Kazakhstan Kagazy Plc v Baglan Abdullayevich Zhunus (formerly Baglan Abdullayevich Zhunussov)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henshaw |
| Judgment Date | 21 December 2021 |
| Neutral Citation | [2021] EWHC 3462 (Comm) |
| Docket Number | Case Nos: CL-2013-000683 |
| Court | Queen's Bench Division (Commercial Court) |
[2021] EWHC 3462 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane,
London, EC4A 1NL
THE HONOURABLE Mr Justice Henshaw
Case Nos: CL-2013-000683
and CL-2019-000494
and
Robert Howe QC, Daniel Saoul QC and Jonathan Miller (instructed by Hogan Lovells International LLP) for the First to Fourth Claimants
Kamar Uddin ( Direct Access) for the Respondents to the Charging Order Applications in case CL-2013-000683 and the Fifth to Fourteenth and Seventeenth Defendants in case CL-2019-000494
Hearing dates: 7–9, 12–15 and 21–23 July 2021
Draft judgment circulated: 8 December 2021
Approved Judgment
| (A) INTRODUCTION | 4 |
| (B) PROCEDURAL BACKGROUND | 5 |
| (C) WITNESSES | 7 |
| (1) Witnesses of fact | 7 |
| (2) Expert witnesses | 10 |
| (D) PRINCIPAL FACTS | 12 |
| (1) The Underlying Proceedings | 12 |
| (2) The Arip Trusts | 13 |
| (3) The Peak Fraud | 16 |
| (4) Acquisition of Exillon shares | 16 |
| (a) Acquisition of Mr Sturt's shares | 18 |
| (b) Acquisition of Mr Zhunus's shares | 19 |
| (5) Sale of Exillon shares | 22 |
| (6) Acquisition of the properties | 22 |
| (a) The Wycombe Property | 22 |
| (b) The Montrose Property | 23 |
| (c) The Burlington Properties | 24 |
| (d) The Ilford Properties | 25 |
| (E) OVERVIEW OF ISSUES | 25 |
| (F) TRACING CLAIM | 26 |
| (1) Governing law(s) | 26 |
| (2) Requirements for a tracing claim under English law | 33 |
| (3) Duties owed by Mr Arip to the Second Claimant under Kazakh law | 37 |
| (4) Essential factual basis of the tracing claims | 38 |
| (5) Relevance of the settlement with Mr Zhunus | 43 |
| (6) Alliance Bank loans | 45 |
| (7) Bona fide purchase/reputable trustees | 48 |
| (8) Estoppel arising from alleged concession before Leggatt J | 48 |
| (9) No right to trace under Kazakh law | 50 |
| (10) Time bar under English law | 57 |
| (11) Time bar under Kazakh law | 63 |
| (12) Time or other bar under Cypriot law | 66 |
| (13) Conclusion on Tracing Claim | 73 |
| (G) SECTION 423 CLAIM | 73 |
| (1) Introduction | 73 |
| (2) Applicable principles | 73 |
| (a) Overview | 73 |
| (b) “Transaction” | 76 |
| (c) Purpose | 77 |
| (d) Victim | 78 |
| (e) Remedies | 78 |
| (f) Extra-territorial effect | 79 |
| (g) Limitation | 80 |
| (3) The transactions which the Claimants seek to impugn under section 423 | 82 |
| (a) Initial settlement of Exillon shares into the WS Settlement | 82 |
| (b) Subsequent Settlements of Exillon Shares into the WS Settlement | 83 |
| (c) Acquisition of the Wycombe Property | 83 |
| (d) Acquisition of the Montrose Property | 86 |
| (e) Acquisition of the Burlington Properties | 86 |
| (f) Acquisition of the Ilford Properties | 87 |
| (4) Connection with England & Wales | 87 |
| (5) Limitation under English law | 88 |
| (6) Conclusion on Section 423 Claim | 88 |
| (H) THE CHARGING ORDERS CLAIM | 88 |
| (1) Principles | 88 |
| (2) Application | 91 |
| (a) The WS Settlement and the Exillon Shares | 92 |
| (b) The Wycombe Property | 94 |
| (c) The Montrose Property | 94 |
| (d) The Burlington Properties | 96 |
| (e) The Ilford Properties | 96 |
| (3) Conclusion | 97 |
| (I) DEFENDANTS' APPLICATION REGARDING THE FIRST CLAIMANT | 98 |
| (J) CONCLUSION | 99 |
(A) INTRODUCTION
This judgment follows a trial of applications and claims made by the Claimants for the purpose of enforcing an unsatisfied judgment for approximately US$300 million, handed down by Picken J in December 2017 following a thirteen-week trial.
