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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> JSC BTA Bank v Ablyazov [2013] EWHC 3691 (Ch) (26 November 2013) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2013/3691.html Cite as: [2013] EWHC 3691 (Ch) |
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CHANCERY DIVISION
Royal Courts of Justice Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
| JSC BTA BANK |
Claimant/ Applicant |
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| - and - |
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| MUKHTAR KABULOVICH ABLYAZOV |
18th Defendant/ Respondent |
____________________
Hearing dates: 8 and 9 October 2013
____________________
Crown Copyright ©
Mr Justice Henderson:
Introduction
"You and your client are well aware of our client's current personal circumstances, and that of his family.
All of our client's rights are reserved and our client's decision not to defend the application further should not be taken as an admission or acceptance of liability for factual findings in the AAA proceedings or those already made against him in the wider proceedings, including the committal proceedings."
On the eve of the hearing, Addleshaw Goddard confirmed that Mr Ablyazov's instructions remained unchanged.
"There is thus compelling circumstantial evidence that Mr Ablyazov was the true owner of Bubris. There is no documentary evidence to the contrary … The judge was entitled and right to discount the evidence of Mr Ablyazov and his other witnesses, and indeed to find that such evidence was incredible and to be lies."
"96. I would end this section of my judgment by saying this. It is noticeable from the facts of this case, both as found by the judge, but also in the nature of the structure of the arguments as they have developed, how time and time again, as some aspect of Mr Ablyazov's conduct has come under question, so the evidence deployed has become remarkable for the way in which it has taken tortuous turnings which have asked the court to suspend its belief in reality in favour of reduplicating unrealities. Thus in the case of Bubris, the court was asked to believe both that Mr Batyrgarejev, one of Mr Ablyazov's dedicated lieutenants, had been appointed UBO [ultimate beneficial owner] of Bubris by mistake, and that the true UBO had only emerged in September 2010, albeit backdated to May 2010, after two years in which a succession of nominal UBOs had been declared. The significance of September 2010 is that the freezing order against Bubris was served at the end of July 2010.
…
100. As this series of coincidences, misfortunes, errors, misunderstandings and inexplicable developments multiply, the court is entitled to stand back and ask whether there is in truth a defence or defences as alleged, even if no burden rests on Mr Ablyazov, and the burden remains on the bank, or whether there is at any rate the realistic possibility of such, or on the other hand whether the court is being deceived. The trial judge decided that it was being deceived by witnesses without credibility. It is not for this court to say that he was wrong without strong grounds for doing so, grounds which have simply not been formulated.
101. I would therefore conclude that the appeal on each element of the committal judgment should be dismissed."
"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 AAA proceedings
"1. As set out in more detail below, this claim concerns the transfers of certain AAA-rated investment bonds (the "AAA Investments"), which were acquired by the [Bank] in May 2008 with a nominal value of US$292 million and a market value in excess of US$300 million, to the [BVI Defendants] on or around 22 January 2009 (the "January 2009 Transfers"). The January 2009 Transfers were effected upon the instructions and orders of [Mr Solodchenko], for the ultimate undisclosed benefit of [Mr Ablyazov].
2. The [Bank] received no payment or other consideration in exchange for the transfer of the AAA Investments. The [BVI] Defendants no longer hold the AAA Investments. The [Bank] claims that, it is to be inferred, [that] the January 2009 Transfers were consequent on [Mr Solodchenko] and/or [Mr Ablyazov], in June 2008, having allowed or caused the AAA Investments to be used as a form of security (formal or otherwise) for obligations owed by the [BVI] Defendants to a third party (the "June 2008 Security"). At present the [Bank] does not know the precise nature of the June 2008 Security.
3. Neither the grant of the June 2008 Security nor the January 2009 Transfers had any commercial purpose or benefit for the [Bank], and they both lacked any justification from the [Bank's] perspective. The June 2008 Security and/or the January 2009 Transfers were a means of misappropriating and/or wrongfully dissipating the [Bank's] assets."
(1) Between 21 and 22 May 2008, the Bank acquired the AAA Investments. These were initially held on the Bank's behalf by State Street Corporation, a company incorporated in Massachusetts. On or about 22 May 2008, the Bank arranged to, and did, transfer the AAA Investments to an account in the Bank's name with an affiliate in Kazakhstan of OJSC Alfa-Bank ("Alfa Russia").(2) On 23 May 2008, the Bank, acting by Mr Solodchenko, entered into a brokerage agreement with Alfa Equity Investments Limited ("Alfa Equity"), a BVI company affiliated to Alfa Russia which provided brokerage services to the Bank and the BVI Defendants (with whom it also entered into brokerage agreements around the same time). The brokerage agreement with the Bank provided, by clause 1.4, that the Bank would remain at all times the sole beneficial owner of securities transferred to or acquired by Alfa Equity under the agreement.
