Jersey Unreported Judgments

Fraud - application by the representor seeking information about the first respondent.

[2012]JRC072

Royal Court

(Samedi)

29 March 2012

IN THE MATTER OF THE SECOND REPRESENTATION OF DAVID STANDISH AND OTHERS, RECEIVERS OF THE ASSETS OF MR MUKHTAR ABLYAZOV

Advocate A. J. N. Dessain for the Representors.

Advocate I. C. Jones for the First and Second Respondents.

judgment

the bailiff:

1.        This is a further application by the representors ("the Receivers") by which they seek information about the first respondent ("Eurasia Logistics"), which is administered by the second respondent ("Nautilus"), a registered trust company carrying on business in Jersey. 

2.        The background to the appointment of the Receivers is set out in the previous judgment of the Court dated 23rd December, ([2011] JRC 239A, paragraphs 4 - 12), and we do not propose to repeat it.  Suffice it to say that JSC BTA Bank ("the Bank") is engaged in litigation before the High Court in London against Mr Ablyazov and a number of other defendants.  It is alleged that, while he was chairman of the Bank, which is incorporated in Kazakhstan, Mr Ablyazov misappropriated the Bank's funds.  At the time of the making of the Receivership Order the claim was in excess of US$1.8 billion. 

3.        On being satisfied that the freezing and disclosure orders which it had made were insufficient to ensure that Mr Ablyazov did not dissipate his assets pending trial, the High Court appointed the Receivers as receivers of the various assets in which Mr Ablyazov is said to have a beneficial interest. 

4.        In its previous judgment, this Court recognised the appointment of the Receivers (who are appointed by the High Court and do not act for the Bank) and authorised them to exercise certain powers within Jersey.  

Developments since the last order

5.        Eurasia Logistics, which is incorporated in Jersey, is one of the 700 or so companies around the world named in the Receivership Order.  Following the recognition of their appointment in Jersey, the Receivers wrote on 8th December, 2011, requiring Eurasia Logistics to provide certain information ("the Information") about itself, including details of its assets and the identity of its ultimate beneficial owner.  A similar request was made of Nautilus on 22nd December, 2011. 

6.        Eurasia Logistics and Nautilus have refused to provide the information on the ground that they do not believe that Eurasia Logistics has anything to do with Mr Ablyazov and it would be wrong to disclose confidential information about a company owned by someone else in circumstances where, so far as they are concerned, Mr Ablyazov has no interest in the company.  

7.        It is in those circumstances that the Receivers bring the matter back before the Court seeking orders that Eurasia Logistics and Nautilus should within 7 days provide the Information to the Receivers.  Although not originally in the prayer of the Representation, the Receivers now also seek further orders against Eurasia Logistics and Nautilus as follows; that they take no steps whatsoever or act upon any instructions in connection with any actual or potential dealings with Eurasia Logistics (and any other Receivership companies) and/or assets within the Receivership and/or documents relating to the same, without the Receivers' express written consent and that they report to the Receivers immediately any attempt to deal with Eurasia Logistics (or any of the Receivership companies) and/or assets of which they become aware, or any requests made to them that may be connected with any such attempts (irrespective of who makes any such requests).  

8.        On 25th January, 2012, Carey Olsen, on behalf of Eurasia Logistics and Nautilus, stated that Eurasia Logistics and Nautilus would be prepared to reconsider their position upon receipt of substantive answers to Eurasia Logistics' previous enquiries and requests, particularly upon sight of the evidence upon which the Receivers relied in making the assertion that Mr Ablyazov was the ultimate beneficial owner of Eurasia Logistics.  So far as Carey Olsen was concerned "the ball is therefore firmly in the Receivers' court". 

9.        On 2nd March, Mr Milsom swore a third affidavit.  This was intended to update the Court on recent developments in the English proceedings and the Receivers' concern that Mr Ablyazov, or others acting on his behalf, may attempt to dissipate or remove assets subject to the Receivership Order.  It also provided information about why there were grounds for believing that Mr Ablyazov was interested in Eurasia Logistics, so that this Court could have comfort that there was a good reason for the inclusion of Eurasia Logistics in the Receivership Order.  

