JSC BTA Bank v Ablyazov & Ors

This is an application issued on 23 September 2011 to adjourn the two week hearing fixed to commence on 28 November 2011 of the Claimant’s application for an order committing the Defendant for contempt of court. The application was heard on 4 October 2011.

On 21 June 2011 I gave a short judgment explaining the directions I proposed to give with regard to the contempt application; see [2011] EWHC 1522 (Comm). Pursuant to that judgment directions were given on 28 June 2011. Paragraph 8 provided for the Defendant to serve his evidence by 30 September 2011 and paragraph 11 provided for a two week trial to commence on 28 November 2011. The Defendant says that, as a result of events occurring after those directions were given, he needs more time to serve his defence and that a four week trial is required which may be fixed in January/February 2012.

The application is based upon (i) the manner in which the Claimant has progressed its application since my directions were issued, (ii) the additional burdens upon the Defendant in the litigation since those directions were issued, (iii) unforeseen events outside the litigation which have placed further burdens on the Defendant’s time and (iv) the time required by the Defendant to prepare his evidence.

There are five preliminary matters which I must mention before considering the reasons put forward in support of the Defendant’s application.

First, in order to ensure that the contempt hearing be manageable I restricted the hearing to 3 allegations, rather than 35 allegations.

Second, in order to ensure that the Claimant’s case on those 3 allegations should be clearly stated and particularised I ordered that there should be a further pleading setting out the allegations, particulars and evidence relied upon. That pleading was served on 4 July 2011.

Third, the 3 allegations are based to a very large extent upon matters set out, at length, in Mr. Hardman’s 23^rd and 25^th witness statements dated, respectively, 24 January 2011 and 7 April 2011, which were provided in support of the Claimant’s successful applications to extend the receivership of the Defendant’s assets to include a large number of additional companies. It is therefore material which the Defendant has had for a significant period of time before the contempt application was issued on 16 May 2011. As one would expect the Defendant and his then solicitors, Stephenson Harwood, very promptly began to study the evidence of Mr. Hardman. Thus, on 4 February 2011, the return date for the first extension to the receivership order, leading counsel for the Defendant stated that relevant enquiries were already in hand. On 9 February 2011 the Defendant referred in his first affirmation to the “current state of his investigations” and said that he would provide a “full update as to the position” once his investigations were complete. On 7 June 2011 counsel said that a “detailed response to the evidence in Hardman 23 and 25 is currently being prepared for the purposes of the contempt proceedings.” Thus it appears that the Defendant has been investigating the evidence on which the contempt application is based for some months, from February 2011.

Fourth, in my judgment of 21 June 2011 I noted (at paragraph 5) that a contempt application may properly be brought as a means of putting pressure on a defendant to comply with a freezing order which has been issued against him and for that reason it will usually be appropriate to determine the contempt application promptly. The evidence adduced by the Defendant’s new solicitors, Addleshaw Goddard, discloses that in March 2011 land “indirectly owned” by the Defendant was pledged to the Central Bank of Russia. It is accepted that, having regard to the decision of the Court of Appeal in this matter on 19 October 2010 (see [2010] EWCA Civ 1141) this was a breach of the freezing order. In mitigation it was pointed out that the Defendant had been committed to execute such a pledge since June/July 2010 and that at that time, based upon my decision (later reversed by the Court of Appeal) similar conduct was thought by the Defendant not to have been a breach of the freezing order. However, that does not excuse the Defendant from having failed in March 2011, when he was aware of the decision of the Court of Appeal, to apply to the court for permission to execute the pledge. His failure to make such an application before executing the pledge is disturbing and worrying. It certainly fuels the Claimant’s fear that unless the contempt application is brought on promptly other assets of the Defendant may be disposed of in breach of the freezing order.

Fifth, notwithstanding the Claimant’s justifiable desire to bring the contempt application on promptly, the Defendant is entitled, as a “minimum right”, pursuant to Article 6, paragraph 3, of the European Convention for the Protection of Human Rights, to have adequate time for the preparation of his defence to the charges of contempt which have been made against him.

The question which the Court must resolve therefore is whether the Defendant will have had adequate time to prepare his defence if, as suggested by the Claimant, the time for service of the Defendant’s evidence is extended by 14 days to 14 October 2011 and the trial commences, as previously ordered, on 28 November 2011.

