JSC BTA BANK v (1) ROMAN VLADIMIROVICH SOLODCHENKO [2011] EWHC 1613 (Ch)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
[2011] EWHC 1613 (Ch)Case No Claim No. HC10C02462Venue Royal Courts of Justice, Strand, London, WC2A 2LL
Between
JSC BTA BANKClaimant/Applicant(1) ROMAN VLADIMIROVICH SOLODCHENKO(2) PAUL KYTHREOTIS(3) JASON CHRISTIAN HERCULES(4) CELlNA HOLDING INVESTMENTS LIMITED(FORMERLY BUBRIS INVESTMENTS LIMITED)(5) SHORELINE INVESTMENT HOLDING LIMITED(FORMERLY GRANTA INVESTMENT HOLDINGS LIMITED)(6) NAFAZKO INVESTMENTS LIMITED(7) OLOFU INVESTMENTS LIMITED(8) MYMANA HOLDINGS INVESTMENTS LIMITED(FORMERLY KYMA INVESTMENT HOLDINGS LIMITED)(9) MABCO INC(10) CALERNEN FINANCE INC(11) ASTROGOLD CORP(12) GRUNDBERG INC(13) EASTBRIDGE CAPITAL LIMITEDDefendants(14) SYRYM SHALABAYEVDefendant/Respondent(15) ALEXANDER UDOVENKO(16) PARK HILL CAPITAL LIMITED(17) ANATOLY ERESHCHENKO(18) MUKHTAR KABULOVICH ABLYAZOVDefendants
Before
Mr JUSTICE BRIGGSMR STEPHEN SMITH QC and MISS EMILY GILLETT (instructed by Messrs Hogan Lovells) appeared on behalf of the Claimant/Applicant.The Fourteenth Defendant/Respondent did not attend and was not represented.Date 17 May 2011
[1]MR JUSTICE BRIGGS: This is an application by the claimant, JSC BTA Bank, to commit Syrym Shalabayev to prison for contempt of court by reason of his failure to comply with the disclosure provisions in an international freezing order served personally on him in Cyprus on 5 th November 2010. An unusual feature of this case is that, since service of the freezing order and the substituted service of the committal application, Mr Shalabayev has done nothing of any kind to respond, either by communicating with the Bank or with the court, or by instructing legal representatives to do so. He has not, therefore, attended today nor offered any excuse for not doing so.[2]The questions, therefore, arise: (i) should the court proceed to hear the application in Mr Shalabayev's absence; and (ii), if so, and if the contempt alleged is proved, should the court proceed immediately to sentence, again in his absence, or adjourn for a sufficient time before sentence to give him a final opportunity, either to purge his contempt or to raise any relevant matters in mitigation?[3]Since the answers to those questions depend upon, substantially, the same evidence as is relied on by the Bank to prove the alleged contempt, it is convenient to set out that evidence and, in particular, the procedural history of the matter first.[4]The Bank's claim against Mr Shalabayev is, in summary, that he was centrally involved in a misappropriation of very substantial assets of the Bank and in the dishonest concealment of the proceeds of their realisation for the ultimate benefit of his brother-in-law, Mr Ablyazov. A measure of the loss alleged to have been caused to the Bank by Mr Shalabayev's conduct can be derived from the £200 million upper limit of the without notice freezing order granted against him by Henderson J on 3 rd November 2010.[5]Paragraphs 9 to 11 of that freezing order, contained under the heading "Provision of Information", imposed the following obligations on Mr Shalabayev: "9 .(1) Unless sub-paragraph (2) applies, each Respondent must within seven working days of service of this order and to the best of his/its ability after making all reasonable enquiries: (a) inform the Applicant's solicitors in writing of all of his/its worldwide assets exceeding in value £10,000, whether in his/its own name or not and whether solely or jointly owned and whether the Respondent is interested in them legally or beneficially or otherwise, giving the value, location and details of all such assets; (b) supply to the Applicant's solicitors copies of all documents in his/its control (which for these purposes shall mean documents which are or were in his/its physical possession and/or to which he/it has a right to possession and/or to which he/it has a right to inspect or take a copy) which evidence the matters set out in (a) above.