JSC BTA Bank v Ablyazov

This is an application by the claimant to amend aspects of a Receiving Order obtained against the defendants in August 2010.

The application is made without notice and in private and is supported by the Receivers who have been represented at the hearing.

The background to the application is set out in a series of judgments which Mr. Justice Teare has given in these proceedings. The general background to the proceedings and to the Receivership Order is set out in his judgment of 16 July 2010 and in particular paragraphs 1 to 35, 126 to 147, and 161 to 170. The immediate background leading up to the present application is covered in his sentencing ruling of 16 February 2012 and his judgment of 29 February 2012.

In summary, the claimant bank has claims which I am informed total some $4.5 billion against the defendants and in particular the first defendant Mr. Ablyazov. It is alleged that the claimant's assets were misappropriated when Mr. Ablyazov was chairman of the claimant bank. There are eight sets of proceedings in the Commercial Court and one in the Chancery Division.

Since August 2009, the claimant has done what it can to ensure that Mr. Ablyazov's assets are preserved so that they will be able to meet any judgment subsequently obtained. The steps taken have included obtaining a worldwide freezing order against Mr. Ablyazov in August 2009, cross-examining Mr. Ablyazov as to his personal asset disclosure in late 2009, obtaining the Receivership Order in August 2010 and adding 636 undisclosed companies to the Receivership Order in January, April and May 2011.

In February 2012, the bank obtained an order committing Mr. Ablyazov to prison for a period of 22 months for three deliberate substantial contempts of court. The allegations found proved concerned the non-disclosure of assets in breach of the freezing order, the giving of false evidence on oath, and dealings with assets contrary to the terms of the freezing order. The recent events which have prompted the present application are essentially these.

Firstly, Mr. Ablyazov has, it would appear, gone into hiding. He did not, despite indications given otherwise to the Court, attend the handing down of the Court's judgment on the contempt application. He failed to attend the judgment and has since disappeared and has not informed his solicitors of his whereabouts.

Secondly, Mr. Batyrgareyev, who is Mr. Ablyazov's principal disclosed nominee, would appear to have taken a number of recent steps to procure formal corporate documentation relating to companies within Mr. Ablyazov's asset holding structures, seemingly for the purpose of dealing with such companies or their assets contrary to terms of the freezing and receivership orders. In particular, it has recently come to the claimant's attention that there has been an attempt to sell a valuable asset covered by the Receiving Order, namely Mr. Ablyazov's 10 per cent interest in a company called Novaya Tabachnaya Companiya in return for consideration of 77 million Euros.

There have been Cypriot proceedings brought by third parties in relation to this purported sale in which reference is made to a notice given from a company called Instem, of whom the director is said to be Mr. Batyrgareyev. That notice refers to a sale on 10 February of the shareholding and steps were taken in the Cypriot proceedings to seek to prevent that sale from being completed.

Thirdly, in his committal judgment Mr. Justice Teare found at paragraph 33 that Mr. Batyrgareyev had executed backdated novation agreements on Mr. Ablyazov's instructions for the purpose of dealing with frozen assets and frustrating the Receivership Order.

The application is supported by the 37th witness statement of Mr. Hardman and also by the Receivers’ report dated 6 March 2012. The amendments which are sought to the Receivership Order and the justification for those amendments are explained in the Receivers’ report, in Mr. Hardman's statement and the supporting skeleton argument the Claimant has provided for this hearing.

The Claimant seeks to vary the Receivership Order in the following respects:

The jurisdiction to make the orders sought derives from section 37(1) of the Senior Courts Act 1981, which provides that:

The present application includes an application to appoint the Receivers as managers of various companies, and although section 37 does not make express reference to the appointment of a manager, it has long been recognised that the power to make such an appointment derives from section 37. Examples are the cases of Hart v Emelkirk [1983] 1 WLR 1289, and Parker v Camden London Borough Council [1986] 1 Ch 162.

The distinction between a receiver and a receiver and manager is explained in Kerr & Hunter On Receivers and Administrators as follows:

The particular purpose for appointing the Receivers as managers in the present case would be to prevent Mr. Batyrgareyev from continuing to act as a director of companies caught by the Receivership Order, the need for which has been highlighted by the recent activities in relation to corporate documentation and in relation to the 10 per cent shareholding. As Lord Atkinson said in Moss SS Co Ltd v Whinney [1912] AC 254, 263:

Turning to the particular amendments which are sought to be made, the first is that the Receivers be appointed as managers of various companies identified in the draft order. The Receivers in their report state that they have concluded that were Mr. Batyrgareyev or another nominee, Mr. Kythreotis, to remain free to act as directors of any companies within the Receivership, then:

In this regard reference is made to Mr. Justice Teare’s judgment in relation to the backdated novation, the recent attempts made to obtain corporate documents and the recent purported sale of the 10 per cent shareholding.

