JSC BTA Bank v Solodchenko & Ors

This is an application by JSC BTA Bank, a leading Kazakhstan bank now owned by the Government of that country (the “Bank”), to commit Mr Anatoly Ereshchenko (“Mr Ereshchenko”) to prison for a number of criminal contempts of court. In essence, the Bank says that Mr Ereshchenko deliberately lied when he responded to a Norwich Pharmacal order for disclosure made against him on 3^rd November 2010 (the “Disclosure Order”). The lies that Mr Ereshchenko is alleged to have told were effectively twofold: first, that so far as he could recall he knew nothing about the transactions in question (the so-called “AAA Transactions”), and secondly that he did not have access to any documents that might assist.

It may be noted by way of background that this is the 4^th committal application in the 11 sets of English proceedings that the Bank has issued against those that are said to have been involved in multiple frauds of which it has been the victim. This particular set of proceedings was issued in the Chancery Division, but the remaining 8 sets of proceedings are being litigated in the Commercial Court.

The background to the AAA Transactions is inevitably complicated. But I shall seek to set out the Bank’s basic claims and the chronology as succinctly as possible. Before doing so, it is important to understand a little of Mr Ereshchenko’s alleged role. He is a Russian national, who was one of three directors of an English corporate services company called Eastbridge Capital Limited (“Eastbridge”). Whilst he was always based in London, he travelled extensively during the relevant periods. Moreover, Eastbridge had offices in Moscow, and later in Cyprus. Mr Ereshchenko’s case is that another of Eastbridge’s directors, a Mr Aleksander Udovenko, the 15^th Defendant (“Mr Udovenko”), was primarily involved in the corporate services activities of Eastbridge, and that his own role was peripheral and limited and took up only a minimal amount of his time. In answering the extensive questions posed by the Disclosure Order, Mr Ereshchenko says now that he genuinely could not remember the entities involved or what might have occurred in relation to them. Later disclosures of documentation by the Bank have, says Mr Ereshchenko, to some extent jogged his recollection, and he has been increasingly forthcoming as matters have progressed. But ultimately, he still says that he was mostly only copied in to emails, was never in charge of Eastbridge’s activities in relation to the AAA Transactions, and was generally only involved when a proponent of the AAA Transactions, one Mr Timur Surapbergenov (“Mr Surapbergenov”) of JSC TuranAlem Securities (“TAS”) a subsidiary of the Bank, wanted to chase some specific action that Eastbridge was supposed to be undertaking.

The Bank, for its part, submits that Mr Ereshchenko’s position is wholly implausible. It points to numerous documents that were sent to or by Mr Ereshchenko, and says that he cannot possibly have forgotten the names of the BVI Defendants and the Further Recipients, nor the fact that he had been involved in numerous dealings in relation to them. It points to the fact that he, amongst others, held a Power of Attorney, to act for them (which Mr Ereshchenko denies he knew about). More importantly, perhaps, the Bank points to the events that were known to Mr Ereshchenko between the nationalisation of the Bank in February 2009 and the grant of the Disclosure Order in November 2010, and submits that it is inconceivable that he cannot have known when he was served with that order that it concerned the AAA Transactions in which he had been involved. The Bank contends that Mr Ereshchenko decided deliberately to lie about the extent of his knowledge because he feared the consequences if he told the truth.

The Bank’s claims in relation to the AAA Transactions may be summarised as follows:-

The Disclosure Order that was made by Henderson J on 3^rd November 2010, required Mr Ereshchenko within 21 days of service of it to:-

The Disclosure Order also required Mr Ereshchenko to make an affidavit setting out the answers within 28 days of service of the order.

Schedules A, B and C are reproduced in Appendix 1 to this judgment. In outline, Schedule A asked a series of detailed questions concerning the transfers of money and of the AAA Investments that made up the AAA Transactions between June 2008 and January 2009, and Schedule C required Mr Ereshchenko to provide details of the ownership and management over each of the BVI Defendants and the Further Recipients and Eastbridge. At the beginning of the hearing, Mr Paul Lowenstein Q.C., counsel for Mr Ereshchenko, provided me with a list of some 199 individual questions comprised within the terms of the Disclosure Order. The exercise that Mr Lowenstein had undertaken demonstrated the level of detailed knowledge that the Disclosure Order demanded in relation to numerous transfers and transactions over the period. I was struck, in reading Mr Lowenstein’s document, and indeed the Disclosure Order itself, that nobody could reasonably be expected to hold in his head the detailed answers to many of these questions, even if that person had been intimately involved in the transactions at the time. That said, the Bank’s allegations on this application do not really turn on Mr Ereshchenko’s failure to provide the details, but more on his failure to accept at the outset that he was involved at all – or at least to any significant extent.

The Bank’s first generic allegation is that Mr Ereshchenko gave false evidence about his knowledge of and involvement in the AAA Transactions. The following statements are alleged to have been made without an honest belief in their truth:-

The Bank’s second generic allegation is that Mr Ereshchenko gave false evidence about the location of, and access to, relevant documents. The following statements are alleged to have been made without an honest belief in their truth:-

It appears that the allegation in paragraph 10(iii) above is not now pursued, since it was not put to Mr Ereshchenko in his cross-examination, and appears anyway to be duplicative of the allegation in paragraph 10(ii) above.

At some time in 2003, Mr Mukhtar Kabulovich Ablyazov (“Mr Ablyazov”) was apparently released from prison in Kazakhstan and came to London.

On 8^th September 2003, Eastbridge was incorporated. On 9^th September 2003, Mr Ereshchenko and Mr Udovenko became directors of Eastbridge.

In May 2005, Mr Ablyazov returned to Kazakhstan to take up his position as Chairman of the Bank’s board of directors.

On 1^st June 2006, Mr Ereshchenko emailed a Mr Bernard Krebs saying that he had told him (Mr Krebs) on the telephone that Eastbridge was Mr Ablyazov’s London office.

Between 28^th December 2007 and 2^nd January 2008, the BVI Defendants were incorporated in the BVI.

On 21^st and 22^nd May 2008, the Bank acquired the AAA Investments.

Between 22^nd and 23^rd May 2008, both the Bank and the BVI Defendants entered into brokerage agreements with and opened accounts at Alfa Equity.

On 4^th June 2008, Mr Alexander Chekalin, “Head of Legal” at Eastbridge Moscow (“Mr Chekalin”) emailed Mr Paul Kythreotis, the 2^nd Defendant (“Mr Kythreotis”), copied to Mr Udovenko, but not to Mr Ereshchenko, attaching 5 draft securities’ sale and purchase agreements to sign for the 5 BVI Defendants. The agreements in question may have related to sales of the AAA Investments from the Bank to the BVI Defendants.

On 9^th June 2008, Mr Ereshchenko’s expense report shows that he incurred £234.84 in respect of accommodation at a hotel in Riga. It was suggested (though he could not recall) that Mr Ereshchenko went there to sort out the problems that had arisen in relation to the transfers of funds at TKB in relation to the AAA Transactions.

Also on 9^th June 2008, the BVI Defendants entered into loan agreements with the Further Recipients in the sum of US$250.1 million. These loans are said by the Bank to be shams.

On 10^th June 2008, the Bank transferred the AAA Investments to its account at Alfa Equity.

On 10^th and 17^th June 2008, the BVI Defendants entered into the short sales of AAA Investments to Alfa Equity. The consideration of US$294.1 million was received by the BVI Defendants from Alfa Equity on 11^th and 18^th June 2008.

Between the 12^th and 20^th June 2008, the BVI Defendants transferred monies (purportedly under the allegedly sham loan agreements) to the Further Recipients.

On 13^th June 2008, Mr Anton Rybalkin, a lawyer at Eastbridge Moscow (“Mr Rybalkin”), emailed Mr Udovenko and others saying that he was sending documents to be signed by Mr Solodchenko, and concluding: “the transaction with Alfa Bank is under the control of [Mr Ablyazov]. If necessary the explanation can be given by [Mr Udovenko], [Mr Ereshchenko] and me”.

On 16^th July 2008, Mr Surapbergenov emailed Mr Kairat Sadykov (“Mr Sadykov”), Mr Udovenko, Mr Ereshchenko, and Mr Valery Manokhin, the head of the finance team at Eastbridge (“Mr Manokhin”), copied to Mr Nurlan Mukhametzhanov, the Bank’s Head of Treasury (“Mr Mukhametzhanov”) and others under the heading “repayment of coupons under the Alfa scheme” saying that “[w]e have to remit funds to [Alfa Equity] broker accounts. Further the money will be transferred to [the Bank’s] broker accounts”, and that money should be remitted to 3 of the 5 BVI Defendants, and asking Mr Ereshchenko and Mr Manokhin to “make sure that the money has been credited to the companies’ accounts, and also to perform the transfer to Alfa Equity broker accounts, plus you should sign appropriate transaction applications from the companies”. This is the first of a number of emails concerning the payment of coupons on the AAA Investments to Alfa Equity.