The manner in which the Claimant has prepared for the committal hearing is said to have caused the Defendant particular difficulty in preparing his defence.

The first matter relied upon is the volume of evidence relied upon by the Claimant notwithstanding that, pursuant to my directions, there are only 3 allegations of contempt to be tried, as opposed to 35. The evidence to be relied upon is said to be 50% of Mr. Hardman’s 23^rd and 25^th witness statements and voluminous exhibits. Assuming this to be right, I am not persuaded, in circumstances where the Defendant and his solicitors have been preparing their response to Mr. Hardman’s evidence for some months, that the Defendant has not had adequate time to prepare his defence to that evidence. Mr. Matthews QC points out that the case against the Defendant is based upon inference. That is true. But since 4 July 2011 the Defendant and his solicitors have had the benefit of a detailed pleading setting out the facts and matters alleged from which the appropriate inferences can, on the Claimant’s case be drawn, and identifying the particular passages in the witness statements of Mr. Hardman relied upon in support of those alleged facts and matters. This pleading was served pursuant to paragraph 3 of my order dated 28 June 2011. This pleading must, notwithstanding criticisms of it to which I will return, have greatly simplified the task of the Defendant in preparing his own evidence in response. Thus the order I made provided for the Defendant to have from 4 July 2011 until 30 September 2011, almost 3 months, to prepare his evidence in response to the 3 charges of contempt to be heard in November/ December 2011. In circumstances where the Defendant and his solicitors had already been preparing their response to that evidence since February 2011 I consider that the Defendant will have had adequate time to prepare his evidence if time is extended until 14 October 2011.

The second matter relied upon is that between 22 July and 18 August 2011 the Claimant has served about 2400 further pages of documents. Some (the Claimant says 350-400 pages, the Defendant says about 1400 pages) were provided as material which might be thought to damage the Claimant’s case or assist the Defendant’s case (although the Claimant thought they did neither). The remaining documents were those on which the Claimant said it might rely in support of its case. The explanation for the disclosure of these other documents is that the Claimant does not want to be accused of “ambushing” the Defendant by relying upon these documents when the Defendant provides his evidence.

The Claimant indicated at the previous directions hearing that it did not have any further documents to disclose which might damage its case or assist the Defendant’s case. In order to err on the side of caution the Claimant has now disclosed documents which may possibly be in that category; see Hogan Lovells’ letter dated 22 July 2011. I am told that the documents are, in the main, emails in the English language. With the assistance of the pleading of the Claimant’s case I consider that Addleshaw Goddard ought, without any significant delay, to be able to form a view as to whether they assist the Defendant’s case. The other documents (which were provided as and when they became available to the Claimant) can be similarly checked by Addleshaw Goddard since they are also, in the main, emails in the English language. There may be some documents which are difficult to understand (one was shown to me during the course of the hearing) but I was not persuaded that there were so many of them that they prevented the Defendant from being able to provide his evidence in response to the charges of contempt particularised in the Claimant’s pleading.

The third matter relied upon is the suggested shortcomings in the Claimant’s pleading. Some documents relied upon were not disclosed until 18 August 2011. Some allegations can only be understood by looking at parts of Mr. Hardman’s evidence which are said not to be relied upon. And at least part of one allegation does not appear to be supported by evidence. Assuming that these are valid complaints I am not persuaded that they prevent the Defendant from preparing his evidence in response to the allegations made against him either at all or before 14 October 2011. Although I was somewhat dismayed by the length of the pleading when I first saw it, reading the document has persuaded me that it is a helpful and informative document, notwithstanding the possible blemishes identified by Addleshaw Goddard.

Since my directions were issued the Defendant has also had to deal with the matter of his e-disclosure custodians, the BTA Georgia hearing which concerns a question of disclosure, the purported service of additional proceedings, an application by the Receivers to intervene in an arbitration commenced by the Defendant and claims by the Defendant to privilege in relation to the Big Yellow storage documents and certain other matters. I do not doubt that all of these matters have required the attention of Addleshaw Goddard and that at least some of them have required the personal attention of the Defendant. But I am not persuaded that, individually or collectively, they are such as to prevent the Defendant from having had an adequate opportunity to prepare his evidence in response to the contempt allegations. The Defendant always seems to have different teams of solicitors and counsel assisting him on different aspects of this litigation.

