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||Neutral Citation Number:  EWHC 3771 (Comm)
||Case No: 2013-FOLIO 57
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
||Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
B e f o r e :
MR JUSTICE HAMBLEN
|| PUBLIC JOINT STOCK COMPANY
VSEUKRAINSKYI AKTSIONERNYI BANK
||- and -
||(1) SERGEY MAKSIMOV & others
Mr C Samek QC and Mr D'Cruz (instructed by Eversheds LLP) for the Claimant
Mr Davies (instructed by McGuireWoods London LLP) for the First Defendant
Hearing dates: 23 September, 20,21,22,23 October 2014
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice Hamblen:
- The Claimant Bank ("the Bank") applies to commit the First Defendant ("Mr Maksimov") to prison for contempt of court in breaching worldwide freezing orders made by Cooke J dated 16 January 2013 ("the Cooke Order") and Field J dated 2 May 2013 ("the Field Order")..
- The Cooke and Field Orders (and subsequent confirmatory return date orders) were granted pursuant to Section 44 of the Arbitration Act 1996 in support of the Bank's LCIA arbitral claim against Mr Maksimov for approximately US$ 200 million for alleged breach of a Framework Agreement. A full arbitration hearing on the merits took place over 3 days in January 2014, final submissions were completed in May 2014 and an award is awaited.
- The Cooke Order was made against Mr Maksimov (as First Defendant/Respondent). The alleged breaches are of paragraphs 6(2), 6(3), 10(1) and 11 of the order, which provided as follows:
(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."
- The Field Order was made against the Fifth to Twenty Ninth Defendants (companies registered in the Ukraine and multiple off-shore jurisdictions) pursuant to the Chabra jurisdiction on the grounds that there was good reason to suppose that they were all companies owned and controlled by Mr Maksimov and that their assets in truth belonged to him. The alleged breaches are of paragraph 17 of the order, which provided as follows:
(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."
- Mr Maksimov failed to provide disclosure of his assets until his 2nd affidavit served on 14 January 2014. He has admitted that was a breach of paragraphs 10(1) and 11 of the Cooke Order. However, the Bank alleges further grounds of contempt and also wishes to draw to the Court's attention facts and matters said to be relevant to sentence for Mr Maksimov's admitted contempt.
- The allegations of contempt on which the Bank's application is based are set out in the Amended Grounds of Contempt dated 13 March 2014, not all of which are now pursued. The Grounds still relied upon are as follows:
(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.
- The Bank's committal application was issued on 12 September 2013. A hearing was fixed for 6 December 2013. As the result of Mr Maksimov's letter to the court dated 29 November 2013 that hearing was adjourned to 14 January 2014.
- At that hearing a finding of contempt (based on the original Ground (1)) was made by consent by Walker J on 14 January 2014 as follows:
"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."
- The balance of the committal application, namely consideration of whether the contempt was continuing or had been purged as a result of Mr Maksimov's disclosure of assets in his 2nd affidavit, and the issue of sentence, was adjourned for the first available date after 3 March 2014.
- The committal application came back on before Andrew Smith J on 14 March 2014 but the hearing was again adjourned upon Mr Maksimov's application, to a date after 12 May 2014 and the Bank was ordered to serve Amended Grounds of Contempt. These were meant to particularise the ways in which the Bank claimed that Mr Maksimov had still not complied with his disclosure obligations under the Cooke Order and also to set out the ways in which it claimed that he had also procured or caused breaches of the Field Order.
- The hearing of the committal application was again adjourned upon Mr Maksimov's application by Teare J on 22 May 2014. By his order, Teare J directed that the hearing of the committal application take place on an expedited basis in September 2014, with a 5-day time estimate. He also gave directions regarding the service of evidence as to the feasibility of Mr Maksimov giving evidence by video link from Ukraine and directed that there be a case management conference before the hearing.
- At the case management conference before Andrew Smith J on 4 August 2014 Mr Maksimov confirmed that he no longer sought an adjournment of the hearing of the committal application and accepted the feasibility of his giving evidence by video link from the Ukraine from a secret location. To that end the parties entered into a consent order as approved by Andrew Smith J.
- On 12 September 2014 Eder J made an order directing that PCB Litigation cease to act as Mr Maksimov's solicitors in these proceedings immediately.
- On 23 September 2014, the first day of the expedited hearing ordered by Teare J, McGuireWoods London LLP came on the record for Mr Maksimov and sought a further adjournment through leading counsel. I ordered that the Bank should open the case and that the hearing would then be adjourned part heard to be completed at a 3 day hearing from 20 October to 22 October 2014. That hearing duly took place and Mr Maksimov gave evidence by video link.
- Aside from Mr Maksimov's oral evidence there was a substantial volume of evidence before the court. Chronologically, the principal witness evidence was as follows:
(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.
- It was submitted on behalf of Mr Maksimov that there were a number of background matters of relevance to the applications made. These were dealt with at length in his witness statements and affidavits. Although parts of the background were very much in issue, he was not cross examined about them and the court is in no position to determine them. In those circumstances I accept that for the purpose of this application I should proceed on the assumption that what he says is correct, without making any findings to that effect.
- The Bank is a full service bank incorporated and operating in the Ukraine. It has 132 offices and wide sales network throughout the Ukraine covering all regions and major industrial centres. The Bank was founded in 1992 and, in the mid-1990s, Mr Maksimov acquired a majority shareholding registered both in his own name and through certain shareholding companies. Mr Maksimov was appointed as President of the Bank and Chairman of its Supervisory Board in 1996.
- In 2005, a company called TBIF Financial Services B.V. ("TBIF") purchased a stake in the Bank and, in 2006, increased its shareholding to 48.65%. By December 2009, Mr Maksimov had lost majority control of the Bank. In late 2010, TBIF sold its shareholding to a group of investment companies represented by Troika Dialog investment bank and, around the same time, Mr Maksimov ceased to hold the positions of President and Chairman of the Supervisory Board. He did however maintain a minority shareholding in the Bank.