10.      Dealing first with developments since the making of the Order, the Court was informed that, in November and December 2011, there was a lengthy hearing over many days before Teare J in the High Court to consider the Bank's allegation that Mr Ablyazov was in contempt of court by lying about his assets and failing to disclose his beneficial ownership of certain assets.  Mr Ablyazov was represented and was also cross-examined under oath.  Teare J handed down his judgment on 16th February, 2012, having circulated a draft judgment on 14th February.  In the course of his judgment, the judge noted that Mr Ablyazov did not hold assets in his own name.  He was often the ultimate beneficial owner (UBO) even though nominees on his behalf were held out as the UBO.  

11.      Teare J found Mr Ablyazov to be in contempt of court.  The judge held that, contrary to his assertion, Mr Ablyazov was the true UBO of a number of companies.  

12.      Although he had said that he would be present in court upon delivery of the judgment on the contempt hearing, Mr Ablyazov did not appear.  In the circumstances the judge sentenced Mr Ablyazov to 22 months' imprisonment.  In sentencing Mr Ablyazov the judge said this at pp 74 - 76 of the transcript:-

"The total sentence is therefore 22 months.  That is close to the maximum sentence that the Court can impose, but I do not consider that anything less would mark the seriousness of Mr Ablyazov's conduct in failing to comply fully with the [freezing order].  He decided, in breach of that order, not to disclose certain of his assets, to lie under oath and to deal with his assets." 

Mr Ablyazov's whereabouts are currently unknown but it is thought likely that he is no longer in the United Kingdom. 

13.      As set out in paragraphs 30 - 32 of Mr Milsom's third affidavit, the Receivers are aware of steps being taken which could lead to the transfer of certain assets which are the subject of the Receivership Order.  This appears to be orchestrated by one of Mr Ablyazov's nominee UBOs.  Accordingly, on 17th February, the Receivers sent letters to all the registered agents, corporate service providers etc holding the assets subject to the Receivership Order informing them of the contempt judgment and of the Receivers' concern that Mr Ablyazov (or others acting on his behalf) might attempt to dissipate or remove assets which are the subject of the Receivership Order.  The letter requested the recipient to take no steps as a result of any such instructions which they might receive and to report to the Receivers any attempt to do so.  Nautilus and Eurasia Logistics refused to give such assurance because they say that they are satisfied that Mr Ablyazov is not the UBO of Eurasia Logistics.  It is in these circumstances that the Receivers seek the additional order referred to at para 7 above. 

14.      Finally, in his third affidavit, Mr Milsom, while making it clear that his affidavit does not disclose all the evidence in their possession connecting Mr Ablyazov to Eurasia Logistics because they feel unable to disclose some of the evidence on the ground that it may prejudice the Receivership, has disclosed certain evidence with the intention of giving comfort to the Court that there is good reason to believe that, even though Mr Ablyazov may not be listed as the UBO in the books and records of Nautilus, he is the true UBO of Eurasia Logistics.  A summary of those reasons as put forward by Mr Milsom is as follows:-

(i)        It is clear from publicly available documents, as well as documents obtained by the Receivers, that Eurasia Logistics is a central part of a wider group of companies known as 'IPG Eurasia Group' ("the Eurasia Group").  

(ii)       Mr Ablyazov has admitted under oath that he is the majority owner of the Eurasia Group and that up until at least July 2009, he was the beneficial owner of 75% of Eurasia Logistics.  

(iii)      Mr Ablyazov's claim (also under oath) that he "gave" his 75% in Eurasia Logistics to its management in July 2009, a matter of days before the Bank obtained its freezing injunction relief against him, is incredible.  

(iv)      Furthermore, the Receivers have since obtained documentary evidence which contradicts this claim by Mr Ablyazov.  

(v)       The suggestion that the purported UBO of the Eurasia Logistics is someone else is not decisive.  Mr Ablyazov admits to using nominees to hold his assets and this has been recognised by the High Court.  

(vi)      Moreover, the likely nominee in this case (Mr Syrym Shalabayev - Mr Ablyazov's brother-in-law) is a known nominee of Mr Ablyazov who, like Mr Ablyazov, has been convicted of contempt of the English court and has been shown to have lied and back-dated documents repeatedly in order to conceal Mr Ablyazov's assets.  

15.      Mr Milsom then goes into more detail in respect of each of these points but we do not think it necessary to rehearse these details in a judgment which is to be made public.  