(2) If the provision of any of this information is likely to incriminate the Respondent, he/it may be entitled to refuse to provide it, but he/it is recommended to take legal advice before refusing to provide the information. Wrongful refusal to provide the information is contempt of court and may render the Respondent liable to be imprisoned, fined or have his/its assets seized. 10. (1) Unless sub-paragraph (2) applies, each Respondent must within seven working days of service of this[6]The reference in paragraph 10(1)(a) to Schedule D is a reference to a series of questions, by way of interrogatories, about payments referred to in an earlier schedule, Schedule C, designed to require Mr Shalabayev to provide information of a tracing nature to assist the Bank in finding, if possible, where the proceeds of the assets to which I have referred are now to be found.[7]Service of the freezing order occurred, as I have said, on 5 th November 2010. Service is verified by the Bank's service agent, a Mr Marios Pavlou, who is a private service process officer, appointed by the Supreme Court of Cyprus, and it describes personal service on Mr Shalabayev at the Curium Palace Hotel, Limassol in Cyprus, including the freezing order itself, an order for service out of the jurisdiction and a letter from the Bank's solicitors, which specifically drew to the recipient's attention the disclosure obligations in the freezing order, warned him of the consequences of non-compliance and encouraged him to obtain legal advice.[8]The letter also made reference to the Bank's wish to serve further documents on Mr Shalabayev as soon as possible, including an application for continuation of the freezing order. In fact, the evidence shows that Mr Shalabayev had left the hotel when, on the following day, the process server endeavoured to serve those additional documents.[9]The disclosure obtained pursuant to further court orders from Yahoo, an email service provider, shows that Mr Shalabayev has been in the habit, continuing after the service of the freezing order upon him, of using email accounts with that service provider, including proxy servers designed to conceal his whereabouts. That material suggests that, although by no means certain, Mr Shalabayev is at present, probably, resident in Sofia, Bulgaria. The evidence shows that he was resident in London for a period ending in 2009 and that he is very unlikely to be within the jurisdiction now.[10]In the absence of any response by Mr Shalabayev after service of the freezing order, the Bank issued the present committal application on 13 th December 2010, supported by the tenth affidavit of Mr Hardman, to which my attention has been drawn, which was sworn on 10 th December.[11]Recognising that it would be unlikely that service on Mr Shalabayev could be effected by normal methods, the Bank obtained an order for service by email to the email addresses revealed as in use by Yahoo's disclosure, both of the substantive proceedings, including the amended particulars of claim, and of the committal application marked for hearing today and the evidence in support, from Peter Smith J on 14 th April. Service was effected by email on the following day. The covering letter, also sent by email, concludes in bold type as follows:
"It is important that you take legal advice in relation to the attached documents, ideally from an English-qualified solicitor, without delay. If you do not respond to the legal proceedings, judgment can be entered against you on the Bank's claims in your absence. If you do not respond to the committal proceedings (which are the subject matter of the 13 December 2010 Application Notice), you could be sentenced for the contempt of court alleged against you by the Bank, including to a custodial sentence. A hearing has been arranged for the committal application to take place at the High Court in London on 17 May 2011 at 10.30 am. We would strongly recommend that you participate in that process."