- Those investment companies in turn sold their shares in the Bank to a Cypriot company called Quickcom Limited in stages culminating in November 2012. Quickcom, which currently holds 82.9% of the shares in the Bank, is controlled by a Ukrainian businessman called Mr Bakhmatiuk.
- The emergence of the dispute between Mr Bakhmatiuk and Mr Maksimov is described at paragraphs 19 to 24 of Mr Maksimov's 2nd affidavit (which repeats material included in Mr Maksimov's 1st affidavit in January 2013). In September 2011 Mr Maksimov, together with other shareholders of the Bank, requested that the National Bank of the Ukraine intervene in the Bank's affairs as a result of the alleged granting by the Bank of US$150 million in loans to a Cypriot company called Avangardco IPL, said to be controlled by Mr Bakhmatiuk. This request came against the background of litigation initiated by Mr Maksimov in the summer of 2011 by which he sought to re-establish his majority shareholding in the Bank on the ground that Mr Bakhmatiuk had acquired his control in breach of certain pre-emption rights. Mr Maksimov also initiated defamation proceedings against several individuals with close links to Mr Bakhmatiuk, including Mr Maltsev, as a result of statements that they had made about him to the Ukrainian media.
- Mr Maksimov also describes how, after investigating Mr Bakhmatiuk's business affairs, he learnt that his companies were in severe financial distress and that information provided to prospective investors upon Avangardco's listing and Eurobond issue in 2010 had been inaccurate. In view of the threat to the solvency of the Bank, given that the loans to Avangardo were unsecured, Mr Maksimov says that he decided to make this information known at the Bank's Annual General Meeting of Shareholders on 28 December 2011 and to propose to the London Stock Exchange that they investigate Mr Bakhmatiuk's activities. However, before he was able to do so, he was arrested, he believed on the instigation of the Mr Bakhmatiuk.
- The subject matter of the Ukrainian criminal proceedings brought against Mr Maksimov is an allegation that he misappropriated money from the Bank during 2008, at a time at which he was President and Chairman of the Bank's Supervisory Board. This is denied by Mr Maksimov who says that no funds were removed from the Bank at all and there was simply a circular movement of money from and back to the Bank, which was carried out for accountancy reasons and is not contrary to any law in the Ukraine. It is common ground that these Ukrainian criminal proceedings were instigated by the Bank itself, Ukraine being a country where it is common to have a "civil plaintiff" in criminal proceedings.
- On 22 December 2011, Mr Maksimov, who does not have a criminal record, was arrested by a team of special forces wearing masks and carrying machine guns in the midst of a New Years' party with his staff in Kiev. On 27 December 2011, a criminal freezing order was imposed against Mr Maksimov. This refers to the opening of the civil proceedings, and the civil claim in those proceedings by the Bank, and states that, in order to "secure the civil claim in the criminal case and enforcement regarding possible confiscation of property…" certain identified properties owned by Maksimov are "arrested" as are "all deposits, assets and other property owned by [Mr Maksimov] wherever it is located". There is no provision allowing Mr Maksimov to use his assets to pay for legal representation.
- Thereafter Mr Maksimov was placed in detention and held at times in solitary confinement until June 2012, when he was released on bail. The conditions of his bail (which are still in place) prevent him from leaving the city of Kiev. The circumstances in which Mr Maksimov came to be released from prison are described in the witness statement of his partner Ms Gregori. She explains how, following Mr Maksimov's arrest, she was subjected to an intolerable level of harassment and pressure. The prosecutor's office referred Ms Gregori to a Mr Mihailovich who, it was said, could "arrange for Sergei's release".
- This led to a demand for a substantial bribe in the sum of US$300,000, which Ms Gregori paid in March 2012. This only led to further demands for money in return for Mr Maksimov's release and to Mr Maksimov being moved to sharing a cell with 15 hardened criminals. Ms Gregori was forced, under intense pressure, to sell her house with a view to raising the money to pay for the new and larger bribe. However, before this new bribe was paid, Mr Maksimov was released as a result of the actions of Rabbi Bleich, the Chief Rabbi of the Ukraine, who had made efforts to secure his release, including meeting the then President of the Ukraine, Mr Yanukovich.
- It is Mr Maksimov's belief, and that of his Ukrainian lawyer Advocate Boyko, that these criminal proceedings were arranged by Mr Bakhmatiuk as part of the wider shareholders' war described above.
- At the time when the Cooke Order was made in January 2013, the criminal proceedings against Mr Maksimov were ongoing and Mr Maksimov was heavily engaged in defending himself against what he has always maintained were false allegations. It was submitted on his behalf that this is of direct relevance to the Court's evaluation of his response to the order at that time.
- Mr Maksimov continued to be heavily engaged in the Ukrainian criminal proceedings until the end of March 2013. As he explained in his 2nd Affidavit at paras. 26 -27:
"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…"
- On 28 March 2013, the Shevchenko district Court of Kiev issued a ruling to the effect that the pre-trial investigation had been inadequate in a number of important respects, that the indictment was non-specific and defective and that the matter would have to be referred back for further investigation. The current position is that enquiries by Mr Maksimov's lawyers suggest that the Prosecutor has determined that there is not enough evidence for the case to go forward and that they will be discontinued but this has not yet become "official", and there is no document to that effect, or indicating that the bail condition has been lifted.
- Although after the end of March 2013 the criminal proceedings were less of a pre-occupation for Mr Maksimov, there were further events in 2014 that impacted on his ability to deal with the English court proceedings.
- On 20 February 2014 Mr Maksimov learnt of a threat to his life. The relevant events are described in Mr Maksimov's 1st witness statement, served on 4 March 2014. In summary, Mr Maksimov received information from a Ukrainian official in the ministry dealing with organised crime that Mr Bakhmatiuk, the majority shareholder in the Bank, wished to have him killed and had paid money to arrange his murder. Mr Maksimov went into hiding at a safe house maintained by the Israeli embassy in Kiev (he has an Israeli passport). The Bank disputes this evidence.
