Contract - further application by the representors as receivers seeking
permission to disclose documents and information.
[2013]JRC150
Royal Court
(Samedi)
30 July 2013
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Before :
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Sir Michael Birt, Kt., Bailiff, and Jurats
Kerley and Milner.
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IN THE MATTER OF THE FIFTH
REPRESENTATION OF DAVID STANDISH AND JOHN MILSOM, RECEIVERS OF THE ASSETS OF
MUKHTAR ABLYAZOV.
Advocate A. J. N. Dessain and Advocate E. B.
Drummond for the Representors.
judgment
the bailiff:
1.
This is a
further application by the representors in their capacity as receivers of the
assets of Mr Ablyazov. On this
occasion, they seek permission to disclose documents and information they have
obtained in Jersey to the plaintiff in the proceedings in England which gave
rise to their appointment in the first place.
Background
2.
The
background to this matter appears in the judgment of this Court dated 23rd
December, 2011, reported at [2012] (1) JLR 44 (“the December
judgment”), which gave the Court’s reasons for making an order on
30th November, 2011, recognising the appointment of the receivers in Jersey. In short, JSC BTA Bank (“the
Bank”), which is incorporated in Kazakhstan, has brought proceedings
against Mr Ablyazov and others in the High Court in London. It is alleged that, whilst he was
chairman of the Bank, Mr Ablyazov misappropriated the Bank’s funds.
3.
The Bank
obtained a freezing order against Mr Ablyazov in those proceedings. Subsequently, it was concluded by the
High Court that Mr Ablyazov had failed to make proper disclosure pursuant to
the freezing order and the Court appointed the receivers as receivers over
various assets which were said ultimately to belong to Mr Ablyazov. It is that appointment which was
recognised by this Court in the December judgment.
4.
Since then
there have been further proceedings in Jersey. On 7th March, 2012, (for reasons
described in a judgment dated 29th March, 2012, ([2012] JRC 072) the Court made
specific orders for disclosure against Nautilus Trust Company Limited
(“Nautilus”) and Eurasia Logistics Limited (“Eurasia
Logistics”), a Jersey company administered by Nautilus. Eurasia Logistics was said to belong to
Mr Ablyazov as ultimate beneficial owner. On 31st May, 2013, this Court recognised
amendments to the receivership order made by the High Court on 17th May, 2013,
which had the effect of appointing the receivers as managers of Eurasia
Logistics. Finally, on 5th July,
2013, this Court noted that Mr Jeremy Outen, who had been one of the original receivers,
had ceased to so act following his departure from KPMG in England and released
him from the undertakings which the receivers had given this Court when their
appointment was originally recognised. It follows that the representors are the
two remaining receivers appointed by the High Court.
5.
Pursuant
to the orders of this Court, the receivers have obtained various documents and
information from Nautilus in respect of Eurasia Logistics. Documents and information have also been
obtained from Deloitte LLP, former advisers to Eurasia Logistics.
6.
As stated
in the December judgment, the receivers are officers of the High Court
appointed to safeguard the assets pending resolution of the Bank’s claim.
They do not act for the Bank.
7.
Mr
Ablyazov has absented himself from the English proceedings. A sentence of 22 months’
imprisonment has been imposed by the High Court for his contempt of court and
he has been barred from defending various of the claims because of his
continuing contempt. The Bank has
now obtained judgments in the sum of approximately US$3.7 billion in respect of
its claims.
8.
As a
consequence of obtaining judgment, the Bank applied in the High Court for an
order varying the receivership order, so that the receivers would be directed
to provide to the Bank’s English solicitors all documents (other than
privileged documents) produced to them during the receivership (a) by Mr
Ablyazov and/or those acting on his behalf and (b) by corporate service
providers, registered agents and/or banks in respect of the companies and
assets covered by the receivership order. This covers the documents obtained by the
receivers in Jersey in respect of Eurasia Logistics.
9.
Popplewell
J granted the variation on 5th July, 2013.
His judgment ([2013] EWHC (1979) (Comm) was in clear terms. He began by describing the position of Mr
Ablyazov as follows at paragraph 9:-
“… In summary, it is
sufficient to say that Mr Ablyazov has been found to have failed to disclose
assets in accordance with the freezing order made against him. He has been found to have lied when cross-examined
about his assets. He has been found
to have dealt with his assets on a significant scale in breach of the freezing
order. He has been found to have
supported his contempt by the suborning of false evidence and the forgery of
documents. His contempt warranted a
sentence of 22 months, which is close to the maximum of 2 years. He has aggravated that contempt by
fleeing the country, again in breach of the freezing order. Mr Hardman’s 57th witness statement
contains cogent evidence of a number of further instances, since that time, of
him dealing with assets in breach of the freezing order with a view to putting
them beyond the reach of the Bank. He
has failed to cooperate with the Receivers in breach of the Receivership Order.
