Home Information Cases JSC BTA Bank v Mukhtar Ablyazov (September 2012)

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JSC BTA Bank v Mukhtar Ablyazov (September 2012)

Summary

A defendant who had breached the terms of a freezing injunction by causing his companies to make pledges to Russian banks was ordered to use his best endeavours to intervene in any enforcement proceedings on the pledges to ensure that the Russian court was informed that the pledges had been made in breach of the injunction.

Facts

The applicant bank (B) made applications in respect of alleged breaches of a freezing injunction made against the respondent (X). X cross-applied for retrospective permission for dealings made by his companies.

B had brought proceedings alleging that X had misappropriated large amounts of money from it. It obtained a freezing injunction, the court appointed a receiver over X's assets, and X was found in contempt of court during the proceedings. In JSC BTA Bank v Ablyazov [2010] EWCA Civ 1141, [2011] Bus. L.R. D119, X obtained clarification from the court of the terms of the injunction. Companies owned by X made pledges of certain property to the Central Bank of Russia (C) and a Russian bank (D) he had been chairman of. X gave evidence that the pledges had not been made to avoid satisfaction of any judgment; for example, the pledge made to C was security for loans made by C to D. There was also evidence of intention to create some pledges but no evidence of their actual creation. There was further evidence of pledges being made by two companies (K and P) whose parent company X had owned; although he said he had sold the parent, he produced no evidence of that and circumstances suggested that he owned K and P.

B applied for (1) a declaration that X had breached the freezing injunction and for an order that X exercise his best endeavours to reverse the dealings with his disclosed assets; (2) an order requiring disclosure of what had happened regarding the intended pledges, a declaration that X owned K and P, disclosure in respect of their pledges and an order to endeavour to reverse them.

Held

(1) There was no doubt that the pledges made in favour of C and D had been made in breach of the freezing injunction. Declarations should only be made where they served a useful purpose. There were two useful purposes in making declarations of breach: X appeared not to accept that he had breached the injunction, so it was appropriate to make declarations in order to make clear to him that he had; and B was entitled to have a clear statement so it could inform C and D, and the Russian court called upon to enforce the pledges, that X had created the pledges in breach of an English court order (see para.53 of judgment). The position regarding reversal of the pledges was more difficult. B had no evidence that the pledges had been made in order to protect X's assets from enforcement of any judgment. The only evidence before the court was that they were for purposes not conflicting with the injunction. There was force in B's argument that as X had breached the injunction, had done so, in respect of most of the pledges, after he had had the benefit of judgment on his clarification application, and had not apologised for his breach, the court should order him to endeavour to reverse the pledges. However, B could not identify any step X could take to undo the pledges. Further, the court had to consider C and D's third party interests, Normid Housing Association Ltd v Ralphs & Mansell (Review of Injunction) [1989] 1 Lloyd's Rep. 274 (Note) applied. The interests of justice were best served by ordering X to use his best endeavours to intervene in any enforcement proceedings to ensure that the Russian court was informed that the pledges were in breach of the freezing injunction. That could not cause injustice to X because it identified the action he was expected to take. Moreover, C and D's interests would only be prejudiced if the Russian court considered that the pledges should not be enforced (paras 54-62). (2) Disclosure was ordered in respect of certain pledges where there was evidence of intention to create but no evidence of creation: X was ordered to produce copies of the share registers in certain companies, and to explain the disparity between his evidence that an intended pledge had not been made and his statement to the receivers that he had made the pledge. Further, a declaration of X's ownership of K and P would be made. Unless X owned them, the matters surrounding them would have to be coincidences, which was improbable. Moreover, X had given no documentary evidence of his sale of their parent and had not explained the use of K's assets as security for D's obligations to C. X's actions in respect of K and P were in breach of the freezing injunction. An order would be made against X in the same terms as in respect of the pledges of his disclosed assets, and he would be ordered to disclose whether pledges in respect of K and P had been made (paras 69-80). (3) It was not in the interests of justice to grant X retrospective permission. There were gaps in X's evidence, he had not acknowledged that he had acted in breach of the injunction or apologised for doing so, and he appeared to have ignored the clarification he had requested, having made pledges despite the clarification decision. Further, he had not purged his contempt (paras 65-68).

Applications granted in part

Queen's Bench Division
Teare J
Judgment date
21 September 2012
References

LTL 25/9/2012 : [2012] EWHC 2543 (Comm)