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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> JSC BTA Bank v A [2010] EWCA Civ 1141 (19 October 2010)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2010/1141.html
Cite as: [2010] EWCA Civ 1141, [2011] Bus LR D119

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Neutral Citation Number: [2010] EWCA Civ 1141
Case No: A3/2010/1955 & A3/2010/2042

IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE TEARE
IN PRIVATE

[2010] EWHC 1779 (Comm)

Royal Courts of Justice
Strand, London, WC2A 2LL
19/10/2010

B e f o r e :

THE RIGHT HONOURABLE LORD JUSTICE MAURICE KAY
(Vice President of the Court of Appeal, Civil Division)
and
THE RIGHT HONOURABLE LORD JUSTICE LONGMORE
and
THE RIGHT HONOURABLE LORD JUSTICE PATTEN

____________________

Between:
JSC BTA BANK
Respondent
- and -

A
Appellant

____________________

Mr Duncan Matthews QC, Mr Lawrence Akka, Mr Thomas Grant & Mr Alexander Winter (instructed by Stephenson Harwood) for the Appellant
Mr Stephen Smith QC, Mr Philip Marshall QC & Mr Tim Akkouh (instructed by Hogan Lovells International LLP) for the Respondent
Mr Robert Miles QC (instructed by Freshfields Bruckhaus Deringer LLP) for the Interested Party
Hearing date: 16th September 2010

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    The Appeal

  1. This is the judgment of the court.
  2. This is an appeal, heard in private, against the order of Teare J imposing a receivership on the assets of Mr A pending the trial of claims made against him for misappropriations allegedly made by him while he was chairman of the claimant bank in Kazakhstan ("the Bank"). The Bank was effectively nationalised in February 2009 when a national wealth fund compulsorily acquired 75.1% of the Bank's share capital.
  3. Mr A denies these claims. He says that the claims are an attempt by the President of Kazakhstan, Nursultan Nazarbayev, to take control of his assets in support of a politically motivated action against him because he (the appellant) is a leading figure in Kazakhstan's democratic opposition. His evidence (which is not, of course, accepted) paints a chilling picture of life in Kazakhstan where power resides with the President and the members of his family and close associates, where the rule of law is not respected and where dissent is ruthlessly eliminated. In 2003 Mr A was arrested and imprisoned and his assets seized after what he and others have said was a politically motivated trial. Whilst imprisoned on what he says were "trumped-up" charges he says that he was subjected to mistreatment, torture and an unsuccessful plot to assassinate him and that his assets were "distributed to the President's coterie". He says that political assassination is used in Kazakhstan as a means of silencing opposition and that there was a further attempt to assassinate him in 2004 in Moscow.
  4. In late January 2009 Mr A was forced to leave Kazakhstan hurriedly. He arrived in London, speaking no (or very little) English, and now lives with his wife and three of his four children in a house in Bishop's Avenue. He is seeking indefinite leave to remain in this country. In August 2009 these proceedings were commenced by the Bank and a Freezing Order was issued against him together with an order restraining him from leaving the jurisdiction and requiring him to surrender his passport.
  5. When he disclosed his assets pursuant to the Freezing Order they were said to be worth, in total, several billion US dollars. Since then, as a result of corrections and further evidence, he appears to value his assets in a somewhat smaller figure but the valuation is still in excess of one billion US dollars.
  6. Mr A does not hold his assets in his own name. Rather, a nominee appears to hold shares in a holding company on his behalf and by that means controls the shareholdings in a chain of other companies at the bottom of which chain is an operating business. The use of a nominee and of companies registered in off-shore jurisdictions makes it difficult to trace his assets. He says that the elaborate scheme by which he owns his assets is necessary to protect him from unlawful depredations by the President of Kazakhstan.
  7. The Bank has asserted that there has been non-compliance with the Freezing Order inasmuch as Mr A has been reluctant to disclose his assets and the methods by which they are held on trust for him, has probably still not disclosed all his assets and has broken the terms of the Freezing Order by disposing of some of his assets. The Bank also says further that he is still likely to continue to put his assets beyond the reach of the Bank if the Bank gets a judgment and the only way in which it is possible to preserve the assets, of which it is aware, is by the court appointment of receivers to hold those assets. The judge found (in Mr A's favour) that he did not breach the Freezing Order in the manner alleged because the dispositions relied on were made in the ordinary course of his business but he was persuaded that Mr A would in the future continue to try to put his assets beyond reach of any judgment and that a receivership order was therefore appropriate. Mr A appeals against the making of that order and the Bank cross-appeals against the finding of the judge that the dispositions were made in the ordinary course of business.
  8. In relation to the receivership order the judge summarised his conclusions in the following way:-
  9. "126. In summary therefore the circumstances which give reason to believe that the Freezing Order may not provide the Bank with adequate protection against the risk that Mr A's assets will be dissipated prior to any judgment that the Bank obtains are as follows:
    i) His initial disclosure of his assets can now be seen to have been seriously inadequate in that he failed to mention the crucial role of a nominee and the nature of the operating assets (save for one). There are grounds for believing that he wished to make it difficult for the Bank to enforce the Freezing Order.
    ii) There are grounds to believe that his failure to mention the sale of Eurasia Tower to Clyde & Co was to avoid the Bank's solicitors learning of the sale and that $20m. had been received in part payment.
    iii) There are grounds to believe that his failure to mention the sale of BTA Kazan to Clyde & Co was to avoid the Bank's solicitors learning of the sale and that the proceeds of the sale had been received, though this was unlikely to succeed in the light of a press release by BTA Kazan.
    127. Those matters give rise to a real risk, in my judgment, that Mr A may use the structure by which he holds his assets to deal with them in breach of the Freezing Order. He has said that he will not do so and no breach has yet been proved but in the light of his prior conduct I am unable, on this application, to be sure that he will not do so in the future. There is therefore good reason for making the Receivership Order. It follows that I am unable to accept Mr Trace's submission that whatever the position may have been in November 2009 there is no longer a risk of dissipation of the assets.
    128. The unexplained whereabouts of at least $40m. paid out to Drey provide good reason for making the Receivership Order in support of the Bank's proprietary claim."
  10. In para 161 the judge expressed his conclusion in this way
  11. "Although Mr A has stated that he will obey the orders of this court that statement has to be considered in the light of his conduct in this action. He has stated that he can be trusted but I have to have regard not only to what he has said but also to what he has done. Consideration of his conduct with regard to disclosure of his assets in August/September 2009 and of his failure to inform Clyde & Co. of dealings in the Eurasia Tower and BTA Kazan has left me unable to trust him not to deal with his assets in breach of the Freezing Order."
  12. Mr Duncan Matthews QC on behalf of Mr A attacked this conclusion by saying:-
  13. i) the judge misdirected himself in law and applied the wrong test for making a receivership order and should have held that such an invasive remedy should only be made if the judge was actually sure that Mr A would breach the Freezing Order when the receivership order was made. The order had to be an order of last resort and should only be made when it was "necessary" to do so;

    ii) the judge was wrong to attach weight to the admittedly inadequate initial response to the freezing order in August 2009 when Mr A had by April 2010 disclosed everything there was to disclose;

    iii) the judge was also wrong to say that Mr A had failed to mention the sale of his interests in Eurasia Tower and BTA Kazan to Clyde & Co because evidence unearthed after the draft judgment was distributed showed that he had done so.

