Featured case: Civil procedure

JSC BTA Bank v Ablyazov [2012] EWCA Civ 1411. Maurice Kay LJ; Rix LJ; Toulson LJ. 6 November 2012


Mukhtar Ablyazov
Mukhtar Ablyazov

There was no authority for the proposition that a full hearing on the merits was required in circumstances where a litigant had forfeited his right to a full trial by his own conduct of the litigation. The judge had been entitled to make orders whereby the appellant would be debarred from defending claims against him unless within a stated period he both surrendered to custody and made proper disclosure of all his assets and his dealings with them.

Appeals dismissed

Mukhtar Ablyazov appealed against three decisions in litigation brought against him by the respondent BTA Bank, which alleged that Ablyazov had defrauded it of almost $5bn (£3bn).

The three judgments appealed against had (i) found Ablyazov guilty of contempt of court; (ii) sentenced him on each of three proven contempts to 22 months’ imprisonment concurrently; and (iii) made unless orders whereby Ablyazov would be debarred from defending the claims against him, and his defences would be struck out unless within a stated period he both surrendered to custody and made disclosure of all his assets and his dealings with them.

The contempt of court involved non-disclosure of assets, lying during cross-examination, and dealing with assets. Ablyazov failed to attend the handing down of the judgment committing him to prison for contempt and absconded to avoid his sentence.

Ablyazov argued that in concluding he was in contempt of court the judge had failed to apply the standard of proof he had set for himself and had made findings he was not entitled to make.

Also, he said, the sentence of 22 months was too long in circumstances where the maximum sentence was two years and the judge lacked jurisdiction to make the surrender order. Furthermore, the European Convention on Human Rights 1950 art.6 gave him a right to be heard, or a right to an adjudication on the merits, and the curtailment of that right inherent in the unless orders was wrong. The unless orders were not necessary, proportionate or justified.

Appeals dismissed (Toulson LJ dissenting in part)

The judge had overwhelmingly used the language of the criminal standard and uniformly did so when reaching his conclusions on any essential plank of BTA’s case. There was no doubt the judge had applied the criminal standard of proof. Ablyazov’s complaints about the analysis fell to be rejected.

There was no justification for interference with the sentence imposed. Although there had not been a total failure of compliance with the orders imposed Ablyazov was of central importance within the litigation and his contempts had been multiple, persistent and protracted, involving offences of non-disclosure, lying in cross-examination and dealing with assets, supported by the suborning of false testimony and the forging of documents. The sentence imposed was justified.

Ablyazov had failed to provide any authority for the proposition that a full hearing on the merits was required in circumstances where a litigant had forfeited his right to a full trial by his conduct of the litigation. The court was not required to persevere to a full trial on the merits.

Ablyazov had not been able to show that there had been any element of judicial unfairness in the way that any of the hearings concerning him had been conducted. He had the opportunity for trial if he complied with the court’s orders, but chose to forfeit opportunities given to him. It was impossible to submit that the court lacked jurisdiction to do what was just and convenient, and necessary, to protect its own orders and to give effect to the interests of justice. The order that Ablyazov surrender to custody was not beyond the power of the court, nor was it particularly novel. The appeal against the order debarring Ablyazov from defending the claims unless he made proper disclosure of his assets and his dealings with them, should be dismissed.

Commentary:

Richard Lewis

Richard Lewis, senior associate, Hogan Lovells

Fraud litigation is an increasingly complex area. The BTA case involved a number of developments in English law that are of significant importance in the context of cross-border fraud litigation.

In a series of landmark judgments in the BTA litigation the English courts have provided guidance in a number of crucial areas including the scope and effect of freezing orders, receivership orders and non-party disclosure orders.

Worldwide freezing and disclosure orders have become a familiar part of the English litigation landscape. The freezing orders obtained by BTA in this litigation were, over time, made more effective than the standard form, in particular by being made unlimited in respect of overseas assets and by it being made clear – following clarification from the Court of Appeal (CoA) – that they extended to assets held by a respondent as bare trustee for others.

The CoA also issued a ruling clarifying the ambit of the ‘ordinary course of business’ exception. This should limit the ability of defendants to dissipate their assets in future.

The receivership order obtained by BTA was the largest and most extensive pre-judgment receivership ever made by an English court. The assets covered by it were predominantly based outside England and owned through a highly complex structure of offshore companies, trustees and nominees. Following a series of without notice applications to more than 600 companies that Ablyazov had not admitted to owning were added to the receivership.

It is clear from the BTA litigation that the English courts are willing to develop the application of the law in an attempt to ensure their orders are not flouted.

Although it is inevitable that frauds will continue to be perpetrated and concealed in ever more ingenious ways, and that new and more powerful weapons are needed for litigators, for now the courts are doing as much as they can to keep up with the modern means being deployed by fraudsters.