JSC BTA Bank v Ablyazov & Anor [2017] EWHC 2702 (Comm)

[2017] EWHC 2702 (Comm)Case No CL-2015-549
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Rolls Building, 7 Rolls Building, Fetter Lane, EC4A 1NLDate 6 November 2017
Before
Sir Andrew Smith(sitting as a Deputy High Court Judge)
Between
JSC BTA BankClaimant(1) Mukhtar AblyazovDefendants(2) Ilyas KhrapunovDefendant
Mr Stephen Smith QC and Mr Tim Akkouh (instructed by Hogan Lovells International LLP) for ClaimantMr Marc Delehanty (instructed by Hughmans Solicitors LLP) for Second DefendantHearing Hearing dates: 21 and 22 September 2017
Judgment ApprovedSir Andrew Smith:
[1]These are my reasons for my decisions on two applications that were before me at the second management conference in this case on 21 and 22 September 2017. It is convenient to refer to them as the “stay application”, an application made by the second defendant, Mr Ilyas Khrapunov, and the “amendment application”, an application by the Bank, as I shall refer to the claimant. The applications were contentious between the Bank and Mr Khrapunov: the first defendant, Mr Mukhtar Ablyazov, takes no part in the proceedings.[2]I said at the hearing that: i) I would refuse the stay application, but would direct that witness statements of fact and hearsay notices be exchanged by 4.30pm on 30 June 2018 (rather than by 4.30pm on 30 April 2018, as previously ordered); and ii) I would permit the proposed amendment (subject to a minor and uncontroversial change in the draft pleading). I said that I would give my reasons later.[3]On 27 September 2017, before I had done so and before my order was perfected, Mr Khrapunov’s representatives told me that on 25 September 2017 there had been a “significant development” concerning the amendment application and applied for me to “revisit and reverse” my decision on it. The parties agreed that I should deal with that application on paper and without oral submissions. In the event, the further evidence and submissions did not lead me to change my decision.[4]There is no need for me to describe in any detail the proceedings, or the related proceedings brought in this court by the Bank over the last eight years or so: they have been explained in other judgments to which reference can be made. It is sufficient to say that in this action the Bank brings a claim against Mr Ablyazov and Mr Khrapunov, his son-in-law, alleging a conspiracy by unlawful means: the Bank has judgments for over $4.6 billions against Mr Ablyazov, and it alleges that he and Mr Khrapunov acted together to deal with assets in breach of court orders made against Mr Ablyazov so as to prevent it from enforcing the judgments.

The stay application

[5]The background to the stay application is a challenge by Mr Khrapunov to the Court’s jurisdiction to entertain the claim against him. His challenge was partly successful before Teare J, who held that the Court has jurisdiction only over the claim for damage caused by wrongful dealings before 16 February 2012. The Court of Appeal allowed the Bank’s appeal and determined that the Court has jurisdiction over the whole of the claim. It refused Mr Khrapunov’s application for permission to appeal to the Supreme Court and also his application to postpone the date to serve his defence until after the Supreme Court had determined an application by him for permission to appeal.[6]The case was before me for a case management hearing on 20 June 2017, and on that occasion I ordered, inter alia, that: i) The parties make disclosure by 15 December 2017; ii) Witness statements be served by 30 April 2018; and iii) The trial be fixed to start not before 1 November 2018. In the event, the trial has been fixed to start on 21 January 2019, the first “reading day” being 16 January 2019.[7]On 8 August 2017 the Supreme Court granted Mr Khrapunov permission to appeal against the Court of Appeal’s judgment on jurisdiction. I was told that it is expected that the Supreme Court will hear the appeal in January or February 2018, and give its decision by May 2018. This timing is, of course, not certain, but both parties made submissions to me on the basis that this was probable and accepted that I should deal with the stay application accordingly.