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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Public Joint Stock Company Vseukrainskyi Aktsionernyi Bank v Maksimov & Ors (Rev 1) [2014] EWHC 3771 (Comm) (17 November 2014) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2014/3771.html Cite as: [2014] EWHC 3771 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Rolls Building, Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
PUBLIC JOINT STOCK COMPANY VSEUKRAINSKYI AKTSIONERNYI BANK |
Claimant |
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- and - |
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(1) SERGEY MAKSIMOV & others |
Defendant |
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Mr Davies (instructed by McGuireWoods London LLP) for the First Defendant
Hearing dates: 23 September, 20,21,22,23 October 2014
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Crown Copyright ©
Mr Justice Hamblen:
Introduction
(1) (Paragraph 6) "Until the return date or further order of the court, the Respondent must not—
(1) remove from England and Wales any of his assets which are in England and Wales up to the value of US $80 million; or
(2) in any way dispose of, deal with or diminish the value of any of his assets whether they are in or outside England and Wales up to the same value;
(3) (in the case of the First Respondent only, and without prejudice to this order insofar as it affects the Second, Third and Fourth Respondents) cause or procure that any of the companies listed in Schedule 2 to this order (i) dispose of, deal with or diminish any assets which they hold or control other than in the ordinary course of business; or (ii) cause or procure that they enter into any agreements or obligations other than in the ordinary course of business."
(2) (Paragraph 10 (1)) "… the Respondent must within no later than 72 hours after service of this order and to the best of his ability inform the Applicant's solicitors of all his assets worldwide exceeding US $50,000 in value whether in his own name or not and whether solely or jointly owned, giving the value, location and details of all such assets."
(3) (Paragraph 11) "Within 7 working days after being served with this order, the Respondent must swear and serve on the Applicant's solicitors an affidavit setting out the above information."
(Paragraph 17) "Effect of this order – It is a contempt of court for any person notified of this order knowingly to assist in or permit a breach of this order. Any person doing so may be imprisoned, fined or have their assets seized."
(1) Ground (1) - Mr Maksimov failed to provide disclosure of his assets and an affidavit verifying that disclosure in accordance with paragraphs 10(1) and 11 of the Cooke Order (now only relevant to sentence).
(2) Grounds (2) and (3) – Mr Maksimov caused or procured the 22nd Defendant, United Overseas Sales Corporation ("United"), to deal with its assets by transferring its shareholding in the 6th Defendant, Bauman Trade LLC ("Bauman") in breach of paragraph 6(3) of the Cooke Order and/or thereby knowingly assisted in or permitted a breach of the order by those companies in breach of paragraph 17 of the Field Order.
(3) Ground (4) - Mr Maksimov caused the shares owned by United and the 26th Defendant, Davidson Distribution Ltd ("Davidson") in the 9th Defendant, Kyivrichport PJSC ("KRP") to be disposed of or dealt with and thereby knowingly assisted in or permitted a breach of the order by those companies in breach of paragraph 17 of the Field Order.
(4) Ground (5) – Bauman, United, Davidson, the 15th Defendant, Dyrect Investment LLC ("Dyrect"), the 20th Defendant, Citilink Distribution Ltd ("Citilink"), and the 23rd Defendant, Inmodal Company Ltd ("Inmodal") failed to provide disclosure of their assets and Mr Maksimov, thereby knowingly assisted in or permitted a breach of the order by those companies in breach of paragraph 17 of the Field Order.
(5) Ground (6) - Mr Maksimov failed to inform the Claimants to the best of his ability of (a) the value or detail of his shares in United; (b) the value of his shares in Inmodal, Davidson, X Inc. and Citilink; (c) the details of his assets, namely the shares he holds in Inmodal, Davidson, X Inc., Citilink and BudShluakhMash PJSC ("BSM") in breach of paragraph 10(1) and/or 11 of the Cooke Order.
(6) Ground (7) – Mr Maksimov failed to disclose his shares in the 25th Defendant, Cascade Ventures Ltd ("Cascade") in breach of paragraphs 10(1) and/or 11 of the Cooke Order.
Procedural history
"1. It is declared that the First Defendant was in contempt of Court in failing to provide disclosure of his assets as required by and within the meaning of paragraphs 7, 10(1) and 11 of the Freezing Order [i.e. the Cooke Order] until Monday 13 January 2014. This declaration is without prejudice to the question of whether the First Defendant is in continuing contempt or has purged his contempt."
