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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> JSC BTA Bank v Ablyazov & 16 Ors  EWHC 2019 (Comm) (24 June 2014)
Cite as:  1 WLR 1547,  WLR 1547,  WLR(D) 284,  EWHC 2019 (Comm)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| JSC BTA BANK
|- and -
|MUKHTAR ABLYAZOV AND 16 OTHERS
John Machell QC (instructed by Boodle Hatfield LLP) for the Respondent
Hearing dates: 11 April and 13 June 2014
Crown Copyright ©
The Honourable Mr Justice Flaux:
Detailed background to the application
"because of the importance of this litigation, which is ongoing, and that it is important that Mr Tyschenko appreciates the importance of complying with orders of this court during a period when he may be involved in dealing with the disclosure order and other orders…"
"MR JUSTICE EDER But what happens… in a case where a Norwich Pharmacal Order is made and that it appears after compliance that because of the documents disclosed then, in compliance with the order, and further enquiry is then made, it is then discovered that the non-party against whom the original order was made is guilty of a tort or a crime or something like that? It seems odd that the applicant should not then be able to come back to the court and say 'Now we have got the documents we know that this non-party is in fact involved in a crime or a tort or something of that kind and our losses include the costs that have been paid…I am making this order now…on the assumption that Mr Tyschenko is not involved in any fraud or tort or anything of that kind and that's why I am prepared to make it, but it seems to me that Mr Akkouh is right, that if the underlying premise, which is the basis upon which I'm making that order, ultimately proves incorrect, that somehow or other I should deal with that….I'm keen that Mr Tyschenko gests his costs virtually automatically but I think Mr Akkouh is right…that although Totalise [a reference to a decision of the Court of Appeal which I consider in more detail below] may not deal with it expressly, I do think that I cannot and should not close the door in this kind of case from the possibility of Mr Akkouh coming back and saying, for whatever reason, on new evidence, new material, that that is-that order should be varied."
"In accordance with paragraphs 7 and 8 of the Disclosure Order, the Claimant shall pay, on the qualified indemnity basis, the respondent's legal costs, a reasonable allowance for the time the Respondent spends and the Respondent's out of pocket expenses incurred relating to, preparing for and attending the further [cross-examination] up to the conclusion of the further [cross-examination]."
The further cross-examination was subsequently listed, by agreement between solicitors and counsel, for 27 February 2014.
"Subject to agreeing suitable transfer documents, our client is willing to transfer such right and interest he (or his relevant companies) may have (if any) in the shares in…Medion and Logopark Tolmachevo…pursuant to an order providing for…Medion to be added to the receivership and directing the transfers to the receivers to be made…"
"So far as FinanceInvest LLC is concerned, our client does not believe that it is a company beneficially owned by Ablyazov…We have taken instructions from our client in relation to the evidence given by him during the cross-examination and he says that his evidence that it was owned by Ablyazov was mistaken…On that basis, our client's position is that there is no basis for him to transfer the shares to the Receiver."
"… I accepted [Mr Tyschenko's] evidence and in reliance upon it adjourned the cross-examination of Mr Tyschenko. It now appears that on Wednesday of this week, when that statement was being put before me on behalf of Mr Tyschenko, he was not in Kiev meeting with Fortuna's clients and creditors but was in Moscow, albeit on Fortuna business. It is plain that I was misled ….. If I ask myself whether I can trust Mr Tyschenko to obey the freezing order, in circumstances when he has permitted me to be told something which is plainly untrue, I am afraid that the answer is plain: I cannot."
Q I want to turn to the LPM company. You've described [it] as a service company and you said it was under the control of Mr Popov. Would you disagree with me if I suggested to you that the ultimate owner of the LPM company is Mr Ablyazov?
A I would disagree.
Q So who do you say is the ultimate owner of the LPM company?
A I think it's Mr Popov and the company managers. Mr Popov has an ongoing conflict with Mr Ablyazov, just as Mr Okhotnikov used to have.
Q …I'm taking from your evidence that neither you nor any of your companies has any ownership interest in LPM?