- It was submitted that these events are highly relevant to the various criticisms made of Mr Maksimov's 1st witness statement for not giving a complete account of various matters. It was produced when he was physically in hiding at a safe house because of the emergence of the threat to his life. As he explained at paragraph 14 of that statement:
"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."
- In these extreme and unusual circumstances it was submitted that it would be unfair to expect of Mr Maksimov a standard of perfection in relation to his 1st witness statement.
- The difficulties in which Mr Maksimov found himself due to the threats to his life also underlay the requests for adjournment which he then made. In this connection he was able to produce corroborating evidence in relation to the threat to his life from two public officials in the Ukraine. Mr Maksimov remains in hiding and he gave evidence from a secret location somewhere in the Ukraine.
- As a result of the Ukrainian criminal freezing order Mr Maksimov has throughout been unable to pay for his English lawyers using his own funds and has had to fund his legal representation through donations from members of the Jewish Confederation of the Ukraine.
- It was submitted on his behalf that this chronology of events demonstrates that Mr Maksimov has necessarily had to supply information and documents in a piecemeal fashion and under extraordinarily difficult circumstances. It was further submitted that the Court should bear all this history in mind when assessing the various criticisms made by the Bank of his evidence and in particular alleged inconsistencies between Mr Maksimov's 1st and 3rd witness statements and allegations that evidence "emerged for the first time" in the 3rd witness statement. I accept that these are relevant considerations.
Contempt of Court – the relevant principles
- As I recently held in IPartner v Pancore  EWHC 3608 (Comm) at :
"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  EWHC Comm at .
(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 .
(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  - ; Templeton Insurance v Motorcare Warranties  EWHC 795 (Comm) (Eder J.) at -, upheld on appeal at  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.) -  approving Arlidge Eady & Smith at 12-112 - 12-116. (And see now Arlidge, Supplement p. 126-128 at paras 12-115 - 12-115C.)
- The Bank's case depends on circumstantial evidence. The proper approach to such evidence was summarized by Teare J in the context of a contempt application in JSC BTA Bank v Ablyazov  EWHC 237 (Comm) as follows:
"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  AC 480 per Lord Norman. Further, I respectfully adopt the words of David Richards J. in Daltel v Makki  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."
- The Bank does not, however, have to prove beyond reasonable doubt every fact or piece of evidence which is relied upon to prove an essential element by inference - see JSC BTA Bank v Ablyazov (No 8)  1 WLR 1331,  EWCA Civ 1411 at  –  per Rix LJ:
"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  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
- The Bank submitted that there were two important general credibility issues that the Court should take into account, namely the evidence of Dr Giles and the general implausibility and unreliability of Mr Maksimov's evidence.
- Dr Giles's evidence arose in the following circumstances. Exhibited to Mr Maksimov's 7th witness statement dated 8 October 2014 were two notarised minutes of meetings taking place in Budapest in April 2006. The first of these meetings related to a meeting minute dated 4 April 2006 which purported to record the appointment of Mrs Klychnikova as Executive Operating Manager of United. The second of these meetings related to a meeting minute dated 20 April 2006 which purported to record the appointment of Mr Beshlega as Executive Operating Manager of Davidson. Dr Giles, a documentary forensic expert, examined these documents and reported on them in a report dated 14 October 2014, which was provided to Mr Maksimov's lawyers during the afternoon of 15 October 2014. That was the Wednesday before the Monday on which the hearing was to be resumed - 20 October 2014.
- The report concluded that the signature and stamp on the two documents was absolutely identical such that one or both of the documents must have been created by adding an electronic image of the signature and stamp to the document, as opposed to being physically signed and stamped by the relevant notary. She stated that there is "conclusive evidence to support the view that the copy Notarisations are not copies of documents signed independently by the Notary".
- On the afternoon of Thursday 16 October 2014 a further report from Dr Giles was served calling into question the signature and seal by Evbaz Capital on two agency agreements dated 21 November 2012. These documents had been provided to the Bank in March 2014.
- Mr Maksimov objected to the late admission of this expert evidence, of which there had been no prior warning and in circumstances where permission to adduce expert evidence had never been sought. It was submitted that it raised both factual and expert issues which could not fairly be dealt with in the short time available, particularly given that Mr Maksimov was due to give evidence on the first day of the hearing.
- I ruled that Dr Giles's second report should not be allowed in evidence given that it related to documents which the Bank had had for many months, the very short time between service and the hearing, and the need for both factual and expert inquiry. Dr Giles's first report was different in that it related to documents only recently disclosed. I held over any final ruling until after Mr Maksimov had given evidence on all other matters. In the meantime his legal team could continue with factual and expert inquiries and speak to him on this specific issue. In the event Mr Maksimov's cross examination was still going on the last afternoon of the scheduled hearing, Wednesday, 22 October 2014, and the Bank resumed its application before that evidence was complete. At that stage it was explained on behalf of Mr Maksimov that it was not proposed to call any responsive expert evidence and that Dr Giles was not required to be called. There were, however, exchanges with the notary which it was wished to put in evidence, subject to concerns about waiving privilege. In those circumstances I ruled that Dr Giles's first report could be admitted, that Mr Maksimov could be cross examined about it, and that Mr Maksimov could put in responsive factual evidence, if he so wished. In the event none was put forward.
- The Bank submitted that one or both of the notarisations was a forgery, that the only person with a motive to do so was Mr Maksimov and that the Court should conclude that he was involved in that forgery.
- This is a serious allegation and it is unfortunate that it has come forward at such a late stage and had to be addressed in such haste. It is clear on the evidence that at least one of the notarisations was not signed by the notary. However, the motive for so doing is far from clear. There is no need for minutes of meetings to be notarised and one would not normally expect them to be so. The meetings took place in 2006 and there was evidence of both Mrs Klychnikova and Mr Beshlega acting as Executive Operating Manager thereafter. Mrs Klychnikova's position as Executive Operating Manager is important in relation to Ground (2), but Mr Beshlega's role is of peripheral significance to the Contempt Grounds. I also have to take into account the fact that there has been limited opportunity to investigate into the matter properly and that it apparently relates to events occurring 8 years ago. In all the circumstances, on the current state of the evidence, I am not satisfied to the criminal standard that Mr Maksimov was involved in the production of a falsely signed/stamped notarisation. However, I accept that the evidence does mean that the Court should be cautious about placing reliance on non-public documents produced by Mr Maksimov in respect of which serious questions have been raised.