(1) 8th witness statement of Mr Hyde of Eversheds dated 25 May 2013 in support of the application.
(2) 10th witness statement of Mr Hyde dated 3 December 2013 dealing with service of the application on Mr Maksimov.
(3) 1st affidavit of Mr Maksimov dated 31 January 2013 addressing the Cooke Order.
(4) 2nd affidavit of Mr Hyde dated 22 May 2013 dealing with service of the Field Order on the 5th to 29th Defendants.
(5) 5th affidavit of Mr Kodunov dated 20 September 2013 dealing with service of HHJ Mackie QC's orders whereby permission was given to enforce the Cooke and Field Orders abroad.
(6) Mr Maksimov's 29 November 2013 letter to the Court seeking an adjournment of the committal hearing fixed for 6 December 2013.
(7) 2nd affidavit of Mr Maksimov dated 13 January 2014 in which he gave asset disclosure.
(8) 6th affidavit of Mr Maltsev (of the Bank) dated 26 February 2014 leading evidence in relation to Mr Maksimov's asset disclosure in his 2nd affidavit.
(9) 1st witness statement of Mr Maksimov dated 4 March 2014 (in which he responds to Mr Maltsev's 6th affidavit).
(10) 3rd witness statement of Mr Maksimov dated 12 May 2014 in which he responds to the Amended Grounds of Complaint.
(11) 7th witness statement of Mr Maksimov dated 8 October 2014.
(12) 2nd witness statement of Mr Maltsev dated 15 October 2014.
(13) Report of Dr Giles dated 14th October 2014.
(14) 8th witness statement of Mr Maksimov dated 19 October 2014.
General background
"26. By February 2013 the Court hearings in the criminal proceedings were underway. There are at pages 58 to 115 copies of the minutes of the Court hearings. Hearings took place on 8, 11, 18, 22 and 24 January and on 7, 11 and 18 February 2013. From this it can be seen that during this period I had extensive full day Court hearings at least once or twice per week.
27. Defending these criminal proceedings totally consumed my life at this time, and the life of my partner Anna Gregori. We were under immense pressure. In these circumstances I admit that I did not focus on what was happening in the English proceedings and Eversheds' letter of 4 February 2013…"
"I have, in the 10 days or so, some limited opportunity to provide information to my lawyers in relation to Mr Maltsev's 6th Affidavit. However, given what has been happening, I have not been able to give this my full attention. What follows is what I have been able to put together in the time available. I have tried to meet some of the main allegations made by Mr Maltsev. However, although I have access to a computer and a telephone, I do not have access to the hard copy documents in my office. I believe that it is too dangerous for me to physically go to the office to retrieve those documents."
Contempt of Court – the relevant principles
"The relevant principles may be summarised as follows:
(1) Non-compliance with a court order endorsed with a penal notice amounts to civil contempt enforceable by committal if "a person (a) required by a judgment or order to do an act does not do it within the time fixed by the judgment or order, or (b) disobeys a judgment or order not to do an act": CPR 81.4; Arlidge, Eady & Smith on Contempt (4th ed) 3.1 - 3.11A, 3.21-3.24, 3.69-3.72, 12.1 - 12.7.
(2) Contempt of court must be proved to the criminal standard of proof - i.e., beyond reasonable doubt: Masri v CCC [2011] EWHC Comm at [144].
(3) The claimants must prove that each Respondent (i) knew of the terms of the WFO; (ii) acted (or failed to act) in a manner which involved a breach of the WFO; and (iii) knew of the facts which made that conduct a breach: Masri at [150].
(4) There is contempt if an act intentionally done amounts to a breach of the WFO. It is not necessary to show that the Respondent knew or believed that those intentional acts amounted to a breach: Masri [150] - [154]; Templeton Insurance v Motorcare Warranties [2012] EWHC 795 (Comm) (Eder J.) at [17]-[20], upheld on appeal at [2013] EWCA Civ 35.
(5) Where a company is ordered not to do certain acts and a director of that company is aware of the order, he is under a duty to take reasonable steps to ensure that the order or undertaking is obeyed, and if he wilfully fails to take those steps and the order or undertaking is breached he can be punished for contempt. It may be otherwise if the director can reasonably believe some other director or officer is taking those steps: Templeton Insurance (Eder J.) [23]- [24] approving Arlidge Eady & Smith at 12-112 - 12-116. (And see now Arlidge, Supplement p. 126-128 at paras 12-115 - 12-115C.)