On 1^st August 2008, Mr Udovenko emailed numerous people including Mr Ereshchenko thanking them for their comments on the algorithm procedure relating to documents that referred to Eastbridge’s archive of documents and the electronic register of documents.

On 15^th September 2008, Mr Udovenko emailed a Bank employee, copied to Mr Ereshchenko and others regarding the transfer of offshore companies on to Moscow. Mr Ereshchenko said that he did not think he knew about these events.

A chain of emails on 8^th October 2008 concerning a bond transaction by Bubris included an email from Mr Ereshchenko to Mr Chekalin saying that he (Mr Ereshchenko) “[a]greed” the execution of certain documents.

On 10^th October 2008, Mr Ereshchenko was sent 4 statements for 4 of the 5 BVI Defendants’ accounts at TKB.

On 15^th October 2008, Mr Manokhin sent Mr EreshchenkoandMr Udovenko an email about the pooling of cash held in TKB.

On 23^rd October 2008, Mr Ereshchenko was sent by email a supplement to the brokerage agreement between Alfa Equity and each of the 5 BVI Defendants.

On 31^st October 2008, Mr Surapbergenov emailed Mr Sadykov, Mr Ereshchenko, Mr Rybalkin and Mr Udovenko concerning the repayment of coupons (presumably interest on the AAA Investments that had been short sold by the BVI Defendants) on 15^th November 2008 saying that Mr Ereshchenko would need to prepare the respective orders of the BVI Defendants for transfer of the money to the Bank.

On 11^th November 2008, Mr Ereshchenko sent Mr Surapbergenov an email saying that money “will clear on the companies’ brokerage accounts tomorrow” and that the originals of the supplemental agreements were already with Alfa Equity. Ms Elena Lapteva of Eastbridge responded asking MrSurapbergenov to take the bank’s fees into account on future payments.

On 24^th November 2008, there is a challenged corrupted email relied upon by the Bank, but not copied to Mr Ereshchenko, asking whether London could be recorded as the “archive location” for Eastbridge.

Also on 24^th November 2008, Mr Surapbergenov emailed Mr Ereshchenko concerning payment for coupons saying that the “authorisation must be signed urgently”.

On 8^th December 2008, an administrative director of Eastbridge Moscow emailed Mr Manokhin, copied to Mr Ereshchenko, Mr Udovenko and others indicating that archives had been taken to London.

On 18^th December 2008, Mr Chekalin emailed Mr Kythreotis saying that Mr Ereshchenko had confirmed by telephone transfers from 2 of the BVI Defendants to Alfa Equity. The email also asked Mr Udovenko to approve the transfers.

The 5^th January 2009 is the apparent date of the 5 draft SPAs purporting to document the sale of the AAA Investments from the Bank to the BVI Defendants.

On 22^nd January 2009, the AAA Investments were transferred on Mr Solodchenko’s instructions from the Bank’s account at Alfa Equity to the BVI Defendants’ Alfa Equity accounts.

On 2^nd February 2009, the Kazakh government acquired 75.1% of the Bank, through a sovereign wealth fund, Samruk Kazyna. It appears that at or about this time, Mr Solodchenko was dismissed as Chairman of the Bank’s management board, and Mr Ablyazov was dismissed as Chairman of the Bank, fled Kazakhstan, and came to London.

On 2^nd March 2009, Ms Victoria Kolyasova of Eastbridge (“Ms Kolyasova”) emailed Mr Udovenko, Mr Ereshchenko, Mr Syrym Shalabayev the 14^th Defendant (“Mr Shalabayev”) and others saying that if they (Mr Udovenko and Mr Ereshchenko) approved the application for powers of attorney for many companies including the BVI Defendants and some of the Further Recipients “please send a request to the Registrar”. The powers of attorney were apparently granted to Mr Ereshchenko, Mr Shalabayev, Mr Udovenko and Mr Rybalkin and others on 3^rd March 2009.

On 6^th March 2009, Ms Kolyasova sent an email to Mr Udovenko and Mr Ereshchenko and others saying to Mr Udovenko that “by indication of [Mr Ereshchenko] I am … sending you the draft of letter to register for signing attached documents”.

On 9^th March 2009, Mr Ereshchenko emailed to Mr Kythreotis 5 securities sale and purchase agreements dated 5^th January 2009 between the Bank and each of the 5 BVI Defendants (the “5 SPAs”).

In March 2009, according to Mr Ereshchenko, Eastbridge closed its Moscow office. Also in that month, it appears that Mr Surapbergenov came to visit Mr Ereshchenko in London for a week and gave him the draft 5 SPAs and told him that he was very concerned about his position because of events in Kazakhstan.

On 24^th April 2009, Ms Kolyasova sent an email to Mr Udovenko and Mr Ereshchenko asking that an inquiry be sent to the registrar, Mr Kythreotis, in relation to Bubris. This was part of a series of emails, to which Mr Ereshchenko was a party, concerning bond trading at this time.

On 12^th August 2009, Mr Aizhulov ceased to be a director Eastbridge.

On 13^th August 2009, Blair J granted a without notice freezing injunction against Mr Ablyazov and others in what have become known as the “Drey proceedings”.

In August 2009, Mr Aizhulov left London.

In December 2009, Mr Udovenko left London and has not returned since then. His whereabouts are unknown.

On 12^th February 2010, Mr Udovenko resigned as a director of Eastbridge, leaving Mr Ereshchenko as the sole director of Eastbridge.

On 28^th May 2010, Mr Ereshchenko resigned as a director of Eastbridge.

On 20^th June 2010, Mr Ereshchenko says that he stopped working for Eastbridge.

On 26^th July 2010, the Bank obtained worldwide freezing orders against the first 12 Defendants in these proceedings.

On 27^th July 2010, the Bank obtained freezing orders against the Defendants to these proceedings incorporated in the BVI from the BVI court.

On 28^th July 2010, these proceedings were commenced against the first 12 Defendants.

In August 2010, Mr Ereshchenko says that he threw his laptop computer away.

On 6^th September 2010, the BVI court found the Defendants to these proceedings incorporated in the BVI to be in contempt of court in failing to comply with its disclosure orders, and ordered the sequestration of their assets.

On 30^th September 2010, a new director of Eastbridge was appointed, Mr Ramil Burganov, and it was sold to a Russian company for £2.

On 3^rd November 2010, Henderson J made the Disclosure Order against Mr Ereshchenko.

On 10^th November 2010, the Disclosure Order was personally served on Mr Ereshchenko.

On 15^th November 2010, Mr Ereshchenko instructed solicitors (Dawsons LLP) to act for him in relation to the Disclosure Order.

On 22^nd November 2010, the Bank’s solicitors provided Mr Ereshchenko’s solicitors with the bundles that had been before Henderson J on 3^rd November 2010.

On 26^th November 2010, Mr Ereshchenko’s solicitors wrote to the Bank’s solicitors saying they had only undertaken a preliminary review of the large number of documents provided, and seeking an extension of time for compliance with the Disclosure Order.

On 2^nd December 2010, Mr Ereshchenko’s solicitors and the Bank’s solicitors agreed a 7-day extension of time for compliance with the Disclosure Order.

On 8^th December 2010, the matter came before me on Mr Ereshchenko’s applications for a 14 day extension of time for compliance with the Disclosure Order. I stood over the application and extended the date for compliance with the Disclosure Order to 10^th December 2010. In the course of the hearing, I made it clear that Mr Ereshchenko needed to tell the court what he had already done to comply with the Disclosure Order and what needed to be done and how long it would take. His then counsel, Mr George Bompas Q.C., informed me on that occasion that he had not yet met Mr Ereshchenko by that time. I did not, contrary to the understanding that seems to have been gained by Mr Ereshchenko, say that I would not grant an extension when the matter returned on 10^th December 2010. Unfortunately, however, Mr Ereshchenko seems to have misunderstood that he would be obtaining no further extension and decided not to re-apply to me on the 10^th December 2010.

Instead, on 10^th December 2010, Mr Ereshchenko made his December statement in response to the Disclosure Order. I shall set out the pertinent parts of this important statement in due course, but, in outline, he said that he did not have any information about the AAA Transactions, and that the BVI Defendants and the Further Recipients had been dealt with by Mr Udovenko’s part of the Eastbridge business. On the same day, Mr Ereshchenko provided undertakings which prevented him leaving the jurisdiction.

On the evening of 10^th December 2010, Mr Ereshchenko attended at the offices of SPW (UK) LLP, a firm of chartered accountants acting for Eastbridge (“SPW”). He inspected 4 or 5 out of 20 boxes of documents that had been retrieved from the Big Yellow storage company by Mr Salim Shalabayev.

On 15^th December 2010, Mr Ereshchenko made his December affidavit verifying his December statement and saying: “I know nothing, so far as I can recall, about any of the transactions whereby US$300 million of AAA-rated investments were allegedly fraudulently transferred by the Bank to the BVI Defendants”.

