JSC BTA Bank v Mukhtar Ablyazov
| Jurisdiction | England & Wales |
| Judge | Lord Clarke,Lord Neuberger,Lord Hodge,Lord Kerr,Lord Mance |
| Judgment Date | 21 October 2015 |
| Neutral Citation | [2015] UKSC 64 |
| Date | 21 October 2015 |
| Court | Supreme Court |
[2015] UKSC 64
Lord Neuberger, President
Lord Mance
Lord Kerr
Lord Clarke
Lord Hodge
Appellant
Stephen Smith QC
Tim Akkouh (Instructed by Hogan Lovells International LLP)
Advocate to the Court Jonathan Crow QC
Adam Holliman (Instructed by The Government Legal Department)
Heard on 28 July 2015
(with whom Lord Neuberger, Lord Mance, Lord Kerr and Lord Hodge agree)
This appeal is concerned with the interpretation and application of the standard form freezing order. It arises in the course of long-running litigation between JSC BTA Bank ("the Bank") and Mr Mukhtar Ablyazov ("the respondent") in which the Bank has to date obtained a number of judgments against the respondent amounting in all to US$4.4 billion, none of which he has satisfied. Throughout much of this litigation the respondent was represented by solicitors and counsel. Indeed they filed a detailed notice of objection to the grant of permission to appeal to the Supreme Court and signed an agreed statement of facts and issues. However, they thereafter withdrew from the record and did not appear at the hearing of the appeal. The court is however grateful to Mr Jonathan Crow QC and Mr Adam Holliman who appeared as advocates to the court and made detailed submissions on the issues in this appeal.
The statement of facts and issues identifies three issues, which all depend upon the terms of a freezing order which was made by Teare J on 12 November 2009 and was subsequently amended (together "the Freezing Order"). The issues were: (1) whether the respondent's right to draw down under certain loan agreements is an "asset" within the meaning of the Freezing Order; (2) if so, whether the exercise of that right by directing the lender to pay the sum to a third party constitutes "disposing of" or "dealing with" or "diminishing the value" of an "asset"; and (3) whether the proceeds of the loan agreements were "assets" within the meaning of the extended definition in paragraph 5 of the Freezing Order on the basis that the respondent had power "directly or indirectly to dispose of, or deal with [the proceeds] as if they were his own". It can be seen that these are essentially questions of construction of the Freezing Order.
The background can be taken shortly from the agreed statement of facts and issues. The Bank was one of Kazakhstan's four systemic banks. Between 2005 and early 2009, the respondent was its chairman and majority shareholder. When the Bank was nationalised in February 2009, the respondent fled to England and did not return to Kazakhstan. The Bank's case is that, while chairman, he presided over the misappropriation of over US$10 billion of the Bank's monies for his own personal benefit. The Bank commenced 11 sets of proceedings in this jurisdiction seeking compensation of about US$6 billion. In a judgment handed down on 19 March 2013, Teare J found that two of the Bank's former senior officers and one offshore company formerly controlled by the respondent had knowingly assisted in three frauds perpetrated by the respondent which led to the misappropriation of sums exceeding US$1.5 billion. Further, on 26 November 2013, Henderson J granted the Bank summary judgment in an amount of US$295m plus interest, in respect of the respondent's fraudulent misappropriation of assets shortly before nationalisation. He was debarred from defending the three cases which went to trial, because he had failed to comply with several orders of the court. He was not however debarred from defending the summary judgment application, which he continued to do until just before the hearing, when he chose not to defend. The Bank has to date entered judgment against the respondent in four cases in an aggregate sum (as stated above) of over US$4.4 billion. No part of these judgments has been paid by the respondent, although small sums (relative to the value of the judgment) have been realised by the receivers appointed by the court, who are also in the process of selling certain assets found to belong to him.
The Freezing Order includes the following provisions in so far as it relates to the Bank and the respondent:
"4. Until judgment or further order … the respondent must not, except with the prior written consent of the Bank's solicitors –
a. Remove from England and Wales any of his assets which are in England and Wales … up to the value of £451,130,000 …
b. In any way dispose of, deal with or diminish the value of any of his assets in England and Wales up to the value of …£451,130,000 …
c. In any way dispose of, deal with or diminish the value of any of his assets outside England and Wales unless the total unencumbered value … of all his assets in England and Wales … exceeds £451,130,000 …
5. Paragraph 4 applies to all the respondents' assets whether or not they are in their own name and whether they are solely or jointly owned and whether or not the respondent asserts a beneficial interest in them. For the purpose of this Order the respondents' assets include any asset which they have power, directly or indirectly, to dispose of, or deal with as if it were their own. The respondents are to be regarded as having such power if a third party holds or controls the assets in accordance with their direct or indirect instructions.