- As to Mr Maksimov's evidence, he was cross examined for the best part of 2 ˝ days. In their Closing Submissions the Bank produced a long list of what it contended were unsatisfactory features of his evidence. I accept that some of his answers in cross examination were unsatisfactory and that on some issues, as appears below, I am unable to accept his evidence. However, I do not accept that it has been demonstrated that his evidence is wholly or generally dishonest or unreliable. On many matters his evidence was clear and credible. I approach his evidence critically on each issue and with regard to the evidence as a whole, but not on the basis that he has been shown to be a generally dishonest or unreliable witness.
(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 find the relevant chronology relating to this admitted contempt of court to be as follows.
- The Cooke Order was made on 16 January 2013. Mr Maksimov first became aware of it on 19 January 2013 and he received a copy of it on 21 January 2013.
- Mr Maksimov was aware of the disclosure obligation set out in the Cooke Order but he also appreciated that there was an exception under paragraph 10(2): "If the provision of any of this information is likely to incriminate the Respondent, he may be entitled to refuse to provide it, but is recommended to take legal advice before refusing to provide the information".
- On 28 January 2013, Mr Maksimov sent a letter to Eversheds. This letter stated that it was being provided in accordance with paragraph 10 of the Cooke Order. In the letter Mr Maksimov referred to the ongoing campaign against him by Mr Bakhmatiuk and the Ukrainian criminal proceedings and stated:
"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."
- Evidence was then served on 31 January 2013, the day before the return date, in the form of Mr Maksimov's 1st affidavit and Mr Kitcatt's 1st witness statement. Mr Kitcatt of Burchills had been acting for Mr Maksimov in relation to the LCIA arbitration. He made clear to Mr Maksimov that he had no specialist knowledge or expertise in relation to freezing orders.
- Mr Maksimov's 1st affidavit explained that since first becoming aware of the Cooke Order on 21 January 2013 he had been involved in two hearings in the Ukrainian criminal proceedings and had had very little opportunity to read and understand the approximately 100 pages of documentation, in English, that had been served on him. He also explained the difficulties he had experienced in having the affidavit sworn in the correct way in the Ukraine. Mr Maksimov then went on to explain the background of the Ukrainian criminal proceedings and the criminal freezing order and the LICA arbitration proceedings.
- In paragraphs 12 and 13 of the 1st affidavit he stated as follows:
"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."
- This shows that Mr Maksimov understood by this time that self-incrimination in foreign criminal proceedings would only excuse him from his obligations of disclosure if the court so ruled in the exercise of its discretion. It follows that Mr Maksimov knew that unless and until the court so ruled the obligation on him remained.
- Mr Boyko's advice was exhibited to Mr Maksimov's 1st affidavit. Mr Boyko stated that he had been asked to advise on whether informing the Bank of his worldwide assets would be likely to incriminate Mr Maksimov in the Ukraine. After describing the criminal proceedings against Mr Maksimov and the circumstances of his arrest by armed gunmen, Mr Boyko stated:
"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."
- Mr Boyko's conclusion was that "my advice is not, under any circumstances, to provide any information regarding your assets, even in response to a reasoned and lawful request, as the present threat from the criminal prosecution on the Ukraine must be taken into consideration".
- The return date hearing took place on 1 February 2013 before Flaux J. Mr Maksimov was represented at that stage by leading and junior counsel (Steven Gee Q.C. and Peter Stevenson). They were instructed to attend the hearing as Mr Maksimov's representatives by Mr Kitcatt. The outcome of the hearing was a consent order continuing the Cooke Order, but providing a right to Mr Maksimov to apply to vary or set aside that order without showing a change of circumstances, but not imposing a timetable for any such application.
- During the course of the hearing Mr Gee Q.C. made the following statement in relation to the failure to provide asset disclosure:
"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."
- Whilst I accept Mr Maksimov's evidence that he never spoke to counsel, I am satisfied that this advice was communicated to him by Mr Kitcatt, as Mr Kitcatt himself confirmed when making submissions in the LCIA arbitration. Mr Kitcatt advised him of the outcome of the hearing. That outcome was that it was up to Mr Maksimov to apply to vary or set aside the Cooke Order and unless and until he did so the disclosure order remained.
- Mr Maksimov did not envisage that Burchills would act for him in relation to the Commercial Court proceedings. He did however make a specific request in his 1st affidavit that all communications in respect of the proceedings be sent to Burchills and explained that he envisaged them acting as a "postbox" or conduit for communications. I am satisfied that Burchills fulfilled that role and that Mr Maksimov did receive all relevant documents through this channel thereafter.
- On 4 February 2013, no asset disclosure having been provided, Eversheds wrote a letter to Burchills in relation to the freezing order and the provision of asset disclosure. The letter stated that:
"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."
- Although Mr Maksimov stated in cross examination that he did not remember seeing this letter I am satisfied that was forwarded to him and that he did see it at the time.
- As already described, during this period Mr Maksimov was heavily engaged in the Ukrainian criminal proceedings and remained so up until the end of March 2013.
- Notwithstanding the advice he had received from Mr Kitcatt as to the outcome of the 1 February 2013 hearing and the lessening of pressure from the Ukrainian criminal proceedings Mr Maksimov did not seek to make any application to vary or set aside the Cooke Order. It appears that he took solace from the fact that the Bank was apparently not pressing the contempt application threatened in its 4 February 2013 letter since no more had been heard about it. As was submitted by the Bank, he effectively stuck his head in the sand and hoped that the problem would go away without the need for action on his part.
- The Bank's committal application was finally issued on 20 September 2013 and, on 2 October 2013, the Claimant obtained an order permitting that application to be served on Burchills. Mr Maksimov saw it shortly thereafter.