On 3^rd February 2011, the Bank located 25 boxes of documents and the old Eastbridge server at the Big Yellow storage company. Apart from some relevant documents located on Eastbridge’s old server, the Bank does not suggest that the 25 boxes contained any documents that are relevant to the issues in these committal proceedings.

On 3^rd February 2011, Mr Ereshchenko was joined as the 17^th Defendant to these proceedings, restricting him from leaving the jurisdiction and making use of his passport pending an application by the Bank to cross-examine him.

On 7^th February 2011, the Bank executed a search order against the Defendants including Eastbridge.

On 10^th February 2011, the Bank issued its application to cross-examine Mr Ereshchenko.

On 11^th February 2011, the 3^rd February 2011 order was replaced by undertakings.

On 1^st March 2011, Mr Ereshchenko filed his March statement in support of his opposition to an order for cross-examination.

Half an hour after he had filed his March statement on 1st March 2011, the Bank served its re-amended Particulars of Claim on Mr Ereshchenko including the details of its claims against him.

On 5^th April 2011, the Bank was granted permission to cross-examine Mr Ereshchenko in respect of his compliance with the Disclosure Order.

In mid-April 2011, the Bank executed a search order against Euroguard, a company in Cyprus. It appears from the evidence given orally by Mr Hardman that many relevant scanned documents were recovered as a result of this search.

On 31^st May 2011, Mr Ereshchenko served his defence to the claim in these proceedings.

In June 2011, Briggs J sentenced Mr Shalabayev in his absence to 18 months imprisonment for contempt of court in these proceedings.

Between 28^th and 30^th June 2011, Mr Ereshchenko was cross-examined before Peter Smith J (the “June cross-examination”).

On 30^th June 2011, the June cross-examination was terminated when he admitted “lying” when he had said that he did not concern himself with the basis on which Mr Shalabayev was acting in connection with Eastbridge. When he gave evidence to me, Mr Ereshchenko said that he had used the wrong word when he had said he was “lying”, and I confess to finding myself in agreement with him on that point. But, be that as it may, Peter Smith J ordered, as a result, that the cross-examination be adjourned with liberty to restore on 7 days’ notice, and that Mr Ereshchenko should provide an affidavit in full compliance with the Disclosure Order and correcting previous inaccuracies, and that the passport undertakings be continued until 7 days after the conclusion of the cross-examination.

On 12^th July 2011, an interim freezing injunction was made against Mr Ereshchenko.

On 19^th July 2011, Mr Ereshchenko made his July affidavit in purported compliance with Peter Smith J’s order.

On 25^th July 2011, the freezing injunction was continued against Mr Ereshchenko until after judgment.

On 28^th October 2011, the Court of Appeal sentenced Mr Kythreotis to 21 months imprisonment for contempt of court in his absence.

Between the 17^th and 21^st November 2011, the restored cross-examination of Mr Ereshchenko took place before Henderson J.

On 22^nd November 2011, the Bank’s solicitors wrote to Mr Ereshchenko’s solicitors notifying them that they intended to apply to commit Mr Ereshchenko.

On 16^th December 2011, the Bank issued its committal application against Mr Ereshchenko.

On 17^th January 2012, Henderson J refused to adjourn the application and ordered a 4-day trial of the committal application starting on 30^th April 2012, gave permission for the Bank to pursue allegations that Mr Ereshchenko had made false statements in documents verified by a statement of truth without an honest belief in its truth under CPR 32.14(2)(b), ordered the Bank to file an affidavit explaining the categories of documents searched for the purpose of Mr Ereshchenko’s cross-examination, and saying whether it was aware of any documents which would damage its case or advance Mr Ereshchenko’s case on the committal.

On 24^th January 2012, the Bank served the affidavit of Ms Rebecca Wales in compliance with the 17^th January 2012 order.

On 16^th February 2012, Teare J decided on the Bank’s application that Mr Ablyazov had been guilty of contempt of court in responding to the disclosure he had been ordered to make pursuant to a worldwide freezing order by falsely maintaining that he was not the ultimate beneficial owner of the 4^th Defendant, Bubris Investments Limited (“Bubris”), one of the BVI Defendants, and of certain other valuable properties and companies.

Later in February 2012, Mr Ablyazov was sentenced in his absence to 22 months in prison by Teare J for contempt of court. Mr Ablyazov has not returned to England to serve his sentence, but has appealed the decision.

On 15^th March 2012, the Bank issued a summary judgment application against Mr Ablyazov and the BVI defendants.

On 19^th March 2012, the Bank served detailed particulars of Mr Ereshchenko’s alleged contempt pursuant to directions given by Peter Smith J.

On 20^th March 2012, Peter Smith J adjourned the trial to 18^th June 2012, and directed pleadings as to the alleged contempt, and limited disclosure by the Bank, and ordered that any fact found at the committal trial shall be conclusive between the parties unless fresh material becomes available and the Court concludes that that material potentially undermines the relevant findings.

On 30^th March 2012, Mr Ereshchenko served Points of Defence in relation to the allegations of contempt.

On 2^nd May 2012, Peter Smith J gave the Bank permission to amend its particulars of contempt, and required Mr Ereshchenko to amend his defence.

On 4^th May 2012, the Bank served amended particulars of the alleged contempt.

On 18^th May 2012, Mr Ereshchenko served his May affidavit in answer to the committal application.

On 24^th May 2012, Mr Ereshchenko served amended Points of Defence in relation to the allegations of contempt.

The Bank’s substantive claims against Mr Ereshchenko for dishonest assistance in breaches of fiduciary duty are contained in its re-amended Particulars of Claim. The relevant claims are set out at paragraphs 116P-Q as follows:-

“116P. Ereshchenko provided assistance to Ablyazov and/or Solodchenko in their breach of fiduciary (and other) duties and in the concealment thereof, and provided assistance to each of the BVI Defendants and the Further Recipients, in the following manner:

PARTICULARS OF ASSISTANCE

The Particulars given below are the best the Bank is presently able to give. Following disclosure in these proceedings the Bank expects to be able to augment these particulars.

(a)

As particularised in paragraph 24E above, Ereshchenko held powers of attorney over the affairs of Bubris, Granta, Nafazko and Olofu from 3 March 2009.

(b)

Ereshchenko was intimately involved in the co-ordination and payment of the coupon payments in respect of the AAA Investments over the period July 2008 to January 2009, as set out at paragraph 66A to 66C above.

(c)

By reason of the matters set out in (a) and (b) above, and his directorship of Eastbridge at all material times, it is to be inferred that Ereshchenko was intimately connected with the assistance provided by Eastbridge and particularised in paragraph 116A, above.

(d)

As particularised at paragraphs 75E (i) to (j) above, Ereshchenko, at a time when he had ceased to be a statutory director of Eastbridge, procured, permitted or acquiesced in the concealment of documents relating to Eastbridge in the Storage Unit.

(e)

Ereshchenko has provided false evidence in these proceedings about his knowledge of, and involvement with, the AAA Investments, the BVI Defendants and Further Recipients so as to conceal his role and/or the true ultimate beneficial owner of the BVI Defendants and Further Recipients.

(f)

Ereshchenko has provided false evidence in these proceedings about his knowledge of and access to documents material to the Bank’s claims pleaded herein.

116Q. In providing the assistance particularised above, Ereshchenko acted dishonestly and/or with a lack of good faith.

PARTICULARS OF LACK OF GOOD FAITH/ DISHONESTY

The Particulars given below are the best the Bank is presently able to give. Following disclosure in these proceedings the Bank expects to be able to augment these particulars.

(a)

Ereshchenko knew or ought to have known that the AAA Investments were intended to be used, and were in fact used, to satisfy the BVI Defendants’ Delivery Obligations owed to Alfa Equity, without the Bank receiving any consideration.

(b)

Ereshchenko knew or ought to have known that the use of the AAA Investments in satisfaction of the Delivery Obligations or the BVI Defendants’ receipt of the AAA Investments, for no consideration, was not for the Bank’s ultimate benefit.

(c)

Ereshchenko knew or ought to have known that the June 2008 Transactions and the January 2009 Transfers were procured and implemented to give the impression of arm’s length commercial transactions which they were not.

(d)

Ereshchenko knew or ought to have known that the payment of the coupon payments as set out at paragraphs 66A to 66D above was not consistent with arm’s length commercial transactions.

(e)

Ereshchenko knew or ought to have known that the true ultimate beneficial owner of the BVI Defendants and the Further Recipients was at all material times Ablyazov,

(f)

Ereshchenko knew that he procured, permitted or acquiesced in the concealment of Eastbridge’s documents in the Storage Unit at a time when he was no longer a statutory director of Eastbridge,

(g)

Ereshchenko knew that he gave false evidence about his knowledge of, and involvement with, the AAA Investments, the BVI Defendants and the Further Recipients so as to conceal his role and/or the true ultimate beneficial owner of the BVI Defendants and Further Recipients.

(h)

Ereshchenko knew that he gave false evidence about his knowledge of and access to documents material to the Bank’s claims pleaded herein”.

