JSC BTA Bank v Mukhtar Ablyazov & Ors

Where funds may belong beneficially to a claimant, a defendant seeking to use them for living or legal expenses must first provide full and frank evidence that no other funds or assets are available for those purposes. If that threshold is met, the court must balance the risks of injustice to both parties. The merits of the underlying proprietary claim may be left aside where each side has a real prospect of success. A bare assertion that family members cannot continue financial support is insufficient where their assets and financial circumstances are unexplained.

The Bank claimed that approximately £1 million held in an account in Madiyar Ablyazov’s name remained beneficially owned by his father, Mukhtar Ablyazov. Madiyar asserted that the money was a gift. The Bank also alleged that the transfer was liable to be set aside under section 42 of the Insolvency Act.

Pending trial of the rival claims, Madiyar applied for permission to use the money for living expenses and legal costs. The central issue was whether he had established that he lacked access to other funds or assets.

1. Application dismissed. Madiyar had not discharged the threshold burden applicable where funds were arguably subject to a proprietary claim.
2. In such a case, the applicant must show by full and frank evidence that he has no other funds or assets, or access to them, for reasonable living expenses and legal costs. If other resources exist, they must be used first.
3. If that threshold is satisfied, the court must balance the risks of injustice. The relevant balancing exercise was described by Hoffmann LJ in Xylas v Khanna [1992] WL 12678996 as involving the competing risks that the claimant may lose the fund through expenditure, or that the defendant may be unable to mount a proper defence.
4. The court declined to assess the merits of the rival ownership claims because each party had a real prospect of success. Madiyar had adequately disclosed his own limited assets and income, but the evidence showed substantial past assistance from family members. There was no evidence from those family members about their assets, resources or ability to continue support. His assertion that they could not assist further was therefore insufficient.
5. Because the threshold requirement was not met, permission to draw on the account for living or legal expenses was refused.