JSC BTA Bank v Ablyazov

A receiver may be appointed before judgment in support of a freezing order where the freezing order does not adequately protect against dissipation. Evidence of an actual breach is relevant but is not essential. The court must consider all the circumstances, including the invasive nature of receivership, the risk of harm to the defendant and his business, the claimant’s undertaking in damages, and whether a less intrusive remedy would suffice. The Angel Bell liberty extends to assets held through controlled companies and to the ordinary management of a substantial asset portfolio, provided the dealing is not aimed at frustrating enforcement. The burden of proving that a dealing breached the freezing order rests on the party alleging breach.

The Bank alleged that its former chairman had misappropriated substantial funds and sought the appointment of receivers over his assets in support of an existing freezing order. The defendant sought clarification of the order’s liberty to deal with assets in the ordinary and proper course of business, declarations concerning past transactions, and return of his passport.

The central issues were whether receivership was just and convenient, whether the challenged transactions fell within the Angel Bell liberty, and whether continued retention of the passport was necessary to secure compliance with the court’s orders.

1. Receivership. The application succeeded. Under section 37 of the Supreme Court Act 1981, the court had to decide whether appointment was just and convenient in all the circumstances. A receiver is an invasive remedy, particularly where appointed over all assets. The relevant question was whether the freezing order gave adequate protection against the risk of dissipation. Actual breach was not indispensable; inadequate disclosure and other circumstances could establish that the defendant could not safely be trusted to comply.
2. The court weighed the defendant’s inadequate initial disclosure, his failure to disclose dealings in Eurasia Tower and BTA Kazan, the unexplained whereabouts of at least US$40 million, the proposed receivers’ strategy, likely costs, possible damage to operating businesses, cooperation by the defendant, and the Bank’s undertaking in damages. Less intrusive undertakings were insufficient because they did not provide control of the relevant corporate structures or delivery of title documents.
3. The order was justified and proportionate under Article 1 of the First Protocol and Article 8 of the Convention. It was to be amended so that specified obligations were expressed as best endeavours obligations. The Bank’s undertaking had to be fortified by payment into court or a first-class bank guarantee of £25 million, together with £7.5 million for receivership costs and the existing £7.5 million fortification. The £5 million bond required by CPR 69.5 was also to be provided.
4. Freezing-order liberty. The construction advanced by the Bank was rejected. The Angel Bell liberty applied to assets within the extended definition of assets, including assets held through entities controlled by the defendant. Holding and managing a substantial portfolio could constitute a personal business. A transaction remained capable of being in the ordinary course even if it occurred only once or was a poor investment, unless it was so inexplicable and unreasonable as to indicate bad faith and an intention to defeat enforcement. The burden rested on the party alleging breach.
5. The sales of the interests in BTA Kazan, Omsk Bank and Eurasia Tower were in the ordinary course of business. Declarations were granted for those completed transactions, but not for proposed future transactions, since whether a transaction was ordinary could be determined only after it occurred.
6. The passport order was continued until the receivers’ first report. The passport application therefore failed.