The letter concluded by providing contact details for Mr Hardman at Hogan Lovells, both by telephone and email.[12]There has, since the service of the committal proceedings by email, been no response by Mr Shalabayev, either to the Bank, its solicitors or to the court, nor has he attended today. Whether to proceed in Mr Shalabayev's absence[13]Committal proceedings seeking imprisonment of a respondent are a serious matter. Although it has a discretion to do so, the court will proceed in the absence of the respondent only in exceptional circumstances. Committal proceedings are quasi-criminal in nature and are criminal proceedings within the meaning of Article 6 of the Human Rights Convention. It is, therefore, to the jurisprudence about the discretion to hear criminal proceedings in a defendant's absence that this court will look for guidance in the context of committal. That jurisprudence was usefully summarised by Roth J, in the contempt context, in recent proceedings, JSC BTA Bank v Alexander Yu Stepanov [2010] EWHC 794 (Ch) at paragraph 12. "12. Contempt proceedings are quasi-criminal proceedings, as Lord Justice Oliver there emphasises, and they are criminal proceedings for the purposes of Article 6 of the European Convention on Human Rights. I was therefore referred to consideration by the House of Lords as to when a criminal trial can take place in the absence of the defendant. This was in the case of R v Jones (Anthony) [2002] UKHL 5 [2003] I AC 1. There their Lordships approved, with one qualification, the guidance given in that case in the Court of Appeal in a judgment of the court delivered by Lord Justice Rose, R v Hayward [2001] QB 862 . The Court of Appeal, after noting the general right of a defendant to be present at his trial and indeed to be legally represented, and the discretion of the trial judge to proceed without him, said this (at para.22):
'That discretion must be exercised with great care and it is only in rare and exceptional cases that it should be exercised in favour of a trial taking place or continuing, particularly if the defendant is unrepresented. In exercising that discretion fairness to the defence is of prime importance, but fairness to the prosecution must also be taken into account. The judge must have regard to all the circumstances of the case, including in particular ... '
The Court: of Appeal then set out various factors to be considered, which I read omitting the one that was disapproved by Lord Bingham on appeal in the House of Lords:
'(1) The nature and circumstances of the defendant's behaviour in absenting himself from the trial or disrupting it, as the case may be and, in particular, whether his behaviour was deliberate, voluntary and such as plainly waived his right to appear; (2) Whether an adjournment might result in the defendant being caught or attending voluntarily and/or not disrupting the proceedings; (3) The likely length of such an adjournment; (4) Whether the defendant, though absent, is, or wishes to be, legally represented at the trial or has, by his conduct, waived his right to representation. ' (5) concerns an absent defendant's legal representations which does not here apply: '(6) The extent of the disadvantage to the defendant in not being able to give his account of events, having regard to the nature of the evidence against him.' (7) concerns the risk of the jury reaching an improper conclusion about the absence of the defendant and so obviously does not apply; and (8) refers to the seriousness of the offence: '(9) The general public interest and the particular interest of victims and witnesses that a trial should take place within a reasonable time of the events to which it relates.'
The remainder are not relevant."[14]Applying those principles to the present case, I decided that I should hear the application in Mr Shalabayev's absence, at least for the purposes of deciding whether the alleged contempt had been proved. My reasons follow:(a) The evidence clearly demonstrates personal service of the freezing order and the case for a finding of contempt is based, simply, on Mr Shalabayev's complete lack of response to date to the obligations imposed in relation to disclosure. It is, on the question of whether the contempt is proved, a straightforward case in which a fair and just outcome is wholly unlikely to be affected by Mr Shalabayev's presence or absence, with or without legal representation.(b) The evidence about Mr Shalabayev's continuing active use of his email accounts and his use of proxy servers shows that this application and the evidence in support has come to Mr Shalabayev's attention and that he is deliberately declining to respond, both to the freezing order and to this application.(c) The ordinary course of an adjournment, coupled with a bench warrant compelling a respondent's attendance, is unlikely to bring about Mr Shalabayev's attendance, since he is almost certainly out of the jurisdiction and, even if within the jurisdiction, his whereabouts are not known. Any adjournment until Mr Shalabayev's attendance can be ensured might well be indefinite and that would amount to a denial of justice to the Bank. Whether the contempt is proved[15]In my judgment, applying for this purpose the criminal standard of proof, the alleged contempt is proved beyond reasonable doubt. The evidence clearly demonstrates both personal service of the freezing order, endorsed with the appropriate penal notice, together with a covering letter warning of the consequences of breach, and proves the complete failure by Mr Shalabayev, without explanation or excuse, to provide the disclosure ordered, either in time or at all. The contempt is both serious and continuing. It is particularly serious because, on the evidence before the court, Mr Shalabayev played a central role in the concealment of the proceeds of the realisation of the