The High Court has ordered the disclosure of documents held by Addleshaw Goddard, Clyde & Co and Stephenson Harwood in the ongoing battle between Kazakhstan’s JSC BTA Bank and its former chair Mukhtar Ablyazov.
Handing down judgment this morning (8 August) Mr Justice Popplewell approved the application by the bank’s solicitors Hogan Lovells, instructing Erskine Chambers’ Stephen Smith QC, to disclose documents relating to the assets of Ablyazov and his brother-in-law Syrym Shalabayev. These documents were previously withheld on the grounds of legal professional privilege.
Popplewell J said disclosure should be allowed because the three firms are “likely to hold documents casting light on Mr Ablyazov’s and Mr Shalabayev’s beneficially owned assets which may assist the Bank in executing its judgments and enforcing the Court’s orders against them”.
The successful application is an attempt to enforce judgments entered by BTA before the High Court against Ablyazov (11 December 2012). The bank alleged that its former chair embezzled funds, but it is understood that it is yet to recover any of its lost assets.
Popplewell found that Ablyazov had set out to deceive his solicitors and had engaged them in order to pursue a “strategy of concealment, forgery and deceit” in relation to his assets.
“One of the points made on behalf of Mr Ablyazov and Stephenson Harwood was that the solicitors were unlikely to hold material casting light on assets which Mr Ablyazov had not disclosed because the solicitors would have been under a professional duty to ensure such assets were disclosed or to come off the record,” Popplewell J said.
He added: “The submission itself serves to reinforce the analysis that what was occurring was an abuse of the ordinary relationship of client and solicitor. The solicitors were being deceived to a very substantial extent about aspects of Mr Ablyazov’s holdings in, and dealings with, assets, whilst being retained to conduct the litigation under the pretence that what they said on their client’s behalf in relation to the assets was complete and true.”
Addleshaw Goddard, Clyde & Co and Stephenson Harwood have all acted for Ablyazov at various points in the long litigation. Clydes was originally instructed in 2009 by Ablyazov, Shalabayev and two other former BTA officers. Stephenson Harwood was brought on board in December 2009, alongside Clydes, to act for Ablyazov, before being replaced by Addleshaws in 2011 (19 September 2011).
Popplewell J agreed with the three respondent firms that the scale and cost of disclosing millions of documents – over 500,000 emails and 40GB of electronic data – would be both complex, expensive and lengthy. However, he found there was a “real prospect of material being disclosed in response to the order which makes the complex and expensive exercise involved proportionate”.
He also suggested that disclosure could reveal the details of the ownership of Green Life International, which is currently funding Addleshaws’ representation in the ongoing litigation. Mr Justice Christopher Clarke has already found that the company could be beneficially owned by Ablyazov, and Popplewell J said disclosure of any investigation carried out by Addleshaws into the source of the funding “may well be of assistance to the Bank”.
The firms suggested that the overall cost of disclosure would amount to about £2.5m. While BTA said it was unwilling to fund the disclosure exercise, and recognised that the trio of law firms should not bear the cost themselves, Popplewell J said this did not mean a disclosure order should not be made.
“Any order the Court makes will depend for its implementation on funding by Mr Ablyazov,” he noted.
“It has been made clear on his behalf that he has no intention of funding it, and he continues to maintain that he has no undisclosed assets with which he has the ability to do so. This led to a submission that no order should be made because the Court will not act in vain. I reject this as a ground for declining to make an order required by the interests of justice. The Court makes orders on the basis that they are to be obeyed, and it would require exceptional circumstances for a respondent to be able to resist an order by saying that because he will not obey the order, it should not be made in the first place.”
Today’s ruling comes ahead of a Supreme Court hearing which will look at standard form freezing orders and examine how Ablyazov conducted his defence of the High Court litigation (2 April 2014).
It is not yet clear whether the firms will appeal today’s decision. In a statement Addleshaws said: “We are studying the judgment and will be considering it with our client. We do not propose to comment further.”
The legal line-up:
For the claimant, JSC BTA Bank
Erskine Chambers’ Stephen Smith QC and Tim Akkouh and New Square Chambers’ Chris Lloyd, instructed by Hogan Lovells partner Chris Hardman
For the first defendant and first respondent, Mukhtar Ablyazov
For the third respondent, Clyde & Co
One Essex Court’s Alain Choo Choy QC and Anna Boase, instructed by Clyde & Co Chris Burdett
For the fourth respondent, Stephenson Harwood
Essex Court Chambers’ Jeffrey Gruder QC, instructed by Stephenson Harwood partner Roland Foord