…
EXCEPTIONS TO THIS ORDER
9. a. Paragraph 4 of this Order does not prohibit the respondent from spending up to £10,000 a week … towards his individual ordinary living expenses … nor does it prohibit the respondent from spending a reasonable amount on legal advice and representation. But before spending any money on legal advice and representation the respondent must notify the Bank's legal representatives in writing where the money to be spent is to be taken from.
b. This Order does not prohibit the respondent from dealing with or disposing of any of his assets in the ordinary and proper course of any business conducted by him personally.
…
19. The respondent may apply to vary or discharge this Order …"
In due course, the Court of Appeal confirmed that, (at least) in respect of certain transactions, the respondent had no business which would enable him to take advantage of the ordinary business proviso. So his permitted spending was limited, for relevant purposes, to (1) £10,000 per week plus (2) a reasonable amount on his own legal expenses. The Bank maintains that this exception does not allow a defendant to fund a co-defendant's legal expenses.
The issues in this appeal have proceeded on the basis that the respondent entered into two binding and effective loan facility agreements, dated 1 September 2009 and 1 April 2010, with a BVI company called Wintop Services Limited ("Wintop") and a further two agreements, dated 17 August 2010 and 1 December 2010, with another BVI company called Fitcherly Holdings Limited ("Fitcherly"), (collectively "the Loan Agreements"). In each case the respondent was described as the borrower and Wintop and Fitcherly were respectively described as the lenders. I note in passing that the Bank does not accept that Wintop and Fitcherly were third party lenders as the respondent maintains. Rather, the Bank contends (and Christopher Clarke J ("the judge") held (at [2011] EWHC 2664 (Comm), para 71) that there was "strong ground for believing" that they were the respondent's "creatures or conduits". However this appeal and the decisions of the lower courts have proceeded on the basis that the Loan Agreements are binding and effective.
Clause 1 of each agreement provided for a loan facility of £10m and contained the following material terms under the heading "AMOUNT AND TERMS OF THE LOAN:
"1.1 Facility. The Lender hereby agrees, subject to the terms and conditions set forth herein, to extend a loan facility to the Borrower in the principal amount of 10,000,000 GBP (ten million Great Britain pounds) ("the Loan Facility"). The loan facility shall be made available to the Borrower for two years as of the Date of the Agreement ("Availability Period").
1.2 Disbursement. The Loan Facility shall be disbursed in a form agreed by the Parties in one or several disbursements … upon the Borrower's written request …
1.3 Interest. The Loan Facility shall bear interest at the rate of 5% (five per cent) per annum. Interest for each Tranche shall accrue daily from the Date of Disbursement of such Tranche until repayment in full of the principal of the Tranche and all accrued interest thereon …
1.4 Repayment. All Tranches, together with all accrued and unpaid interest thereon, shall be payable by the Borrower upon the Lender's request, but not earlier than four years after the Date of the Agreement …
…
1.6 Cancelation of the Loan Facility. Notwithstanding section 1.1 hereof, any undrawn portion of the Loan Facility may be cancelled upon delivery to the Borrower of a written cancellation notice by the Lender.
…
1.8 Binding Effect for the Borrower. … this Agreement constitutes the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with its terms …
…
1.11 Binding Effect for the Lender. …this Agreement constitutes the legal, valid and binding obligations of the Lender, enforceable against the Lender in accordance with its terms …
1.12 Use of Proceeds. The proceeds of the Loan Facility shall be used at the Borrower's sole discretion. The Borrower may direct the Lender to transfer the proceeds of the Loan Facility to any third party. …
1.16 Assignment. … The Borrower may not assign or transfer any of its rights under this Agreement without the prior written consent of the Lender."
The Loan Agreements have been fully drawn down and pursuant to them the respondent has directed...
