Ablyazov’s swan song in the English courtroom: BTA can start collecting, pitfalls remain

“Mr Ablyazov’s contempts have been multiple, persistent and protracted, have embraced the offences of non-disclosure, lying in cross-examination, and dealing with assets, and have been supported by the suborning of false testimony and the forging of documents,” And: “It is difficult to imagine a party to commercial litigation who has acted with more cynicism, opportunism and deviousness towards court orders than Mr Ablyazov.” With such blunt observations accompanied by an avalanche of thorough explanations and considerations, on November 6 the Royal High Court of England and Wales has dismissed Mukhtar Ablyazov’s last attempt to keep the verdict of 22 months in prison and further debarring from defence in the series of trials, the first of which already started on November 6, by Kazakhstan’s ailing bank BTA to regain some of its lost funds embezzled by Ablyazov at the time he was at the bank’s helm. Three cases are due to be settled from here to late spring next year, but they could be followed by 32 others put forward by the bank earlier but shelved by the court as long as the criminal case for contempt still hang in the air – which is no longer the case since Ablyazov failed to show up and furthermore is  also most likely to fail to comply with the freezing order’s inherent disclosure demands and/or give himself up to authorities within the imposed term of 7 days after the final verdict – referred to as tne extension of an earlier so-called uinless-order. But whereas for Ablyazov the curtain seems to have finally fallen, for BTA it is but the start of a long struggle, in which Ablyazov may have been put on the sideline but other defendants, both personal and in the form of some of the hundreds of the offshore enterprises the gang has been using, may well try to fight proceedings further.


Ablyazov’s swan song in the English courtroom: BTA can start collecting, pitfalls remain“In the present round of appeals, Mr Mukhtar Ablyazov appeals from three judgments of Mr Justice Teare under which the judge has respectively (i) found him guilty of contempt of court; (ii) sentenced him on each of three proven contempts to 22 months in custody concurrently; and (iii) in consequence has made an ‘unless’ order whereby Mr Ablyazov will be debarred from defending the claims made against him, and his defences will be struck out, unless within a stated period he both surrenders to custody and makes proper disclosure of all his assets and his dealings with them,” the appeal verdict’s text reads. “The stated period for surrender was until 9 March 2012, and for disclosure until 14 March 2012. However, the judge’s order also provided that, in the event of appeal, the sanctions for non-compliance would not take effect until seven days after any dismissal of the appeal. Mr Ablyazov had a right of appeal from the judgments committing him to prison, and obtained permission to appeal from the judge from his judgment imposing sanctions. I will refer to the three judgments as the ‘committal’ judgment, the ‘sentence’ judgment, and the ‘unless’ judgment respectively.”

The affair has already been dragging on two years and a half. “This litigation was commenced by the bank obtaining a without notice freezing injunction from Blair J on 13 August 2009,” the judgment reminds. “The freezing order, affirmed inter partes, lies at the root of the subsequent proceedings to commit Mr Ablyazov, and thus of this appeal. On 21 August 2009, Teare J dismissed Mr Ablyazov’s application to stay the standard disclosure aspects of the freezing order until after the return date, and on 30 September 2009 this court dismissed Mr Ablyazov’s appeal. […] Despite disclosure by Mr Ablyazov of assets which he originally said were worth several billion dollars, a figure which he subsequently revised to something in excess of one billion, by February 2010 the bank had concluded that Mr Ablyazov would not comply voluntarily with his disclosure obligations, and so on 16 February 2010 applied for the appointment of receivers over Mr Ablyazov’s assets. The application was heard over 6 days in May and June 2010. On 16 July 2010 Teare J gave a 200 paragraph judgment in that application, and appointed receivers. Mr Ablyazov appealed that decision to this court, which rejected his appeal. This court called upon Mr Ablyazov to understand that freezing orders are not made lightly, that a good arguable case of fraud had been made against him, and that as a litigant in England he was required to co-operate with the court to ensure that assets were preserved. The terms of the receivership order were settled on 6 August 2010.”