- A hearing was then arranged for 6 December 2013. On 29 November 2013, Mr Maksimov wrote to the Court making representations about his fears as to misuse of his asset disclosure and asking for an adjournment so that he would have an opportunity to instruct English solicitors to defend him. In relation to the fact that asset disclosure had not been provided, Mr Maksimov explained:
"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."
- This shows that Mr Maksimov was aware of the fact that no order relieving him of the obligation to provide disclosure order had been made by the court. I do not accept his evidence that he understood that the court had accepted his position that no disclosure needed to be provided. His letter makes it clear that he understood that it had "not yet done so".
- At the hearing on 6 December 2013, Mr Justice Walker granted the request for an adjournment to 14 January 2014. Mr Maksimov was ordered to provide his evidence in response to the application and the submissions made to the Court by counsel for the Claimant by 8 January 2014.
- In his 2nd affidavit, Mr Maksimov explained that, at this point, he took steps to identify an English firm of litigation solicitors to represent him at the contempt hearing and to raise funds to pay for that representation (since he was unable to use any of his own assets for that purpose). Mr Maksimov made contact with PCB on 5 January 2014 and was able to put them in funds on 8 January 2014, the necessary funds having been raised by the Chief Rabbi through the Jewish Confederation of the Ukraine.
- On Wednesday 8 January 2014, PCB emailed Eversheds stating that they had been instructed to act for Mr Maksimov and that they were working on Mr Maksimov's evidence in response to the application for committal.
- As Mr Maksimov has explained in his 7th witness statement, the asset disclosure was prepared under very significant time pressure over the weekend of 11/12 January 2014 and served the following day.
- I accept that evidence, although Mr Maksimov had to an extent created these difficulties for himself by leaving it so late to seek to find funds for the instruction of solicitors.
- The asset disclosure was made in an 18-page affidavit. At the same time Mr Maksimov applied for an order that any hearings at which the content of his asset disclosure was to be debated should be heard in private due to concerns about misuse of such information in the Ukraine. By agreement between the parties and with the consent of the Court privacy restrictions have been in place for part of the subsequent hearings.
- There were errors in the Schedule of assets provided by Mr Maksimov's affidavit. As Mr Maksimov explained in evidence, the priority urged upon him in the limited time available was to ensure completeness. Although the Bank originally contended that full disclosure had not been given on various grounds, ultimately only one ground has been pursued, that relating to Cascade under Ground (7).
- In summary, in the light of my findings the most relevant considerations would appear to be as follows:
(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.
- It is common ground that during the currency of the Cooke Order there was a transfer of the legal interest in the Bauman shares held by United, in which Mr Maksimov acknowledges that he has a 50% interest. On the evidence, the beneficial interest in the shares has remained throughout with United. Mr Maksimov's estimate of the value of the Bauman shares in his 2nd affidavit was US$14.2m. It was the most valuable asset disclosed in his Schedule.
- In such circumstances there was on any view a "dealing" in those shares. However, Mr Maksimov's evidence is that this was carried out by Mrs Klyuchnikova, United's Executive Operating Manager, without his knowledge. He therefore did not cause, procure or knowingly assist in or permit the transfer. The Bank contends that this evidence is incredible and should be rejected.
- The relevant chronology according to Mr Maksimov's evidence and the documents he has provided is as follows.
- United is incorporated in the Seychelles. Prior to the transfers at issue, it was the legal and beneficial owner of the entire issued share capital of Bauman (a Ukrainian company), which in turn owned a valuable minority shareholding in the Bank. The Bank was aware of these facts at the time at which it applied for the Cooke Order.
- Both Mr Maksimov and his ex-wife were appointed as directors of United. Mrs Klyuchnikova was seemingly appointed as the Executive Operating Manager of United on 4 April 2006.
- Around October 2012, a problem emerged in relation to United because Mr Maksimov's ex-wife was in possession of the original corporate documents, including it's a certificate of good standing. There is a letter from a Mr Glukhenkyi, Ukrainian lawyer, dated 12 November 2012 noting that it was not possible to obtain properly executed documents in relation to United and recommending that a procedure be devised for the "transfer of the corporate rights in trust to a friendly company".
- On 20 November 2012, there was a meeting of the shareholders of Bauman at which it was resolved to "assign" the entire issued share capital of Bauman to a company called Triopart. Triopart is a Belize company owned by Mr Maksimov's partner Ms Gregori and her business partners.
- The following day, on 21 November 2012, a written trust agreement between United and Triopart was entered into referring to Mrs Klyuchnikova being unable to "receive a relevant updated set of corporate documents from both shareholders and directors of the United [sic] to support and to manage the activities of the Company in the Ukraine" and the fact that "the Company bears significant risk of loss of assets and termination of activities due to reasons mentioned above" and going on to provide that Triopart has agreed that the Bauman shares "may be transferred into temporary confidential possession of the Triopart at any moment in the years of 2012 and/or 2013 for the purposes of protection of the United interest in Ukraine when it finds it necessary at its sole discretion". This trust agreement then sets out provisions by which United may, in the future, transfer the legal ownership of the Bauman shares to Triopart to be held on trust for United. No transfer of the legal interest in the shares was actually carried out at this stage.
- During 2013, the Bank announced a rights issue, which would have had the effect of diluting the interests of minority shareholders such as Bauman. Some of the minority shareholders, including Bauman, resolved to make a complaint to the State Securities Commission of the Ukraine. This raised the problem of the inability of Bauman's sole shareholder, United, to provide a certificate of good standing. This is challenged in Mr Maltsev's 2nd Witness Statement in which it is claimed that the Bank had no difficulty in obtaining a similar certificate through its Seychelles lawyers.
- On 22 August 2013, Mr Maksimov was hospitalised with chronic pancreatitis. Copies of the relevant medical records have been provided. He remained in hospital until 30 August 2013.
- On 23 August 2013, Mrs Klyuchnikova, the Executive Operating Manager of United, decided to implement the transfer of the legal interest in the Bauman shares from United to Triopart, as contemplated by the trust agreement dated 21 November 2012. It was Mr Maksimov's evidence that Mrs Klyuchnikova made this transfer because the minority shareholders in the Bank, including Bauman, were getting ready to make their complaint to the State Securities Commission.
