JSC BTA Bank v Ablyazov

Permission to deal with assets subject to a freezing order, whether prospective or retrospective, involves a broad discretion. The court must consider all the circumstances and do justice between the parties. Whether the transaction’s purpose conflicts with the purpose of the order is a highly material consideration, but it is not the sole question.

The applicant bears the evidential burden. The court may approach evidence with healthy scepticism where the applicant has previously been less than frank. Retrospective permission is inappropriate where the evidence is insufficient to enable the court properly and confidently to determine the application. Relief requiring steps to reverse dealings should be framed with regard to practical effectiveness and the interests of affected third parties.

The claimant bank made applications concerning pledges and mortgages of assets allegedly owned or controlled by the defendant. It sought declarations that the dealings breached a freezing order, orders requiring their reversal, and disclosure concerning intended or undisclosed transactions.

The defendant sought retrospective permission for the dealings, arguing that their purposes did not conflict with the freezing order. The court also considered the defendant’s alleged ownership of two logistics companies and related security arrangements. The central issues were the scope of the court’s discretion, the sufficiency and reliability of the evidence, the proper relief for breach, and the extent of disclosure required.

1. The court declared that the pledges and mortgages made in favour of AMT and CBR were made in breach of the freezing order. The defendant could not rely on the ordinary-course-of-business liberty and had not obtained permission before dealing with the assets.

2. The discretion to permit dealings with frozen assets is broad. The court must consider all the circumstances and seek to do justice between the parties. The objective purpose of the transaction is highly material, particularly whether it risks frustrating enforcement of a judgment, but the inquiry is not confined to that issue.

3. The applicant must provide sufficient evidence to enable the court properly to determine the application. Retrospective permission requires particular caution. Here there were material evidential gaps, including insufficient contemporaneous and financial evidence supporting the alleged business purposes. The defendant’s prior lack of candour also justified healthy scepticism.

4. Although the bank had shown breaches, it had no evidence that the dealings were designed to defeat enforcement. The court therefore declined to order unconditional reversal. Instead, the defendant was ordered to use his best endeavours to intervene in enforcement proceedings by AMT’s liquidator or CBR and inform the Russian court that the securities had been created in breach of the English freezing order. The order was framed to identify effective steps and to take account of third-party interests.

5. Retrospective permission was refused. The defendant had not acknowledged or purged his contempt, and had proceeded with several dealings after the Court of Appeal had clarified that court permission was required.

6. The court ordered targeted disclosure where it was just and convenient, including share registers, evidence concerning an alleged decision not to require security, an explanation of inconsistent accounts, and particulars of intended pledges. It declared that the defendant was more likely than not to own the two logistics companies and declared the related mortgage to be a breach.