(3) Between 23 May and 10 June 2008, Mr Solodchenko procured the transfer of the AAA Investments from the Bank's account at Alfa Russia to an account in the name of the Bank at Alfa Equity. No payment was made for the transfers, and once they had been effected Alfa Equity was obliged to hold the AAA Investments in accordance with the terms of the brokerage agreement. Alfa Equity then continued to hold the AAA Investments on behalf of the Bank until they were transferred to the BVI Defendants on 22 January 2009.
(4) On 9 June 2008, each BVI Defendant entered into a separate loan agreement with one of the Further Recipients. Under these agreements, the BVI Defendants together purported to lend to the Further Recipients sums totalling US$250.1 million within the next ten days, the money to be transferred to bank accounts held by the borrowers with Trasta Komercbanka in Riga, Latvia ("TKB" or "Trasta"). The loans were purportedly repayable over periods of either eight, nine or ten years by one or more instalments, with interest at the rate of either 5% or 6% per annum to be repaid with the principal amount of the loan. Thus it was apparently open to the borrower to defer repayment of both principal and interest until a date which (depending on the agreement) was either 9 June 2016, 9 June 2017 or 9 June 2018. Furthermore, the loans were apparently unsecured.
(5) Between 10 and 17 June 2008, the BVI Defendants contracted to sell securities of the same descriptions and amounts as the AAA Investments to Alfa Equity, for a consideration of approximately US$294.1 million. These appear to have been "short" sales, because the BVI Defendants did not at that time own the securities which they contracted to sell. The purchase price under the agreements was payable almost immediately, but delivery of the securities did not have to be made until 31 December 2008 (or, in the case of two transactions with the fifth defendant, 10 June 2009).
(6) The consideration for the short sales was duly paid by Alfa Equity to the BVI Defendants at Alfa Equity, and was then transferred to accounts held by them at TKB in Latvia.
(7) Around the same time, in mid-June 2008, approximately US$250 million of the proceeds of the transfers to the BVI Defendants' accounts at TKB were paid to further accounts at TKB in the names of the Further Recipients. These payments were, at least ostensibly, made pursuant to the loan agreements dated 9 June 2008. The remaining US$44 million-odd was not paid to the Further Recipients. Most of this balance (amounting to some US$42.5 million) appears to have been retained by Bubris which then used it to deal in bonds.
(8) On this application, the Bank does not allege that Alfa Equity was complicit in the fraud. Accordingly, to make commercial sense of the short sale agreements, it invites the court to infer that the Bank must have pledged the AAA Investments to Alfa Equity, or granted some form of security over them, in order to secure the delivery obligations of the BVI Defendants under the sale agreements. On the available evidence, I agree that this inference should be drawn. It is incredible that Alfa Equity would have agreed to pay the purchase price under the sale agreements to the BVI Defendants in June 2008, without the assurance that the BVI Defendants would in due course be able to honour their delivery obligations, whether at the end of December 2008 or in June 2009.
(9) On 13 June 2008, a potentially significant email was sent by Anton Rybalkin, a lawyer at Eastbridge Capital (Moscow) Limited ("Eastbridge Moscow"), the Russian subsidiary of the thirteenth defendant Eastbridge Capital Limited ("Eastbridge"), an English company providing corporate services of which the fifteenth defendant, Aleksandr Udovenko ("Mr Udovenko") and the seventeenth defendant, Anatoly Ereshchenko ("Mr Ereshchenko") were then directors. The email was copied to Mr Udovenko, and its subject was "Agreements to be signed by R. Solodchenko". It read as follows:
"As agreed: I am sending the documents that need to be signed by [Mr Solodchenko]. The seal is required. Please sign the scans and transfer the signed documents to me with Igor in Moscow. The original documents go to Moscow, as we get them – we will send them for the subsequent signature. The transaction with Alfa Bank is under the control of MKA [i.e. Mr Ablyazov]. If necessary the explanation can be given by [Mr Udovenko], [Mr Ereshchenko] and me.Thanks for the co-operation."(10) The Bank relies on this email as contemporary evidence that the transactions with Alfa Bank relating to the AAA Investments were under the personal control of Mr Ablyazov. Mr Ablyazov accepts that the reference to "MKA" is probably a reference to himself, but says he had never seen the email before it was put to him in cross-examination in the committal trial, and he has no knowledge of its subject matter or the transaction to which it refers. He says that employees of the Bank were keen to use his name "in order to give weight to proposals of all kinds", even when he had nothing to do with them. He adds (paragraph 45 of his first witness statement in opposition to the summary judgment application):
"This might happen in relation to the holding of festivities or holidays, or in relation to arrangements that the [Bank] was to enter into. It was part of the psychology of employees in large companies in the CIS countries to do this by using the name of the head of the organisation to lend weight to a proposal. I anticipate that this is what Mr Rybalkin was doing in this document."(11) On 22 January 2009, Mr Solodchenko signed transaction forms instructing Alfa Equity to transfer the AAA Investments from the Bank's Alfa Equity account to the BVI Defendants' Alfa Equity accounts. The Bank alleges that it received no consideration for these transfers. It is the Bank's case that this was the means whereby the BVI Defendants were enabled to fulfil their delivery obligations under the June 2008 sale contracts. As it is put in the re-amended particulars of claim:
"71. Having received the AAA Investments on behalf of the BVI Defendants, Alfa Equity then acquired the AAA Investments from the BVI Defendants in satisfaction of the Delivery Obligations. The BVI Defendants no longer hold the AAA Investments.72. In summary, as at the end of January 2009 and as a result of the matters set out above:(a) the BVI Defendants obtained the benefit of substantial payments from Alfa Equity totalling US$294,138,715.27 …; and(b) the Bank was deprived of the AAA Investments. It did not receive and has still not received any consideration in return, whether a sum representing the nominal value of the AAA Investments or their market value or any other value.