    The Legal Test

  14. There can be no doubt that the court has power to appoint a receiver in support of a freezing injunction. The jurisdiction is conferred by s.37 of the Senior Courts Act 1981 in general terms:-
  15. "(1) The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so.
    (2) Any such order may be made either conditionally or on such terms and conditions as the court thinks just."
  16. An early instance of the exercise of the power was in Derby v Weldon (No. 3) decided by Sir Nicholas Browne-Wilkinson VC on 7th November 1988 when freezing injunctions were known as Mareva injunctions. He said:-
  17. "The first question of law, which does not give me much trouble but was very properly referred to by [counsel], is whether a Receiver can be appointed in aid of a Mareva injunction. In my judgment it plainly can be done. If the proper preservation of the assets frozen under the Mareva order requires the introduction of a Receiver to hold certain assets, I can see no reason why such a Receiver should not be appointed as a matter of law."

    He thought it right to appoint a receiver on the facts of that case.

  18. When the case reached this court at [1990] Ch 65 Neill LJ said (page 94):-
  19. "Section 37(1) of the Act of 1981 gives the High Court a similar jurisdiction to appoint a receiver to that conferred for the grant of an injunction. The remedies are of course separate remedies and in some cases it may be appropriate to grant only one of those remedies rather than both. I am quite satisfied, however, that in this case the judge was right to appoint a receiver … as well as granting an injunction."
  20. It is true that the appointment of a receiver is a very intrusive remedy. It is also expensive and not easily reversible. These considerations can, however, be ameliorated by an appropriately fortified undertaking in damages. A receivership order will no doubt be completely inappropriate in the ordinary Freezing Order case where assets are constituted by money in bank accounts (in respect of which the relevant bank can be given notice) or by immovable property. The order will therefore only be appropriate in cases where an injunction is insufficient on its own. Such cases are only likely to arise where there is a measurable risk that, if it is not granted, a defendant will act in breach of the Freezing Order or otherwise seek to ensure that his assets will not be available to satisfy any judgment which may in due course be given against him. If, therefore, the method by which a defendant beneficially holds his assets is transparent, a receivership order may well not be necessary. But if it is opaque and there is a reasonable suspicion that such opacity will be used by a defendant to act in breach of a freezing order, it may well be the case that a receivership order is appropriate.
  21. In Don King Productions Inc v Warren [1999] 2 Lloyds Rep 392, 396 Neuberger J (as he then was) accepted the proposition that it would be appropriate to appoint a receiver:
  22. "Where there is strong evidence to suggest at an interlocutory stage that the Mareva injunction … [is] being breached."

    This is obviously correct as far as it goes but was not intended as a complete statement of the law; Mr Matthews accepted that but relied on National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] VLR 386, 541 where it was said that the appointment of a receiver was

    "an extraordinary and drastic remedy, to be exercised with utmost care and caution and only where the court is satisfied there is imminent danger of loss if it is not exercised."

    If "imminent" is intended to mean only "in the near future" we would not accept that that is a definitive statement of the law because as Robert Walker J (as he then was) said, in making an admittedly much narrower receivership order than is sought in this case, in International Credit and Investment Co (Overseas) Ltd v Adham [1998] BCC 134, 136 F – G:-

    "… It has become increasingly clear, as the English High Court regrettably has to deal more and more often with international fraud, that the court will, on appropriate occasions, take drastic action and will not allow its orders to be evaded by the manipulation of shadowy offshore trusts and companies formed in jurisdictions where secrecy is highly prized and official regulation is at a low level."
  23. The judge rejected Mr A's submission that, before a receivership order could be made, there must be evidence that the defendant has breached or is about to breach the terms of the Freezing Order made against him. He said (para 15):-
  24. "There may be other circumstances which show that the defendant cannot be trusted to obey the Freezing Order. In the present case reliance is placed on the defendant's inadequate disclosure of his assets. In my judgment inadequate disclosure may, depending on the circumstances of the case, enable the court to conclude that the Freezing Order does not provide the claimant with adequate protection."
  25. We agree that that is the right approach and if, therefore, a Freezing Order does not, of itself, provide adequate protection to a claimant because there is a measurable risk that a defendant may use the structure by which he holds his assets to deal with those assets in breach of the Freezing Order, then a receivership order will normally be justified.
  26. The question is therefore whether there is such a measurable risk in this case. That is primarily a matter of judgment in the light of the ascertainable facts which the judge familiar with the case is in by far the best position to make. If he has decided that there is such a risk, this court will be reluctant to interfere.
  27. The Facts

  28. Mr Matthews attacked the judge's conclusions by reminding us (1) that there was every reason for Mr A to organise his affairs as he did, (2) that a receivership order would be extremely invasive and (on the basis of the expert evidence of the well-known receivership and insolvency expert Mr Christopher Morris) (3) that the outside world would perceive any such order as indicating either that the businesses currently operated by Mr A were insolvent or at least that, since Mr A was no longer in charge, the businesses would wither and die because clients were no longer able to deal with Mr A. He then submitted that any initial inadequacy in disclosure had been cured by the time the matter came before the judge and the judge was wrong to treat that and the failure to declare dealings in certain assets as justifying his conclusion that there was a risk that Mr A would deal with his assets in breach of the order.
  29. In the light of these arguments it is necessary to set out something of the history of disclosure of assets as relied on by the judge and the history of the supposed failure to declare dealings in Eurasia Tower and BTA Kazan to Clyde & Co who were then acting for Mr A.
  30. Disclosure History