In short, he no longer maintains
even a pretence, as he once did, of being willing to abide by the orders of the
court.”
10. He went on as follows to explain why he was
granting the application:-
“29. Turning, then, to the
merits of the application, the starting point is that as a matter of principle
it seems to me to be right that the Bank should have access, for the purposes
of enforcement, to the documents and information which the receivers have
acquired for the purposes of the receivership. The purposes of the receivership prior to
judgment included the preservation of assets specifically so that they might
thereafter be available in order to assist in enforcement. The receivership was concerned with
assets to the extent that they were or might be treated as being assets of Mr
Ablyazov. Now that the Bank has
obtained judgment, the Bank should in principle be entitled to know that which
the receivers know, in order to assist the Bank in considering and taking steps
to enforce their judgments against assets which are arguably to be treated as
those of Mr Ablyazov.
30. Moreover, it is desirable, for
the purposes of the receivership itself, that the Bank should be as fully
informed as possible to make decisions as to which of the many companies which
are the subject matter of the receivership it wishes to pursue for the purposes
of enforcing its judgments. Without
an ability to make those decisions, and without those decisions being made, the
receivership would be open ended. It must come to an end at some point, and
it can only properly come to an end once the Bank has had a reasonable
opportunity to enforce against the assets which are the subject matter of the
receivership order. Disclosure of
information is necessary to afford the Bank that reasonable opportunity.”
11. It is in these circumstances that the receivers
now apply to this Court for leave to disclose the documents obtained in Jersey
to the Bank’s solicitors pursuant to the variation of the receivership order
made by Popplewell J and described above.
12. Advocate Dessain submits that, arguably, an
order from this Court is not required for the receivers to be able to make such
disclosure to the Bank’s solicitors. That argument arises in the following
way. Paragraph 2 of the order of
this Court dated 30th November, 2011, recognising the receivership order is in
the following terms:-
“Order that the Receivership
Order in its current form or as it may be amended from time to time by
order of the English High Court, is hereby recognised by the Royal Court;
provided that any further order of the English High Court and/or amendment of
the Receivership Order which results in the Receivers being appointed as
receivers of assets of which they are not presently receivers shall not be so
recognised without the further order of the Royal Court …”.
[Emphasis added]
Thus, it is said that the amendment of 5th
July, 2013, by Popplewell J has automatically been recognised.
13. As to the undertakings given by the receivers
at the time of the original recognition order in this jurisdiction, the
relevant one was as follows:-
“Not to use any
information and documentation obtained pursuant to the Order, or any other
order of the Royal Court, other than for the purposes of the Receivership, by
order of the English Court or for the purpose of obtaining recognition of the Receivership
Order in other jurisdictions, save with leave of the Royal Court.”
14. At the time that undertaking was given,
paragraph 27 of the receivership order stated that:-
“The Receivers shall be
permitted to use and/or disclose all information that has come, or will come,
in to their possession for the purposes of the receivership …”
15. As part of the decision to direct disclosure to
the Bank’s solicitors, the 5th July, 2013, order of Popplewell J
introduced a new para 27C into the receivership order which states:-
“Complying with any order
of the Court in relation to the disclosure of documents is deemed to be a
purpose of the receivership.”
16. Advocate Dessain therefore raises the point
that this Court has in effect already authorised the receivers to make
disclosure to the Bank because that is what the receivership order now
provides and such disclosure would not be in breach of the undertaking because
it would be “for the purposes of
the receivership” (as now defined at para 27C) and also “by order of the English Court.”
17. Advocate Dessain has gone on to make it clear
that, whatever the technical arguments, the receivers realise that there may be
room for doubt and for this Court to feel that information is now to be
disclosed in a manner very different from that envisaged at the time of the
recognition order. They have
accordingly made this application.
18. In our judgment, the receivers were quite
correct to do so. What is now
proposed is very different from what was envisaged at the time the undertaking
was given.
19. In Re AG (Manchester) Limited [2005] JRC
035D, the liquidator of an English company obtained an order from this Court
that a Jersey trustee disclose certain documents and information to the
liquidator. The liquidator gave an
undertaking to the Court that the documents and information disclosed by the
trustee would only be used “for the purposes of the
company’s liquidation.” He had not however disclosed that, as an
English liquidator, he had a statutory duty to assist the Official Receiver and
the Secretary of State, pursuant to the Insolvency Act 1986 and the Company
Director’s Disqualification Act 1986 respectively, by supplying them
with information obtained during the liquidation nor that he had already
received a request for such assistance. He now wished to make such disclosure and
applied to amend his undertaking.