In short, as a result of the matters set out above, the Bank no longer has the AAA Investments or any sum in return for them."
"15. Because of his position within the [Bank] Mr Ablyazov had no involvement in (and has no knowledge of) the transactions and documents which form the basis of this claim.
16. At all times Mr Ablyazov complied with his duties under the JSC Law, the Regulations of the Board of Directors, the [Bank's] Charter, the Civil Code, duties of a fiduciary nature (which are denied in any event), the Code of Corporate Governance of the [Bank], his Contract of Employment and the Labour Code.
17. It is denied that Mr Ablyazov was or is the ultimate beneficial owner of the BVI Defendants and the Further Recipients."
The history of the summary judgment application
"62. The overall tenor of the defences advanced by Mr Ablyazov and the BVI Defendants is inherently implausible and does not suggest any commercial rationale for the AAA Transactions. Even aside from Mr Justice Teare's findings and the evidence I refer to above showing that the story about Mr Sadykov being the UBO of the BVI Defendants is untrue, it is wholly implausible that the series of transactions set out at paragraphs 55 to 75 of the RAPOC [re-amended particulars of claim] were ordinary commercial transactions conducted with parties who were at arms' length with the Bank. No payment was ever made to the Bank in consideration for the January 2009 Transfers and (notwithstanding the circulation of unsigned draft agreements apparently intended for backdated execution) no agreements were ever executed to underpin those transfers. Further, the BVI Defendants have provided no explanation about how loans made by the Bank might ever have been properly repaid.
63. The only attempt at an explanation provided by the BVI Defendants was that the Further Recipients purchased bonds issued by the Bank using (some of) the money they had received as a result of the Onward Transfers from the BVI Defendants. Even if it is the case that the Further Recipients purchased such bonds, the receipt by the Bank of monies in consideration for the purchase of those securities is not the repayment of monies to the Bank owed by the BVI Defendants or others, nor does it amount to consideration for the AAA Investments themselves (being, on the BVI Defendants' own case, consideration for the purchase of entirely different bonds)."
"58. Given that I do not own any of the companies involved in the AAA Transactions, did not control or authorise any of the transactions, and knew nothing about the transactions, it is impossible for me to give any explanation for them. All I could do is speculate as to the commercial rationale having now seen some of the transactional documents (albeit many of them are only draft documents)."
"… confirmed to me, in his capacity as Board member representing the interests of a major shareholder of the Bank, that he would not have voted to approve the Bank entering into those transactions had they come before the Board of Directors of the Bank because of the extremely high risks involved for the Bank and the lack of any apparent commercial reason for the Bank to do so."
Likewise, Mr Talvitie said he would not have voted in favour of the Bank granting security in 2008 in favour of Alfa Equity so that the BVI Defendants could enter into the short sale agreements, nor would he have voted in January 2009 for the Bank to transfer the AAA Investments for no consideration. He said "he would have regarded such a transaction as of no value to the Bank and completely uncommercial".
"I cannot recall any REPO transactions where the counter party was known to the Bank and was not a bank or other financial institution. As far as I remember, the Bank did not ever enter into REPO transactions with related parties."
"26. As I have indicated, Mr Béar argues that I should not override the rules that I have set out as to the filing of evidence so as to allow the Bank effectively to change its case and rely on a far wider gamut of documentation than was referred to in their original application.