It will be immediately apparent that some of these allegations are the same as those comprised in the contempt application; in particular, the allegations of dishonesty in giving false evidence as to his knowledge of the AAA Transactions and the concealment of documents. I will return to this aspect of the matter.

I will deal now with the written and oral evidence that was adduced at the hearing, before turning to deal with the applicable law, and the specific allegations of contempt.

Mr Hardman is a partner in the Bank’s solicitors. He gave evidence on days 2 and 3 of the hearing. He was heavily cross-examined on his role in the litigation as a whole, it being suggested that Hogan Lovells International LLP was running the litigation rather than the Bank. I accepted Mr Hardman’s denial of these propositions and his evidence that he took instructions from the Bank’s asset recovery sub-committee, normally represented by a Mr Prosyankin.

Mr Hardman was also attacked on the basis that the Bank had contended (in its opening skeleton argument) that its purpose in bringing the committal application was to “coerce Mr Ereshchenko to provide a full, complete and accurate account of his knowledge and involvement in the AAA Transactions, with a particular focus on the destination of the funds which were misappropriated from the Bank and the identity of those for whose benefit the fraud was orchestrated”. Mr Hardman freely admitted that the Bank was now aware of the answers to many of the questions asked in the Disclosure Order, but maintained that it did not know where some US$45 million had gone. As Mr Hardman put it:-

“We don’t know where in the region of $45 million has gone, we don’t know to whose benefit that has been paid. It may have been paid on the instructions of [Mr Ablyazov] through Mr Ereshchenko; we don’t know. But who benefited from it and who may be the subject of claims to recover that money, we don’t know, we can’t say. We don’t have that information. We think Mr Ereshchenko does”.

Mr Hardman accepted that he knew of no evidence that Mr Ereshchenko was concerned with the concealment of Mr Ablyazov’s interest in Bubris.

Mr Lowenstein cross-examined Mr Hardman about the documents that the Bank had obtained from Euroguard in Cyprus, and the relationship between Euroguard and Mr Kythreotis. His evidence was that there was no connection between Euroguard and Mr Kythreotis, though they had some business relations. Mr Hardman explained that Euroguard was a renamed Eastbridge Cyprus, which was a relocated Eastbridge Moscow, and that the same group of Russian women ran it. Mr Kythreotis, he said, was one of a number of Cypriot offshore service providers, who would have been sent instructions from Euroguard.

Mr Hardman also explained how the scanned documents taken from Euroguard were discovered, when the Bank found a receipt for some scanning by an entity called Iron Trust with Euroguard’s tea and coffee receipts which showed that one or two weeks earlier, 17,000 documents had been scanned into pdf form, and the originals shredded.

Mr Ereshchenko’s December statement (made on the 10^th December 2010) is crucial to this application. It is this statement (and the immediately subsequent December affidavit) that is said to contain deliberate lies. The December statement cannot be properly understood without reading it as a whole, because the crucial parts refer back expressly and impliedly to the rest of the document. I have therefore reproduced below greater parts of the December statement than would normally be necessary as follows:-

“4.

Eastbridge was established by Alexander Udovenko, Anuar Aizhulov and me in September 2003. I had met Mr Udovenko at the London Business School where we had done an MBA together. Before business school I had worked as a management consultant for three years and was based during that period in Moscow and Sydney. My background was therefore management consultancy. Mr Udovenko’s background before business school was in legal services and banking. He had previously worked in the in-house legal department at an investment bank in Moscow. We set up Eastbridge together with a view to Mr Udovenko building a corporate and administration services business, and me building a private equity and investment advisory service, both of us principally focussing on clients from the Russian, Ukrainian and Kazakhstan markets. …

8.

We started as equal sharing partners. A bit later, Mr Aizhulov started to spend most of his time on Ukrainian projects. His principal role was as an introducer of business and, although he was a director of Eastbridge, his contribution was relatively small. Mr Udovenko was based in London but he travelled a lot to Moscow, Kazakhstan and Ukraine. I too was based in London but I also travelled a lot. Very shortly after Eastbridge was established, it was clear that by far the largest generator of business for Eastbridge was Mr Udovenko and the corporate services side of the business expanded with members of staff engaged by Mr Udovenko.

9.

I worked on my own account and I worked independently from Mr Udovenko and his corporate and legal services practice. My focus was market research for the purposes of identifying potential investment opportunities and the evaluation of potential investment targets in principally Russia, Kazakhstan and Eastern Europe for independent investors. In fact, whilst I travelled extensively seeking investment opportunities, this resulted in few deals of any significance. My contribution to Eastbridge’s business was not significant. Mr Udovenko, therefore, took all decisions on behalf of the company. …

The 3 November Order

13.

Turning first to the question in Schedule A to the Order, all of these questions relate to bank accounts held by the BVI Defendants and the Further Recipients at Alfa Equity and Trasta Banks. I was not a signatory on any of these accounts. I have no knowledge about the establishment of the BVI Defendants or the Further Recipients. All of these companies were dealt with by Mr Udovenko’s part of the business. I was not aware that I was granted a Power of Attorney by four of the five BVI Defendants, a power which was valid only from 3 March 2009 to 2 March 2010. I did not sign those Powers of Attorney and nobody told me about them. As far as I know, I never signed anything or did anything in exercise of those Powers of Attorney.

14.

I do not know what monies are left in the accounts identified in Table 2 of Schedule B to the Order and I have no means of finding out. The validity of my Powers of Attorney expired in March 2010 and, as I have said, I am not a signatory to the bank accounts. Since I no longer have any role at Eastbridge, I have no basis on which to make enquiries either of Alfa Equity and Trasta Banks or of the companies themselves.

15.

It follows, therefore, that I do not know when money left those accounts or in what amounts, or who gave the necessary instructions, or who might have influenced those instructions. Nor do I know where any money that left those accounts went to or the identity of the recipients. For the same reason, I do not know whether any consideration was given or paid by the recipient, what form the money is now in, whether it is in bank accounts and, if so, which, or whether any assets were purchased.

16.

I note from the papers I have seen, which have been obtained by the Bank, that I was not a recipient of, or party to, any of the instruction e-mails referred to by the Bank as being at the heart of the alleged fraud. I note, however, that I was sent copies of three e-mails in May 2009 and one e-mail in October 2009 which appear to refer to or relate to one or other of the BVI Defendants. But I do not recall them, they appear to be administrative only and they were many months after the alleged fraud.

17.

I do not know what reasonable inquiries I might be able to make in order to find answers to these questions. As I have said, I have no authority to request any information from the banks. All of the companies are already parties to these proceedings and I understand the Bank is already taking enforcement steps against them. Mr Udovenko may have information but he is also already a party to these proceedings and I do not know where he is. The last time I spoke to him was early in 2010. I do not know how to contact the various former members of staff who would have worked for Mr Udovenko on these sorts of assignments – they left Eastbridge over a year ago.

18.

I do not have any company documents that might assist, or indeed any company documents at all.

19.

Turning to Schedule C, and dealing first with all of the companies listed in Schedule C, except Eastbridge, I can confirm that since I had no involvement in the establishment or administration of any of these companies and since, as I have said, I was unaware of the Powers of Attorney which I held for a short period over the BVI Defendants, that I do not know who the legal or beneficial owners of any of these companies are, and I do not know who ultimately controls any of these companies or who provides instructions to the directors concerning the decisions they should take. I do not know who had signatory powers over the accounts held at Alfa Equity and Trasta by these companies.

20.

For the same reasons as I have explained in my answer to Schedule A, I do not know what reasonable inquiries I could make to get answers to any of these questions and I do not have any documents that might help.

21.

Turning to Eastbridge and to the best of my knowledge and belief, the answers to the questions are as follows:

a)

Mega Property Limited;

b)

I have not seen any documents confirming the identity of the beneficial owner, but I have always believed it was Mr Udovenko;

c)

Mr Udovenko;

d)

I have not seen any documents confirming the identity of the beneficial owner, but I have always believed it was Mr Udovenko;

e)

I do not have this information; and

f)

I believe this question does not apply to Eastbridge.

8 December Order

22.

I am asked to explain what steps I have taken to date in order to comply with the Order. In fact, there is very little which I felt I could reasonably do. I have made inquiries of Mr Solodchenko as soon as I received the 3 November Order. He told me that he was being sued by the Bank in relation to the transactions which are the subject of the Order. He showed me a copy of his Defence and explained that he had no knowledge of the transactions in question. I tried but failed to contact Mr Udovenko. I have no documents and no access to documents that might help. The only people I could turn to are already parties to the proceedings and if I was able to contact them (and apart from Mr Solodchenko, the only ones I could contact, because their details are in the papers provided by the Bank, Mr Kythreotis and Mr Hercules) I cannot imagine that they would be prepared to provide information to me which they are not prepared to provide to the Bank. I believe therefore I have taken all possible steps required from me to comply with the Order.

23.