  31. The original Freezing Order (at this stage in the sum of £175 million) was made by Blair J on 13th August 2009 and, in accordance with the usual form, required a disclosure of assets together with information about where certain moneys had gone ("the Schedule C questions") within 48 hours. Mr A applied for the order requiring information to be stayed pending an application to discharge the Freezing Order. Teare J refused that application but extended time for providing information about assets until 27th August 2009. Mr A sought to appeal Teare J's refusal of a stay. He obtained a stay pending appeal but that appeal was dismissed on 30th September 2009 although Mr A did obtain from this court an order that the information about assets which he was to disclose should be restricted to the Bank's solicitors and not passed on to the Bank. Mr A had sworn (but not served) affidavits on 27th August 2009 to comply with Teare J's original order; he served those affidavits after this court had given its judgment on 30th September.
  32. That disclosure was so defective that Teare J found it necessary on 16th October 2009 to order that Mr A be cross-examined. This itself is an unusual course which judges of the Commercial Court are often reluctant to take. The court is quite busy enough as it is without having to make space in its list for urgent applications to cross-examine defendants on defective affidavits supplied in purported compliance with directions contained in Freezing Orders. It is well-settled that such cross-examination is to be confined to the supposed inadequacy of the defendant's affidavit and is not permitted to amount to pre-trial interrogatories. The cross-examination initially took place on 27th October. Naturally enough Mr A was asked questions about the identity of individuals involved in his asset holding structure but he said that he did not wish to reveal the names of individuals for fear of reprisals by the authorities in Kazakhstan; Teare J nevertheless required him to reveal their names and Mr A then disclosed that a nominee held assets on his behalf.
  33. A day's cross-examination did not prove to be enough because it emerged that other documentation existed which required to be disclosed. The further date of 18th November was set but it was only on the day before that second cross-examination that Clyde & Co (then acting for Mr A) provided that further documentation. It became clear that assets held by a nominee were held pursuant to trust deeds but no such deeds had been produced. These were produced by Clyde & Co on 24th November 2009; although most of them purported to be executed after the date of the Freezing Order, one was earlier. On or about 11th December the Freezing Order was amended to prevent Mr A dealing with any of his assets, unless the total unencumbered value of his assets within the jurisdiction exceeded £175 million.
  34. On 15th December 2009 Clyde & Co sent the following letter to the Bank's solicitors:-
  35. "We refer to your various letters concerning the cross-examination of our client….
    We enclose, at Annex 1 to this letter, a table which sets out further information in relation to our client's assets which have already been disclosed to you. In each case, where documents are available they are listed in the table and enclosed with this letter. Although some of the information and documents listed in the table may have been disclosed previously, this table is not intended to supersede previous disclosure given by our client. Where no documents are disclosed that is because our client does not have and/or cannot obtain copies of any relevant documents.
    We also enclose a copy of the balance sheet for Company N.
    The companies to which you refer at points 31 and 32 of Annex A to your letter dated 25th November 2009 are the same company. Our client made disclosure in respect of these companies on 27th August 2009.
    For the avoidance of doubt, please note that in voluntarily answering the questions you have raised in correspondence, our client does not agree to disclose any further information which he is not obliged by the Freezing Order to disclose. Our client will not answer any further questions.
    Yours very truly"

    It was the receipt of this letter with its final stone-walling sentence that persuaded the Bank that they were never going to get to the bottom of the corporate share structure of the various companies in which Mr A had said he had an interest without a receivership order and the application for that order was made on 19th February 2010. The stone-walling stance did not survive the service of the application and on 16th April 2010 Mr A did produce what Mr Matthews called:

    "a very full account of, inter alia, Mr A's main underlying assets and the structure by which they are held."
  36. Whatever the truth of that, it is impossible to conclude that Mr A had been doing his best to comply with the orders of the court. One quite understands that he had to arrive in London in haste in January 2009 at a time when he spoke very little English and with a family for which he had to provide. But by May 2009 (and probably before) he was already instructing Clyde & Co in relation to his complaints about the Kazakh government since Clyde & Co had on 6th May 2009 brought arbitration proceedings against the government on behalf of two of Mr A's companies and a further arbitration was begun on the same day in August 2009 as the Freezing Order was obtained. By the first return date fixed for the Freezing Order, Clyde & Co were already able to serve a 32 page witness statement presumably taken on Mr A's instructions. Any perceived difficulty about Mr A's unfamiliarity with the English language and English legal procedures has to be seen in that context.
  37. It is no doubt intensely irritating to become involved in substantial litigation, especially litigation in which one is a defendant. It may be the case that Freezing Orders like the one made in this case are not a feature of Kazakh jurisprudence. But those who take up residence in this country must understand that judges of the Commercial Court do not make Freezing Orders lightly; they only do so where there is a good arguable case against the defendant and, where the allegations are (as in this case) allegations of fraudulent conduct, where there is a good arguable case of fraud. Of course they do not pre-judge the matter; they accept that when the matter is examined at trial there may be a wholly innocent explanation of apparently fraudulent conduct. But in case there is no such explanation, they are concerned to hold the ring between the parties so as to ensure that if (but only if) there is a judgment, the defendant will not have dissipated his assets before judgment is given. English litigants understand this all too well and non-English litigants must recognise that this has been the position in England for many years and that English judges expect that such litigants understand that position and co-operate with the court to ensure that their assets are preserved. Ordinary living expenses and dispositions in the ordinary course of business are, of course, untouched by the order, as the order itself makes plain.
  38. The judge dealt with the inadequate initial disclosure at length in paras 76-85. He took as an example the disclosure of an "indirect interest in Blackdesert Holdings Ltd" and explained how that was a meaningless disclosure as it stood until it was possible to see that through various companies in a chain. Blackdesert was the developer of a tower block in Moscow comparable in size and development to Canary Wharf. (We attempt to explain this more fully below in connection with the subsequent disposition of Eurasia Tower). He concluded that there was a serious possibility that Mr A's omissions were made in order to make it difficult for the Bank to enforce the Freezing Order.
  39. The judge then turned to the disclosure made in relation to the proprietary claim which he called the Schedule C disclosure. That schedule showed that $295m was paid to a company called Drey, who then paid out parts of that sum to various entities in the course of a very short period of time; but the schedule showed that of that sum $215m had come back to the Bank which also accepted that a further $30m had also been received by it. But a payment of $41.1m had been paid to an entity called F.M. Company and was still missing. In his cross-examination Mr A denied any interest in all but 5 of the companies mentioned in the chart and said the chart and the information in it had been provided by a Mr Y with whom he was no longer in contact. The judge concluded, despite strenuous argument to the contrary, that he could not disbelieve Mr A's assertion that he had no interest in the companies mentioned in the chart other than the 5 he agreed he did have an interest in. But he was also not persuaded that Mr A had in his third affidavit "bared his soul" (as Mr A would have the judge believe). He was left with a reasoned suspicion that he had not declared all his assets. He then added (para 100):-
  40. "But his explanation also reveals a remarkable state of affairs, namely, that Mr Y, with whom Mr A is no longer in contact, has very considerable power over A's funds. This emphasises the need for a receiver to be appointed in relation to the Bank's proprietary claim in respect of (at least) the missing $40m paid to FM Company. (The $30m payment to Estar has now been found to have made its way back to the Bank where it remained for a short period before being paid out to ABN Amro on a trade finance transaction.) Mr A has now denied owning Devesta, a company recorded by him as having made substantial transfers of the sums first paid to Drey. This apparent change of evidence (which he attributes to a mistranslation or a failure on his part to express himself) also emphasises the need for a receiver to be appointed,"
  41. In all the circumstances it is not surprising that Teare J, who has, after all, been familiar with the case since August 2009 and has seen and heard Mr A being cross-examined over a 2 day period, came to the conclusion that Mr A wanted to make it difficult for the Bank to enforce the Freezing Order and might use the structure by which he holds his assets to deal with them in breach of the order. These are exactly the circumstances in which a receivership order will be justified.
  42. The judge, of course, (see para 7 above) justified the making of the order not merely because disclosure was inadequate but also because there were dealings which he concealed from his own solicitors. So it is to those we turn.
  43. Eurasia Tower and BTA Kazan