[8]By his notice of application dated 8 September 2017 Mr Khrapunov applied for an order to stay “the substantive proceedings”. Its basis is that if his appeal to the Supreme Court is wholly successful, the proceedings against him will be dismissed, and even if it succeeds only in that the decision of Teare J is restored, the scope of the proceedings, and so trial preparations, will be significantly reduced. However, Mr Khrapunov does not seek to have the proceedings stayed entirely: in particular, he wants to proceed with applications that he has made to discharge a worldwide freezing order (“WFO”) against him and an order that he be cross-examined on his response to it: they have been fixed for hearing in November 2017. At the hearing of the stay application Mr Marc Delehanty, who represented Mr Khrapunov, put before me draft orders in which he sought to state more precisely what stay is sought. As I understand it, essentially Mr Khrapunov seeks by whatever form of order to defer until after the Supreme Court’s decision procedural steps by way of preparation for the trial of this action, including in particular disclosure and inspection of documents, service of witness statements, pleadings (and pleading amendments) and issuing any Part 20 proceedings. Accordingly, he seeks amendments to the timetable ordered in June 2017 and consequently that the trial be deferred by a few months, Mr Delehanty suggested perhaps by only some three months.[9]There was some debate during the hearing about whether the order sought was really a “stay” such as is contemplated in CPR 3.1(2)(f), but it would not be fruitful for me to consider that question further. The proper approach to applications for a stay has been explained as follows: “a stay is the exception rather than the rule, solid grounds have to be put forward by a party seeking a stay, and, if such grounds are established, then the court will undertake a balancing exercise weighing the risks of injustice to each side if a stay is or is not granted”, per Sullivan LJ in DEFRA v Downs, [2009] EWCA Civ 257 at para 8. Accordingly, an applicant for a stay normally has to identify that he will be exposed to some form of irremediable harm if no stay is granted, and it is not enough to demonstrate “temporary inconvenience that any applicant is bound to face because he has to live, at least temporarily, with the consequences of an unfavourable judgment”: DEFRA v Downs, cit sup, at para 9. (See too Mahrani v Sippy, [2013] Civ 1820 per Aikens LJ.) These principles were invoked by Mr Stephen Smith QC, who represented the Bank, and Mr Delehanty did not seek to distinguish them on the basis that the application was not truly for a stay. His argument was that Mr Khrapunov satisfies the test enunciated by Sullivan LJ: that, if the proceedings continue towards trial pending the decision of the Supreme Court, he would suffer serious prejudice or at least that he would be exposed to a real risk of serious prejudice.[10]As I have said, I acceded to Mr Khrapunov’s application only in that I adjusted the date for service of witness statements to 30 June 2018. To my mind, this change, which the Bank hardly resisted, is consistent with maintaining the trial date: after all, the timetable had been laid down to allow for a trial in November 2018, and it is in fact fixed to begin two and a half months later.[11]It is convenient next to explain why I have referred to Part 20 proceedings. Pursuant to an order made at the June Case Management Conference, on 31 July 2017 the Bank served particulars about what recoveries it had made in respect of its judgments against Mr Ablyanov. It stated that “entities” under the ultimate beneficial ownership of Mr Kenges Rakishev, who is the Bank’s Chairman and has had a major beneficial interest in it since 2014, (the “Rakishev entities”) had taken steps in respect of assets of Mr Ablyazov. It was denied that these steps were taken by “the Bank, its agents or entities under its control”. Mr Khrapunov says that in view of the Bank’s particulars he intends, if his appeal to the Supreme Court does not result in the proceedings against him being dismissed, to apply to join as third party defendants Mr Rakishev and the so-called Rakishev entities. According to the skeleton argument served on his behalf, he contemplates claims described as follows: “Assuming the truth of the Bank’s position expressed in its [particulars] … Mr Rakishev has been interfering in the asset recovery process and/or taking advantage of the knowledge that he has by virtue of his position at the Bank in effect to feather his own nest. On the face of it, his or his nominees’ acquisition of assets otherwise available to the Bank suggests the commission by him of wrongs/breaches of duty which have contributed to the same loss and damage to the Bank in respect of which it brings the present claim against Mr Khrapunov. Moreover, Mr Rakishev’s actions will have caused loss and damage to Mr Khrapunov – not least in finding himself subject to these proceedings and the WFO against him”.