27. This would normally be a very strong point to make. In this case, however, whilst it is true that the Bank has widened the scope of the application, it has done so with an understanding of what is really in issue before the court. As Mr Béar said in his skeleton argument, citing a point that I made yesterday to Mr Smith:
"But you confine yourself to saying, (1) here are the transactions, (2) it is wholly implausible that they are honest, (3) loss was caused, and (4) it is perfectly obvious from the UBO material that he, Ablyazov, must have been the UBO".
Mr Smith accepted that. It is therefore now clear, even if it was not clear at the outset of this application, that the Bank is seeking to establish that on the information that was before Teare J it is not necessary to go into the detail of the transactions or to have disclosure in relation to the detail of the AAA transactions in order to satisfy the court that summary judgment is appropriate.
28. Mr Béar would plainly be correct in saying that it would be impossible to decide a summary judgment application if it were necessary to go into the details of the AAA transactions. Effectively, the Bank is saying that the transactions speak for themselves.
29. Nonetheless, the Bank realised in the course of its argument that it needed to put me in the same position as Teare J and the Court of Appeal was in when they heard those applications. That is the reason why additional evidence has been filed (in addition to the question of Kazakh law) and in my judgment it is reasonable to allow the Bank to make sure that its application can sensibly be heard by ensuring that what is before me is as comprehensive as what was before Teare J and what was before the Court of Appeal. But they cannot go further than that and I do not think they seek to."
Vos J then considered whether the Bank should be allowed the necessary indulgence to serve the material in question later than they should have done. He held that the indulgence should be granted: see paragraphs [31] to [34].
"37. In effect, Mr Béar says that there would need to be a much higher degree of certitude in this case than in other cases, not only because it is a fraud case but because it is a complex case where cross-examination and disclosure may reveal all sorts of things which we can only imagine at this stage, and he says that this is a short cut that is wholly inappropriate in this kind of case.
38. I do not accept those submissions. I have considered the issues that have been placed before me thus far. Nothing I say should be taken as giving any indication of the way in which I may in due course decide the summary judgment application. I have not yet heard full argument and I have no view, even a provisional view, as to the likely outcome of it.
39. But it does seem to me that the Bank is seeking to raise a relatively simple argument. I say "relatively simple" because it is only relatively simple in the context of an extremely complex case. One of the problems with this litigation has been throughout that there have been so many decisions and so many appeals in different courts with different personnel that until one understands the history, one is hardly in a position to understand the application with which the court is faced at any particular time. But I have had the good fortune to hear, I think, six days of argument in this case on a quite separate matter of a committal motion against another defendant [Mr Ereshchenko] only a couple of weeks ago. Whilst that has been the subject of complaint by Mr Béar, who says that Mr Smith and I are ahead of him because he did not attend that hearing, it has enabled me to get a grip on the complex history of this case.
…
42. I now have an extremely clear idea of what would need to be decided in order to grant summary judgment. I also have an extremely clear idea of the defences that Mr Ablyazov, through Mr Béar, is intending to raise. I can say, without giving any indication as to my view, that those are in some cases formidable arguments but they are formidable arguments that need to be resolved and can be resolved in a further period of just three days' argument.
…
45. But the reason, just briefly, why I think summary judgment may be appropriate is because … it is possibly arguable on behalf of the Bank that it could be obvious from the transactions that they were not honest. I am fully conscious of Mr Béar's submission that quite the reverse is obvious, but it seems [to] me that until full argument has been heard I cannot take a view one way or the other.
46. If it were obvious that the transactions were dishonest then that would be one point in the Bank's favour. That would negate the need for what could be a massive investigation into the detail of these transactions and the personnel involved in them.
47. Likewise, I have not heard argument on the question of loss. Under Kazakhstan law it is common ground that causation of loss must be shown. It seems to me that that could be arguably obvious and equally it could be arguably not obvious. But the Bank is simply saying: "We succeed if it is obvious and we do not succeed if it is not obvious". As it seems to me that, again, is something that remains in play.
48. The further questions that I have to take into account are difficult questions, raised by the defendant, of Kazakhstan law. I have not yet had an opportunity to hear any argument on that and again do not have any view, even a provisional view. But from the little I have read it at least seems to me possible that the Bank will be able to argue that the very interesting disputes between the experts on Kazakhstan law are nothing to the point in this particular case. Again, I am not prejudging it. Mr Béar may be entirely right that the arguments are substantial and need to be resolved after oral evidence. But if he were not right and in one day's further argument on Kazakhstan law I could reach a clear view, then that would save days, and possibly weeks of court time …
49. As regards the fourth point – namely whether or not it is obvious that the UBO material shows that Mr Ablyazov must have been the UBO of the five BVI defendants – that, as it seems to me, is a question which has already been determined against Mr Béar by Teare J on the criminal standard. So there must be some possibility that I will decide it against him again."