Picken J's judgment was given in case CL-2013-000683 ( the “Main Proceedings”). He held that the Second Defendant to those proceedings, Mr Maksat Arip (“ Mr Arip”), the former Chief Executive Officer of the Claimants' corporate group ( the “KK Group”), had perpetrated a very large and sophisticated fraud on the Claimants, with the connivance of his co-defendant Ms Shynar Dikhanbayeva, the former Chief Financial Officer of the KK Group. Picken J gave judgment against Mr Arip and Ms Dikhanbayeva in favour of the Claimants for US$298,834,593 by way of damages and interest, and ordered a payment on account of costs of £8 million ( the “Picken J Order”). Nothing has to date been paid towards either of those sums.
Mr Arip was subsequently found guilty of contempt of court in absentia and sentenced to prison for two years by Phillips J, having ignored an injunction granted by Jacobs J requiring him to deliver up valuable wristwatches in part-satisfaction of the Picken J Order. His wife, Mrs Sholpan Arip (“ Mrs Arip”), and his mother-in-law Ms Larissa Asilbekova (“Ms Asilbekova”) were subsequently found by Jacobs J to have engaged in an “ asset dissipation and concealment exercise”. Jacobs J made an order pursuant to section 51 of the Senior Courts Act 1981 that they be jointly and severally liable for the £8 million costs order, having assisted with the funnelling and concealment of monies used to fund Mr Arip's defence. Mrs Arip and Ms Asilbekova have made no payment towards that obligation, and Ms Asilbekova has failed to comply with asset disclosure orders contained within a post-judgment worldwide freezing order subsequently made against her.
The Claimants now seek to enforce the Picken J Order against valuable assets which they claim to be amenable to such enforcement on the following bases:
i) The Claimants bring a tracing claim, in case CL-2019-000494 ( the “Tracing Proceedings”) on the basis that the monies stolen from them by Mr Arip ( the “Stolen Funds”) can be traced or followed into a variety of assets said to be held by companies within Cypriot trusts structures for the benefit of Mr Arip and his family. Those assets are four sets of properties in London (known as the “ Wycombe Property”, the “ Montrose Property”, the equity in the “ Burlington Properties” and the “ Ilford Properties”, together the “ Properties”) as well as a sum of £72 million in cash currently held in a Swiss bank account (collectively, the “ Assets”).
ii) Alternatively, the Claimants seek (also in the Tracing Proceedings) orders under section 423 of the Insolvency Act 1986 in respect of a number of the transactions which resulted in the Assets being transferred to the companies in question, the objective being to obtain orders transferring the Assets to the Claimants in part satisfaction of the Picken J Order.
iii) In the further alternative, the Claimants seek to enforce the Picken J Order by way of applications for final charging orders against the Properties. Those applications were originally made in the Main Proceedings, and ordered to be tried alongside the claims made in the Tracing Proceedings. They are advanced as a fallback in the event that the Claimants are not found to be the beneficial owners of the Properties. The Claimants say that if they are not the beneficial owners of the Properties, then Mr Arip is the beneficial owner, and the Claimants are entitled to enforce the Picken J Order against them via final charging orders and orders for their sale.
(B) PROCEDURAL BACKGROUND
The First to Fourth Defendants in the Tracing Proceedings (i.e. Mr Arip, Ms Dikhanbayeva, Mrs Arip and Ms Asilbekova) contested the proceedings against them, leading up to the trial before Picken J and the section 51 application referred to above. However, they have not, at least directly, participated since then: they have not filed pleadings, given disclosure or participated in any other way at the enforcement stage.
The proceedings have been defended by the Fifth to Fourteenth and Seventeenth Defendants to the Tracing Proceedings, whom for simplicity I shall refer to as the “ Defendants”). Each of them is a corporate holding vehicle and/or trustee company which holds legal title to one of the Assets; and the sole director of each was Mr Andreas Georghiou, a Cypriot lawyer.
The Defendants' conduct of and approach to these proceedings has been unsatisfactory in several respects.
i) In late 2018 Mrs Arip obtained anti-suit injunctions from the Cyprus courts, sought and granted without notice, to block the Claimants' attempts to enforce the Picken J Order in this jurisdiction. This delayed both the progress of the Charging Order Applications and the bringing of the Tracing Proceedings and resulted in two adjournments of the trial of these matters. The Cyprus courts were subsequently highly critical of the steps Mrs Arip had taken, including stating that she had “ conspired” with the (then) trustee in respect of the relevant applications.
ii) The Defendants have failed to...
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