To answer the questions in the Order, therefore, I am forced to rely on the little I already know. Initially, however, all my efforts were focussed instead on seeing whether the Order had been properly made in the first place and whether or not, therefore, there may be grounds to set it aside, and at the same time trying to understand the full potential implications for me of complying with the Order. The risks of being dragged into this litigation, involving serious allegations of fraud and very substantial amounts of money, particularly where I might appear to be taking sides, need no elaboration. I refer to the statement of Mathew Rea dated 8 December 2010, filed in Court yesterday, which explains the steps taken by me and by my advisors in that regard.

24.

I am also required to explain what steps I still need to take in order to comply with the Order. I have, however, in what I have set out above, attempted in fact to comply with the Order in full. It follows that I do not intend to apply to discharge the Order. I now believe that I have complied so far as I am able. The Bank’s lawyers have requested that I make inquiries of Mukhtar Ablyazov, Mr Udovenko, Mr Shalabayev and Mr Kythreotis. As to Mr Udovenko and Mr Shalabayev, I do not know where they are and have no means of contacting them. It never occurred to me that Mr Ablyazov might provide any helpful information to help me answer any of the Bank’s questions. He is already being sued by the Bank for substantial sums and I cannot reasonably expect he would cooperate, although I can of course ask him if the Bank wishes me to do so. I will also make inquiries as the Bank requests of Mr Kythreotis.

25.

I am obliged under the 3 November Order to serve an affidavit setting out the above information by next Wednesday 15 December 2010, so I propose to include in that affidavit the results of those further inquiries” (emphasis added).

As I have already said, on 15^th December 2010, Mr Ereshchenko made his December affidavit verifying his December statement and saying (importantly): “I know nothing, so far as I can recall, about any of the transactions whereby US$300 million of AAA-rated investments were allegedly fraudulently transferred by the Bank to the BVI Defendants”. The Bank places great reliance on the alleged falsity of this sentence. It must be accepted, however, that when Mr Ereshchenko refers to his recollection, he is referring back to his December statement. The two documents must, therefore, in my judgment, be read together.

Mr Ereshchenko’s 2^nd witness statement was his March statement (of 1^st March 2011) in which he was opposing the Bank’s application that he be cross-examined on his written evidence. He said the following at that time:-

“7.

The fundamental point is that, at the present time, I am unable to provide any further information relevant to the Norwich Pharmacal Order (“the Order”) made against me by this court on 3 November 2010 (at a time when I was not a defendant in the action). I simply do not know any more than I have already said in response to the questions set out in the Order. It may be that if I am shown further documents my memory will be jogged; but as it is I have tried and can remember no more. …

33.

The Order asked me to provideinformation relating to highly specific payments and accounts identified in Schedule B to the Order (all of which relate to the BVI Defendants and the Further Recipients). Additionally, I was ordered to provide information regarding the corporate and beneficial ownership structures of each of the corporate defendants to the proceedings (namely, the BVI Defendants and the Further Recipients). The information requested included who gave instructions to the directors or agents of each of these companies; who had power to act on behalf of these companies; and who had signatory power over the listed Alpha Equity accounts of these companies.

34.

The Order was not very clear to me not least, because: (1) I did not have sight of relevant documents (2) I was only served with the Order on 10 November 2010 [CGH15: 1] and (3) my solicitors did not get the 10 lever files which related to the Order until 22 November 2010. There was a lot therefore, to do and assimilate in a very short time frame.

35.

The court will have read my evidence served in response to the Order. In short summary, it was as follows:

a.

In response to the questions in the Order relating to the accounts, so far as I can recollect that I was not a signatory to any of the accounts detailed in Schedule B to the Order and I cannot recollect any information, sought by the Order, regarding, either the monies left in the specified accounts or the monies that had left the accounts.

b.

In relation to the BVI Defendants, I was unaware that I had been granted any Powers of Attorney over the BVI Defendants and I did not sign those Powers of Attorney and was not told about them; as far as I knew, I never signed anything in exercise of those Powers of Attorney.

36.

The Claimant alleges that five newly exhibited emails dated between 31 October 2008 and 25 September 2009 (the “Emails”) suggest that I have not been truthful and that my role was more extensive than my evidence suggests. The Emails are referred to in the Fifth Witness Statement of Mr George Hardman and can be found at …. The Claimant suggests that the Emails provide evidence that: I was involved in the production of documents for Mr Udovenko’s part of the Eastbridge business and for the BVI Defendants; I was involved in the administration of the BVI Defendants bank accounts; I mayhave signeddocuments on behalf of the BVI Defendants; and I was in some way involved with the Alpha Equity accounts held by the BVI Defendants. The Claimant further suggests, apparently in reliance on the Emails, that I have provided assistance in the implementation of the alleged fraud of which the Claimant complains in the AAA proceedings and say (at paragraph 11 of Mr Hardman’s Fifth Witness Statement) that “documents .. show that [I] had intimate involvement...” with the BVI Defendants.

37.

In reality it is actually very unclear what, if anything, the Emails show about my involvement with the BVI Defendants. I deny that I have been knowingly involved in the alleged fraud or knowingly received any monies from it. …

44.

I was contacted by Eastbridge’s accountants, SPW (Mr Viswa Kaliappan), prior to 10 December 2010 (I think in about the beginning of December 2010).  SPW sought my help to find missing Eastbridge documents and specifically the bank statements for the last 2 months i.e. July and August 2010 which were needed for the disclosure order that Eastbridge was dealing with.  …

48.

When Viswa Kaliappan contacted me and said that certain Eastbridge accounting documents were missing and asked for my help I speculated that the documents SPW wanted might possibly have been in the Office amongst those documents which had not been passed to SPW and that maybe the missing Eastbridge accounting documents were mixed up amongst the Aleksandr Udovenko and Syrym Shalabayev’s boxes of papers which I knew had been taken away by Syrym’s brother, Salim, at the end of September 2010 as part of the winding down of Eastbridge.

49.

I therefore, called Salim sometime in December and asked him if the boxes he had, contained Eastbridge documents.  Salim said to me that he did not know and did not want to be bothered to review all the documents himself. Instead, he suggested that I do it.  I thought it would be a good idea to review the boxes at SPW’s offices as they were acting for Eastbridge and it was they who were asking for my help. .  I had no idea at all whether any of the documents Salim had were relevant to anything mentioned in the Order.

50.

I spoke to SPW and we agreed that the review would take place in their offices with them.

a.

On 10 December 2010 I was tied up for the whole working day preparing and filing my Witness Statement under the Order. In the evening I went to SPW’s offices.

51.

When in their offices, I started to look through the boxes and quickly found the documents that SPW said were missing. I gave them to SPW. In the time I was there I reviewed only 4-5 of the boxes.  

52.

In the 4-5 boxes I looked through on 10 December 2010 I saw underlying documents to support the figures in Eastbridge’s accounts, but which were not sent to SPW for bookkeeping. I did not see anything in these boxes which struck me as being anything that might have been relevant to any of the questions asked of me in the Order.  I am fairly confident that had I seen something relevant to the Order I would have tried to see what I should do about it. But I did not, so the issue did not arise. I understand that the Claimant now has access to documents recovered from what is called the “Yellow Box Premises”. It has not disclosed to me what documents relevant to the Order it has uncovered. Therefore, if the Claimant now says that these are relevant to the Order, I do not know why it remains necessary for me to be cross-examined, alternatively, if it is thought necessary to cross-examine me at this stage I should be given access to the relevant documents before any cross-examination takes place.

53.

I wish to clarify something I said in my witness statement on 10 December 2010 (which I confirmed as true by my Affidavit).

a.

At paragraph 22 I said: “I have no documents and no access to documents that might help”

b.

At the time I made that statement I believed it to be true because I had no documents required under the Order and had not yet had access to any such documents and as referred to above, I did not know what was in the boxes that were to be sent to SPW for me to find the missing accounting material that SPW wanted. 

c.

After as I have explained above I had inspected the 4-5 boxes at SPW’s offices (for the reasons referred to above) and seen some documents relating to Eastbridge, I still believed that I had no documents which were relevant to any question asked under the Order and would help in that respect.   I accept that I should have been more precise in my subsequent Affidavit but I was under immense pressure at the time I swore my Affidavit and finding it difficult to properly function for the reasons referred to above and to have the precision I understand is needed in English and even more so in legal English. …

The March affidavit was, as I have said, sworn for the specific purpose of resisting the order for cross-examination. It was not, therefore, and should not be viewed as, an attempt to revisit the entirety of the evidence given in response to the Disclosure order in the December statement and the December affidavit.

After the cross-examination before Peter Smith J was abandoned in the circumstances I have described on 30^th June 2011, Mr Ereshchenko was required to revisit his response to the Disclosure Order. That gave rise to his July affidavit, which did indeed go back over Mr Ereshchenko’s response to the Disclosure Order in the light of the numerous additional documents that had been produced by the Bank since that time (many of them from the search orders that it had executed at Euroguard and elsewhere). In his oral evidence before me, Mr Ereshchenko vouched for the accuracy of his July affidavit. The July affidavit runs to 35 pages, so I have restricted my quotation to those parts that give appropriate context to the sections that are specifically said to be deliberately false, as follows:-

“5.