With this in place, it still remained up to BTA, now under government control, to gather the evidence required to make the order materialise. “In the meantime the bank was taking steps of its own to police Mr Ablyazov’s disclosure of, and dealing with, his assets,” the latest appeal judgment continues. “These processes yielded much material which caused the bank further concern as to widespread non-disclosure and dissipation, and led to its decision to seek to enforce compliance by way of an application to commit Mr Ablyazov for contempt of court. This further disclosure also led the bank, by stages, to add more than 600 further companies to those being administered by the receivers.” This also demonstrated further that Ablyazov had been lying – and kept lying in court, which eventually would result in his prison term and narrow escape – this time not from Kazakhstan but from the UK. “Mr Ablyazov disclosed 17 assets, which he originally said were worth $5 billion, and now says are worth $1 billion,” the November 6 verdict resumes. “The receivers’ most recent valuation is of $220 – $379 million. Mr Ablyazov can fairly say that there has been a decline in value over the years, especially given his troubled position, but even so there remains a vast gap between the allegedly fraudulent loans and the disclosure. The documents which the bank has obtained from court orders against third parties have led to the addition of over 600 companies to the receivership order. A successful entrepreneur on Mr Ablyazov’s scale would know that he could not present himself as without any assets at all. It is revealing however, that he has not even disclosed his own homes in England. There is, in my judgment, no inherent improbability in the bank’s case here.”

Ablyazov by proxy owns in the order of 63 million Sterling in property in and around London, which BTA hopes to recuperate in still pending trials. Throughout proceedings, including during the hearings that led to the November 6 judgment, Ablyazov’s defence lawyers have tried to thwart earlier court considerations concerning the stockpiles of evidence of fraud on a massive scale going as far as questioning the integrity of Justice Teare, the judge who handled most of the trials in the process – in vain, as it now has appeared. “These submissions track the whole of the evidence and arguments deployed at trial. It is an attempt simply to reargue the trial,” Rix states in the verdict. “The judge was meticulous in dealing with every aspect of that evidence and argument in his judgment. I have considered these submissions, with the aid of the bank’s skeleton and the judge’s judgment, with care, but I cannot find in the submissions made on appeal any reason for doubting the judge’s own careful evaluations and conclusions, which I find compelling.” And further down: “In my judgment, it is simply not possible to attempt to unpick the trial judge’s conclusions in this way. Those conclusions are dependent upon his assessment of the witnesses whom he has heard, and on his great familiarity with the issues in this litigation. Again, it remains the position that, without a significant error of law or fact, it is not for this court to superimpose its views on that of the trial judge; nor, in the light of these submissions, am I in any way inclined to do so. For all the reasons explained by the judge, the impugned documents had the most serious question marks raised against them solely as documents.”

Towards the end of the verdict,, the language used to the three Lords Justice to argue their considerations gets tougher. “Mr Ablyazov’s contempts have been multiple, persistent and protracted, have embraced the offences of non-disclosure, lying in cross-examination, and dealing with assets, and have been supported by the suborning of false testimony and the forging of documents,” Lord Justice Rix observes. “The contempts have also been seriously aggravated by post-judgment events. Although the judge did not take these matters into account in his sentencing judgment, and only addressed them when he came to his unless judgment, the position is that Mr Ablyazov failed to attend the handing down of the committal judgment and has gone on the run to avoid his sentence. When reserving his committal judgment, Teare J asked for an undertaking that Mr Ablyazov would attend the judgment. His counsel, Mr Matthews ‘Confirmed that he will be present’. The judge gave Mr Ablyazov the benefit of a forensic doubt as to whether a formal undertaking had been given of which Mr Ablyazov was in breach. Even so, this is undoubtedly an aggravating feature of his contempts. Moreover, although ordered by the judge to surrender himself to the tipstaff and to make proper disclosure, Mr Ablyazov has done none of those things. He nevertheless pursues his litigation by instructing his lawyers from some safe, but unknown, haven. In the circumstances, the submission that his sentence ought to have been suspended pending trial is totally without merit. […] It seems to me that the sentence imposed by the judge, which allowed for the remittance of up to 10 months for prompt and full compliance, was fully justified by the facts. […] I would therefore dismiss the appeal against [the] sentence.”

Whereas concerning the imprisonment imposed on Ablyazov, both the judgment and its term have now been confirmed in the highest possible appeal. Regarding his further exclusion from defence unless he gives himself in before November 14, there appeared to be a difference between the three Lords’ views regarding the “unless” rule, with the hard-line decision finally prevailing through a vote. “Following Mr Ablyazov’s absconding, the judge on 29 February 2012 gave a third judgment in which he gave his reasons for imposing an unless order, to the following effect. Mr Ablyazov will be debarred from defending the claims made against him, and his defences will be struck out, unless within the stated period he both surrenders to the tipstaff and makes proper disclosure of all his assets and dealings with them,” the verdict reminds. “The stated period for surrender was until 9 March 2012 and for disclosure was until 14 March 2012. However, the judge’s order also provided that, in the event of an appeal, the sanctions for non-compliance would not take effect until seven days after the dismissal of the appeal. That was designed to preserve the position pending any appeal. […] These orders were opposed, but the judge was satisfied that he had both jurisdiction to make them, and ought in his discretion to make them.”