Summary judgment: relevant principles
"The court may give summary judgment against a … defendant on the whole of a claim or on a particular issue if –
(a) it considers that –
…
(ii) that defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
By virtue of rule 24.3(2), the court may give summary judgment against a defendant "in any type of proceedings", subject to immaterial exceptions.
"20. It is important to keep in mind the principles to be applied in deciding whether a case is suitable for disposal on a summary basis. The most authoritative up-to-date statement is that of Lord Hope in Three Rivers DC v Bank of England (No. 3) [2001] 2 All ER 513:
"In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents, without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman [2001] 1 All ER 91, at p. 95 that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all."
21. Another frequently cited passage on the same theme is the judgment of Colman J in De Molestina v Ponton [2002] 1 Lloyd's Rep 271, 280 para 3.5, speaking of the difficulty of basing summary judgment on inferences of fact in a complex case:
"…, as Three Rivers District Council shows, where the application in such complex cases relies on inferences of fact, the overriding objective may well require the claim to go to trial in the interest of a fair trial. That is because the relevant inference could not be safely drawn without further discovery and oral evidence at the trial. It is thus necessary, where such inferences are relevant, to guard against the temptation of drawing them as a matter of probability, because the achievement of the overriding objective requires a much higher degree of certitude. Where in a complex case, as may often be the situation, the frontier between what is merely improbable and what is clearly fanciful is blurred, the case or issue should be left to trial."
22. To these familiar citations, Mr Reza adds the words of Potter LJ in ED&F Man Liquid Products v Patel [2003] EWCA Civ 472 para 10:
"However, that does not mean that the court has to accept without analysis everything said by a party in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporary documents. If so, issues which are dependent upon those factual assertions may be susceptible of disposal at an early stage so as to save the cost and delay of trying an issue the outcome of which is inevitable …"
23. If Mr Reza was hoping to find in those words some qualification of Lord Hope's approach, he will be disappointed. The Three Rivers case was specifically cited by Potter LJ. He was in my view intending no more than a summary of the same principles. Lord Hope had spoken of a statement contradicted by "all the documents or other material on which it is based" (emphasis added). It was only in such a clear case that he was envisaging the possibility of rejecting factual assertions in the witness statements. It is in my view important not to equate what may be very powerful cross-examination ammunition, with the kind of "knock-out blow" which Lord Hope seems to have had in mind."
"… the ability of the defendants to show a realistic prospect of success on the "control" issue should be determinative of this application so far as liability is concerned. The litigation disadvantages on which they rely (absence of disclosure or independent sources of documentation and so forth) have to be seen in that context."
The beneficial ownership of the BVI defendants
"The first requirement is that the judgment in the earlier action relied on as creating an estoppel must be (a) of a court of competent jurisdiction, (b) final and conclusive and (c) on the merits. The second requirement is that the parties (or privies) in the earlier action relied on as creating an estoppel, and those in the later action in which that estoppel is raised as a bar, must be the same. The third requirement is that the issue in the later action, in which the estoppel is raised as a bar, must be the same issue as that decided by the judgment in the earlier action."
"In my opinion your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings. One of the purposes of estoppel being to work justice between the parties, it is open to courts to recognise that in special circumstances inflexible application of it may have the opposite result …"
"119. I accept that there is no direct evidence that Mr. Ablyazov was the true ultimate beneficiary of the shares in Bubris. In the circumstances of this case that is not a matter of surprise. His ownership of assets is expressly structured to ensure that no paper trail leads to him. Nevertheless, the Bank has the burden of making the court sure that the only reasonable inference to be drawn from the matters to which I have referred is that Mr. Ablyazov is the true beneficiary of those shares.
120. Mr. Sadykov has said in a written statement dated 25 November 2011 that he was the owner of Bubris. But he also said that he informed Mr. Kythreotis by post in May 2010 that he had been the owner or beneficiary of Bubris since April 2008. The suggestion that he wrote such a letter in May 2010 was untrue for the reasons I have already given …
121. Whether or not Mr. Sadykov is a man of such wealth as would enable him, through the vehicle of a creature company, to enter into obligations to the Bank worth $300m., the fact that Mr. Batyrgarejev [an admitted close business associate and nominee of Mr Ablyazov's] was appointed the UBO in April 2009 and remained so until February 2010 sits most unhappily alongside the notion that Mr. Sadykov is and always was the true beneficial owner. For, as I have already said, Mr. Batyrgarejev's appointment as UBO is a powerful indication that Mr. Ablyazov was the true beneficial owner. Further, the circumstances in which Mr. Batyrgarejev was removed as UBO in February 2010 and the fact that the letter dated 7 May 2010 from Mr. Sadykov was backdated are indicative of steps being taken by those administering Bubris to keep Mr. Ablyazov's interest in Bubris secret from the Bank. Finally, there is no credible reason why Mr. Sadykov, if he were the true owner of Bubris and had remained hidden since 2008, should choose September 2010 to take centre stage after Bubris had been made a defendant to the AAA proceedings.