  44. The Eurasia Tower was used by the judge as an example of Mr A's inadequate disclosure in August/September 2009 because it was a substantial structure in Moscow similar to Canary Wharf acquired by Mr A as a base site in 2004. It was a joint venture between Mr A (through a company called Handcart which held 50% of the shares in a company called Blackdesert which held 99% of the shares in a company called Company P which owned the shares in Tekhinvest which owned the office block known as Eurasia Tower, all as eventually explained in April 2010) and a Mr Pavel Fuchs. In his August affidavit Mr A merely disclosed an "indirect interest in Blackdesert Holdings Ltd". The only document supplied with that disclosure was a share certificate saying that 5000 Blackdesert shares were held by Handcart and 10,000 shares in Handcart were held by a company called Company S. This lack of transparency was one of the reasons why the judge was induced to order Mr A's cross-examination. It was only after that cross-examination that it emerged that it was a nominee who held the shares in Company S for Mr A and it became apparent that Mr A controlled Blackdesert. No indication had been given in Mr A's August 2009 affidavit that Blackdesert was in a chain that ended up with Eurasia Tower as an operating business. The judge was (not surprisingly) satisfied (para 85) that there was a serious possibility that Mr A omitted any reference to a nominee and the Eurasia Tower in order to make it difficult for the Bank to enforce the Freezing Order and to enable any breach to remain undetected.
  45. It then further emerged in April 2010 that Mr A had agreed on 15th September 2009 to sell his interest in Eurasia Tower for $50m to Mr Fuchs. The first tranche ($20m) was paid on 1st December 2009 and title then passed. In his first cross-examination Mr A said he owned a construction project valued at $50m. He did not say he had recently agreed to sell it for that price. After the title to the shares in Blackdesert had passed to Mr Fuchs on 1st December, the attachments to Clyde & Co's letter of 15th December 2009 said (wrongly) that Handcart owned 50% of the shares in Blackdesert. Mr Stephen Smith QC for the Bank submitted that Mr A did not tell Clyde & Co about the sale and that that was a deliberate deception. In the absence of any denial by Mr A or his legal team that he had failed to inform Clyde & Co of the sale, the judge concluded "on the evidence presently available" (para 113) that Mr A had indeed not told Clyde & Co about the sale because (para 114) Mr A did not wish the Bank's legal team to know that his interest in Blackdesert had been sold and that he had already received $20m in part payment.
  46. Similar points have been made about a sale by Mr A of his interest in the bank BTA Kazan. He referred to his interest in BTA Kazan during his cross-examination of 18th November 2009 without saying that he had sold that interest in October 2009. The proceeds of the sale were used to purchase subordinated debt in BTA Moscow. The judge concluded that, as with the Eurasia Tower sale, Mr A did not inform Clyde & Co of the sale.
  47. Mr Matthews submitted to us that it was very unfair to conclude that Mr A had not informed Clyde & Co of these dealings because in order to establish that he had informed them of those dealings Mr A would have had to waive privilege in his instructions to Clyde & Co. He was never invited to do this and the judge should not, therefore, have made any findings as to what Mr A did or did not tell Clyde & Co. This submission was not made to the judge on the hearing of the application of the receivership order. If it was a point to be relied upon, it ought to have been.
  48. This aspect of the case is somewhat bedevilled by the fact that between December 2009 and April 2010, Mr A changed his solicitors and had Messrs. Stephenson Harwood acting for him by the time of the hearing of the receivership application. Although they took over Clyde & Co's papers, they were no doubt not completely familiar, at the time of the argument in relation to the receivership application, with all the attendance notes. When it became apparent (on delivery of the draft judgment in July 2010) that the judge was placing considerable reliance on Mr A's supposed failure to mention the dealings in Eurasia Tower and BTA Kazan to Clyde & Co, Stephenson Harwood traced an attendance note of a meeting between Mr A and someone at Clyde & Co of 30th September 2009 which must in all probability have taken place after the Court of Appeal had, on that date, upheld Teare J's decision that Mr A must make disclosure although he was proposing to take proceedings to discharge the freezing order. A heavily redacted copy of that attendance note was then (quite improperly) sent to the judge and he was invited to amend his draft judgment before he delivered the definitive version.
  49. The proper procedure was not (of course) to ask the judge to make a substantial amendment to his judgment but to apply, in the event of permission to appeal being granted, for the admission of the attendance note as fresh evidence. No such application has been formally made.
  50. Mr Matthews submitted that, in spite of the procedural impropriety, this court should not let the judge's finding on this important matter stand and we have, exceptionally, decided to consider the position in the light of that attendance note, the un-redacted parts of which read
  51. "Disposal of some assets in list
    Signed off on already
    Have to now disclose affidavits

    It does therefore appear that Mr A may have informed Clyde & Co that there were dealings (or potential dealings) at a time when the freezing order was in any event confined to the sum of £175 million and Mr A was saying that his assets were well in excess of that sum.

  52. That does not, however, affect the real gravity of the Bank's legitimate complaint against Mr A that he was not disclosing his assets. As explained above, there was no mention of Eurasia Tower at all in his first two affidavits and an asset the size of Canary Wharf can hardly have slipped Mr A's mind.
  53. The judge, instead of saying (as he might well have done) that the attendance note unearthed by Stephenson Harwood would have to be relied on in this court if permission to appeal was granted and not otherwise, added certain paragraphs to his final judgment as delivered asking himself whether it would be unfair or unjust to Mr A to refuse to review his judgment. He concluded it would not, partly because he (para 204 (ii))
  54. "would remain of the view that his seriously inadequate initial disclosure of his assets provides reason to believe that the Freezing Order may not provide the Bank with adequate protection against the risk that his assets may be dissipated prior to judgment. There would remain a risk that he may use the structure by which he holds his assets to deal with them in breach of the Freezing Order. I would still be left unable to trust him not to deal with his assets in breach of the Freezing Order."

    We do not find this in the least surprising.