[12]I am sceptical about the threat of Part 20 proceedings, and not persuaded that this threat need or should significantly disrupt the progress to trial of the Bank’s claim. It is not clear to me what the nature of the cause(s) of action would be or that Mr Khrapunov has a proper basis to bring such claims against Mr Rakishev and the entities referred to, not least because if the information in the Bank’s pleading is correct – and it is said to be on the basis of that information that Mr Khrapunov is contemplating the Part 20 proceedings – it might be that Mr Rakishev has made no recoveries or at least none that exceed the expenses incurred in seeking them.[13]Certainly no steps have been taken by Mr Khrapunov to start Part 20 proceedings. It was said that this is because he might be submitting to the jurisdiction if he brought them. But in so far as he was concerned that the Bank might so contend, this has been handled in comparable circumstances without hampering the progress of the action: on 24 February 2017 Knowles J made an order by consent that the service of Mr Khrapunov’s defence should not constitute submission to the jurisdiction, and Mr Smith made clear that the Bank would consent to a similar order with regard to bringing Part 20 proceedings. Mr Delehanty also argued that Mr Khrapunov would be exposing himself to a counterclaim by Mr Rakishev in the Part 20 proceedings, and I recognise that, if an order to protect Mr Khrapunov were made before Mr Rakishev or his entities have been joined as party to the proceedings, he or they could apply to set it aside. But I was told that Mr Khrapunov has not even sent a letter before action to Mr Rakishev or his entities in respect of the threatened Part 20 proceedings; still less has he sought an arrangement with Mr Rakishev to deal with any concerns about submission to the jurisdiction.[14]However that might be, I am not persuaded that, if such Part 20 proceedings were brought, they would require that the trial in January 2019 be adjourned and could not be accommodated in the present timetable for the Bank’s proceedings against Mr Khrapunov. Therefore, although I do not entirely discount this consideration in deciding the stay application, I do not give it great weight.[15]I must therefore come to the question whether, as a result of me refusing relief other than changing the date for serving witness statements, Mr Khrapunov will suffer serious prejudice that would have justified further relief and outweighed any disadvantage that the Bank might have suffered. Mr Khrapunov identified three kinds of prejudice: i) That, if his appeal to the Supreme Court is wholly or even partly successful, he and his advisers will have been put to trouble and expense unnecessarily preparing for the trial (which might be labelled “wasted preparation” prejudice); ii) That he will be required to disclose to the Bank confidential and possibly sensitive information, exposing himself to a real risk that it or the Government of Kazakhstan might improperly use it to his disadvantage and that of his family (“disclosure” prejudice); and iii) That he would be unfairly hampered from obtaining evidence from potential witnesses if their identities were made known to the Bank and their statements served on the Bank although the proceedings might not go to trial (“witness” prejudice).[16]I take witness prejudice first. I observe that Mr Khrapunov has not previously expressed this concern: in his Case Management Information sheet of 13 June 2017, served before the June CMC, when asked to give the names of witnesses of fact on whom he intended to rely on at trial or to explain why this was not being done, he simply relied “Not yet in a position to answer this”. But it is now said that this is a real risk because of how the Bank has in the past dealt with those whom it has perceived to be assisting Mr Khrapunov, and so it is said that: i) A Ms Elena Tyschenko (or Ms Olena Tyschenko, according to Mr Matthew Jenkins, a solicitor and member of Hughmans Solicitors LLP, who act for Mr Khrapunov) was imprisoned to procure her co-operation with the Bank. At a hearing on 2 May 2017 HHJ Waksman QC was sufficiently persuaded that there was “information of concern” about this to allow Mr Khrapunov to rely on the allegation in support of his application to set aside the WFO. ii) A Norwich Pharmacal order and a writ ne exeat regno was obtained by the Bank against a Mr Eesh Aggarwal. iii) In the case of Ukraine v Kononko, [2014] EWHC 1420 (Admin), the Administrative Court upheld a decision to refuse on the grounds of abuse of process an order to extradite to the Ukraine the respondent, Mr Kononko, who was alleged to have defrauded the Bank, the abuse being that the Bank’s Ukrainian lawyers were improperly involved with the Ukrainian authorities.