Pre-trial or post-judgment relief - Freezing order
JSC BTA Bank v Ablyazov: Queen's Bench Division, Commercial Court (Mr Justice Teare): 21 September 2012
In August 2009, a freezing order was made against the defendant in the course of complex and long-running litigation. Between February 2010 and May 2011, the defendant, through his companies, pledged or mortgaged certain assets to a bank in liquidation (AMT) and, in one case, a Russian bank (CBR). In October 2010, the Court of Appeal, Civil Division, found proposed pledges would be in breach of the freezing order (see  All ER (D) 109 (Dec)).
The claimant bank sought a declaration that the defendant had acted in breach of the freezing order and an order that the defendant use his best endeavours to reverse dealings with his disclosed assets. It sought further disclosure of events with respect to pledges that appeared to have been intended but where it was unclear that pledges had in fact been made with respect to land and three companies. The claimant further sought a declaration that the defendant owned certain assets which he had not disclosed in breach of the freezing order and an order that the defendant use his best endeavours to reverse dealings with his undisclosed assets.
The defendant sought retrospective permission for the pledges, claiming in his witness statement that they were made for purposes which did not conflict with the purposes of the freezing order. The claimant opposed the defendant’s application on the basis that he had been convicted of contempt of court for which he had been sentenced to imprisonment but had gone into hiding.
It fell to be determined: (i) whether declarations of breach of the freezing order should be made; (ii) whether the defendant should be ordered to use his best endeavours to reverse the pledges; (iii) whether retrospective permission for the pledges should be granted; (iv) whether further disclosure should be ordered; and (v) whether declarations and orders should be made with respect to the defendant’s undisclosed assets.
The court ruled: (1) The pledges in favour of AMT and CBR had been made in breach of the freezing order. There were at least two useful purposes in making declarations of breach: (i) to make it clear to the defendant that his conduct had been in breach of the freezing order; and (ii) the claimant was entitled to have a clear statement of the position so that it might, if it wished, inform AMT, CBR and the Russian court called upon to enforce the pledges that the defendant had created the pledges in breach of an order of the English court (see  of the judgment).
(2) The interests of justice would best be served by making an order that the defendant use his best endeavours to intervene in any enforcement proceedings brought by CBR or the liquidator of AMT to ensure that the Russian court was informed by the defendant that the pledges had been created by the defendant in breach of the freezing order issued by the English court (see  of the judgment).
(3) It would not be in the interests of justice to grant the requested retrospective permission on the basis that: (i) although evidence had been given by the defendant (supported by some documents) that the pledges had been made for purposes which had not conflicted with the purposes of the freezing order, there were gaps in that evidence; (ii) the defendant had not acknowledged that he had acted in breach of the court’s order or apologised for doing so; and (iii) the defendant had not purged his contempt of the court (see - of the judgment).
(4) Further disclosure of land assets would not add to what had already been said in the defendant’s witness statement. It would be just and convenient to order the defendant to produce a copy of the share register with respect to two companies and order the defendant to explain the disparity in his evidence (see , , ,  of the judgment).
(5) It was more likely than not that the defendant was the owner of two properties which had not been disclosed and a declaration to that effect should be made. A mortgage had been registered against one undisclosed property in breach of the freezing order. It would be appropriate that the same order be made against the defendant as would be made in respect of the pledges of his disclosed assets. Further, it would be appropriate for the defendant to state whether the pledges contemplated with respect to a company’s liabilities had in fact been executed and if so to give particulars of them (see - of the judgment).
Stephen Smith QC and Tim Akkouh (instructed by Hogan Lovells International LLP) for the claimant: Duncan Matthews QC and George Hayman (instructed by Addleshaw Goddard LLP) for the defendant.