A It was our plan actually to buy LPM and Mr Popov came to see us and made that proposal to us. And I think I mentioned either in my evidence or in my affidavit to the effect that we were going to buy that company from the managers. But if you ask me whether I control or own the company, my answer is it's Mr Popov who owns the company, and he has a conflict with Mr Ablyazov very similar to the conflict I had with Mr Ablyazov. We have a good friendly relationship with Mr Popov, he is a partner.
Q You said you were going to buy that company but do I understand from your evidence that the negotiations to buy didn't complete and you never did buy the company?
A Well I wouldn't really call it a negotiation. I was in touch with Mr Popov all the time, on an ongoing basis, and just because he has a conflict similar to the conflict that I have does not make him a partner.
Q So did you or did you not buy LPM?
A I really have no recollection. I have a hundred companies. How can I recall everything that happens in those companies?
Q When you were in control of Tolmachevo and Medion/Logopark Pyshma you told us on the last occasion that some payments were made to LPM?
A Mm hmm
Q How much was paid?
A I do not know.
A I do not know.
Q Does LPM have its own premises?
A I don't think so.
Q So where does Mr Popov run LPM from?
A Those assets were run by the managers, Mr Popov and I remember there was an Anatoly there…
Q In an office in Moscow?
Q Who else is at LPM apart from Popov? Are there any other staff?
A There must be. I think so. But I really do not know. I am in touch with Popov only. We received control in October. There was the director there. And it was our plan to make sure the company continued in existence.
Q You received control of Tolmachevo and Medion, you didn't receive control of LPM did you?
A No, LPM was an auxiliary company. I do not really remember any documentation related to that company, any records related to that company. I only had a relationship-ongoing relationship with Mr Popov.
Q …are you aware of any payments by the LPM company to any of the companies in the Fortuna or Factor Capital groups?
A We have been working with Mr Popov for several years, so it is quite possible that he may have made some payments.
[Mr Smith QC then put to him the cross-examination about Elpeim on 13 December 2013 when he said that he had acquired it recently and that it had a large staff]
Q There you were clear that the LPM company had been purchased in October or November 2013. This morning you said it hadn't been purchased. The question of purchase had arisen, but it hadn't been taken to a purchase.
A Well for us to be absolutely clear about what the true answer to that question is, we would need to turn up the shareholders' register, and then from that register we would see who the shareholder was at what time.
Q So are you saying you may have purchased the LPM company at some point in time?
A What I'm saying is we need to turn up the documents. Something similar happened to Fininvest. When I was writing the affidavit I said that it was my company. I bought it from the managers. So I said that we had bought it. And then, when I looked at the transcript, I saw something different. So for us to be absolutely certain and not to mislead either the court or yourself, sir, we would need to look at the documents.
Q Well my understanding is that the shareholder of record in LPM is a company called Sreda SJSC…Is that one of your companies?
A I don't think so. I don't think that Sreda played any role at all…I do not even recall exactly who worked there…it had nothing to do with these assets. It had nothing to do with [the logoparks]. You see there is simply no way I can recall everything.
Q So what did it have something to do with? What was its business?
A How would I know? We have 40, maybe 50 companies. It may have been one of the auxiliary companies, or it may not have been one of the auxiliary companies.
Q So it may be one of your companies, is that what you're saying?
A I would need to double-check. I would need to see the documents. I would not like to hypothesise.
Q Who is Mikhail Tuz?
A Mikhail Tuz is my driver.
Q Is he the shareholder or controller of Sreda?
A I simply do not recall.
Q Is it possible?
A It is possible.
Q What about Yevgeniya Podorazhnaya?
A She used to work for Factor…By the way she was a director of Sreda.
Q When was she a director of Sreda?
A I do not know. Am I expected to know all the directors?
Q Well you recalled that she was a director of Sreda. When did you learn that she was a director of Sreda?
A Well I just recollected that. As soon as I recollected that, I told you.
Q When she worked at Factor, was she your personal assistant?
A No I think-and I do not recall exactly-I think she was either a secretary or an administrator.
