Salim Shalabayev v JSC BTA Bank
| Jurisdiction | England & Wales |
| Judge | Gloster LJ,Lady Justice King,Lord Justice Jackson |
| Judgment Date | 07 October 2016 |
| Neutral Citation | [2016] EWCA Civ 987 |
| Docket Number | Case No: A3/2013/1529 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 October 2016 |
[2016] EWCA Civ 987
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION, COMMERCIAL COURT
Mr Justice Teare
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Jackson
Lady Justice Gloster
and
Lady Justice King
Case No: A3/2013/1529
James Sheehan (instructed by Withers LLP) for the Appellant
Stephen Smith QC and Emily Gillett (instructed by Hogan Lovells International LLP) for the Respondent
Hearing dates: 26, 27 April 2016
JudgmentApproved
Introduction
This is an appeal by the appellant, Salim Shalabayev ("Mr Shalabayev") against an order of Mr Justice Teare ("the judge") dated 17 May 2013 ("the order"), by which the judge dismissed Mr Shalabayev's application to intervene in an application by the respondent, JSC BTA Bank ("the Bank"), a Kazakhstan bank, for a final charging order over a property situate at Flat 17, Alberts Court, 2 Palgrave Gardens, London NW1 6EL ("Alberts Court" or "the property") and made a final charging order over the property. The registered proprietor of the property is Bensbourogh Trading Inc ("Bensbourogh") a company incorporated in the British Virgin Islands. It purchased the long leasehold title to the property on 27 June 2008 for £965,000.
The Bank applied for a charging order on the basis of two judgment debts in its favour which it had obtained in proceedings brought against the first defendant, Mukhtar Ablyazov ("Mr Ablyazov"), totalling approximately US$1.6 billion. In the charging order proceedings, the Bank contended, based on a finding by the judge made in a judgment ("the committal judgment") in committal proceedings heard in December 2011 and brought by the Bank against Mr Ablyazov ("the committal proceedings"), that Alberts Court belonged to Mr Ablyazov.
Mr Shalabayev's position was and is that he is the beneficial owner of Alberts Court and Bensbourogh, and that the property does not belong to Mr Ablyazov. He contends that, on that basis, the court had no jurisdiction to grant a charging order over Alberts Court in favour of the Bank.
The judge refused an application by Mr Shalabayev to be joined to the Bank's application for a final charging order, on the basis that Mr Shalabayev's position amounted to "as plain a case as there could possibly be of a collateral attack [on the judge's own findings in the committal proceedings] which would bring the administration of justice into disrepute". Accordingly, he held that Mr Shalabayev's application to have the issue of ownership litigated was an abuse of the process of the court.
The issue on this appeal is therefore whether the judge was right to refuse Mr Shalabayev's application to intervene in the Bank's application for a final charging order in respect of Alberts Court and to have the ownership issue determined.
On the appeal Mr James Sheehan appeared on behalf of Mr Shalabayev and Mr Stephen SmithQC and Miss Emily Gillett appeared on behalf of the Bank.
Factual and procedural background
This application arises out of long-running proceedings brought by the Bank against, primarily, its former Chairman, Mr Ablyazov, alleging the fraudulent misappropriation of monies from the Bank. Mr Shalabayev is not a party to any of the substantive proceedings, although he has been a respondent to numerous interlocutory applications made by the Bank.
The following is a summary of the proceedings against Mr Ablyazov, including the involvement of Mr Shalabayev.
The Bank now has judgments against Mr Ablyazov totalling in excess of US$ 4 billion, including a summary judgment granted by Henderson J on the merits on 26 November 2013 for approximately US$400 million including interest. According to the Bank's evidence, the value of Mr Ablyazov's disclosed assets, in contrast, amounts to a small fraction of the value of the judgments obtained against him. The Bank has made numerous interlocutory applications in an attempt to track down and secure Mr Ablyazov's undisclosed assets. In the underlying proceedings in the Commercial Court, a freezing order was first granted against Mr Ablyazov in August 2009; a receivership followed after a very hotly contested hearing in 2010 ("the freezing order" and "the receivership order").