- The date of the transfer of the legal interest in the Bauman shares to Triopart is confirmed by a document showing that Bauman's articles of association were amended on 23 August 2013 and refers back to the 20 November 2012 minutes.
- It was Mr Maksimov's evidence that he had no knowledge of, and did not authorise, this transfer of the legal interest in the Bauman shares. That the decision was made by Mrs Klyuchnikova herself is supported by her signed statement (which the Bank points out does not contain a statement of truth), which states:
"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)."
- A further problem then emerged as a result of the fact that Bauman, as a Ukrainian company, was formally required to have more than one registered shareholder. There is written advice from a Ukrainian lawyer to this effect dated 9 September 2013.
- Acting on the basis of this advice, Mrs Klyuchnikova resolved to transfer the legal interest in a small number of the Bauman shares into her own name so that both she and Triopart would be registered as the legal owners with the shares continuing to be held on trust for United. A second trust agreement was therefore prepared and signed on 17 September 2013 ("the Trust Deed") declaring that Triopart and Ms Klyuchnikova, jointly identified as the "trustee", were to hold the entire issued share capital of Bauman on trust for United.
- As with the August 2013 transfer referred to above, this second transfer was carried out by Mrs Klyuchnikova and she says in her statement that it was her decision. She states that:
"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."
- The Trust Deed was referred to in a documented meeting of the shareholders of Bauman taking place on 19 September 2013. Minutes of this meeting are exhibited to Mr Maksimov's 7th witness statement.
- Articles of Association, amended on 20 September 2013, and showing the identity of Bauman's shareholders after this transfer, have been disclosed. Those Amended Articles refer back to the 19 September 2013 meeting of Bauman's shareholders.
- Bauman duly made its complaint, along with certain other minority shareholders in the Bank, to the State Securities Commission. Documentary evidence has been produced to confirm that this complaint was made prior to 28 November 2013. Mr Maksimov's 3rd witness statement explains that the minority shareholders "are awaiting a decision on that report before commencing their action in the Kiev Commercial Court".
- The present position is that the Trust Deed remains in effect and the entire issued share capital of Bauman is held on trust by Triopart and Mrs Klyuchnikova for the benefit of United. Mr Maksimov has offered, in his 7th witness statement, to request the transfer of the legal interest in the shares back to United so as to restore the position that existed prior to the August transfer.
- It was Mr Maksimov's evidence that he did not know of the transfers until January 2014.
- The Bank contended that Mr Maksimov's evidence should be rejected. It so contends for the following principal reasons:
(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.
- As to (1), the Schedule stated in relation to United that it was a "Holding company and the value is defined in the subsidiary". The Schedule set out Bauman's estimated value as $14.2 million but it did not make it clear that this was the subsidiary referred to. The Bank submitted that this was a deliberate attempt to conceal how his most valuable asset was held. I reject that case. The important point is that the relevant underlying asset and its value was disclosed. Moreover, Bauman is a Ukrainian limited liability company and its shareholders are a matter of public information. Further, the Bank already knew that Mr Maksimov had an interest in United and that Bauman was a subsidiary of United, as is apparent from Mr Maltsev's table of Mr Maksimov's assets. It also knew that Bauman's value reflected its shareholding in the Bank itself. In such circumstances the Bank's "concealment argument" makes no sense. There would be no point in seeking to conceal from the Bank things which, as Mr Maksimov was aware, the Bank already knew. Still less to do so in relation to matters of public record.
- As to (2), in his 1st witness statement Mr Maksimov explained that the transfer of the shares to Triopart and Mrs Klyuchnikova took place on 17 September 2013 pursuant to the Trust Deed of that date. The Bank pointed out that the Trust Deed itself suggested on its fact that the transfer had already taken place. In his 3rd witness statement Mr Maksimov explained that in fact all of the shares had been transferred to Triopart on 23 August 2013 and that, because Ukrainian law prohibits there being just one shareholder, the further transfer of a small part of the shares was made to Mrs Klyuchnikova took place on 17 September 2013. The Bank submitted that the 19 September 2013 meeting minutes later produced showed that the September transfer cannot have taken place until 19 September 2013, introducing a yet further inconsistency.
- It is correct that there are some inconsistencies in the way in which Mr Maksimov has explained the transfers. However, the underlying documents speak for themselves and there is no suggestion that they are not authentic. Indeed both the August and the September 2013 transfers are reflected in the Amended Articles, a public document. I am satisfied that the sequence of events is as described in the chronology set out above and that there were two transfers; the first in August to Triopart and the second in September from Triopart to Mrs Klyuchnikova. The second transfer is readily explicable since it is accepted that Ukrainian law requires that there be more than one shareholder. The agreement governing the September transfer is the Trust Deed even if the actual transfer and/or registration of it took place later.
- As to (3), the Bank submitted that it is incredible that there should be transfers of this very valuable shareholding taking place without Mr Maksimov's knowledge and that the reality is that they were carried out at his direction. Although Mrs Klyuchnikova may have been Executive Operating Manager, she was very much his subordinate. Moreover, the transfer was to Triopart, a company part owned by his partner, Ms Gregori. It beggars belief that neither of them told him anything about what had occurred until he learned of the transfers in January 2014.
- These are compelling points. However, there is credible corroborative evidence to support Mr Maksimov's evidence in relation to the August transfer. In particular: the documents showing that the arrangements for making such a transfer were already in place; the undisputed fact that he was ill in August 2013 and in hospital from 22 to 30 August 2013; the need for documents for the proposed shareholder's action, and Mrs Klyuchnikova's evidence that she could not contact him at that time and that she made the decision to transfer the shares. Although this statement does not contain a statement of truth it is signed, there has been no suggestion that it is inauthentic, nor was it put to Mr Maksimov that he had procured false evidence.
- There is also credible corroborative evidence to support Mr Maksimov's evidence that he was unaware of the September transfer at the time. In particular, this was a transaction relating to a small number of shares and was only carried out for compliance reasons. In itself it was of no particular significance.