  55. So, although (in the light of the attendance note now produced) we do not think Mr A can be said to have concealed his dealings in Eurasia Tower and BTA Kazan from his own solicitors, we consider that the inadequate initial disclosure in August 2009, not ameliorated until April 2010 and then only under the pressure of cross-examination and reluctant disclosure of critical documents, amply justifies the judge's conclusion that there is a measurable risk that Mr A will, if he is able to do so, act in breach of the Freezing Order granted by Blair J and continued by Teare J. We therefore dismiss Mr A's appeal against the making of the receivership order. In these circumstances it is strictly unnecessary to consider the cross-appeal but, since the parties have attached considerable significance to the matter, we will say something about it.
  56. The Cross-appeal

  57. Mr A applied to the judge for clarification of the meaning and effect of the Freezing Order which he made on 12th November 2009 as subsequently amended on 11th December 2009. The freezing order (in paragraph 4(c)) now restrains Mr A, without the prior consent of the Bank, from in any way disposing of, dealing with or diminishing the value of any of his assets outside England and Wales unless the total unencumbered value of all his assets within the jurisdiction exceeds £175 million. He accepts that this has not been the position at any time since 11th December 2009 material to the application under appeal.
  58. The point at issue on this appeal concerns the scope of paragraph 9(b) of the order which provides that:-
  59. "This Order does not prohibit the First to Third and Fifth to Seventh Respondents from dealing with or disposing of any of their assets in the ordinary and proper course of any business conducted by them personally."
  60. Mr A sought declarations that none of the following transactions was a breach of the Freezing Order. They were:-
  61. (i) the sale of shares in BTA Kazan Joint-Stock Commercial Bank (Tatarstan) by Rikas Finance, TuranAlem Capital, Delta Torg and AMK-Invest in October 2009;

    (ii) the sale of shares in OAO Omsk Bank by the same entities in January 2010;

    (iii) the proposed sale of shares held by ZRL Beteiligungs in ZAO BTA Investbank (BTA Armenia); and

    (iv) the marketing of Project D.