[17]At least some of these allegations, unsurprisingly, touch on controversial issues, and I should not express any unnecessary views about them because they might, at least to a significant extent, be under consideration at the November hearing. Whatever their merits, as Mr Smith observed, the potential witnesses (whom Mr Khrapunov has not of course identified given the nature of his argument about witness prejudice) could hardly expect certainty about whether the claim will go to trial: it is the nature of litigation that witnesses will never know that. More importantly, to my mind, the change in the date for service of witness statements until after the expected date of the Supreme Court judgment really meets the witness prejudice argument.[18]With regard to disclosure prejudice, Mr Khrapunov says that he is naturally and legitimately concerned about disclosing information to the Bank when it might prove unnecessary because in the past the Bank and the Kazakh Government have used and misused information to his detriment and so oppressed him and his family and associates; and that there is a real risk that the Bank will not comply with its duty to use any disclosure only for the purposes of the litigation (unless the Court permits other use). Again, this submission introduces controversies that are likely to be the subject of argument at the November hearing and in other litigation, and again I shall not express any opinion about them unnecessarily. But I should set out the nature of the material on which Mr Khrapunov relies.[19]The criticisms of the Bank included that it arranged for Mr Khrapunov to be put under surveillance; that it made and published on the internet a film about him about which criminal defamation proceedings have been bought in Switzerland; and that it was party to attempts to have him extradited to the Ukraine, using to this end the order in these proceedings for his cross-examination in respect of his disclosure pursuant to the WFO. The Bank responds that surveillance of Mr Khrapunov was proper and justified; and that much of the film is well-founded, and Mr Ablyazov too has sought to publicise his contentious account of this dispute. I shall say nothing about the allegation that the cross-examination order was improperly deployed because it is controversial and the subject of continuing litigation. In any event, these criticisms seem to be of limited relevance in that they are not allegations of improper use of information provided to the Bank on disclosure or in comparable circumstances.[20]With regard to the relationship between the Bank and the Kazakh Government, Mr Khrapunov says that the Government and Kazakh politicians have been involved in decisions about the Bank’s claims against Mr Ablyazov, that there have been disclosed to the Government both information about his assets and draft judgments of the English court that were embargoed, and generally that information has been closely and informally shared between the Bank and the Government. The Bank refutes that there is really any significant risk that information will be improperly passed to the Government. It accepts that there were exchanges between the Bank and the Government before proceedings were first brought against Mr Ablyazov in this jurisdiction in August 2009: one email refers to the Prime Minister telephoning to “order the filing of court papers” to commence them. But the Bank submits that this is unremarkable given that at that time the Bank was partly nationalised. I consider that this provides no basis to infer that the Government has continued to have any part in directing the litigation since it disposed of its interest in the Bank in 2014, still less to infer that the Bank has improperly disclosed information in this context or that it will do so. While Mr Khrapunov’s position is that the Bank is still “under the control of the Kazakh state” and does not operate independently of political considerations, he has produced no real evidence of this.[21]The Bank has not been able to confirm whether embargoed drafts of judgments were passed by one of its officials, but acknowledges that, if they were and the documents relied on in support of the allegation are authentic, its official acted wrongly, and the Bank has apologised. Without condoning any such conduct, to my mind this complaint does not in itself provide any convincing basis for believing that documents disclosed by Mr Khrapunov or information in them will be passed to the Government.[22]I have not recited everything on which Mr Khrapunov has sought to rely in support of his contention that the discovery process will expose him and others as he contends. However, I have considered all the evidence and neither it nor Mr Khrapunov’s arguments convince me either that there is any exceptional risk that the Bank will use improperly documents or information that it receives through the disclosure process or that its relationship with the Kazakhstan Government is such as to aggravate the risk that documents or information disclosed will be used to harass, oppress or otherwise wrong Mr Khrapunov or those associated with him.