In preparing my Initial Evidence, I accept that, for the reasons set out below, I did not provide a full account of my knowledge and involvement in transactions relevant to these proceedings (the “Relevant Transactions”). At the time my focus was on providing direct answers to what I understood to be direct questions. I see now that I could have provided some more information, particularly as to the context of the Relevant Transactions. I could not, however, at the time of my Initial Evidence have provided anywhere near the sort of detail that I now give because I did not then have access to any of the material that I have now seen in the Bundles. Whilst, I appreciate that the way the case has been put by the Claimant suggests that there was an extensive fraud, I must stress that my own participation in events: was not part of my everyday work; was done (as I believed at the time) for the benefit of the Claimant bank itself; and was without any dishonest intent on my part and without any personal gain to me. …

7.

I maintain that most of the evidence provided by me during the course of the Cross-examination Hearing was truthful to the best of my recollection and belief. However, due to the acute pressure that I was under throughout the three days of the Cross-examination Hearing, I accept I did not always give a clear and accurate account of my knowledge or understanding of some of the details relevant to these proceedings and responsive to the 3 November Order. I apologise unreservedly to the Court for my failure to properly comply with its order. …

10.

It was not possible for me to provide much of the information set out below prior to the Cross-examination Hearing for the following reasons:

a.

As will be apparent from this affidavit and as I have maintained throughout, I had limited involvement in the Relevant Transactions and the time I spent dealing with these matters was minimal;

b.

In light of the above, my recollection of these matters is, and has always been, very limited. I was previously unable to properly recall my involvement, not having reference to relevant contemporaneous documents. Before I was provided with the Bundles I only had access to a few isolated emails, selected by the Claimant to support its case that I was “intimately involved” with the Relevant Transactions. Whilst I knew this not to be the case, I did not recall the emails clearly and was unable to provide a proper explanation for them out of context;

c.

In short, I could not have provided the explanations I have given below previously, as I was uncertain of the circumstances surrounding the few documents I saw and was not able to put them into context or explain them. I was aware of the need to be accurate in my evidence and, whilst I might have made some vague suppositions about the emails I was presented with, I was unable to comment with any precision;

d.

The disclosure of further documentation by the Claimant in the Bundles has allowed me to put the previous emails into some context and to more fully recollect the picture of events relevant to these proceedings. However, I note that that the correspondence in the Bundles remains patchy and if I had access to further documentation it is possible I would be able to say more. …

124.

In relation to corporate services: I do not know where the client files were kept. I do not believe that these files were kept in London, because I did not see client files in the office. I believe, therefore, that most client documentation must have been maintained offshore by the companies that Aleksandr was administering. However, I do not know this for certain. I said at the Cross-examination Hearing that I thought client files might be kept in Moscow (3:25:16). For the reasons stated at paragraphs 50-55 above I had no responsibility for Eastbridge Moscow and, therefore, did not deal with the maintenance of documents there and do not know where these documents may have gone. I indicated at the Cross-examination Hearing that some of the people from Eastbridge Moscow moved to Cyprus (3:25:21) and that I could, therefore, infer that Eastbridge Moscow documentation may also have been received in Cyprus (3:27:4). This is speculation and is outside of my knowledge.

125.

By 2010, Eastbridge had no corporate services left in the UK. Therefore, whilst it is correct that I was formally in charge of Eastbridge at this time, this no longer included corporate services (3:28:14). Accordingly, I am certain that no corporate services client documentation was maintained by Eastbridge in London at this time. The files which Aleksandr and Mr Shalabayev left after their departure, which I believed to be their own personal documents, were kept in an empty office in Tower 42, alongside the housekeeping files not required by SPW. These files were subsequently, I now understand, moved to the Big Yellow Storage Facility and are now in the possession of the Bank’s legal team. As noted above, I have already provided my account of my involvement with and knowledge of these documents, which may be found at paragraphs 42-53 of my 2^nd witness statement and paragraph 46 of my Defence” (emphasis added).

My impression is that, in the July affidavit and indeed in the sections of the June cross-examination that I have read, Mr Ereshchenko tried, in general terms, to give accurate answers to the questions he was asked about the documents that had, by then, become available. I will return to this impression in due course.

Mr Ereshchenko’s May affidavit was made on 18^th May 2012 in response to the Bank’s application to commit. The May affidavit runs to 98 pages and 135 paragraphs, and rehearses the material contained in previous statements and affidavits. It is a comprehensive account of Mr Ereshchenko’s case concerning the documents that had, by then, been produced, his involvement in the AAA Transactions and the evidence he has previously given. He concludes by reiterating that he has never knowingly given false evidence. In his oral evidence before me, Mr Ereshchenko vouched for the accuracy of his May affidavit. I shall not seek to set out all the details that it contains, but again I can say that I have the impression that Mr Ereshchenko tried to give accurate answers to the questions he was asked about the documents. There are, however, two paragraphs that I shall set out as I think that they go a long way towards explaining Mr Ereshchenko’s approach to providing his December Statement:-

“34.

As I have previously stated, at the time of preparing my December Witness Statement I perceived that the Disclosure Order required me to provide specific answers to what I understood to be specific questions. This view was taken, rightly or wrongly, in part because that is the culture in which I grew up in the Soviet Union where there is a common mistrust of the judicial system and where one answers official questions strictly and shortly without any extraneous information and certainly without seeking to make inferences or to speculate. It is important that the Court understands the very different culture that I grew up in. The Disclosure Order’s questions related to where money had been and where it currently was, who the ultimate beneficial owners of the various defendant companies were and who gave instructions in relation to companies and accounts. I did not know in December 2010, and to a large extent still do not know other than by reference to documents subsequently disclosed by the Claimants, the answers to these questions. In short, I believe that my December Witness Statement included all of the information that I could have included at the time. …

47.

I have already explained that much of what I was being asked to do ran counter to the culture in which I had grown up. Much of the information, which I subsequently disclosed and which the Claimant suggests should have been apparent to me in December 2010 as set out in paragraphs 11 to 13 of the Particulars of Contempt, is still largely based on speculation or vague memories of discussions with others. I did not consider these matters in December 2010 at the time that my Witness Statement was prepared, but even if I had considered them I did not understand that I should speculate or be ambiguous in formal written evidence. I believed that I was required to state accurately what I knew rather than what I speculated might have been the case”.

On the first day of Mr Ereshchenko’s cross-examination before me by Mr Stephen Smith Q.C., counsel for the Bank, numerous documents were put. He answered the questions in a detailed and careful manner. Perhaps surprisingly, in the whole day of cross-examination, it was not once suggested to him that his answers were inaccurate, let alone deliberately false. In the briefest of outline, Mr Ereshchenko repeated what was contained in his July and May affidavits, which was in broad terms supported by the documents that were put to him. As it seemed to me, without lengthening this judgment by noting every document put to Mr Ereshchenko, it was clear from the documents that the Bank relies upon that Mr Ereshchenko was generally playing a secondary role to that of Mr Udovenko and Mr Shalabayev who were more intimately involved in the affairs of the BVI Defendants and the Further Recipients. This applies equally to the documents concerning the grant of a power of attorney to Mr Ereshchenko for the BVI Defendants, the coupon transactions, and the various securities transactions involving Altyn Invest. The first day of cross-examination, then, confirmed the impression that I have already mentioned in relation to the July and May affidavits to the effect that Mr Ereshchenko was trying carefully to explain all the documents that were put to him. This impression does not, however, necessarily mean that his December statement accurately recorded his independent recollections as to documents and the AAA Transactions. I shall return to those central questions in due course.

In the second day’s cross-examination, Mr Smith tried to draw the threads together by summarising the knowledge that Mr Ereshchenko must have gained between May 2008 and September 2009 as revealed by the emails and documents to which he was a party (and which had been put to him the previous day). My note of this part of Mr Ereshchenko’s evidence records the following:-

When Mr Ereshchenko was asked about the December statement that he had made in response to the Disclosure Order, he said that he did not think that he remembered the names of the BVI Defendants at that time, and that the lists of money transfers in Schedule B to the Disclosure Order did not jog his memory. When it was put to him that the transfers to TKB were at just the time when he had been in Riga in mid-June 2008, he said that “… this involvement with Timur Surapbergenov was just a part of the work-flow, I didn’t see it as anything extraordinary. So I just cannot imagine how I would recall -- how it even crossed my mind to cross-reference the dates of my dealing with TKB, because my dealing with TKB, I just -- when I said that I was – that I dealt with TKB in June, it’s all reconstructed on the documents which I see now. I mean, it’s too long a shot for me to make it in December 2010”. The following exchange then occurred:-

“You are trying to make a case that I should have recalled this particular transaction, which is now AAA transaction, as something extraordinary, as something out of ordinary. But this was just one of the things I was involved in, one of the many things. And so you are saying that I should have recalled that, I should have recalled that. Well, it's just -- it's just a flow which passes through me and I didn't focus on that.