The Receivers say that their appointment as managers would be the most simple, efficient and expeditious way of removing the powers of Mr. Batyrgareyev in particular over these companies. The need for such appointment is underscored by the recent findings made by Mr. Justice Teare and the fact that Mr. Ablyazov has gone into hiding.

It was an important part of the original Receivership Order that Mr. Ablyazov cooperate with the Receivers, and indeed paragraph 12 of the order contains a mandatory injunction obliging him to so cooperate. He has now disappeared and not only is that cooperation therefore not going to be provided, but it also means that he is no longer, it would appear, subject to the jurisdiction and control of this court which was also an important part of the structure of the Receivership Order.

So, as Mr. Miles submits on behalf of the Receivers, the landscape has changed and there is a real need to extend the powers of the Receivers to make them managers in the way I have indicated.

The second amendments sought involve amendments to paragraphs 12B and C of the Receivership Order. These amendments would enable the Receivers to obtain information in relation to disclosed assets. The existing orders in relation to information have been of assistance, but it is now proposed by the Receivers, and supported by the claimant, that power be extended to what is described in the order as the "Disclosed assets", in order to make the Receivers' powers more efficacious. Again, that is particularly important in the light of the disappearance and therefore the non-availability of the cooperation of Mr. Ablyazov.

The third category of amendments concerns the Schedule 3 companies. Mr. Ablyazov almost invariably holds his companies through an extended corporate chain. The Receivership Order was intended to give control over these structures by appointing Receivers over Mr. Ablyazov's properties generally by referring to his interest in the underlying disclosed asset as the subject matter of the Receivership.

There has been an ongoing dispute between the Receivers and Mr. Ablyazov as to whether this construction of the Receivership Order is correct. The claimant now applies for the names of all companies in which Mr. Ablyazov has a disclosed interest to be added to Schedule 3 of the Receivership Order. This is firstly in order to be able to procure information about all such companies from third parties and secondly to remove any doubt as to their appointment as Receivers and managers over such disclosed companies.

Given the difficulties which the Receivers have met in procuring information from third parties who were not explicitly named in the Receivership Order, and given the expectation that Mr. Ablyazov can no longer be expected to cooperate with the Receivers, the need for the amendments to the order is made out. This amendment would also involve changes to paragraph 2 of Schedule 4 of the Receivership Order so as to make it clear that the Receivers have power to carry on the business of the disclosed company but not of the local operating companies at the bottom of each corporate structure.

Next, the claimant seeks an amendment that the Receivership Order be extended to cover three UK properties which Mr. Justice Teare found, to the criminal standard, were owned by Mr. Ablyazov. These are identified in the original freezing order and they consist of a substantial property called Carlton House on Bishops Avenue in Hampstead, a substantial estate near Windsor called Oaklands Park, and also a flat in London called Alberts Court.

The registered proprietors are companies who are already caught by the Receivership Order, but the claimant and the Receivers have real concerns as to the maintenance of these valuable properties in the light of Mr. Ablyazov's disappearance, and also evidence as to the lack of upkeep and lack of insurance covering these properties.

As far as Carlton House is concerned, it is unoccupied and it appears that there is no electronic security. It has had a garage broken into and there is real concern that the ground may be occupied by travellers or that the house could be broken into and vandalised.

In my judgment it clearly makes sense in the interests of preserving these assets that the Receivership Order be extended to cover them.

The other amendments sought are essentially minor amendments to names in the existing order, and to refer to additional corporate service providers or registered agents in the Schedules to the order.

Mr. Hardman in his statement at paragraphs 37 to 43 sets out various matters which might be raised in opposition to the order which is made. I am satisfied that none of them provide a reason why the order should not be made, but I would note in particular paragraph 37 in which he states as follows:

For the reasons which I have outlined, the reasons given by the Receivers in their report, and by Mr. Hardman in his witness statement, I am satisfied that the amendments sought for the Receivership Order should be made. In addition I am also satisfied that in line with earlier orders there should be provision that service of the order may be delayed until 22 March 2012 in order that the amended order can be recognised in other jurisdictions. In addition, again in line with earlier orders, it should be provided that no documentation relating to the application should be put on the court file until after service and in addition permission should be given to enforce the Receivership Order overseas. Again, this is similar to previous orders.

Finally, provision is also to be made for the purpose of ensuring that appropriately certified copies of the amended Receivership Order and certificates pursuant to judgment regulation are produced.

For all those reasons I grant the application with the amendments which have been discussed during the course of the hearing.