  62. Until amended on 11th December 2009 the freezing order allowed Mr A to dispose of or deal with his assets outside the jurisdiction so long as the total value of his assets worldwide exceeded £175 million. The change in the order to the form described above means that transactions (ii) – (iv) are prevented by the injunction unless they fall within the exception contained in para 9(b). But at the hearing before the judge the Bank was unable on the evidence to show that the value of Mr A's assets worldwide did not exceed £175 million and Mr Stephen Smith QC, on behalf of the Bank, therefore accepted that it could not prove a prior breach of the order in respect of the disposal of the shares in BTA Kazan made on 1st December 2009 regardless of whether the transaction fell within paragraph 9(b) of the order. But the Bank did dispute that the sale of the shares was in the ordinary course of Mr A's business.
  63. At the hearing the Bank therefore relied on only two matters as constituting breaches of the Freezing Order. These were the sale of the shares in Omsk Bank and the use of the proceeds of sale to acquire Tier 2 subordinated debt in BTA Moscow, another bank owned and controlled by Mr A. The judge held that these transactions were dealings and disposals in the ordinary course of a business carried on by Mr A so as to fall within the provisions of paragraph 9(b) but he declined to decide whether the proposed sale of Mr A's interest in BTA Armenia and in Project D were permitted by the Freezing Order in advance of those transactions taking place. He also applied his ruling that the Omsk Bank transactions were within the exception to the BTA Kazan share disposal and also to the sale of Mr A's interest in the Eurasia Tower property which featured in the evidence in connection with the receivership application.
  64. We are therefore concerned on the Bank's cross-appeal with the transactions (i) and (ii) in paragraph 43 above and with the sale of the Eurasia Tower.
  65. Freezing orders (like Mareva injunctions before them) commonly contain express exceptions to the order which entitle a defendant to expend money on ordinary living expenses up to a stated amount and to deal with or dispose of assets in the ordinary and proper course of business. The effect of these provisions is to authorise the expenditure or disposal of assets covered by the exception free from the restrictions imposed by the order and therefore without the necessity of giving prior notice to the claimant or of obtaining the consent of the claimant or the court.
  66. The exception about disposals of assets in the ordinary course of business contained in paragraph 9(b) is not quite in standard form. To come within the exception the dealing or disposal must be in the ordinary and proper course of a business conducted by Mr A personally. It was common ground before us that the concluding words should be construed so as to include disposals made by a company or other entity controlled by Mr A if the transactions in question can be said to have been carried out in the ordinary course of Mr A's own business. This is consistent with paragraph 5 of the order which provides that:-
  67. "Paragraph 4 applies to all the Respondents' assets whether or not they are in their own name and whether they are solely or jointly owned and whether or not the Respondent asserts a beneficial interest in them. For the purpose of this Order the Respondents' assets include any asset which they have the power, directly or indirectly, to dispose of or deal with as if it were their own. The Respondents are to be regarded as having such power if a third party holds or controls the asset in accordance with their direct or indirect instructions."
  68. Just as Mr A is restrained by the order from disposing of or dealing with the underlying assets of the companies, trusts or other entities controlled by him, so he is entitled to the benefit of the exception contained in paragraph 9(b) in relation to such transactions. The judge had rejected Mr Smith's submission that dealings by those entities in their own assets and investments, whilst caught by paragraphs 4 and 5 of the freezing order, were not covered by the paragraph 9(b) exception because they were carried out as part of the company's business and not that of Mr A. The judge's rejection of that argument (which was not challenged on this appeal) was based on being able to treat disposals by a wholly controlled company or other entity as a disposal of an asset by Mr A in the course of his business. But the judge did not decide that a disposal by one of the underlying companies is necessarily a disposal by Mr A so that Mr A cannot rely on paragraph 9(b) in a case where the disposal or dealing by the company is not carried out as part of Mr A's own business regardless of whether it can be justified as a transaction within the ordinary business of the company which carried it out.
  69. Exceptions such as the one contained in paragraph 9(b) have their genesis in the early authorities as to the basis of and limitations upon the grant of Mareva relief. The purpose of a freezing order is not to give a claimant security for a possible judgment over the defendant's assets but the more limited one of preventing a judgment from going unsatisfied due to the dissipation by the defendant of his assets. The requirement that the disposal should not be one designed to avoid the satisfaction of a judgment sets the boundaries of protection.
  70. The convenient starting point in terms of authority is the judgment of Robert Goff J (as he then was) in Iraqi Ministry of Defence v Arcepey Shipping Co SA (The Angel Bell) [1981] QB 65. This concerned an application by creditors of a defendant who was subject to a Mareva injunction for the court to authorise the repayment of a loan out of monies otherwise subject to the order. The judge granted the application. Two passages are, we think, relevant for the purposes of the present appeal. The first is at page 71 C-E:-
  71. "Mr. Hobhouse submitted that the purpose of the Mareva jurisdiction was to freeze a foreign defendant's assets in this country to ensure that there is a fund available in this country from which the plaintiff will be able to satisfy a judgment. In support of this he relied in particular on the form of the order usually made in these cases which restrains the defendant from dealing with his assets within the jurisdiction and from removing his assets from the jurisdiction. I do not, however, see that the usual form of the order as such assists his argument. As was made plain by Mustill J. in the Third Chandris case, the point of the Mareva jurisdiction is to proceed by stealth, to pre-empt any action by the defendant to remove his assets from the jurisdiction. To achieve that result the injunction must be in a wide form because, for example, a transfer by the defendant to a collaborator in the jurisdiction could lead to the transfer of the assets abroad by that collaborator. But it does not follow that, having established the injunction, the court should not thereafter permit a qualification to it to allow a transfer of assets by the defendant if the defendant satisfies the court that he requires the money for a purpose which does not conflict with the policy underlying the Mareva jurisdiction."
  72. The second is at page 73 B-C:
  73. "All the interveners are asking is that the defendants should be free to repay such a loan if they think fit to do so, not that the loan transaction should be enforced. For a defendant to be free to repay a loan in such circumstances is not inconsistent with the policy underlying the Mareva jurisdiction. He is not in such circumstances seeking to avoid his responsibilities to the plaintiff if the latter should ultimately obtain a judgment; on the contrary, he is seeking in good faith to make payments which he considers he should make in the ordinary course of business. I cannot see that the Mareva jurisdiction should be allowed to prevent such a payment. To allow it to do so would be to stretch it beyond its original purpose so that instead of preventing abuse it would rather prevent businessmen conducting their businesses as they are entitled to do.
  74. The decision in the Angel Bell was affirmed by the Court of Appeal in Normid Housing Association Ltd v Ralphs [1989] 1 Lloyd's Rep 274 where the plaintiffs sought an injunction to restrain a firm of architects from compromising a claim which they had against their professional indemnity insurers on the ground that it would prejudice the plaintiffs' rights under the Third Parties (Rights Against Insurers) Act 1930. In the alternative, the injunction was sought by way of Mareva relief on the basis that the settlement of the claim amounted to the disposal of a chose in action.
  75. This alternative argument was given relatively short shrift by the Court of Appeal. Lloyd LJ (at p. 275) said that:-
  76. "The Courts have never allowed the Mareva jurisdiction, beneficial though it be, to inhibit the ordinary course of business or to interfere with a defendant's ordinary transactions, especially where third parties are involved. This was decided so far as concerns the payment of debts in the ordinary course of business in the case which is usually known as The Angel Bell [1980] 1 Lloyd's Rep. 632; [1981] Q.B. 65, even though it was arguable on the facts of that case that the debt in question was irrecoverable as a money lending transaction. It was decided, so far as the ordinary living expenses of individuals are concerned – even though the living expenses were on the grand scale – in P.C.W. (Underwriting Agencies) Ltd v P.S. Dixon [1983] 2 Lloyd's Rep. 197 as varied on appeal.
    But the principle extends beyond the payment of debts, or the incurring of ordinary living expenses. It applies also to all ordinary transactions in the course of business or, I would add, in the course of life. That appears from the decision of the Court of Appeal in Avant Petroleum Inc. v Gatoil Overseas Inc., [1986] 2 Lloyd's Rep. 236. I need not refer to the facts of that case. The relevant passage is to be found in the judgment of Lord Justice Neill at p. 243 where he said:
    … The Mareva jurisdiction should not be used if the effect of the injunction which is granted is to bring to an end entirely a bona fide and established method of trading unless some wholly new arrangements are made between the party enjoined and some third party.
    So the question on the present appeal comes to this: whether the proposed settlement would be a transaction in the ordinary course of business? To my mind it would. It is not suggested, as I have already said, that the proposed settlement is in any way collusive. Obviously it could not be in the ordinary course of business if it were. Nor is it certain that the architects are bound to recover at least £250,000. If the insurers can show that the only valid claim against them arises under the 1983-1984 policy and if they can show that the policy is voidable for non-disclosure, the architects would recover nothing. So this is not a case where the proposed settlement is inexplicable save on the basis that the architects are putting their assets, or seeking to put their assets, beyond the plaintiffs' reach."