Several of these are relied upon but the most significant appears to be that on 21 July 2011 AMT Bank, which I am told is one of the Defendant’s most important assets, had its banking licence revoked by the Central Bank of Russia. AMT is now facing compulsory liquidation with a hearing listed in Moscow for 10 October 2011. AMT has therefore ceased normal operations and the Defendant needs to resist the liquidation to save AMT’s operations and reputation. The Defendant anticipates having to spend 5 hours a day embroiled on this issue from now until December 2011.

I have no reason to doubt that this is a serious matter for the Defendant. However, although he says that “management repeatedly calls [him] about these issues”, it is unrealistic to suppose that he is without assistance in dealing with this matter. He has a board of directors of which he is the chairman. This contempt application is also a serious matter for the Defendant, which is brought by the Claimant for understandable reasons. I do not consider that he can expect that the conduct of the contempt application should take second place to dealing with the Defendant’s business interests.

It is accepted that “notwithstanding the various obstacles [the Defendant] has faced, significant progress has been made.” However, it is said that much work needs to be done (analysing the latest disclosure, meeting with the Defendant to go through that documentation and speaking to potential witnesses). It is estimated that a further 2 months is required before the Defendant’s evidence can be completed.

It has been said on behalf of the Defendant that the allegations of contempt have been denied. It is said that he does not and has never owned or been the beneficial owner of the shares in Bubris Investments Limited, of the real estate in England said to be owned by him, or of FM-Company, Bergtrans or Carsonway. It is said that he did not breach the freezing order with regard to Stantis Limited. Nothing more has been disclosed about his response to the allegations made against him. On one view his evidence about the companies and assets which he says he does not own and has never owned might be expected to be quite short. If he has no involvement and has had no involvement in these companies and assets one would not expect him to be able to give much evidence about them. Legal submissions as to what facts can be proved by the evidence relied upon by the Claimant and as to what can be inferred from those facts are for counsel. If, however, he has been involved in these companies and assets but his interest in them has fallen short of beneficial ownership then he might have more extensive evidence to give about his involvement with those companies. Even so, since the contempt hearing is limited to a small number of companies or other assets, I find it difficult to accept that he needs a further two months to state his evidence with regard to those companies and assets. So far as Stantis is concerned I also find it difficult to understand why a further two months is required to enable him to state his case with regard to the allegation that he has breached the freezing order with respect to it.

So far as evidence from others is concerned it is unclear whether statements are to be provided by them. Daria Kabanova has “provided important information” but no mention is made that she is willing to give a statement. Syrym Salabayev, who has been convicted of contempt in the Chancery Division of this court and has been sentenced to a term of imprisonment, has “only recently, been in dialogue” with the Defendant. Clyde and Co. who act for him have said that he was “likely to assist” but no meeting has yet been arranged. A gentleman known, for the purposes of this judgment, as Mr. B. has had a series of questions put to him but at present there is no dialogue with him. He lives abroad. Salim Shalabayev is also mentioned but Addleshaw Goddard are yet to contact him. Consideration is being given to whether or not there is a need to have expert evidence on the topic of dating documents to reflect agreements in multiple languages. This evidence does not persuade me that it is likely that evidence will be given by any of these persons such that further time, in addition to that which the Defendant has had since February 2011, is required to enable him to have adequate time to prepare his defence.

At the beginning of September 2011 the Defendant withdrew his instructions from Stephenson Harwood and instructed Addleshaw Goddard. The latter firm doubtless has a major task to “get up to speed” with this large and complex litigation, of which the contempt application forms a part. This application to adjourn the contempt hearing was not based upon those difficulties but they were said to be a factor which I should take into account.

The evidence from Addleshaw Goddard was that they understood from the Defendant that he had been dissatisfied with the conduct of his defence in this litigation by Stephenson Harwood and that his concerns went back to October 2010. Mr. Smith QC submitted that the change of solicitor was a tactic designed to put off the trial of the contempt application. He went so far as to submit that the decision to instruct Addleshaw Goddard was taken after the Court of Appeal on 29 July 2011 had refused both permission to appeal my directions order and a stay of that order and, at a later date, had refused to expedite a renewed oral application for permission to appeal. He also submitted that the Defendant had in February 2010 withdrawn instructions from Clyde and Co. and instructed Stephenson after the application for a receivership order had been issued. These allegations were denied. Mr. Matthews pointed out that, having regard to the compliance checks required of a solicitor before accepting instructions, the Defendant must have approached Addleshaw Goddard before the Court of Appeal’s decision on 29 July 2011 and, for the same reason, must have approached Stephenson Harwood before the receivership application was issued.