Decision

16.      At the hearing on 7th March Advocate Jones said that Nautilus rested on the wisdom of the Court.  However, on behalf of Eurasia Logistics, he sought an adjournment in order that enquiries could be made to see whether Eurasia Logistics accepted or disputed the information contained in Mr Milsom's third affidavit, which had only been supplied to Eurasia Logistics on 2nd March which was the Friday preceding the hearing on Wednesday.  Eurasia Logistics did not believe that Mr Ablyazov was its true UBO and did not wish to disclose confidential information without making all necessary enquires.  It had for some time been requesting the Receivers to explain why they considered Eurasia Logistics to be ultimately owned by Mr Ablyazov and the Receivers had now supplied the information too late for Eurasia Logistics to be able to make proper enquiries by the time of the hearing.  He applied for an adjournment of one month. 

17.      During the course of the hearing, the Court asked Advocate Jones to take instructions on whether Eurasia Logistics (the directors of which are supplied by Nautilus) could assure the Court that the person whom their records show to be the UBO was a person whose name did not appear in any of the papers which had been supplied by the Receivers.  After a short adjournment for Advocate Jones to obtain instructions, he replied that he was instructed that Eurasia Logistics did not feel able to disclose any information about its UBO and was therefore unable to give the confirmation sought by the Court.  

18.      The Court declined to grant Eurasia Logistics an adjournment and made the orders requested by the Receivers.  We would summarise our reasons for doing so as follows:-

(i)        Eurasia Logistics was included in the Receivership Order because Mr Justice Teare, who is very familiar with the detailed facts of the proceedings, considered there to be good reason to suppose that Eurasia Logistics is beneficially owned by Mr Ablyazov. 

(ii)       The fact that, according to the records of Eurasia Logistics and Nautilus, the UBO of Eurasia Logistics is not Mr Ablyazov is by no means conclusive.  To quote but two passages from the contempt judgment of Teare J:-

"34. The manner in which Mr Ablyazov holds his assets has created difficulties for both parties.  Since Mr Ablyazov's acknowledged aim is to ensure the absence of a paper trail leading to him the fact that the paper trail leads to other persons is worthless as evidence that those persons are the owners of the assets in question.  He must therefore rely on evidence from persons, including himself, who make or benefit from a business of creating documents which state things to be true which are not.  The creation of such documents must cause the Court to exercise caution before accepting as true, or as possibly true, statements made by such witnesses notwithstanding that the creation of such documents may be a necessary practice to prevent the President of Kazakhstan from unlawfully appropriating such assets." 

At para 79.2:-

"Mr Ablyazov uses offshore companies and trusted associates for the very purpose of keeping his ownership of companies and assets hidden from view.  Holding companies and assets in that manner necessarily involves the creation of documents which state untruths, namely, that X is the UBO of a company when X is not the UBO and Mr Ablyazov is.  Moreover, his trusted associates are willing to change the apparent UBO and back date the change.  Whether or not assets are held in this way to avoid the reach of the President of Kazakhstan, Mr Ablyazov is prepared to make false statements to this court based on the documents created by his associates."  

During the course of his judgment, Teare J held that he could place little weight on the evidence of Mr Ablyazov and those who had given evidence on his behalf.  

(iii)      The evidence produced by Mr Milsom in his third affidavit suggests that there is good reason to believe that Mr Ablyazov is the true UBO of Eurasia Logistics even if this has not been made known to Nautilus and the directors of Eurasia Logistics.  It also suggests that Mr Ablyazov and others acting on his behalf are seeking to deal with assets subject to the Receivership Order.  We accept therefore that delay in obtaining the Information may be prejudicial to the Receivership. 

(iv)      The order of the Court entitles the Receivers to demand information about the assets subject to Receivership Order.  This is what they have done and Eurasia Logistics/Nautilus have known for many months that that is the position.  They should have been making enquiries at a much earlier stage in order to obtain evidence that the person they believe to be the UBO is not acting as any form of nominee for Mr Ablyazov and has no connection with him. 

(v)       The Court must strike a balance between assisting in the enforcement of an order which is designed to prevent a defendant from dissipating his assets and rendering any judgment nugatory on the one hand and recognising the confidentiality of persons having nothing to do with the matters which are the subject of litigation on the other.  However, on the evidence produced to us, the Court is satisfied that there is good reason at this stage to suspect that Mr Ablyazov is the true UBO of Eurasia Logistics and that the balance comes down in favour of the Information being provided to the Receivers.  They are officers of the English court and they have confirmed that the Information will only be used in support of their role as Receivers.  Furthermore, should they become convinced that Eurasia Logistics is in truth nothing to do with Mr Ablyazov, they will take the necessary steps to return the Information. 

19.      For these reasons, we made the orders requested by the Receivers.  

Authorities

Representation of Standish and Others [2011] JRC 239A.