"8. It is notable that the Bank's case against Mr. Ablyazov, on the first two allegations of contempt, depends upon inference from such circumstantial facts and matters as the Bank is able to prove. As in any criminal trial circumstantial evidence can be relied on to establish guilt. It is however important to examine the evidence with care to see whether it reveals any other circumstances which are or may be of sufficient reliability and strength to weaken or destroy the Bank's case; see Teper v R [1952] AC 480 per Lord Norman. Further, I respectfully adopt the words of David Richards J. in Daltel v Makki [2005] EWHC 749 (Ch) at paragraph 30: "In particular if, after considering the evidence, the court concludes that there is more than one reasonable inference to be drawn and at least one of them is inconsistent with a finding of contempt, the claimants fail." I accept the submission of Mr. Matthews QC, counsel for Mr. Ablyazov, that where a contempt application is brought on the basis of almost entirely secondary evidence the court should be particularly careful to ensure that any conclusion that a respondent is guilty is based upon cogent and reliable evidence from which a single inference of guilt, and only that inference, can be drawn.
9. Although there is no burden on Mr. Ablyazov to prove anything on this application he has advanced a case in relation to each of the three alleged contempts. It is a corollary of the burden of proof being upon the Bank that if, after considering the evidence, I consider that Mr. Ablyazov's case is or may be true then the Bank will have failed to establish the alleged contempt."
"51. …. Moreover, it is not true that every single aspect of a criminal case has to be proved to the criminal standard, although of course the elements of the offence must be.
52. It is, however, the essence of a successful case of circumstantial evidence that the whole is stronger than individual parts. It becomes a net from which there is no escape. That is why a jury is often directed to avoid piecemeal consideration of a circumstantial case …. as Lord Simon of Glaisdale put it in R v Kilbourne [1973] AC 729 , 758, "Circumstantial evidence … works by cumulatively, in geometrical progression, eliminating other possibilities". The matter is well put by Dawson J in Shepherd v The Queen (1990) 170 CLR 573 , 579–580 (but also passim):
"the prosecution bears the burden of proving all the elements of the crime beyond reasonable doubt. That means that the essential ingredients of each element must be so proved. It does not mean that every fact—every piece of evidence—relied upon to prove an element by inference must itself be proved beyond reasonable doubt. Intent, for example, is, save for statutory exceptions, an element of every crime. It is something which, apart from admissions, must be proved by inference. But the jury may quite properly draw the necessary inference having regard to the whole of the evidence, whether or not each individual piece of evidence relied upon is proved beyond reasonable doubt, provided they reach their conclusion upon the criminal standard of proof. Indeed, the probative force of a mass of evidence may be cumulative, making it pointless to consider the degree of probability of each item of evidence separately."
General credibility issues
(1) Ground 1 - Mr Maksimov's failure to provide disclosure of his assets and an affidavit verifying that disclosure in accordance with paragraphs 10(1) and 11 of the Cooke Order.
"I believe that it is likely that any information I provided regarding my assets will be made available by the Applicant, Mr. Bakhmatiuk, Mr. Maltsev and persons connected with them for use in evidence against me, either in the ongoing criminal action or in proceedings which may be brought in the future.
To protect against incriminating myself I therefore, by reference to paragraph 10(2) of the Order, refuse to provide the information sought."
"12. Paragraph 10(2) of the Order states that I may be entitled to refuse to provide any of the information described in paragraph 10(1) if to do so would be likely to incriminate me. I understand that, where such incrimination would occur in foreign criminal proceedings, it is for the court to determine, at its discretion, whether to allow such refusal. I respectfully request that the court exercise such discretion in this case.
13. Paragraph 10(2) of the Order further recommends that I take legal advice before refusing to provide the information sought. I have obtained such advice from Petr Boyko, who represents me in the existing criminal proceedings in Ukraine and is one of the leading criminal lawyers in the country."
"I have no doubt that the Respondent is being prosecuted not because a crime actually took place, but as a result of his conflict with the majority shareholder of the Applicant, Mr Bakhmatiuk. This conflict began in late 2010, escalated during the course of 2011 and was a matter of public knowledge, having been reported and written about extensively in the Ukraine.