Bank's assets and may be supposed to be likely to have disclosable information of the highest value to the Bank in tracing its property. Self-incrimination privilege has not, of course, been invoked by Mr Shalabayev. Whether to proceed immediately to sentence[16]In a case where a serious contempt has been proved in a respondent's absence, it is, in my judgment, appropriate for the court to pause before proceeding immediately to sentence and to consider whether the matter should, in the alternative, be adjourned. There are a number of reasons for this:(a) In ordinary criminal proceedings, a decision to proceed to trial in the defendant's absence by no means leads automatically to sentencing in his absence, as well. Although I profess no expertise in criminal procedure, my understanding is that, in such circumstances, a criminal court will frequently afford a defendant an opportunity to attend to mitigate, all the more so where a custodial sentence is on the cards.(b) The balance of factors which, as here, lead to a conclusion that an absent defendant will suffer no injustice if contempt is proved in his absence may well not lead to the same conclusion in relation to sentence. Liability may, as here, be straightforward, but the possibility of purging contempt or other mitigation may well mean that an immediate sentence could cause, or at least risk, injustice or unfairness.(c) An adjournment during which the respondent is notified that a serious contempt has been proved and that there is a real likelihood of his being imprisoned may serve the beneficial purpose of bringing him to his senses and ensuring compliance. Alternatively, it may simply be fair to afford him that opportunity.[17]Mr Smith QC for the Bank, submitted that, in the Stepanov case, Roth J did, on similar facts, proceed straight to sentence without any apparent pause after finding that contempt had been proved. It was another case of breach of the disclosure provisions in a freezing order, where the respondent was resident abroad at the time of the hearing and was regarded as unlikely to return.[18]I wish to cast no doubt on the exercise by Roth J of his discretion in that case to proceed straight to sentence. For all I know he did pause or, at an earlier stage, weigh separately, but at the same time, the pros and cons in relation both to proof and sentence. Furthermore, Mr Stepanov had, until just before the hearing of the contempt application, active legal representation and, I infer, advice from which Roth J may well have concluded that he knew fully the risk that he was running, so that an adjournment would serve no purpose.[19]Having myself paused after finding contempt proved, I have reached the conclusion in this case that a modest adjournment should be ordered before sentence is passed. My reasons follow: (a ) Mr Shalabayev is a foreign national who, although apparently a fluent English speaker, is unlikely to have obtained any qualified English legal advice about the risk of a sentence of imprisonment which he now faces. (b) That risk, as I wish to make clear by this judgment, is a very serious one indeed. Without in any way prejudicing the matter, I can safely say that a sentence of imprisonment is a strong probability if Mr Shalabayev continues to be as unresponsive as he has been to date. (c) It is inherent in the Bank's application that Mr Shalabayev be imprisoned, that there is perceived to be a real (i.e. more than fanciful) prospect that he will wish to re-enter the jurisdiction at some time in the future. Otherwise a sentence of imprisonment would be a pure case of the court acting in vain. (d) If an adjournment is coupled with an immediate bench warrant requiring Mr Shalabayev to be brought to court for sentence, he will be as likely to be dealt with effectively, if he returns, as he would be if a sentence of imprisonment is passed now, giving him liberty to apply to purge once imprisoned. (e) Importantly, that course will enable the court to be better equipped to decide on an appropriate sentence at that stage, taking into account anything that Mr Shalabayev might then wish to advance by way of purging or mitigation.[20]I do not, however, direct an indefinite adjournment, leaving it up in the air whether sentence will ever be passed. I have in mind directing service by email of a transcript of this judgment, once approved, on Mr Shalabayev, coupled with the issue of a bench warrant, requiring his attendance at an adjourned sentence hearing, and I will hear submissions about an appropriate date for the adjourned hearing. If Mr Shalabayev still does not respond, the court will be very likely to sentence him, after that fair opportunity to respond, in his absence. - - - - - - - -

order

(a) to the best of his/its ability, and after making all reasonable enquiries, provide the answers in writing to the questions set out in Schedule D hereto; and(b) supply to the Applicant's solicitors copies of all documents in his/its control (which for these purposes shall mean documents which are or were in his/its physical possession and/or to which he/it has a right to possession and/or to which he/it has a right to inspect or take a copy) which evidence the matters set out in (a) above. (2) If the provision of any of this information is likely to incriminate the Respondent, he/it may be entitled to refuse to provide it, but he/it is recommended to take legal advice before refusing to provide the information. Wrongful refusal to provide the information is contempt of court and may render the Respondent liable to be imprisoned, fined or have his/its assets seized. 11. Within ten working days after being served with this order, the Respondents must swear and serve on the Applicant's solicitors an affidavit setting out the above information."

Cited in 15 later judgments

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