The Bank's case has always been that Mr Ablyazov used a large, complicated network of offshore companies, incorporated in jurisdictions such as the British Virgin Islands, the Seychelles, Cyprus and the Marshall Islands, to administer and conceal his assets. The receivership order has been extended six times to include over 900 companies believed to belong to Mr Ablyazov. As the judge explained in his judgment in the committal proceedings, the judge found that Mr Ablyazov had been assisted in the management of these companies by his trusted family members, friends and associates, including his two brothers-in-law, the appellant Mr (Salim) Shalabayev and his brother, Mr SyrymShalabayev ("Mr SyrymShalabayev").
In the course of the litigation against him, Mr Ablyazov has: repeatedly breached court orders; given false evidence under oath; fled the jurisdiction in breach of court order upon being provided with the draft committal judgment; and has left over £1m worth of costs orders in favour of the Bank unpaid. Although his departure from the jurisdiction was suspected by the Bank as at February 2012, it was not until December 2012 that this was admitted to the court by letter from his solicitors. At the end of July 2013, he was found in the south of France and arrested upon a red Interpol notice. In January 2014, the French courts determined that he should be extradited to Russia or Ukraine. He remains in custody in France. He has not purged any of his contempts nor has he served any of his three concurrent 22 month sentences of imprisonment imposed upon him. As a result of his continuing contempts, both the Court of Appeal and the Commercial Court have refused to hear argument on his behalf. Mr Ablyazov's conduct provoked the following observation from Maurice Kay V-P upon his appeal against the committal judgment ( [2013] 1 WLR 1331 at [202]):
"It is difficult to imagine a party to commercial litigation who has acted with more cynicism, opportunism and deviousness towards court orders than Mr Ablyazov. Rix LJ has described in trenchant terms the factors which cause me to express myself in this way. There can be no complaint that Teare J decided that the court's powers should be deployed so as to put the maximum pressure on Mr Ablyazov to comply with its orders so as to endeavour to prevent its fair procedures from being subverted."
The committal proceedings against Mr Ablyazov were heard before Teare J in the course of approximately three weeks in December 2011. One of the issues between the Bank and Mr Ablyazov in the committal proceedings was whether Mr Ablyazov was the ultimate beneficial owner of Alberts Court. The significance of this was that Mr Ablyazov had been cross-examined as to his assets in October and November 2009, and had stated that all the residential properties he owned were included in his schedule of assets which he had submitted in compliance with a freezing order; that schedule did not make any reference to ( inter alia) Alberts Court. He was thus said to have given false evidence on oath in this and other respects. The issue of ownership fell to be decided in those proceedings for the purpose of establishing whether or not Mr Ablyazov was in contempt of court.
Mr Ablyazov called Mr Shalabayev as a witness in the committal proceedings. The latter appeared in court and gave evidence (inter alia) that he was the owner of Alberts Court. He was cross-examined for a little less than a day. In the committal judgment 1, the judge found Mr Shalabayev to be an unreliable witness, principally because he admittedly gave false evidence in order to protect the whereabouts of his brother Mr SyrymShalabayev. Accordingly, the judge did not accept Mr Shalabayev's evidence that he was the owner of Alberts Court and duly found that Mr Ablyazov was in contempt in relation to his non-disclosure of the property.
Mr Ablyazovalso called Mr SyrymShalabayevas a witness in the committal proceedings. But, unlike Mr Shalabayev, Mr SyrymShalabayev refused to come to London to give evidence and, instead, gave evidence by video-link from a foreign location which was not disclosed to the Bank. He was cross-examined for over two days. On several occasions during his cross-examination, Mr SyrymShalabayev refused to answer questions put to him. In reaching his conclusions in the Ablyazov committal judgment, Teare J rejected Mr SyrymShalabayev's evidence and found him to have acted as one of Mr Ablyazov's nominees.
I quote the following paragraphs from the committal judgment which are relevant for present purposes:
"16. Before summarising the parties' respective cases it is necessary to note three matters. The first is the manner in which Mr. Ablyazov "holds" his assets. In my judgment on the receivership application, [2010] EWHC 1779 (Comm) at paragraph 7, I described it in these terms:
"7. Mr. Ablyazov does not hold his assets in his own name. Rather, a trusted associate appears to hold shares in a holding company on his behalf and by that means controls the shareholdings in a chain of other companies at the bottom of which chain is an operating business. The use of a nominee and of companies registered in offshore jurisdictions makes it difficult to trace his assets. He says that the elaborate scheme by which he owns his assets is
necessary to protect him from unlawful depredations by the President of Kazakhstan."17. Assets held in this way are assets of Mr. Ablyazov within the wide definition of assets in the WFO....
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