev was cross-examined over the course of two days, including as to the true ownership of Bensbourogh and Alberts Court. In the course of that evidence he said that he was the true owner. He also said that he did not own any other companies outside Kazakhstan, apart from Bensbourogh.
Teare J held to the criminal standard of proof that Mr Ablyazov was guilty of contempt of court: [2012] EWHC 237 (Comm). In the course of his judgment, he found in particular that Mr Ablyazov did not mention the central role played in the administration of his assets by Mr Alexander Udovenko and by Mr Syrym Shalabayev: [79], [179]–[184]. Teare J upheld most of Bank's allegations, including that Mr Ablyazov was the ultimate beneficial owner of a number of properties in London, not Mr Syrym Shalabayev, as both Mr Ablyazov and Syrym himself claimed. One is a large house on The Bishop's Avenue, Hampstead, known as Carlton House, purchased for £15.5m ([147], [238]), another an estate in Surrey, known as Oaklands Park, purchased for £18.15m: [158], [239]. Teare J also held that a company, Sunstone Ventures Ltd ('Sunstone') was administered by Mr Syrym Shalabayev for Mr Ablyazov ([129]–[132]), and that Mr Ablyazov was the beneficial owner of another company, FM Company Ltd ('FM Company'): [191], [242].
Teare J also held that Mr Ablyazov was the beneficial owner of Alberts Court: [2012] EWHC 237 (Comm), [165]–[173], [240]. However, he found that that was not the case with another flat in the same development, 79 Elizabeth Court ('Elizabeth Court'): [159]–[164].
Mr Ablyazov appealed the committal order but the Court of Appeal dismissed the appeal: [2012] EWCA Civ 1411; [2013] 1 WLR 1331. Rix LJ (with whom on this aspect Toulson and Maurice Kay LJJ agreed) said:
"[82] I would again conclude that the judge's reasons for his conclusions are compelling. I have again considered the written submissions carefully, but cannot find in them any reason for doubting the judge's analysis. No error of law is relied upon. There is again an attempt completely to reargue the trial, down to the smallest details. I would come to the same conclusions as the judge myself, and be sure of them, although that is not the test. I do not consider that the conclusions are in any way unsafe."
Rix LJ said this of Sunstone and FM Company:
"[87]…As to Sunstone, Mr Ablyazov accepted in evidence that Sunstone held his interest in TechStroy Alyans for his benefit. It is true that Syrym Shalabayev said he was the beneficial owner of Sunstone: however in circumstances where Syrym was disbelieved in relation to the source of the proceeds paid by Sunstone for Carlton House (which Syrym said came from the proceeds of his uranium business but which the judge found came from the proceeds of Mr Ablyazov's uranium business), the compelling inference is that Sunstone was indeed Mr Ablyazov's company…
[91]…it is submitted that the judge ought not to have rejected the evidence that FM was Syrym's and not Mr Ablyazov's company, nor the evidence that Bergtrans and Carsonway were Mr Kossayev's and not Mr Ablyazov's companies. A comparison of this list of challenges with the judge's findings and analysis set out earlier in this judgment demonstrates how much this appeal is simply an attempt to reargue each of the judge's assessments of the oral and written testimony and the documents (or absence of documents) at trial.
[92] However, in my judgment, this goes nowhere. It is impossible for this court to gainsay the judge's rejection of the credibility (both overall and on this subject-matter) of Syrym Shalabayev and Mr Ablyazov…there was not the slightest documentary evidence to support the account which Mr Ablyazov gave of how the large-scale transactions between FM and Ablyazov companies were generated by Syrym's wealth."
As to Mr Ablyazov, Rix LJ said:
"[106] Mr Ablyazov's contempts have been multiple, persistent and protracted, have embraced the offences of non-disclosure, lying in cross-examination and dealing with assets, and have been supported by the suborning of false testimony and the forging of documents."
Maurice Kay LJ agreed:
"[202] It is difficult to imagine...
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