[23]But to my mind there is another consideration that goes some way to answer to Mr Khrapunov’s complaint of disclosure prejudice. The complaint is, as I understand it, that prejudice would arise from disclosure per se (rather than from inspection of disclosed documents), but Mr Khrapunov did not explain, even in general terms, how a disclosure list might give sensitive information about documents which might be misused as he suggested. After all, he had already made disclosure pursuant to the WFO: he was ordered to inform the Bank’s solicitors to the best of his ability (inter alia) of all his worldwide assets exceeding £10,000 in value, and he cannot be heard to suggest that the disclosure that he has made is not complete and proper. I invited Mr Delehanty to exemplify what further information might be forthcoming from listing documents on disclosure that was liable to cause unfair prejudice to Mr Khrapunov. He suggested first that Mr Khrapunov might have to disclose bank accounts which were not covered by the WFO because they had been closed before the relevant date in October 2015, but the sensitivity of such historical information is not obvious. Secondly, Mr Delehanty suggested that Mr Khrapunov might have to reveal email accounts, and so expose himself to the risk of hacking, claiming that his accounts have been hacked in the past, but a disclosure list need not identify email addresses.[24]As for inspection, the court is used to protecting sensitivities about information, for example by permitting redaction or confining inspection to a limited circle of representatives of the parties. Mr Delehanty’s examples did not persuade me that any new information or documents that Mr Khrapunov would have to disclose will present problems that cannot be managed by the court or need result in unfairness to him.[25]The complaint of wasted preparation prejudice is that, if Mr Khrapunov’s appeal to the Supreme Court is successful, he and his advisers will have done unnecessary work and incurred unnecessary expense by way of making disclosure, supplying documents for inspection, analysing the Bank’s disclosure, producing witness statements and preparing expert reports; and if the appeal is only partly successful, some of the work will have been unnecessary. As I see it, four considerations lessen the force of this argument.[26]First, it likely that the Bank will be ordered to pay Mr Khrapunov’s costs if the claims are dismissed following a wholly successful appeal on jurisdiction, and similarly it is likely that, if the appeal is partly successful, the Bank will be ordered to pay the costs resulting from claims beyond the Court’s jurisdiction.[27]Secondly, Mr Khrapunov has provided no evidence of the cost of the work that might, he argues, be wasted. All that Mr Delehanty was able to submit was that the Bank in its disclosure report estimates its disclosure costs at £200,000 to £300,000, but to my mind this gives little indication of the time or work required to analyse the Bank’s disclosure. Mr Khrapunov’s report does not provide comparable information about his own disclosure exercise (although it should have done so): he responded to the question seeking an indication of the cost of standard disclosure “TBA” (presumably meaning “to be announced”), but no information has yet been given.[28]Thirdly, my order postponing the date for exchange of witness statements goes some way to ameliorating the costs in that regard, and as for expert reports, the timetable provides for Mr Khrapunov to serve any evidence in November 2018.[29]Fourthly, it is worthy of note that despite his professed concern to avoid unnecessary expenditure, Mr Khrapunov does not seek to avoid the expense of the hearing in November 2017 of his application to discharge orders for interim relief made against him. Of course, it is understandable that he would wish to be rid of the WFO, but he gave no more specific explanation as to why he is prepared to incur this expense before the decision in the jurisdiction appeal, which might dispose of the need for it.[30]I should refer to two other points made on behalf of the Bank. First, as it is put in a witness statement of Mr Richard Lewis, a partner of Hogan Lovells International LLP, who act for the Bank, “the suggestion that Mr Khrapunov is concerned about costs rings somewhat hollow given the significant spending on numerous applications and appeals that he has brought since being served with these proceedings”. I do not need to debate the extent of each party’s success or failure on previous interlocutory skirmishing: the point that previously Mr Khrapunov (and indeed the Bank) must have incurred great legal expense without apparent concern is well made.