- What is more difficult to accept is that he had no knowledge of any transfer until January 2014. It is also to be noted that initially it was the August transfer of which he claimed to be ignorant. Nor does Mrs Klyuchnikova say that she never informed him of what she had done. Mr Maksimov's explanation was that what mattered was the beneficial ownership of the shares and there was no particular reason for him to be involved in or to be told about dealings carried out essentially for formal reasons in circumstances where arrangements for that to be done had already been put in place. I shall return to this issue below when drawing conclusions on the evidence as a whole.
- As to (4), the Bank submitted that Mr Maksimov's explanation of the rationale for and timing of the transfers made no sense. There was no need to carry out the transfers to obtain a certificate of good standing, as demonstrated by the fact that the Bank's Seychelles lawyers managed to obtain such a certificate. Nor was there any urgency and therefore need for the transfers to be made in August/September 2013. The Bank suggested that the real reason was the recent service of HHJ Mackie's order of 24 July 2013 permitting enforcement of the Cooke and Field Orders in the Seychelles and the Ukraine.
- However, the arrangements for the transfer of shares to a "friendly company" were set up in November 2012, well before the Cooke Order, let alone the order of HHJ Mackie. There is no reason to doubt the authenticity of those documents and the 20 November 2012 minutes are themselves referred to in the Amended Articles, which are a matter of public record. Further, the arrangements were made on legal advice as to the adverse consequences of not having the company's originally executed corporate documents. The reason for that is that Mr Maksimov's ex-wife had possession of them.
- This arrangement having been put in place it is plausible that it should then be carried into effect and that this should be done for the purposes of having all documents necessary for a proposed shareholder's action, even if that action was not actually commenced until a couple of months later. The transfer would also enable a certificate of good standing to be obtained. Even if there were other ways of obtaining that document this was one means of doing so and, moreover, the benefits of the transfer extended to corporate documents generally.
- As to (5), I have already addressed this under general credibility issues. As far as the position of Mrs Klyuchnikova is concerned, aside from her own statement, there is other evidence which shows that she did act as Executive Operating Manager of United from April 2006 onwards. For example there are 2007-8 documents exhibited to Mr Maksimov's 8th witness statement; the 21 November 2012 Framework Trust Agreement signed by her, and the Trust Deed which was signed by her.
Conclusion on Grounds (2) and (3)
- For the reasons outlined above, many of the points made by the Bank do not bear the weight it seeks to put upon them.
- There is also the fundamental point that the trust agreements, and the fact that thereunder United throughout retained the beneficial ownership of the shares, undermines the Bank's case that the transfers were made to conceal his interest in Bauman or to frustrate enforcement. Although the Bank submitted that the transfers were carried out in order to frustrate attempts at enforcement it is not clear how it would or could do so in circumstances where the beneficial interest was retained, as is clear from the trust agreements. Nor did the Bank put forward any evidence to explain or support this contention.
- Further, there is a multitude of contemporaneous documents that corroborate Mr Maksimov's evidence as to the reasons behind the transfer of the legal interest in the Bauman shares. Whilst the Bank challenges the authenticity of one of those documents, it is not in a position to and does not challenge the authenticity of the other documents. Those show that the transfer of the legal interest in the Bauman shares was, on legal advice, contemplated in November 2012 and that written agreements were executed in November 2012 providing for the transfer to take place at a future date. Those documents show that the reason for the transfer was not asset concealment, but problems associated with having United (a Seychelles company whose bearer share certificate is still in the possession of Mr Maksimov's ex-wife) as the registered shareholder in Bauman. Triopart, a company part owned by Mr Maksimov's partner, Ms Gregori, was identified as a suitable "friendly company" to hold the legal interest in the shares on behalf of United. The documents expressly recorded that, if the transfer took place, Triopart would hold the shares on behalf of United (as did the Trust Deed). As was submitted on behalf of Mr Maksimov, if the intention had been some fraudulent concealment of assets, such documents would be the last thing that he would have wished to bring into existence.
- Considering all the evidence I am not satisfied to the criminal standard that it has been proved that Mr Maksimov procured the August and/or September 2013 transfers or that he knew about them at the time that they were carried out.
- It is possible that he learned of the September 2013 transfer earlier than he has claimed but it is not necessary to make any finding about that. If he did not know about the transfers at the time that they were made then he cannot have caused or procured or knowingly assisted or permitted those transfers. I accordingly find that the Bank has failed to prove these grounds of contempt.
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.
- The Bank's case is that Mr Maksimov caused United and Davidson to sell or transfer their shares in KRP after Mr Maksimov had been served with the Cooke Order.
- The evidential basis for this allegation is information obtained from the website of the Ukrainian Stock Market Infrastructure Development Agency ("SMIDA"). This appears to show that, in the period 31 December 2012 to 31 July 2013, United and Davidson owned shares in KRP.
- This is denied by Mr Maksimov who said in his 1st witness statement that SMIDA's information is often unreliable. He explained that SMIDA is an information service for the users of the Ukrainian Stock Exchange that relies on and gathers its information form news sources in the public domain and provided to it on a voluntary basis. However, companies are not under any legal or regulatory obligation to provide it with information regarding their shareholders and so its content is frequently out of date. He also explained in evidence that for joint stock companies like KRP, whose shares are publically traded, the official register is updated only once a year. The Bank did not serve any evidence in rebuttal to what Mr Maksimov had said about SMIDA in his 1st witness statement.
- If the evidence rested there it is difficult to see how it could be said that the Bank had proved its case to the criminal standard. However, Mr Maksimov has also provided a number of other documents to support his evidence, namely:
(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"".
- The Evbaz Capital agency agreements were the subject matter of Dr Giles's second report. However, they are corroborated by the sale and purchase agreements (which the Bank itself relied upon) and are consistent with the other documents provided.
- The Bank pointed out that the minutes of meeting appointing Mr Beshlega as Executive Operating Manager of Davidson was the subject of Dr Giles's first report. However, as is the case with Mrs Klyuchnikova, there are other documents which evidence that he did so act. To be able successfully to challenge what is shown by the documents the Bank really needs to challenge the authenticity of all or at least most of them, which it is not in a position to and does not do.