  77. At p. 276 he went on:
  78. "Secondly, Mr Blackburn submits that the words "ordinary course of business", which I have used and which are to be found in all the cases, should, on the facts of the present case, be confined to the business of the architects as architects, for example in designing buildings. It does not extend to settling claims. This, with respect, is a misunderstanding of the policy behind the Mareva jurisdiction. Of course a settlement of this kind is not something that happens every day. But that does not mean that when it does happen it is not in the ordinary course of business. I do not propose myself to offer any definition of what is meant by "ordinary course of business". It can, perhaps, best be regarded as the obverse of the concept of dissipating a defendant's assets. But whether or not that be the right touchstone, it certainly covers the bona fide settlement of claims whether by or against a defendant on legal advice."
  79. These cases are important for the guidance which they contain about the legitimate scope of freezing order relief but the issue on the Bank's appeal against the clarification order is a narrower one. Although a freezing order is not intended to prevent the carrying out of transactions in the ordinary course of the defendant's business or, as Lloyd LJ put it, in the ordinary course of life, the question for Teare J was not whether the transactions under review ought be permitted under the order but whether they fell within the express exception contained in paragraph 9(b) of that order.
  80. As Robert Goff J recognised in The Angel Bell, freezing orders (like Mareva injunctions before them) are not in terms limited to disposals or dealings with assets which amount to dissipation. That qualification would render the order practically useless and its policing impossible. Instead, the form of order now contained in the annex to the CPR and in the Commercial Court Guide imposes a blanket restriction on dealings with or disposals of assets up to a stated value but caters for the principles enshrined in the Angel Bell by containing an express exception for disposals in the ordinary and proper course of business and a general right for the defendant to apply to the court for permission to carry out a particular transaction not falling within that exception. It was under a general liberty to apply of this sort that the order in the Angel Bell was made.
  81. The issue for us therefore is not whether the transactions in question were permissible under the Angel Bell or Normid Housing principles but the much more limited question of whether Mr A (or the companies he controlled) were entitled to carry them out without first seeking the consent of the Bank or the court. It is clear from the passages in Lloyd LJ's judgment in Normid that the scale of permissible transactions extends beyond the scope of the ordinary course of business exception, although it was not necessary in that case (as it is in this) for the Court of Appeal to decide where the boundary lay. The proposed settlement of the architects' claim was, on any view, unobjectionable and not therefore susceptible to the grant of Mareva relief.
  82. In his second witness statement of 16th March 2010 made in support of the application for clarification, Mr A states that the sale of the shares in BTA Kazan and Omsk Bank were sales to independent third parties of shares of which he was the ultimate beneficial owner. BTA Kazan (which has its head office in Kazan, the capital of the Tatarstan region of Russia), was owned as to 47% by the Bank and as to a further 51% by four companies (Rikas Finance, TuranAlem Capital, Delta Torg and AMK-Invest) of which Mr A was or is the ultimate beneficial owner. These shares were therefore assets of Mr A within the meaning of paragraph 5 of the freezing order.
  83. Mr A and the four companies were also shareholders in BTA Moscow (now AMT). His evidence is that he decided in 2008 that BTA Kazan should be merged with BTA Moscow so as to become a branch of the Moscow bank and that discussions to that end then took place between the Management Board of the Bank, representatives of BTA Kazan and the Management Board of BTA Moscow. These failed to produce a workable plan for integration with the result that in the summer of 2008 the Bank decided to dispose of BTA Kazan.
  84. In 2009 (as described earlier) the Bank was nationalised and Mr A decided he would dispose of his 51% interest in BTA Kazan. Interest in purchasing the shares was shown by Mr Mudaris Idrisov, the chairman of BTA Kazan, but, according to Mr A, he withdrew following pressure from the government of Kazakhstan. The shares were then sold to three companies (Rusueftkihin Dil Co; Bushpromreserv; and Naiada Development) controlled by a Mr Maxim Pukhlikov. These are said to have been arm's-length sales to purchasers independent of Mr A and there is no evidence to the contrary.
  85. The sales were completed in October 2009 and the proceeds of sale (amounting to the equivalent of US$15 million) were used to buy Tier 2 subordinated debt in BTA Moscow. This is now held by the four companies in place of their shares in BTA Kazan. The economic effect of the transaction is that the proceeds of sale have been lent to or invested in BTA Moscow.
  86. Mr A says in his second witness statement that the sale of the 51% stake was entirely proper and legitimate and was not done with any intention to dissipate the assets. But, as explained earlier, that is not the issue on this appeal. If what Mr A says about the transaction is correct, it would follow that he could have obtained permission to complete the transaction had he applied to the court to do so. But to bring himself within the paragraph 9(b) exception and so obviate the need for such an application, the disposal of the shares must have been carried out in the ordinary course of Mr A's own business.
  87. Very little information is given about these companies in the second witness statement. Mr A says that they are investment companies which regularly acquire and sell equity holdings in other businesses. They also acquire medium to long-term investments which include interest-bearing corporate debt. The Bank in its evidence challenged this assertion by reference to the activities of the four companies listed in the Russian Unified Register of Legal Entities but Mr A says in his fourth witness statement of 17th May 2010 that the entries in the register are not conclusive and that a joint stock company is entitled to carry on other types of business.
  88. Perhaps the most questionable aspect of the BTA Kazan sale is the decision of the vendor companies to invest the proceeds of sale in the subordinated debt of BTA Moscow. The Moscow Bank had a very low credit rating (Caa 2) which would make it an unattractive and potentially risky choice for most investment companies. It is difficult to believe that the decision to invest the proceeds of sale in that business is explicable other than by reference to Mr A's ownership of BTA Moscow.
  89. He accepts that it was always intended that the proceeds of sale would be used to purchase the subordinated debt. BTA Moscow is not put forward as a safe investment but his answer to the criticism of the investment on these grounds is that it was a less risky investment than the shares in BTA Kazan and Omsk Bank. We will return to this point after dealing with the Omsk Bank transaction.
  90. Prior to the transactions in question the shares in Omsk Bank were owned as to 19.99% by BTA Moscow and by the four companies in the following proportions: Rikas Finance (19.99%); TuranAlem Capital (19.92%); Delta Torg (18.98%) and AMK-Invest (9.99%). The remainder of the share capital (11.13%) was owned by various unconnected third parties.
  91. Mr A says in his second witness statement that BTA Moscow had a branch in Omsk (as it did in Kazan) and was therefore a competitor with Omsk Bank. A decision was taken in 2007 by BTA Moscow to sell the shares but a buyer did not emerge until 2009. The sale was eventually completed in January 2010 when BTA Moscow sold its shares for R83,982,707.64 (the equivalent of US$2.9 million).
  92. At the same time the four companies also agreed to sell their shareholdings to the same purchaser for equivalent values. Rikas Finance received the equivalent of US$2.6 million; TuranAlem Capital US$2.6 million; Delta Torg US$2.5 million and AMK-Invest US$1.3 million. On 11th February 2010 these companies used the proceeds of sale (as in the case of the BTA Kazan sale proceeds) to purchase subordinated debt in BTA Moscow.
  93. Mr A says in his second witness statement that it was always intended that when BTA Moscow sold its shares in Omsk Bank the other four companies would do the same but, in the light of this decision, it is more likely that the decision to dispose of their holdings in Omsk Bank was taken as part of BTA Moscow's strategy to dispose of its interest in BTA Kazan and Omsk Bank and not as part of some independent investment decision taken by the four companies.
  94. The evidence is that the four investment companies are all shareholders in BTA Moscow and therefore have an interest in the growth of the Bank. But this is not the same rationale for the purchase of the subordinated debt as Mr A gives earlier in his second witness statement when he says that the subordinated debt purchased with the proceeds of sale of the shares in BTA Kazan and Omsk Bank is typical of the medium and long-term investments made by these companies.
  95. Mr A says in his second witness statement that the four investment companies acquire and divest from holdings regularly in order to concentrate on holdings of the most value and thereby maximise the yield on capital over the long-term. He says that he was not the person who took the decision on behalf of the companies to sell their holdings in BTA Kazan. The decision was taken by the directors, although he approved of it. There is no evidence from the directors to confirm this but if it is right then it would follow that these were disposals by the companies themselves as part of their own business regardless of whether the assets were owned or controlled by Mr A. To bring the case within paragraph 9(b), it would be necessary to show that the directors simply acted on instructions from Mr A in relation to the share sales which is not the case which he puts forward in his evidence.
  96. The material question for the judge was whether these transactions could be brought within paragraph 9(b) as being carried out in the ordinary course of a business conducted by Mr A personally. Mr Smith made a broader submission to the judge that Mr A did not conduct any business personally and that even when dealing in the underlying assets through the medium of the investment companies he was doing no more than to hold and manage his own assets. This was not as such the conduct of a business.