Q According to the information we have, she became the managing director of LPM on 26 November 2013. Is that possible?
A It is likely possible.
Q And she remained managing director …until 26 February 2014. Is that possible?
A Again it is likely so, but we would need to turn up the documents.
Q Why would she for three months have been the managing director of LPM when you said when she worked at Factor Capital she was a secretary or an administrator?
A Maybe we were planning on buying the company or something. You may recall that I wrote in my affidavit that we were planning on buying some companies…
Q …what I'm suggesting to you is that…from the end of November until at least the end of February, you through your former secretary or administrator…had control over LPM.
A What I do know is that she used to work, together with Popov, for more than one month and then she travelled to Yekaterinburg in October, November, or perhaps even in September. That I know for a fact.
Q Are you suggesting that she left the employment of the Factor Group in October, November or perhaps even in September?
A Again I do not recall exactly when she left. I would need to have a look at the documents. What's the problem? She was working with Popov."
Applicable legal principles
"My noble and learned friends, Lord Cross of Chelsea and Lord Kilbrandon, have dealt with the authorities. They are not very satisfactory, not always easy to reconcile and in the end inconclusive. On the whole I think they favour the appellants, and I am particularly impressed by the views expressed by Lord Romilly M.R. and Lord Hatherley L.C. in Upmann v. Elkan (1871) L.R. 12 Eq. 140; 7 Ch.App. 130. They seem to me to point to a very reasonable principle that if through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrong-doing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers. I do not think that it matters whether he became so mixed up by voluntary action on his part or because it was his duty to do what he did. It may be that if this causes him expense the person seeking the information ought to reimburse him. But justice requires that he should co-operate in righting the wrong if he unwittingly facilitated its perpetration.
I am the more inclined to reach this result because it is clear that if the person mixed up in the affair has to any extent incurred any liability to the person wronged, he must make full disclosure even though the person wronged has no intention of proceeding against him. It would I think be quite illogical to make his obligation to disclose the identity of the real offenders depend on whether or not he has himself incurred some minor liability. I would therefore hold that the respondents must disclose the information now sought unless there is some consideration of public policy which prevents that."
"The full costs of the respondent of the application and any expense incurred in providing the information would have to be borne by the applicant."
"29 We believe that Mr Higham is right. Norwich Pharmacal applications are not ordinary adversarial proceedings, where the general rule is that the unsuccessful party pays the costs of the successful party. They are akin to proceedings for pre-action disclosure where costs are governed by CPR r 48.3. That rule, we believe, reflects the just outcome and is consistent with the views of Lord Reid and Lord Cross in the Norwich Pharmacal case  AC 133, 176, 199. In general, the costs incurred should be recovered from the wrongdoer rather than from an innocent party. That should be the result, even if such a party writes a letter to the applicant asking him to draw to the court's attention to matters which might influence a court to refuse the application. Of course such a letter would need to be drawn to the attention of the court. Each case will depend on its facts and in some cases it may be appropriate for the party from whom disclosure is sought to appear in court to assist. In such a case he should not be prejudiced by being ordered to pay costs.
30 The court when considering its order as to costs after a successful Norwich Pharmacal application should consider all the circumstances. In a normal case the applicant should be ordered to pay the costs of the party making the disclosure including the costs of making the disclosure. There may be cases where the circumstances require a different order, but we do not believe they include cases where: (a) the party required to make the disclosure had a genuine doubt that the person seeking the disclosure was entitled to it; (b) the party was under an appropriate legal obligation not to reveal the information, or where the legal position was not clear, or the party had a reasonable doubt as to the obligations; or (c) the party could be subject to proceedings if disclosure was voluntary; or (d) the party would or might suffer damage by voluntarily giving the disclosure; or (e) the disclosure would or might infringe a legitimate interest of another.
31 That does not mean that a party who supports or is implicated in a crime or tort or seeks to obstruct justice being done should believe that the court will do other than require that party to bear its costs and, if appropriate, pay the other party's costs."
Dissembling and evasive evidence
Involvement of Mr Tyschenko in Mr Ablyazov's wrongdoing.
The appropriate Order