To continue reading
Request your trial
-
Koza Ltd and Another v Mustafa Akçil and Others
...This principle was referred to by Lord Clarke JSC, with whom the other members of the Supreme Court agreed, in JSC BTA Bank v Ablyazov [2015] 1 WLR 4754 at [13] in the context of discussing the judgment of Beatson LJ in the Court of Appeal in that case. However, it does not seem to have pla......
-
Deutsche Bank AG v Sebastian Holdings Inc.
...§ 37. 60 A strict construction must be applied to orders whose breach carries penal consequences. In JSC BTA Bank v Ablyazov (No. 10) [2015] UKSC 64, a case about the construction of a freezing order, Lord Clarke (with whom the other members of the court agreed) said: “19. I further agree ......
-
Cyprus Popular Bank Public Company Ltd v Vgenopoulos and Others
...Masri v Consolidated Contractors (Oil & Gas) Company SAL [2009] EWCA Civ 36 and as also happened, in a freezing order context, in JSC BTA Bank v Ablyazov [2015] UKSC 64, a case in which Lord Clarke described at [16] the " sole question" as being "what the freezing order in fact made means......
-
FM Capital Partners Ltd v Frédéric Marino
...beneficially or otherwise” in the first sentence of para. 5 of the order. This phrase, described by Christopher Clarke, J in JSC BTA Bank v Ablyazov (No 5) [2012] EWHC 1819 (Comm); [2012] 2 All ER (Comm) 1243, para. 34 as “the Commercial Court words”, is intended to extend the operation o......
-
Judgments - February 9, 2016
...for companies (including banks) to consider it more closely. Interpretation of the standard form freezing order JSC BTA Bank v. Ablyazov [2015] UKSC 64 The Supreme Court has recently clarified that the definition of "assets" in the Commercial Court's standard form freezing order can include......
-
English High Court Confirms the Scope of Freezing Injunctions in Relation to Third-Party Assets
...between the decision of the Court of Appeal in Lakatamia and the more recent decision of the Supreme Court in JSC BTA Bank v Ablyazov [2015] UKSC 64; [2015] 1 WLR 4754. Whilst the Supreme Court did not find that Ablyazov overruled Lakatamia, it held that Ablyazov must be applied in respect ......
-
Fraudster Using Loans To Try To Get Around English Freezing Order
...JSC BTA Bank v Mukhtar Ablyazov and Others [2015] UKSC 64 Does the standard form of English Freezing Order bite on loans held by the Defendant where he has the power to direct how the proceeds are disposed of? The Supreme Court recently looked at this question purely in terms of the interpr......
-
Getting At Trust Assets And Piercing The Corporate Veil
...substantial claims against him. The properties were therefore held on resulting trust by the companies for Mr Zharimbetov. Footnotes 1 [2015] 1 WLR 4754, Supreme Court 2 At paragraph 43 3 At paragraphs 46-48 4 [2012] 1 WLR 1721, Privy Council 5 [2012] EWHC 3916 (Comm), [2015] EWHC 21316 Thi......
-
Asset Preservation Orders - Mareva Injunctions
...plaintif argued that these loan facilities were “assets” and thus subject to the freezing order. 134 JSC BTA Bank v Ablyazov (No 10) , [2015] UKSC 64. THE LAW OF EQUITABLE REMEDIES 194 The Supreme Court indicated that context and established construction and interpretation of the order shou......
-
Table of cases
...205 JSC BTA Bank v Ablyazov (No 8), [2012] EWCA Civ 4111................................ 205 JSC BTA Bank v Ablyazov (No 10), [2015] UKSC 64 ...................................193–94 JSC BTA Bank v Khrapunov, [2018] UKSC 19 ....................................................201 JSC Commerc......
-
Table of Cases
...29 CPC (6th) 121 (BCSC) 76, 77 98 75,150 John Stagliano v Elmaleh, 2006 FC 585 Jose v Riz, 200g BCSC 1075 236 90 JSC BTA Bank v Ablyazov, [2015] UKSC 64. ......................... 139,143,144,150,170-71 JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev, [2014] EWHC 4336 (Ch), aff'd [2015] EW......
-
Securities and Financial Services Regulation
...the context specificity of some forms of choses in action, which was recently confirmed by the UK Supreme Court in JSC BTA Bank v Ablyazov[2015] UKSC 64, where the proceeds of certain loan agreements were seen as ‘assets’ within the meaning of the extended definition in para 5 of the freezi......