Q. I'm going further than that, Mr Ereshchenko. I'm suggesting that you did recall the names of the BVI companies, or, at the very least, Bubris –

A. The answer is no, I did not recall.

Q. -- and that you appreciated that responding to this order was going to involve you disclosing a lot of information you didn't want to disclose.

A. This is not correct”.

As Mr Ereshchenko said: “by this time, by December 2010, I struggled to match the names of the companies to the affairs -- to the events which Timur brought me in, among other things, he brought me in”. Shortly thereafter, Mr Ereshchenko was asked about his reaction to the Disclosure Order and he said this:-

“Q. … You see, my suggestion to you, Mr Ereshchenko, is that you were frightened when you read the order.

A. I was frightened, yes.

Q. And you were frightened that if you provided the information that may have serious implications for you and/or other people.

A. I'm not sure about other people, but I just did not understand what hit me, because, as far as I remember now, the basis for this order was that I was a director of Eastbridge, first. Second, I hold P0As. That's it. And I was trying to understand how am I linked into this.

Q. We say you had a lot of information which you could give pursuant to this order but you were so frightened you didn't want to give it.

A. I disagree”.

Perhaps the greatest insight into Mr Ereshchenko’s thinking came from this answer when he was being asked about the risks for him if he complied with the Disclosure Order: “The concerns which I expressed were that I do not understand the situation I'm in, I do not understand how is it going to evolve. What I do understand is that I am now dragged into a fight between the big guys. And huge stakes, money involved, government fighting against me. I don't like the idea of it at all. I just want to quietly crawl away from the fight and not be killed in this fight”.

In relation to paragraph 15 of his December statement, Mr Ereshchenko explained why he did not know that the accounts were the ones he had dealt with as follows:-

“A. What I was saying is that it's very important, that to be able to say that these are the events which the disclosure order asks about and this is related to Timur, I need to be certain that the companies the disclosure order is requesting are the same companies. And leave away the number of accounts which are in disclosure order, because, yes, these are TKB, but there are numbers of accounts, long numbers, also I don't know if these are the only accounts, and it's -- it could be a lot of guessing, which I'm not readily -- ready to do.

Q. Let me see if I'm understanding your last answer. Are you saying that the problem you had was that you didn't recognise the numbers on the accounts?

A. That's one of the things, yes. I couldn't. I just could not.

Q. First of all, why didn't you say that?

A. Well, it would have been said but I'm not sure it would add anything to the answer to the disclosure order”.

When asked why he said he did not know who gave instructions for the BVI Defendants, Mr Ereshchenko said: “At the moment, after all the contemporaneous material has been provided, I am certain that this is factually incorrect. I am certain that I couldn’t do any better in December 2010”. He repeated similar answers in relation to the administration of the BVI Defendants and numerous other matters.

On the third day of his cross-examination, Mr Smith finally put to Mr Ereshchenko that he had deliberately lied in 7 of the 8 respects that I have set out above, in his previous evidence to the court. Mr Ereshchenko’s response was the same as it had been in his July and May affidavits, namely that he had had a limited involvement in the AAA Transactions, that he had never knowingly given false evidence, that he believed what he had said at each stage was accurate, and that, because he has been provided with more information as time has gone by, he now acknowledges that some at least of what he said was inaccurate.

Faced with this evidence, Mr Smith put to Mr Ereshchenko the facts and matters upon which the Bank relied in support of its contention that he had lied. I can summarise the 13 points that were put to him, together with his responses, as follows:-

One exchange in the middle of the third day of cross-examination highlighted for me the failure of the parties to understand each other. On the one hand the Bank has a clear belief that Mr Ereshchenko is and has been hiding information from it. On the other hand, Mr Ereshchenko simply does not understand what more he can do to comply with the Disclosure Order. The exchange was as follows:-

“Q. And indeed, we would suggest to you, Mr Ereshchenko, even now you have a greater -- you have a greater recollection of important information which you aren't sharing with us.

A. I have a comment here.

Q. Yes.

A. After hearing Mr Hardman in this witness box and after hearing Mr Lowenstein, I now really fail to understand what the Bank wants to know from me, because we covered -- it seems we covered all the disclosure order, it seems you have all the questions which you wanted answers to, and the thing which you have just said, that I still have something else which you don't know, it's -- well, it's denied, but I just fail to understand the structure of the claimant's approach to that.

Q. It's possible that you missed some of what Mr Hardman was saying. One of the things that Mr Hardman was saying was that there is still no knowledge that the Bank has as to where the Bubris bond portfolio, or the proceeds of the Bubris bond portfolio, has gone to.

A. Yes.

Q. The Bank says that that portfolio, which you were involved in administering, derived from the monies that were received by Bubris.

A. Which I do not admit, yes. We've been through this yesterday, I recall, yes.

Q. You may not admit that, but the question is where has it gone. You were involved after it was received by Bubris. Where has it gone to? What happened to it when you finished dealing with it?

A.

The answer is I don't know, because of the nature of my involvement”.

On the final afternoon of cross-examination, Mr Smith asked questions about the location of Eastbridge’s document archive, client files and electronic register. Mr Ereshchenko was shown a number of documents (some of which I have summarised in the chronology above) showing that documents were at various points in London. He explained clearly and carefully how he was winding down the company in the first 5 months of 2010 and how he cleared out the remaining documents that were in Eastbridge’s London offices after Mr Udovenko left in December 2009. He also explained what happened to the “old server” and the “new server”. In short the old server, unknown to Mr Ereshchenko, found its way with Mr Udovenko’s and Mr Shalabayev’s documents to the Big Yellow storage company under the auspices of Mr Salim Shalabayev, and the new server was sold to Park Hill, who took over Eastbridge’s offices. There were few remaining documents belonging to Eastbridge apart from the company and accounting records that were held by its accountants, SPW, and some documents retained by Mr Ereshchenko personally.

Mr Ereshchenko confirmed, as he had repeatedly said in writing, that he had procured the recovery of Mr Udovenko’s and Mr Shalabayev’s documents from the Big Yellow storage company, again under the auspices of Mr Salim Shalabayev, on the 9^th and 10^th December 2010, when the accountants wanted to see original bank statements, but that it had not occurred to him that the answers to the questions posed by the Disclosure Order would or might be amongst those papers. Mr Ereshchenko denied that he had made the false statements alleged. He said he did not know where the files the Bank wanted were kept. He had an idea that at some point they were in Moscow and then they went to Cyprus, but he did not know where they were on 10^th December 2010 and did not have access to them.

Ms Kabanova worked for Eastbridge Moscow from 2006 to 2009. From 2009 to April 2011, she worked, at the invitation of Mr Shalabayev for Euroguard. She made a witness statement in support of Mr Ereshchenko, but did not attend to be cross-examined. I allowed her evidence to be admitted subject to weight. But her evidence has significantly less weight as a result of her failure to attend. Nonetheless, Ms Kabanova, who was ultimately head of Eastbridge Moscow’s corporate department, was able to confirm that the corporate services side of Eastbridge was organised at the direction of Mr Udovenko, and that Mr Ereshchenko had a limited role chasing Eastbridge Moscow when there were delays or mistakes, and that Mr Ereshchenko did not have authority to instruct any agents directly.

Mr Ereshchenko sought to rely also on the evidence contained in a letter dated 18^th May 2012 from Mr Kaliappan of SPW (Eastbridge’s chartered accountants), which confirmed that he had arranged the meeting at SPW’s offices on the evening of 10^th December 2010, and that SPW had acted as accountant and book-keeper for Eastbridge for over three years. Mr Kaliappan explained that he had been asked by Eastbridge’s lawyers and Eastbridge’s new director to provide complete books and records for Eastbridge, and needed certain bank statements for that purpose. He said that he had contacted Mr Ereshchenko shortly before 10^th December to ask if he could locate the missing statements. MrEreshchenko subsequently confirmed on 9^th December 2010 that documents could be brought to SPW offices on 10^th December 2010 in order for him to search for the missing statements. Mr Kaliappan then said that approximately 20 boxes were delivered to SPW’s offices at around close of business 5.30pm on the 10^th December 2010, and that all the boxes were of a similar size and type; he did not recall seeing any plastic crates amongst the boxes that were delivered. MrEreshchenko arrived later and inspected only about 5 boxes before he found the required bank statements. The boxes were then collected at around 10pm.

It was not suggested by the Bank that Mr Kaliappan’s evidence was in any way unreliable.

Despite a great deal of material in the written submissions, there seems to be nothing between the parties as to the law that needs to be applied in this case. I can summarise it very briefly as follows:-

Some reference has been made expressly and impliedly to the other contempt applications that the Bank has made (with success) against other defendants either to these proceedings or to associated proceedings in the Commercial Court. Before turning to deal with the alleged contempts themselves, it is worth noting that, in the case against Mr Ablyazov, Teare J said this at paragraph 122 about the possibility of further evidence coming to light on the ownership issue he had to decide in order to determine the committal:-

“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”.

