Kazakhstan Kagazy Plc v Baglan Abdullayevich Zhunus (formerly Baglan Abdullayevich Zhunussov)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs,Mr. Justice Jacobs |
| Judgment Date | 08 October 2019 |
| Neutral Citation | [2019] EWHC 2630 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2013-000683 |
| Date | 08 October 2019 |
[2019] EWHC 2630 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Jacobs
Case No: CL-2013-000683
and
Robert Howe QC and Daniel Saoul QC (instructed by Allen & Overy LLP) for the First, Second, Third and Fourth Claimants
Stephen Auld QC and Alexander Milner (instructed by Gresham Legal) for the Fourth and Fifth Defendants
Hearing date: 23 rd July 2019
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.
The application
The 1 st – 4 th Claimants (“the Claimants”) apply for non-party costs orders under s.51 of the Senior Courts Act 1981 against the 4 th Defendant (“Mrs. Arip”) and the 5 th Defendant (“Ms. Asilbekova”), who is Mrs. Arip's mother.
The application arises from substantive proceedings that were resolved following a 13-week trial in the Commercial Court. In December 2017, Picken J handed down a judgment finding that the Claimants had successfully established a very substantial fraud claim against the 2 nd Defendant (“Mr. Arip”) and the 3 rd Defendant (“Ms. Dikhanbayeva”). Mr. Arip is Mrs. Arip's husband and was effectively CEO of the Claimants. Ms. Dikhanbayeva is not related to either of them, but was effectively the CFO of the Claimants. The trial judge held that both of these Defendants had given extensive dishonest evidence to the court, as well as calling a number of other dishonest witnesses in an attempt to corroborate their false account of events.
The claim against Mr. Zhunus, the first defendant, was settled in 2016 and did not proceed to trial. Neither Mrs. Arip nor Ms. Asilbekova were party to the original proceedings.
On 28 February 2018, in a further judgment on consequential matters, Picken J found that Mr. Arip and Ms. Dikhanbayeva were liable for the sum of US$298,834,593 and ordered them to pay £8,000,000 as interim payment on account of costs. No part of Picken J's judgment has been satisfied.
The Claimants have pursued various avenues to try to enforce the judgment. These have included steps which have led to the present application. On 27 April 2018, they made a without notice application under section 37 of the Senior Courts Act 1981 against the Defendants' former solicitors Cleary Gottlieb (“Cleary”) and two partners of that firm, Mr. Sunil Gadhia and Mr. Tihir Sarkar, seeking disclosure of the identity of individuals and entities who had paid Cleary's fees and disbursements for the main proceedings. On 20 July 2018, Knowles J made an order requiring Cleary to provide this information. Pursuant to that order, Mr. Gadhia filed a witness statement confirming that Mrs. Arip had paid around £13.9 million between February 2014 and February 2018, and that Ms. Asilbekova had paid £500,000 on 8 December 2014 towards Cleary's fees and disbursements.
The Claimants now seek orders that each of Mrs. Arip and Ms. Asilbekova should pay the costs which they incurred in the proceedings. Up until 17 January 2018, those costs amounted to £ 12,095,278.43, after allowance for a deduction of £ 75,000 in respect of certain costs of applying for a freezing order. Those costs were principally incurred after the Claimants' present solicitors, Allen & Overy, had replaced Zaiwalla & Co. on 1 April 2015.
Although applications under s.51 are usually determined by the trial judge, the parties were ultimately agreed that it was preferable for the hearing of the application to take place before me, rather than the trial judge. There were a number of reasons for this, including the need to avoid further delay. In addition, there has been a very significant volume of post-judgment applications, and these have been dealt with by a number of different judges. These included a successful application by the Claimants to cross-examine Mrs. Arip with a view to the effective enforcement of a worldwide freezing order which they obtained in September 2018. A particular reason why the parties were agreeable to my resolving the s.51 application was that I had recently dealt with the one-day application for cross-examination (see [2019] EWHC 1693 (Comm)), and the principal facts and arguments relevant to the s.51 application were not dissimilar to those relied upon in the context of that application. The cross-examination had taken place, before a deputy judge, on 15 and 16 July 2019.
The factual background
In this section, I describe in broadly chronological order the principal events relevant to the parties' arguments.
The detailed factual background to the action can be found in the two judgments of Picken J. The more recent procedural background is set out in paragraphs [3] – [18] of my earlier judgment.
In summary, the Claimants are part of a corporate group (the “KK Group”) which is in the business of recycling paper and packaging in Kazakhstan. The 1 st – 3 rd Defendants are former directors and/or shareholders of companies in the KK Group. The claims in the proceedings related to their conduct during their time as directors.
Harbour Fund III, LP (“Harbour”) is a litigation funder that has provided a substantial amount of funding for the Claimants to pursue these proceedings. Harbour was joined as an Additional Party to these proceedings pursuant to Knowles J's order on 22 January 2018.