The prevailing argument in the final decision appeared to be not so much what should happen to Ablyazov, but what could happen to the course of justice itself should he escape it without all possible measure to prevent it being taken – most of all since it looks more than clear now that if Ablyazov could not be trusted previously he can certainly not be trusted since his flight whatever might happen next. “Mr Ablyazov seems to me to be a contemnor in denial,” Lord Justice Rix observed. “The judge expressly relied on the principle that ‘a defence may be struck out if there is a substantial risk of injustice’,” Rix considered towards the end of his lengthy and profound explanations. “He continued: ‘There would therefore appear to be a risk, and a substantial risk…that justice cannot be done to the Bank without further disclosure’. He was in my judgment right to do so. It is true that he had earlier said that ‘it is not suggested that Mr Ablyazov’s failure to comply with the order for disclosure of assets will impede the court’s ability to conduct a fair trial of the issues in the action’. However, he was distinguishing between the issues in the trial themselves, and the recovery of assets, should the bank obtain judgment. He regarded a trial in which a successful claimant could be cheated out of success by the defendant’s dishonest failure to disclose allegedly stolen assets as being fundamentally unfair to the bank and inimical to the interests of justice. He was entitled to regard the matter in that way.”

“The authorities demonstrate that it is vital for the court, in the interests of justice, to have effective powers, and effective sanctions,” Rix continues. “Without these, it would be possible for a defendant (or, in a different situation, a claimant) to flout the orders of the court, which are the court’s considered means by which to keep the scales of justice for the parties even. If once it became known that the court was unable or unwilling to maintain the effectiveness of its orders, then it would lose all control over litigation of this kind, with terrible consequences for the administration of justice. Those wrongly accused of fraud would be relieved of a certain amount of inconvenience, but fraudsters would rejoice and hitch a free ride to interminable litigation on the back of ill-gotten gains. […] It seems to me that the judge was right to say that his orders should encompass all eight of the actions commenced in the commercial court concerning the bank’s claims against Mr Ablyazov. The freezing order encompassed them all, and therefore the same logic applied to them all. It is unnecessary to say anything further about the judge’s additional order, in the event of the unless orders taking effect, for the release of the bank’s fortification. That must follow.”

At the end of the trial, an objection to sustaining the order to debar Ablyazov from further defence was made by Lord Justice Toulson – with the argument that maintaining the prison term for contempt of court and on top of that the debarring measure could come down to double punishment for a single offence. “I agree with Rix LJ’s judgment in every respect except one. I agree that the appeal against the findings of contempt and sentence for contempt should be dismissed,” Toulson considered. “I agree also that the appeal against the order debarring Mr Ablyasov from defending the claims, unless he makes proper disclosure of his assets and his dealings with them, should also be dismissed. On those matters there is nothing which I could possibly add to Rix LJ’s comprehensive judgment. My only point of difference concerns the further order debarring Mr Ablyazov from defending the claims unless he surrenders himself to the custody of the tipstaff. I see nothing wrong with the making of a surrender order in itself. […] I would not expect the court to allow Mr Ablyazov to give evidence at the trial from some place of hiding, but it is another matter to debar him, through counsel, from seeking to test the bank’s claims and perhaps call other evidence. It would or might be different if his non-surrender somehow prejudiced the bank in its prosecution of the claims, but I do not see that his absconding would have that effect. To debar him from defending in those circumstances would be a form of additional punishment for his contempt.”

The knot was cut by the third tribunal member Lord Justice Maurice Kay, who decided to agree with his peer Rix while overruling Toulson in his vote. “There is only one issue upon which my Lords disagree and, even there, Toulson LJ acknowledges that his concern may be academic in the circumstances of this case,” Kay’s observation which concludes the verdict reads. “For my part, I agree with Rix LJ on the issue of the debarring order attaching not only to the disclosure order but also to the surrender order. […] It is difficult to imagine a party to commercial litigation who has acted with more cynicism, opportunism and deviousness towards court orders than Mr Ablyazov.  Rix LJ has described in trenchant terms the factors which cause me to express myself in this way.  There can be no complaint that Teare J decided that the court’s powers should be deployed so as to put the maximum pressure on Mr Ablyazov to comply with its orders so as to endeavour to prevent its fair procedures from being subverted. For these reasons and the more extensive reasons given by Rix LJ, I too would dismiss all the appeals before the Court.”