20. The Court agreed to the requested variation but
gave a strong warning about the importance of undertakings. At paragraph 3 of the judgment, Bailhache
B said this:-
“What is however surprising
is that … the existence of the statutory duty to assist not only the
Official Receiver but also the Secretary of State pursuant to the provisions of
the Company Director’s Disqualification Act 1986 were not disclosed to
the Court. The undertaking is that
information shall only be used ‘for the purposes of the company’s
liquidation”. We are not
persuaded that passing information to the Official Receiver and the Secretary
of State pursuant to statutory obligations can properly be regarded as falling
within the four corners of that commitment. It is a serious matter to break down the
duty of confidentiality which a trustee owes to its client. Where a liquidator persuades this Court
that the duty of confidentiality must yield to some other more pressing public
interest, and gives an undertaking to the Court in relation to the use of any
information obtained, the greatest possible care should be taken to ensure that
nothing is done outside the ambit of that undertaking.”
The Court went on to emphasise the
importance of giving adequate consideration to the precise terms of any
undertaking.
21. We entirely agree with the observations of
Bailhache B. Furthermore, an
undertaking must be read in the context of the information provided at the
time. When the receivers gave their
undertaking in this case, one of the key factors relied upon (and referred to
in the judgment) was that they were not agents of the Bank; they were officers
of the High Court. The purpose of
the receivership was emphasised as being merely to preserve assets pending the
outcome of the litigation. It was
clearly not envisaged at the time that the information and documents would be
supplied to the Bank as plaintiff. This is shown by the comment of the Court
at paragraph 18(v) of the March judgment when it said:-
“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.”
22. We find therefore that it was entirely correct
for the receivers to revert to this Court to seek a specific variation
notwithstanding any technical argument to the contrary. In retrospect, we think that the
undertaking was worded in an unnecessarily wide way and that, in future cases,
greater protection should be built in as to the use to which documents and
information obtained under compulsion in Jersey can be put. The wording of the order and undertakings
in this case does raise the possibility of documents and information being used
for a purpose never envisaged by this Court at the time.
23. Having made these preliminary observations, we
are in no doubt that the Court should permit the receivers to disclose the
documents and information obtained in Jersey to the Bank. As Popplewell J made clear, the whole
purpose of the receivership was to safeguard assets pending resolution of the
proceedings brought by the Bank. Now that the Bank has succeeded in those
proceedings and become a judgment creditor, it is clearly appropriate that documents
and information in the possession of the receivers should be handed over to the
Bank, so that it may pursue such steps as it thinks fit to enforce its
judgment.
24. However, paragraph 27D of the receivership order
as amended on 5th July, 2013, specified two purposes in connection with which
the Bank can use the documents and information supplied by the receivers,
namely (a) the proceedings listed in the schedule to the order of Mr Justice
Teare dated 29th February, 2012, and (b) the enforcement of the Bank’s judgments
against Mr Ablyazov and/or his assets. We require the Bank to provide an
undertaking to this Court that it will not use the documents and information
which are to be disclosed to it by the receivers pursuant to our decision for
any purpose other than the two purposes referred to at (a) and (b) above
without further order of this Court. The receivers may not disclose any
documents and information which they have obtained in Jersey prior to receipt
of such undertaking from the Bank.
25. We should add that we have not thought it
necessary for these proceedings formally to be served on Mr Ablyazov or on
Nautilus, Eurasia Logistics or Deloitte LLP. However, we note that the receivers
provided a copy of the fifth representation and the receivership order as
amended on 5th July, 2013, (redacted in places for reasons of confidentiality)
by way of notice of the hearing to Mr Ablyazov (via his English solicitors), to
Eurasia Logistics and Nautilus (via Carey Olsen) and to Deloitte LLP. None of them have appeared. Nevertheless, we give those parties
liberty to apply, although in the case of Mr Ablyazov, we can envisage that the
Court may wish to be addressed on whether it should hear him given his flagrant
contempt of the High Court. We also
give the Bank liberty to apply, for example if it wishes to vary the
undertaking referred to above.
Authorities
In
the matter of the Assets of Ablyazov [2012] (1) JLR 44.
Representation
of Standish and Others [2012] JRC 072.
JSC BTA Bank-v-Mukhtar Ablyazov
[2013] EWHC 1979 (Comm).
Re
AG (Manchester) Limited [2005] JRC 035D.
Insolvency Act 1986.
Company Director’s
Disqualification Act 1986.