In or around July 2007, Mr. Zhunus, Mr. Arip and Ms. Dikhanbayeva left Kazakhstan for Dubai where they worked on a business involving the exploitation of oil assets in Siberia. This business was carried out through an Isle of Man company called Exillon Energy Plc (“Exillon”), which underwent an initial public offering (“IPO”) in 2009.
In January 2009, Mr. Arip arranged for some valuable shareholdings in Exillon to be issued to a trust called the WS Settlement of which Mr. and Mrs. Arip were the beneficiaries. Initially, their children were also named as beneficiaries but they were later removed. Subsequently, the WS Settlement also acquired further shareholdings in Exillon from third parties including Mr. Zhunus. In consequence, the WS Settlement held around 30.17% of the issued share capital of Exillon.
Between June 2010 and December 2013, the trustees of the WS Settlement carried out a sale of the Exillon shares. The shares were sold in three tranches and raised a total amount of around £97 million and a further US$300 million. The sale proceeds were received by the WS Settlement, and then largely distributed to Mrs. Arip (as set out in paragraph 17 below).
In the meantime, on 2 August 2013, the Claimants had commenced proceedings in England alleging fraud against the Defendants. On the same day, His Honour Judge Mackie QC, on a without notice application, granted a worldwide freezing order (“WFO”) against Mr. Zhunus and Mr. Arip in the amount of £100 million. Subsequently, on 20 November 2013, the amount of the WFO was reduced to £72 million.
In accordance with the WFO, on 12 August 2013, Mr. Arip provided a sworn affidavit which annexed a schedule of his worldwide assets. Two of the most significant assets identified by Mr. Arip were his interests in two trusts: the WS Settlement and another trust known as the Wycombe Settlement, which owned a property in London.
Although Mr. Arip's interest in the WS Settlement formed a substantial part of his assets, it is now common ground that this trust no longer retains any significant funds over and above the £72 million which was the reduced amount of the WFO. The surplus funds over and above that sum were, save for US$ 1 million, distributed to Mrs. Arip. In particular, Mrs. Arip admits receiving the following transfers from the WS Settlement:
a) £14,744,938 paid in three tranches between July and September 2010;
b) £62,597,000 on 6 April 2011;
c) US$181,911,000 on 18 December 2013.
The first two distributions were made prior to the commencement of the present proceedings. The third distribution was made subsequent to the commencement of those proceedings, and after the WFO had been obtained. However, since the sum of £72 million was retained within the WS Settlement, there is no suggestion that this distribution was in breach of the WFO. Mrs. Arip admits that this distribution was made following a request from her to the trustees of the WS Settlement. It is also clear that it was made with the knowledge and approval of Mr. Arip. This is evident from Mr. Arip's ‘Letter of No Objection’ dated 17 December 2013, by which he informed the trustees of the WS Settlement that he did not object to the transfer as long as the value of the assets held by the trust did not fall below £72 million as required by the WFO.
It was very shortly after this distribution that Mrs. Arip's funding of the defence of Mr. Arip started. On 25 February 2014, Mrs. Arip paid approximately £1,500,000 to Cleary from her account at one of her banks, LGT Bank Ltd in Liechtenstein. Her evidence was that this payment was made because she was told by her husband that he had run out of money. She said that it was “inconceivable that any wife would fail to support their husband in these circumstances”. Her agreement to do so was, she said, “borne purely out of love and affection, to help my husband. Maksat had run out of money and it seemed natural to me that as his wife I would support...
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Kazakhstan Kagazy Plc v Baglan Abdullayevich Zhunus (formerly Baglan Abdullayevich Zhunussov)
...buy Exillon shares in January 2009 came from legitimate sources including his KK Group salary. Further, Jacobs J in his decision at [2019] EWHC 2630 (Comm) was satisfied that Mrs Arip, helped by Ms Asilbekova, had taken steps with a view to dissipating or concealing assets, and that the mo......
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...that a similar approach was taken with friends and a financial interest given. 76 Mr Said relied on Kazakhstan Kagazy plc v Zhunus [2019] EWHC 2630 (Comm) where the claimants applied for a non-party Order against two family related defendants. Mr Said said that such case is an example of a......
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Between: (1) Arnage Holdings Ltd (2) Brooklands Holdings Ltd (3) East Farthing Holdings Ltd (4) Ms Katia Rabello (5) Mr Fernando Toledo Plaintiffs v Walkers (A Firm) Defendant
...that a similar approach was taken with friends and a financial interest given. 76 Mr Said relied on Kazakhstan Kagazy plc v Zhunus [2019] EWHC 2630 (Comm) where the claimants applied for a non-party Order against two family related defendants. Mr Said said that such case is an example of a......
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Kazakhstan Kagazy Plc and Others v Baglan Abdullayevich Zhunus and Others
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