122. For these reasons I am persuaded so that I am sure that Mr. Ablyazov is and has been at all material times the true beneficiary of the shares in Bubris. The shares were held on his behalf, successively, by Mr. Udovenko, Syrym Shalabayev, Mr. Batyrgarejev, Mr. Kovalenko and finally Mr. Sadykov. In reaching this conclusion I have considered all of Mr Matthews' submissions at pp.112-145 of his Closing Submissions but they do not cause me to doubt the conclusion I have reached. Nor do I consider that Mr. Ablyazov's denial of ownership may be true. I am sure that it is not. I have noted the submission that in circumstances where the ownership of Bubris is an issue in the AAA action I ought not to decide the matter now when I have not heard all the evidence which will be adduced at trial and that in such circumstances I cannot be sure that Bubris is owned by Mr. Ablyazov. When giving directions for the trial of the contempt allegation this point was considered and rejected. There was an appeal from my decision and the appeal was dismissed; see [2011] EWCA Civ 1386. In any event I remain of the view that it is unlikely that there will be any more material evidence on this issue beyond that which has been provided on this occasion."
"66. These submissions track the whole of the evidence and arguments deployed at trial. It is an attempt simply to reargue the trial. The judge was meticulous in dealing with every aspect of that evidence and argument in his judgment. I have considered these submissions, with the aid of the bank's skeleton and the judge's judgment, with care, but I cannot find in the submissions made on appeal any reason for doubting the judge's own careful evaluations and conclusions, which I find compelling. It is probably superfluous, and, given this court's far lesser exposure to the materials and evidence and argument than the judge enjoyed, even problematical, to attempt to put into my own words, succinctly, the reasons why I find the bank's case on the Bubris allegation fully proved, to the criminal standard. That is not even of course the test on appeal. There is simply no error shown in the judge's findings or reasoning. His conclusion is entirely safe."
"74. There is thus compelling circumstantial evidence that Mr Ablyazov was the true owner of Bubris. There is no documentary evidence to the contrary (the declaration of Mr Sadykov as the UBO stands by itself in no different category from the four previous UBO declarations). The judge was entitled and right to discount the evidence of Mr Ablyazov and his other witnesses, and indeed to find that such evidence was incredible and to be lies.
75. For these reasons, which essentially track those of the judge, I would dismiss this appeal in relation to the first finding of contempt."
Possible justifications for the transactions
"41. On 22 January 2009 the AFN sent the Bank its final report following its inspections between 22 October and 12 December 2008, the purpose of which had been (a) to check on whether the Bank had implemented any plan to eliminate the violations found in the previous inspection and (b) to classify the Bank's loan portfolio. The AFN concluded that the required steps to improve the Bank's business had not been taken. The AFN noted the continuing practice of lending to companies in the BVI and the Seychelles and that notwithstanding the AFN's advice about a conflict of interest the Bank had, on 30 April 2008, arranged for Mr Ablyazov to chair the regional credit committees for Russia and the CIS. Following its review of the loan portfolio (in which the AFN classified 19.46% of the portfolio as non-performing whereas the Bank had classified only 1.82% as non-performing) the AFN required additional provisions of … about US$3.58 billion based upon the financial position as at 1 October 2008."
(a) identified the relevant AAA Investments to be purchased by the relevant BVI Defendant;
(b) required the Bank to ensure "no later than the 22nd of January, 2009" that the relevant securities were re-registered from the name of the Bank in the name of the purchaser;
(c) provided for the specified purchase price to be paid no later than 5 January 2010 (that is to say, one year later than the ostensible date of the document);
(d) provided for interest to accrue in the meantime at the rate of 15% per annum; and
(e) required security to be provided under a Pledge Agreement over 100% of the shares in a company called TOO Orken Kapital KZ ("Orken Kapital").
Mr Ablyazov has admitted that he is the owner of Orken Kapital, and of Gemestra Limited ("Gemestra"), a BVI company which entered into the Pledge Agreement in order to pledge the shares in Orken Kapital. Despite this admission, however, Mr Ablyazov claimed to know nothing about the transaction: see paragraphs 13 and 61 of his first statement.
(a) the BVI Defendants received the AAA Investments without providing any consideration for them, and without ever having any intention that any, or any meaningful, consideration would be provided for them; and(b) the transfer of the AAA Investments caused loss to the Bank corresponding to their market value at the date of transfer.