In my view the charges brought against the Respondent are unfounded and, in normal circumstances, the General Prosecution Service would have rejected Mr. Maltsev's application for a criminal action to be commenced. However, during their extensive investigation and interrogation of the Respondent the investigators have made no secret of their connections with Mr Bakhmatiuk and their own interest in a successful prosecution. They have also repeatedly, and aggressively, sought information regarding the Respondent's assets. Although there is no apparent connection between the issues and the offences which the Respondent is alleged to have committed.
I believe that the principal reason for the Applicant seeking to be informed of the Respondent's assets is in order to be able to use such information against the Respondent. In the existing criminal proceedings the information obtained is likely to be used as evidence of the Respondent's enrichment as a result of the operation described above having been carried out. More broadly, bearing in mind the conflict between Mr Bakhmatiuk and the Respondent, it is probable that the information will be used as a basis for further criminal actions against the Respondent. Regrettably, in view of the defects and weaknesses in Ukraine's system of justice and Mr Bakhmatiuk's wealth and influence, there is a significant risk that the Respondent will not receive a fair trial."
"Now Mr Samek says my client is in contempt, and so on. As far as that is concerned, both counsel, I speak for Mr Stevenson and myself, and for Mr Kitcatt, who is the solicitor, our advice to our client is that he must observe orders of the court unless and until they are discharged. And we will give him that advice in unequivocal terms."
"We note that your client has still not complied with paragraphs 10 and 11 of the Order of the Honourable Mr Justice Cooke dated 16 January 2013, as continued by the Honourable Mr Justice Flaux on 1 February 2013 ("the Order").
During the hearing on 1 February 2013, Mr Gee QC informed the Court that he, Mr Stevenson and Mr Kitcatt of your firm would advise your client "that he must observe orders of the court unless and until they are discharged". Mr Gee QC confirmed to the Court that such advice would be given to your client "in unequivocal terms".
In light of the above and entirely without prejudice to our view that your client is in contempt of court, we hereby request that your client complies with paragraphs 10 and 11 of the Order by close of business tomorrow.
In the event that he has not complied by the above deadline, our client will proceed with a committal application without further reference to you."
"11. The order states that if the provision of any information about my assets is likely to incriminate me, I may be entitled to refuse to provide it, but I should take legal advice before doing so. Petr Boyko, who represents me in existing criminal proceedings in the Ukraine and is one of the leading criminal lawyers in the country… advised me not to disclose information on my assets to the Bank for exactly this reason. A copy of his advice is set out at Tab 4. In my affidavit I asked the court to consider this issue, but as far as I know it has not yet done so.
….
24. I believe that I had good reason to refuse to give information to the Bank about my assets, and (as required by the Cooke J order) I received advice from a very respected lawyer stating clearly that I should not do so. If the court has been asked to make a contempt of court order against me for breach of the Cooke J order, therefore, I ask the court to give me the chance to put my side of the case."
(1) Mr Maksimov was in contempt for nearly a year.
(2) From the time that he was advised of the outcome of the 1 February 2013 hearing Mr Maksimov knew that unless and until the court ruled otherwise he was obliged to provide disclosure.
(3) He did not instruct English lawyers to pursue the application to vary or set aside the order for disclosure. He did request the court in his 1st affidavit so to rule but he was aware that it had not done so.
(4) Up until the end of March 2013 Mr Maksimov was understandably pre-occupied with the Ukrainian criminal proceedings. Thereafter he hoped that the disclosure issue would blow over without need for action on his part and that no contempt application would be pursued. It was only when it became apparent that it would be pursued that he took serious steps to comply with the order.
(5) The clear advice received from Mr Boyko was that he should not disclose his assets. For the reasons set out in Mr Boyko's advice, there were good grounds as a matter of fact for him not to do so, although Mr Maksimov knew that this was no answer as a matter of English law.
(6) This is not a case of a dishonest refusal to comply with a freezing order. Mr Maksimov had understandable reasons for his refusal to do so, but no good reason as a matter of law.
(7) What should have happened, but did not happen, was the making of an application by Mr Maksimov either to vary the disclosure obligations in the freezing order or else to impose privacy restrictions on the asset disclosure at an early stage. Had Mr Maksimov retained English lawyers in relation to the freezing order after the 1 February 2013 hearing this may well have occurred, but he did not do so and instead hoped that the issue would go away of its own accord.