- The Bank also pointed out that there must be other documents evidencing the actual date of the sales of the shares, and in particular the "Securities Acceptance Certificate" referred to in the sale and purchase agreements. It also challenges the credibility of Mr Maksimov's evidence that the proceeds of sale were paid in cash to third party creditors rather than into the seller's account as provided for in those agreements.
- I accept that the documentary evidence could be more complete. However, the preponderance of the evidence before the court shows that an agreement to sell the shares was made and that the shares were transferred before the end of 2012. On any view the Bank has not proved the contrary to the criminal standard. I accordingly find that this ground of contempt has not been proved.
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.
- The Bank's case is that Mr Maksimov knowingly assisted or permitted these corporate respondents to the Field Order to breach that order by failing to take any steps to cause or procure that they comply with that order.
- I am satisfied that the Bank has shown that the relevant companies were properly served with the Field Order. The companies are not parties to this application.
- The Bank alleged that Mr Maksimov "wholly owns" and "owns and controls" the relevant companies. This was disputed by Mr Maksimov but he accepted that he was a director of and a 50% shareholder in the companies (or their 100% parent). As a director he clearly had a degree of control.
- The authorities clearly establish that as a director Mr Maksimov was under a duty to take reasonable steps to ensure that the order was obeyed by the company. He did not do so, and deliberately so. His evidence was that it was not for him to ensure compliance but that even if it had been he would not have done so prior to January 2014 for the same reasons as he was refusing to comply with the Cooke Order up until that time. This was a wilful failure to take reasonable steps to ensure that the Field Order was obeyed. Further, I am satisfied, and this is borne out by the evidence of his control over decisions by United and Davidson, that asset disclosure would have been given by the companies had he sought to ensure that this was done. In all the circumstances I am satisfied to the requisite standard that there was a contempt. It does not matter that Mr Maksimov may not have appreciated that he was obliged so to act. What matters is that he was aware of the terms of the order (which he was) and deliberately refrained from acting on it. This applies to all the companies of which Mr Maksimov was a director, namely United, Inmodal, Citilink and Davidson. As director and 50% shareholder of the 100% parent of Dyrect and Bauman I consider that he was under a like duty to take reasonable steps to ensure compliance by them, took a deliberate decision not to do so, and was likewise in contempt.
- In those circumstances it is not necessary to determine whether Mr Maksimov not only has control over these companies as a director but more generally "owns and controls" them. He had sufficient control to be in contempt.
- Although I have found Mr Maksimov to be in contempt, the contempt may be said to be of a technical nature in that the Bank has had disclosure of these companies' assets through Mr Maksimov's own asset disclosure, as confirmed in Mr Maksimov's 7th witness statement. What is lacking is a separate asset disclosure statement by the companies.
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.
- The Bank accepted that these alleged failures were cured by Mr Maksimov's 3rd witness statement but contended that Mr Maksimov was in contempt until that time.
- In relation to (a) the value or detail of his shares in United, the schedule exhibited to Mr Maksimov's 2nd Affidavit identified United as a Seychelles company falling within Mr Maksimov's corporate assets and stated that its value was "defined in the subsidiary". Bauman was also identified in the schedule of corporate assets, and a value was given for Bauman, but it was not specifically stated that Bauman was the relevant subsidiary of United.
- The value of his shares in United was therefore given in the schedule, although it was not clearly so identified. Further, since the Bank already knew that Bauman was a subsidiary of United it would be reasonably apparent to it that this was the subsidiary referred to. In these circumstances I am not satisfied that this involved a breach of the order. If it did, it could easily have been clarified in correspondence or been the subject of a straightforward request for further information.
- In relation to (b) the value of his shares in Inmodal, Davidson, X Inc. and Citilink, the schedule showed that Mr Maksimov had a 50% interest in each of these "holding" companies. Each of those companies owned a % of the shares in a subsidiary and in each case the % shareholding and its value was stated in relation to each such subsidiary. The value of these companies' assets was therefore disclosed. Again I am not therefore satisfied that this involved a breach of the order but, if it did, it could again easily have been clarified in correspondence.
- In relation to (c) the details of his assets, namely the shares he holds in Inmodal, Davidson, X Inc., Citilink and BSM, the Bank submitted that Mr Maksimov was in breach of the order because "he did not identify the person(s), corporation(s) or other entity(ies) through or under which he "indirectly" owned the said assets". However, the details of those assets were given through the identification of the shareholdings. Whilst the order required disclosure of assets indirectly owned it did not require, or clearly require, details of how those assets were indirectly owned. Again I am not therefore satisfied that this involved a breach of the order but, if it did, it could again easily have been clarified in correspondence.
- I therefore find that this ground of contempt has not been proved.
Ground (7)- Mr Maksimov failed to disclose his shares in breach of paragraphs 10(1) and/or 11 of the Cooke Order.
- The Bank ultimately only pursued this Ground in relation to one company, Cascade. It said that this was due to shortage of time. The Bank's case is that Mr Maksimov owns shares in Cascade and failed to disclose this. Mr Maksimov denies that at the material time he owned any shares, directly or indirectly, in Cascade.
- The Bank submitted that Mr Maksimov should not be believed because he stated in his 7th witness statement that he had had nothing to do with Cascade for 10 years but there is a document indicating that he was a director of Cascade in June 2011. This clearly casts doubt on what Mr Maksimov said in his witness statement but it is not evidence of ownership, still less ownership at the time of the Cooke Order in January 2013. There is no evidence of such ownership, still less sufficient evidence to prove it to the criminal standard. This ground of contempt has also not been proved.
- In summary I reject all the alleged Grounds of Contempt other than Ground (1), which had already been admitted, and Ground (5). I have also made various findings relating to the admitted contempt under Ground (1).
- I will hear the parties further on what the appropriate sanction (if any) may be in the light of my findings and conclusions and also on the issue of costs (which are considerable).
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