Whilst this point about compliance checks suggests that the decision to instruct Addleshaw Goddard was not brought about by the decisions of the Court of Appeal to refuse permission to appeal and to refuse an expedited hearing of the renewed application for permission to appeal it is remarkable that the Defendant has found it necessary to dispense, first, with the services of Clyde and Co. in or about February 2010 and, second, with the services of Stephenson Harwood in or about September 2011. Both of those firms are well known, established and experienced City firms. From my perspective of having heard several major applications in this litigation over the past two years both firms appeared to me have been diligent and effective in protecting the interests of the Defendant, as one would expect. If the Defendant wishes to have the difficulties encountered by Addleshaw Goddard taken into account when consideration is given to adjourning the hearing of the contempt application it is incumbent upon him to explain that he had good reason for dispensing with the services of Stephenson Harwood in or about September 2011 when the preparations were being made by that firm to defend the committal application. Dispensing with the services of Stephenson Harwood at such a time was bound to interfere with the Defendant’s preparations for the committal hearing. An adequate explanation has not been given. To say that the Defendant was dissatisfied with the conduct of his defence and that Stephenson Harwood’s resources seem to have been overburdened is not enough. The only particular complaint to which I was referred was that the Defendant understood that Stephenson Harwood were going to complain about the Claimant’s pleading of the contempt allegation and the late and piecemeal disclosure but that he did not understand why they did not do so. I do not regard this as sufficient particulars of a complaint that “for some months” the Defendant was dissatisfied with the conduct of his defence. In those circumstances I do not consider that I can properly take into account the difficulties faced by Addleshaw Goddard in getting to grips with this case and in particular with the contempt application. Those difficulties are a consequence of the Defendant’s remarkable and unexplained decision to withdraw instructions from Stephenson Harwood who had been assisting him with his response to Mr. Hardman’s 23^rd and 25^th witness statements since February 2011 and with his response to the contempt allegations since May 2011.

The hearing has been set down for 2 weeks commencing at the end of November 2011. Mr. Matthews submits that 4 weeks is likely to be required. Such a period is understood to be available in my court diary for January and February 2012 as a result of the settlement of another action. Mr. Smith submits that 2 weeks is likely to be sufficient and therefore the present fixture is adequate.

Mr. Smith anticipates that he will open the case for one and half days and will cross examine the Defendant for about three to four days. It is unlikely that there will be any further witnesses called by the Defendant and therefore two weeks will be sufficient. Mr. Matthews anticipates that he will cross-examine Mr. Hardman for about 2 days and says that the Defendant may call other witnesses such that 4 weeks would be a better estimate.

In circumstances where the precise nature of the Defendant’s response to the allegations is not known there must be some uncertainty in estimating the likely length of the trial. Mr. Smith accepted that if the Defendant’s case is that some other named individual or entity is the beneficial owner of the assets in question two weeks may not be sufficient. But no indication has been given that that will be the Defendant’s case. Similarly, if Ms. Kabanova, Messrs. Shalabayev, Mr. B and expert witnesses on the practice of dating documents are called two weeks may not be sufficient. But, notwithstanding the time which has elapsed since February 2011, alternatively May 2011 when the contempt application was issued, the Defendant is unable to say that any of these persons will be called.

In those circumstances two weeks is likely to be sufficient (though there is a risk that it may not be). The likely length of the contempt hearing is not therefore a good reason for adjourning the hearing date presently fixed for 28 November 2011. Although there is a risk that the present hearing dates may not be sufficient I do not consider that the existence of that risk justifies adjourning the date which was fixed on 28 June 2011 after much debate as to what the interests of both parties required.

I have done my best in the short time available to weigh the matters put before me so fully by Addleshaw Goddard and so fairly by Mr. Matthews. Having done so I am not persuaded that if I extend time for the service of the Defendant’s evidence until 14 October 2011 and maintain the trial date of 28 November 2011 the Defendant will not have had adequate time to prepare his defence to the contempt allegations which I have ordered to be tried on that date. I therefore refuse the application for an adjournment.