(8) Subject to grounds (2) and (3) below, there is no evidence of any attempt to deal with or dispose of any assets during the period of non-compliance.
(9) Subject to grounds (6) and (7) below, when Mr Maksimov did finally comply, on the evidence presently before the court he disclosed all his assets, including those unknown to the Bank.
Grounds (2) and (3) – Whether Mr Maksimov caused or procured United to deal with its assets by transferring its shareholding in Bauman in breach of paragraph 6(3) of the Cooke Order and/or thereby knowingly assisted in or permitted a breach of the order by those companies in breach of paragraph 17 of the Field Order.
"By August 2013 the documents had still not been brought into order and, as I was unable to make contact with S.V. Maximov or with L. Maximova, I made the decision to transfer the corporate rights of BAUMAN TRADE LLC, belonging to the company UNITED OVERSEAS SALES CORPORATION (UOSC) into trust management with a friendly company, without changing the actual owner, on the basis of the documents that had been executed back in November 2012 (enclosure – first sheet of Articles of Association)."
"After I had performed these actions [i.e. the August 2013 transfer], a further non-conformity of the enterprise's documentation to the requirements of effective Ukrainian legislation was detected, namely that there was one participant in the legal entity (official memo enclosed). Having sought the advice of a specialist in legal matters and having received an official memo with recommendations on how to find a way out of the situation, I took the decision to become one of the owners of BAUMAN TRADE LLC. The trust agreement was re-executed, this time in line with the new composition of participants, in September 2013, although, in essence, it still contained the same norms and provisions as the Framework Trust Agreement of November 2012."
(1) His failure to identify this shareholding in his Schedule of Assets.
(2) Mr Maksimov's evidence on the issue has been inconsistent and contradictory.
(3) His evidence that he only discovered what occurred in January 2014 is incredible.
(4) His evidence as to the rationale for the transfer is incredible.
(5) The doubtful authenticity of the 4 April 2006 meeting minute appointing Mrs Klyuchnikova as the Executive Operating Manager as set out in Dr Giles's first report.
Conclusion on Grounds (2) and (3)
Ground (4)- Whether Mr Maksimov caused the shares owned by United and Davidson in KRP to be disposed of or dealt with and thereby knowingly assisted in or permitted a breach of the order by those companies in breach of paragraph 17 of the Field Order.
(1) A presentation dated July 2012 prepared by firm of advisors in the Ukraine called Dragon Capital in relation to the sale of the shares.
(2) Agreements dated 21 November 2012 between United and Davidson and a company called Evbaz Capital by which Evbaz Capital was appointed as agent to effect a sale of the KRP shares. They envisage a sale of the shares before 29 December 2012.
(3) Sale and purchase agreements dated 21 December 2012 between Holdstar and United and Astorius and Davidson through the agency of Evbaz Capital. Pursuant to clause 2.1 of these agreements, the purchase price was required to be paid into the seller's account by 29 December 2012. Clause 3.1 provided that "[t]he Securities shall be transferred within the period before 29 December 2012 inclusive" and that the fact of transfer "shall be confirmed by the Securities Acceptance Certificate".
(4) Transfer execution documents showing the instruction to transfer the shares on 21 December 2012. These documents are signed on behalf of the sellers of the shares, United and Davidson and contain an instruction to the "Registrar" Invest-M "LLC to "execute a transaction"".
Ground (5) – Whether Bauman, United, Davidson, Dyrect, Citilink, and Inmodal failed to provide disclosure of their assets and Mr Maksimov thereby knowingly assisted in or permitted a breach of the order by those companies in breach of paragraph 17 of the Field Order.
Ground (6) - Mr Maksimov failed to inform the Claimants to the best of his ability of (a) the value or detail of his shares in United; (b) the value of his shares in Inmodal, Davidson, X Inc. and Citilink; (c) the details of his assets, namely the shares he holds in Inmodal, Davidson, X Inc., Citilink and BSM in breach of paragraph 10(1) and/or 11 of the Cooke Order.
Ground (7)- Mr Maksimov failed to disclose his shares in breach of paragraphs 10(1) and/or 11 of the Cooke Order.
Conclusion