The Kazakh law issues
"He gave evidence in a clear, authoritative and fair manner. It was a striking feature of his evidence that whatever question he was asked he had, without hesitation, a clear answer to it. I concluded that he had an exceptionally clear grasp and understanding of the relevant codes. If he had a weakness it was that he tended to give insufficient weight to Articles 2 and 6 of the Civil Code which, as the experts agreed, enabled the Kazakhstani court to adopt a purposive construction in cases of ambiguity or lack of clarity. It may be that his lack of practical experience in the Kazakhstani courts contributed to this weakness and to his over-reliance on the apparent rigidity of the codes."
"(a) any finding made or decision given on that question in the first-mentioned proceedings shall, if reported or recorded in citable form, be admissible in evidence for the purpose of proving the law of that country … with respect to that matter; and
(b) if that finding or decision, as so reported or recorded, is adduced for that purpose, the law of that country … with respect to that matter shall be taken to be in accordance with that finding or decision unless the contrary is proved."
There can be no doubt that the Trial Judgment recorded the relevant findings or decisions of Teare J in citable form within the meaning of subsection (5), so by virtue of subsection (2) his findings or decisions on Kazakh law are admissible in the present proceedings for the purpose of proving that law, and are conclusive unless the contrary is proved.
"The following shall be an affiliate of a company:
(1) a major shareholder;
(2) …
(3) an official of a company … except for an independent director;
(4) a legal entity which is controlled by an individual who is a major shareholder or an official of the company;
…"
And by virtue of Article 64(2):
"Control of a company or another legal entity shall include the opportunity to determine decisions adopted by such company or such another legal entity, respectively."
"67. Disclosure of information regarding affiliates of a company
…
3. Individuals and legal entities being affiliates of a company shall be obliged to submit to the company information regarding their affiliates within seven days from the date of the occurrence of such affiliation.
4. A company shall be obliged to submit a list of its affiliates to the authorized agency according to the procedure established by the authorized agency.
…
71. Interest in a company's effectuation of a transaction
1. A company's affiliates shall be recognised as persons who are interested in a company carrying out a transaction (hereinafter "interested parties"), provided that they are:
(1) a party to such transaction or participate in such transaction as representatives or intermediaries; or
(2) affiliates of a legal entity which is a party to such transaction or participates in such transaction as a representative or an intermediary.
…
72. Information regarding interest in a company's effectuation of a transaction
1. Persons referred to in Clause 1 of Article 71 shall be obliged to provide the board of directors with the following information:
(1) that they are a party to the relevant transaction or participate in such transaction as a representative or intermediary;
(2) regarding legal entities with which they are affiliated, including legal entities in which they individually or jointly with their affiliates own ten per cent or more of the voting shares …; and
(3) regarding ongoing or proposed transactions of which they are aware and in which they may be recognised as an interested party.
73. Procedural requirement for the execution of a transaction in which there is an interest
1. A decision regarding the execution of a transaction in which there is an interest shall be adopted by a simple majority of votes of the members of the board of directors who are not interested in such transaction.
…
74. Consequences of execution by a company of transactions in respect of which special terms and conditions are established
1. Failure to comply with this Law's requirements when effectuating a major transaction or a transaction in which there is an interest shall result in the invalidation of such transaction by a court based upon a suit from an interested party.
2. A person that is interested in the company's execution of a transaction which is concluded in violation of the procedural requirements for its conclusion shall be liable to the company in the amount of losses caused by such person to the company. If the relevant transaction is effectuated by several persons, then they shall have joint responsibility to the company.
…"
"7. In my opinion, the de facto ability to determine decisions made by the BVI Companies through a nominee beneficial holding is sufficient to give rise to an affiliation, even in the absence of any documentary proof. Documentary proof of affiliation is possible where there is direct control and open ownership of a controlling stake. However, indirect forms of control may be proved either by documentation, or, depending on the nature of the relationship, may be proved otherwise."
"I agree with Mr Markov, that if an official of the Bank was affiliated to an outside company, such official had an obligation to inform the Bank of this affiliation, and would be considered an interested person with respect to any transaction between the Bank and such company. Also as pointed out by Mr Markov, this interest would trigger special approval procedures of the Law on Joint-Stock Companies."
"If Mr Ablyazov was the ultimate beneficial owner of the BVI Defendants and failed to disclose this fact to the Bank, then the transfer away of assets with a value of approximately US$300 million for nothing in return would seem to be a clear example of Mr Ablyazov's omission resulting in money being taken out of one pocket (the Bank's) and put in another's (the BVI Defendant's) to the Bank's detriment."
