JSC BTA Bank v Ablyazov & Ors

A third party affected by a freezing or receivership order may use the order’s liberty-to-apply procedure to seek removal of assets. Where beneficial ownership is genuinely disputed, the court which made orders against the defendant may order that issue to be tried. It need not first obtain permission to serve a new claim out of the jurisdiction on the third party.

That procedure is confined to deciding whether the assets remain beneficially owned by the defendant. It does not permit a separate claim that third parties collusively breached the orders, or a claim for restorative relief against them. Such relief requires appropriate originating process, joinder and any necessary permission for service out.

The Bank had obtained freezing and receivership orders against Mr Ablyazov. The orders were later amended to refer specifically to shares in Dregon Land Ltd, the indirect owner of a valuable Moscow logistics park.

Lapointec Ventures Ltd, Limia Holdings Ltd and Dregon Land applied to remove those shares from the orders, contending that Lapointec and Limia had acquired them beneficially following enforcement of security. Field J held that the competing beneficial-ownership claims should be tried and also directed trial of an issue alleging collusive breach of the orders: [2013] EWHC 2161 (Comm).

The appeal concerned whether the court had jurisdiction to order that trial, and whether the trial could extend beyond beneficial ownership to a separate collusion claim.

1. Appeal allowed in part. Christopher Clarke LJ, with whom Elias and Moore-Bick LJJ agreed, upheld the direction for a trial of the ultimate beneficial ownership of the Dregon Land shares. The court set aside the part of the order which extended the trial to an alleged collusive breach of the freezing and receivership orders.

2. The cumulative evidence gave both a good arguable case and good reason to suppose that Mr Ablyazov retained, at least in part, a beneficial interest in the shares despite the apparent enforcement sale. The Bank would have to establish its case at trial on the balance of probabilities. It was unnecessary to choose between the formulations derived from Chabra and Masri, or to decide whether the CPR 24.2 summary-judgment test was distinct.

3. The court had jurisdiction to determine the ownership issue. The original orders had been made against Mr Ablyazov, who was within the jurisdiction, and the applicants themselves invoked the express mechanism allowing a person affected by the orders to seek a variation. The court could therefore decide whether their asserted ownership justified removing the shares from the orders. It did not need first to determine whether service out could be justified under CPR PD 6B.

4. Speedier Logistics v Aardvark Digital was distinguishable. This was not an application to discharge an ex parte order for non-disclosure after a material change, unknown to the affected party. The applicants knew the facts on which they relied and sought a variation under the orders’ own terms.

5. The collusion issue was different in character. The variation application did not entitle the Bank to pursue a new claim requiring the applicants to restore shares or otherwise undo a disposition, even if the applicants were themselves beneficial owners. Any such claim required appropriate originating process and, if pursued against persons outside the jurisdiction, observance of the procedural requirements for service out. Paragraphs 1 and 2(b) of Field J’s order were removed; the beneficial-ownership issue remained for trial. The applicants were ordered to pay 85% of the Bank’s appeal costs and £75,000 on account.

• Court of Appeal (Civil Division): Allowed the appeal only to remove the purported dismissal of the variation application and the issue alleging collusive breach. Otherwise upheld the direction for trial of beneficial ownership: [2014] EWCA Civ 602.
• High Court (Commercial Court): Field J refused then to remove the Dregon Land shares from the freezing and receivership orders, and directed trial of beneficial ownership and collusion issues: [2013] EWHC 2161 (Comm).