  97. Teare J's rejection of these submissions was based in large part on his construction of paragraph 9(b). He refers in his judgment to the definition of "ordinary course of business" by Lloyd LJ in Normid Housing quoted earlier but, as already explained, the focus of the Court of Appeal in that case was on whether the settlement of the issued claim justified the grant of Mareva relief. In that context the description of a disposal in the ordinary course of business as being the obverse of the dissipation of assets makes sense because that was the issue in relation to the grant or not of the injunction. We do not, however, accept that any transaction (even if not dissipatory in nature) can properly be described as one in the ordinary course of business. As explained earlier, the standard exception on which paragraph 9(b) is modelled provides a limitation on the scope of the injunction thereby enabling routine business transactions to be conducted without reference to the court. But dealings or disposals which are not part of the ordinary business of the defendant in that sense do not necessarily fall foul of the purpose of the freezing order. They merely require the approval of the court or the claimant before they are carried out and so enable the court to scrutinise what, on its face, may not appear to be a routine or regular transaction.
  98. The judge relied on the judgment in Normid Housing as providing support for his view that the paragraph 9(b) exception should be construed widely and not narrowly. It should, he said, be construed as extending to the activity of holding and managing assets so long as it is not aimed at dissipating a defendant's assets. We think that this is too widely stated. Literally applied, it would entitle any defendant to dispose of or deal with his investments free of the scrutiny of the court and is inconsistent with the form and structure of a freezing order which, for the reasons stated earlier, deliberately does not limit the scope of the injunction to transactions carried out with an intention to dissipate. The need to protect a claimant from this risk (in a case which by definition must have involved a prior finding by the judge that there is a real risk of dissipation but for the grant of the injunction) is achieved by prohibiting all disposals of assets except those permitted by the express exceptions to the order and by giving the defendant a general liberty to apply in respect of any particular intended disposal. Transactions can therefore be sanctioned by the court and if found to be unobjectionable then permitted: see Atlas Maritime Co SA v Avalon Maritime Ltd ("The Coral Rose") [1991] 1 Lloyd's Rep 563.
  99. This format points, in our view, to the standard exception about disposals in the ordinary course of business being given a narrower rather than a wide meaning. Transactions in the ordinary course of business in the case (e.g.) of a trading company will include all its usual purchases and disposals and the payment of its trade and other liabilities as they fall due. A regulated investment company which acquires and sells shares and other securities on behalf of its clients would be treated in the same way. But we do not consider that the concept of the ordinary course of business would, as a general rule, comprehend alterations in investments by a private investor however wealthy he may be. For them to qualify it would be necessary to show that the investor was himself running a business by making the changes in his holdings rather than merely re-organising his investments to obtain a better outcome.
  100. The judge thought that, even on this view of the construction of the order, Mr A had demonstrated that the BTA Kazan and Omsk Bank transactions fell within paragraph 9(b). This was because his assets are made up of controlling interests in various businesses and that the divestment of the shares in the two banks and the investment of the proceeds of sale in BTA Moscow represent attempts by him to concentrate those assets in a business which he owns and runs. The essence of his reasoning is set out in paragraph 73 of his judgment:
  101. "BTA Moscow is one of a number of assets in respect of which Mr A has declared ownership. It may well be that the proceeds of sale of Omsk Bank would be safer had they remained in cash and that using them to purchase subordinated debt in BTA Moscow is fraught with risk. But Mr A has said that the purchase of debt in BTA Moscow assists it to maintain its required capitalisation. In circumstances where Mr A is using the cash to provide funds to an ailing bank which he owns I am unable to find that the purchase was not in the ordinary course of his business. The Bank has adduced no evidence that the purchase of debt in BTA Moscow was aimed at putting the proceeds of sale beyond the reach of the Bank rather than being aimed at supporting BTA Moscow."
  102. But this, with respect to the judge, ignores Mr A's evidence in support of the application which characterised the disposal of the shares and the purchase of the subordinated debt as independent investment decisions of the four vendor companies. Nor do we accept that the injection of significant assets into a company by its controlling shareholder necessarily constitutes part of the ordinary course of a business carried on by Mr A personally. A private investor does not ipso facto carry on an investment business. Mr A does not in terms suggest that he does. He simply characterises his dealings as shareholder with BTA Moscow as part of his business rather than his non-business activities. But on the evidence this is nothing more than the concentration by him of part of his assets in a particular business. As such, he is no different from any other private investor who, on his own behalf, decides where to put his money. We fully appreciate that the investment of those monies may be significant in terms of supporting the business of BTA Moscow. But that is not Mr A's business nor can a loan to BTA Moscow from its majority shareholder be regarded as part of that business.
  103. The judge took the view that if there were unresolved issues on the evidence as to whether the disposals of the underlying assets were carried out by the companies themselves or by him as part of his own business, the burden rested on the Bank to show that the transactions were outside the paragraph 9(b) exception and that they had not done this. This was, in our view, the wrong approach. Most of the evidence in support of the application was provided by Mr A in his second witness statement of 16th March 2010 and his fourth witness statement of 17th May 2010. On an application for committal the burden is undoubtedly upon the applicant to prove the breaches relied upon to the criminal standard of proof. This includes the burden of showing that a disputed transaction is not within an exception to the order such as that contained in paragraph 9(b): see Nokia Finance SA v Interstone Trading Ltd [2004] EWHC 272. But where the defendant chooses to seek guidance or clarification from the court as to whether certain transactions have contravened or will contravene the terms of the injunction, it seems to us that it is incumbent on him to provide the court with the evidence upon which it can properly answer the question posed by the application. Declaratory relief is discretionary and if the applicant is unwilling to do this the judge should simply decline to make the order and leave it to the claimant to decide in due course whether it wishes to pursue committal proceedings of its own. In any such proceedings the court would have to decide whether the disposals were disposals by Mr A of his assets at all and, if so, whether they were made in the course of his own business. But the court is not obliged to adjudicate upon the defendant's compliance or otherwise with its orders on the basis only of whatever material the defendant chooses to put before it.
  104. We therefore take the view that, even if otherwise unobjectionable, the transactions involving the shares in BTA Kazan and Omsk Bank and the re-investment of the proceeds of sale were not within the exception contained in paragraph 9(b) and that the judge should have dismissed the application for declaratory relief in that respect. If Mr A is right about the nature and purpose of the transactions then the breach of the Freezing Order is likely to be a technical one in the sense that permission for the transactions would have been granted and, in those circumstances, is unlikely to have much influence on the court on the central question whether Mr A would be likely to breach the Freezing Order in the future. We have not therefore taken these breaches into account in deciding whether the judge was right to make the receivership order. But that is not a matter for us and would have to be dealt with in a further application by Mr A if so advised.
  105. That leaves the Eurasia Tower. As mentioned earlier, this is a development under construction in Moscow. Mr A says in his third witness statement that the development was a joint venture between Handcart Investments Ltd (one of Mr A's company) and MCG International Holding Ltd controlled by Mr Pavel Fuchs through the joint venture company called Blackdesert Holdings Ltd. In 2009 Sberbank, the financier of the development, withdrew its support as a result, it is said, of pressure from the Kazakhstan government. Mr Fuchs then approached Mr A with a view to buying him out and so resolving this difficulty.
  106. Mr A agreed to sell his 50% interest in Blackdesert to Mr Fuchs under an agreement made on 15th September 2009. The sale price was $30 million. The agreement was subsequently varied and on 1st December 2009 the first tranche of the purchase price in the sum of $20 million was paid and title passed. The balance was due in May 2010 but remains unpaid.
  107. In his fourth witness statement Mr A explains that the $20 million received from the sale has been used to meet some of the guarantee liabilities of Handcart to a company called Company E. Demands under the guarantee totalling $20 million were made and have been satisfied with the Blackdesert proceeds.
  108. The judge held that Mr A's account of the sale of his interest in and the use of the proceeds of the sale of Blackdesert was consistent with the sale being in the ordinary course of his business. But this finding is subject to the same criticisms as those levelled at his treatment of the transactions in respect of BTA Kazan and Omsk Bank. For the same reasons, we think that he gave paragraph 9(b) too wide an interpretation and that the sale of the shares in Blackdesert was no more than Mr A's exit from what had become a difficult investment. It was not a sale in the ordinary course of a business carried on by him.
  109. We therefore allow the Bank's appeal against the clarification orders and set aside the declarations which the judge made.


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