"… it is more likely than not, it seems to me, that he [Mr Talvitie] would have informed the AFN. For it would have appeared to him an improper and unwise thing for the Board to do and such conduct would have imperilled East Capital's investment. Had he done so it is more likely than not that in those circumstances the AFN would have intervened to prevent the loan being made."
Teare J reached this conclusion after hearing Mr Talvitie give oral evidence and be cross-examined. I see no reason to doubt that a similar conclusion would be reached in the present case, if it went to trial.
"62. Principles of activities of officials of a company
A company's officials:
1. shall fulfil their obligations faithfully and with methods which they reasonably deem to best represent the interests of the company and its shareholders;
2. may not use or permit the use of the company's property in violation of the company's charter or decisions of a general shareholders' meeting or the board of directors, or for personal purposes or abuse their powers when concluding transactions with its affiliates;
…
63. Responsibilities of officials of a company
1. Officials of a company shall be responsible to the company and the shareholders for damage caused by their actions (omission), pursuant to Kazakhstan legislation, as well as for damage cause by:
(1) presentation of misleading or false information;
(2) violation of the procedure for presenting information established by this Law.
2. Based upon a decision of a general shareholders' meeting, a company may file with a court a claim against an official for reimbursement of damage or losses caused by such official to the company."
"one year from the day when the employee or employer knew or should have known of the violation of its right."
Thereafter, according to Professor Maggs, the Bank's claim would be permanently time-barred. Mr Ablyazov's argument is that the Bank's claim against him was not begun within that one year period.
"227. In light of the acceptance by both experts of the principle in question I accept that claims in delict or tort must be brought in accordance with the Labour Code where there is a contract of employment. But I find it difficult to accept, in circumstances where Articles 62 and 63 of the JSC Law impose duties upon the officers of a company and provide an express remedy for breach of such duties, that such remedies may only be exercised in accordance with the provisions of the Labour Code where there is also a relationship of employer/employee between the company and the officer. In particular it is difficult to accept that, although the JSC Law provides for unlimited liability and a limitation period of three years, the more restrictive limitation provisions of the Labour Code must apply. I accept that this may be the reaction of a common lawyer rather than that of a lawyer familiar with the principle of the competition of claims but I take comfort from the circumstance that Mr Vataev, not a common lawyer, was also unable to accept the apparent logic of Professor Maggs' opinion.
228. Ultimately I have been persuaded that the principle which governs parallel claims in contract or tort does not apply to parallel claims for breach of a contractual duty as employee and for breach of a statutory duty as officer of a joint stock company. The latter is not a claim in delict or tort but one which arises from the defendant's status as an officer of the company. The latter status gives rise to the obligations under the JSC Law whether or not the officer is an employee of the company. In the absence of clear decisions of the Kazakhstan courts showing that the Labour Code applies exclusively to claims against officers for breach of their duties under the JSC Law I was not persuaded that the remedies for breach of those duties should be limited in the manner in which claims against an employee under the Labour Code are.
229. I have noted Mr Norbury's submission that the Labour Code, being a Code, takes precedence over the JSC Law, which is only a law and not a code. However, I remain of the view that the clear statement as to the limitation period applicable to officers in the JSC Law must have been intended to apply where officers are sued …
230. It follows that where breach of Article 62 of the JSC Law is relied upon against an officer of the company the Bank has three years in which to bring its claim. The one year limitation in the Labour Code is inapplicable."
"7. However, even if the duties in an employment agreement of an officer of the company mirror provisions of the law, it is incorrect to identify the liability of this officer arising on the basis of the law (including the JSC Law) with the liability arising on the basis of an employment agreement. It is also incorrect to speak of liability arising from an officer's breach of statutory provisions (mirrored by provisions of an employment contract) as being a breach of the conditions of the employment agreement with liability arising under that contract. Hence reference to my article "Liability in Civil Law" in Mr Ablyazov's response to the Bank's claim and Professor Maggs' expert report as far as competition of claims is concerned is inappropriate.
8. Accordingly, the activity of the chairman and members of the board of directors of a joint-stock company is regulated not by the Labour Code, but by the JSC Law, the Code of Corporate Governance approved by the company's general meeting of shareholders, the company's charter, and other internal normative documents of the company."
"14. In light of the above, it is my opinion that the existence of any employment agreement between the Bank with members of the board of directors of the Bank (including Mr Ablyazov) does not prevent the Bank bringing claims and suing such members of the board of directors for breach of principles of officers' activities established by the JSC Law or for breach of the obligation to disclose information about affiliated persons of the company and breach of the procedure for making related-party transactions, including claims for compensation of damages on the basis of Articles 63 and 74 of the JSC Law."
Is there any other compelling reason why the case should go to trial?
Conclusion