Mr Ablyazov’s case provides a good starting point for this discussion. In Mr Ablyazov’s case, the type of contempt was the same as it is here, but Teare J thought he had all the available evidence on the point. That is not the same in this case. There is no doubt that there may be very much more evidence available concerning the AAA Transactions and Mr Ereshchenko’s involvement in them. Indeed, the Bank has not yet been ordered to give disclosure and, according to Mr Hardman, has been careful to disclose only the documents it perceives that Mr Ereshchenko is entitled to receive at this stage. This is not a criticism of the Bank’s conduct. It has behaved entirely properly. But these aspects do need to be borne in mind when the court considers the evidence as to whether or not Mr Ereshchenko has lied.

If the substantive case against Mr Ereshchenko is proved at a trial, the court would undoubtedly be in a better position at that stage to determine whether what he said about his recollection and access to documents in December 2010 was clearly false. Again I do not say this by way of criticism. The Bank is fully entitled to bring this application at this stage. But it needs to accept that, in doing so, it can only rely on the evidence available at this stage and put to Mr Ereshchenko. If there is doubt as to what may later be shown to be the case, Mr Ereshchenko will obviously have to be given the benefit of it.

This point is connected also with the inter-relation between this contempt application and the determination of the substantive issues pleaded against Mr Ereshchenko in respect of his alleged dishonest assistance in breaches of fiduciary duty. I have already set out the pleaded case. It is important to understand at the outset the consequence of deciding that Mr Ereshchenko had lied in the respects alleged in relation to the AAA Transactions. The allegation, in effect, is that Mr Ereshchenko did recall the details of the AAA Transactions, and could, therefore, have given further details about them, despite the absence of a great deal of contemporaneous documentation. Mr Smith argues, for reasons I shall come to, that it is obvious that Mr Ereshchenko must have recalled the AAA Transactions in December 2010. It is, of course, far more likely that the details of the AAA Transactions would have remained uppermost in Mr Ereshchenko’s mind if he was intimately involved with them as the Bank says he was. If I were to decide, therefore, that Mr Ereshchenko lied in saying he did not recall any details, I would be going a long way towards (if not actually) deciding that Mr Ereshchenko knew all about the AAA Transactions because he was a significant player in their creation and execution. The consequence would be that I would be taking a significant step (at least) towards deciding the issue in the action against him, namely whether he was liable for the dishonest assistance in a breach of fiduciary duty as claimed by the Bank.

It is, for this reason, important to note that Mr Ereshchenko vehemently denies his liability to the Bank. He says that he was, in effect, a bit part player, concerned only to chase up the execution of elements of the AAA Transactions, when specifically asked to do so by Mr Surapbergenev. He points to Mr Surapbergenev, Mr Udovenko and Mr Shalabayev as the main players.

Another general point concerns the evaluation that can be made at this stage of the documentary record. When witnesses are said to be lying, a court is always well advised to pay particular regard to the documents (see Lord Goff in Grace Shipping v. Sharp & Co[1987] 1 Lloyd’s Law Rep. 207 at pages 215-6). Mr Lowenstein complained that only 66 documents were put to Mr Ereshchenko. But the point is, in my judgment, a broader one. When evaluating something as nebulous as the veracity of a witness’s statement as to his recollection of past events, it is important to know precisely what he knew at the relevant time. At a trial, it will be possible to ascertain precisely, on all the available evidence after disclosure and oral evidence from witnesses on both sides, Mr Ereshchenko’s role both in Eastbridge and in the AAA Transactions. It will be possible to compare, for example, the roles of Mr Udovenko with the role of Mr Ereshchenko, and evaluate the truth of Mr Ereshchenko’s contention that he spent minimal time on the AAA Transactions and that Mr Udovenko and others were in charge of them at Eastbridge. It will also be possible to evaluate, on the basis of hard evidence, the truth of Mr Ereshchenko’s statements as to what else he was doing between June 2008 and December 2010, a period of 2½ years. At the moment, that evaluation is made more difficult by the fact that the entire documentary record is not available to the court.

I want next to consider Mr Smith’s important submission that, in the light of the events between the nationalisation of the Bank in February 2009 and December 2010, it is inconceivable that Mr Ereshchenko did not know a great deal more than he was prepared to say about the AAA Transactions. Mr Smith points to the series of events recorded in my chronology. He relies on the cataclysmic collapse of the Bank and the flight to London of Mr Ablyazov and Mr Solodchenko; on Mr Surapbergenov’s visit to London and the concerns he expressed; on the initiation of “intense” legal proceedings by the Bank about which Mr Ereshchenko admitted he knew; the fact that Mr Surapbergenov was sentenced to 7 years in prison in Kazakhstan; the closing down of Eastbridge due to these events; on the disappearance of his partner, Mr Udovenko in December 2009; and on a whole host of other catastrophic circumstances that led to the collapse of Mr Ereshchenko’s business activities as he had known them. Mr Smith then points to Mr Ereshchenko’s own evidence that he was frightened and panicked by the service of the Disclosure Order. He submitted that all this added up to an inevitability that he knew what it was all about. He must have recognised the names of the BVI Defendants and the Further Recipients, with which he had been involved, from the Disclosure Order itself, and must have known that he had dealt on their behalf with the AAA Transactions. Accordingly, when Mr Ereshchenko said he could not recall the AAA Transactions, he was, according to Mr Smith, deliberately lying.

This is a formidable case. Were it to be advanced after the court had determined at a trial that Mr Ereshchenko’s role in the AAA Transactions was pivotal or at least instrumental (as the Bank suggests) it might be conclusive. But, in my judgment, at this stage of the proceedings, it is just one element, albeit an important one, to consider when seeking to evaluate the evidence as a whole.

In concluding this general section of the judgment, I should make it clear that I have considered the documents and the evidence very carefully. I have particularly concentrated on the statements and affidavits that Mr Ereshchenko made. I have tried to see, in the case of each of the statements said to be a lie, whether there is material upon which I can be satisfied, so that I am sure, that Mr Ereshchenko’s statement was a lie. I shall deal with each specific allegation in turn.

From the Payments identified in Schedule B below:

what moneys are left in the accounts identified in Table 2 of Schedule B below?

When did money/securities leave those accounts and in what amounts?

Who gave the instructions that money/securities should leave those accounts?

Were those instructions influenced by a suggestion or instruction made by any other individual, and if so who is that other person and what was the suggestion or instruction?

Where did the money/securities which left the accounts go to and for what purpose?

Was any and if so what consideration given and/or paid by the recipient of the money/securities?

What is the identity and address of each recipient of the money/securities?

Are the moneys/securities now in the form of cash and, if so, where is that cash?

Are the moneys/securities now standing to the credit of a bank account or accounts and, if so, which account or accounts in whose name(s) and at which bank(s)?

Were any of the moneys/securities used to purchase any asset(s) or any interest in any asset(s), if so which asset(s) were purchased, by whom, on which date(s) and what has become of them and any proceeds of sale of any of them?

Payments of sums from Alfa Equity to the BVI Defendants. All payments made at any time relating in any way to the sales by the Third to Seventh Defendants to claim no. HC10C02462 (the “BVI Defendants”) to Alfa Equity Investments Limited (“Alfa Equity”) of any or all of the securities referred to in columns A to G of Table 1 which appears at the end of this Schedule. These payments include, but are not limited to, the payments shown in columns H to J of Table 1 (“Table 1”).

Transfers of the AAA Investments from the Bank to the BVI Defendants. The transfers of the AAA-rated securities referred to in Table 3 which appears at the end of this Schedule (“Table 3”) (“the “AAA Investments”) from the Bank to the BVI Defendants.

Transfer of securities from the BVI Defendants to Alfa Equity. The transfers from the BVI Defendants to Alfa Equity of securities matching the AAA Investments in nature, between May 2008 and January 2009 inclusive. The transfers include the transfers made in order to satisfy the delivery obligations created by the transactions referred to in Table 1.

Payments of sums from the BVI Defendants to the Eighth to Eleventh Defendants to claim no. HC10C02462 (the “Further Recipients”). All payments made at any time by the BVI Defendants of any of the sums received by them as referred to in item (1) above. These payments include, but are not limited to, the payments shown in Table 2 which appears at the end of this Schedule (“Table 2”). The references in that Table to “Trasta” are to TrastaKomercbanka in Riga, Latvia.

Payments of sums from the Further Recipients. All payments made at any time by the Further Recipients of any of the sums received by them as referred to in item (4) above. These payments include, but are not limited to, payments of any sums forming part of the payment shown in Table 2.

Who is the legal owner of the shares of each of the Defendants?

Who is know to be or believed to be (stating which applies) the beneficial owner of the shares of each of the Defendants?

Who gives instructions to the director(s) or agents of each of the Defendants concerning the decisions and actions they should take and generally concerning the activities of that Defendant?

Who is known to be or believed to be (stating which applies) the person who ultimately controls each of the Defendants?

Does anyone else other than the director(s) have power to act on behalf of each of the Defendants and, if so, who and how/why?

Who had/has signatory powers over the accounts at Alfa Equity and Trasta into which the Payments were paid as referred to in Schedule C above?