[31]The Bank also submitted that Mr Khrapunov is financing this litigation from frozen funds of Mr Ablyazov, and so any prejudice from expenditure would ultimately be to the Bank in that it has a right to recovery against frozen funds. I am not in a position to reach any firm conclusion about that, I need not do so, and I think it better to express no view about it.[32]I must balance against Mr Khrapunov’s arguments the Bank’s wish to have its claim against Mr Khrapunov decided as soon as possible, which in itself is to my mind wholly reasonable. The proceedings were brought on 17 July 2015, the claim is very substantial, and the Bank has showed a sufficiently arguable case against Mr Khrapunov to obtain the WFO against him. In response Mr Khrapunov submits that the Bank has not pursued the action with “any particular urgency”, pointing out that it has not applied for an expedited trial. But I am not persuaded that there is anything in this point: an expedited trial would not have been ordered, and I cannot accept that the Bank has been dilatory otherwise. In so far as Mr Delehanty argued that the Bank could have made the amendment application sooner than it did, that has not affected the progress of the action as a whole or the trial date.[33]It is also said that the Bank will not be prejudiced by the action being stayed or its progress being slowed because it is protected by interim relief, including the WFO. Apart from the fact that Mr Khrapunov is seeking to have the WFO discharged, it is hardly surprising that the interim relief provides only limited comfort to the Bank given the nature of the claim against him.[34]All this said, I recognise that, as Mr Delehanty submitted, the relief that Mr Khrapunov seeks would delay the trial and any judgment that the Bank might obtain for a relatively short period, and this limits the prejudice that would result to the Bank from a stay.[35]This would be a more powerful point if I could be confident that the case is likely to proceed smoothly to trial and in particular that Mr Khrapunov’s disclosure is likely to be straightforward. But, given the history of this and associated litigation, it is only realistic to foresee a protracted and contentious disclosure exercise and to recognise that the court might well have to decide issues between the parties relating to disclosure and inspection of his documents (and, I suspect, other interlocutory disputes), and the sooner any contentious disclosure exercise is under way the better. My scepticism about Mr Khrapunov’s attitude to disclosure has been shared by other Judges: for example, on 20 January 2016,after Mr Khrapunov had invoked the privilege against self-incrimination to resist disclosure of his personal assets, Phillips J considered that his response suggested “that his present motivation is to avoid giving proper disclosure to the Bank, not a genuine concern as to an increased risk of prosecution”; and on 23 March 2016Teare J, who was considering Mr Khrapunov’s affidavit in response to an order that he make disclosure in relation to his dealings with Mr Ablayov’s assets, recorded that the Bank said that evidence in the affidavit could not be true and opined that “the Bank has a lot of evidence which suggests that”.[36]I shall not fully describe in a public judgment other material that casts doubt on Mr Khrapunov’s response to disclosure orders made against him in this action because it is subject to a confidentiality regime, but Mr Lewis points out that Mr Khrapunov has not responded to the Bank’s complaint that he failed to disclose assets including real estate in France and a so-called “private jet option”. My scepticism is further reinforced by documents that he has provided for case management purposes:Mr Khrapunov’s case management information sheet before the June CMC seemed designed to provide as little information as possible. I have referred already to his answer in his disclosure report about his costs in respect of standard disclosure, and it also suggested (improbably) that he had only one email account: his electronic documents questionnaire (“EDQ”) later accepted that he used various accounts. Mr Khrapunov did not provide an EDQ before the June CMC, but at the hearing his counsel, Mr Charles Samek QC, agreed to serve one within four weeks. It was served on 18 July 2017. It too is unhelpful: for example, it does not identify custodians of documents. It also states that “it is apparent that the position under Swiss law (and potentially other foreign laws) … stands to be investigated [in connection with disclosure obligations] … The Second Defendant will endeavour to clarify his position … in good time before the hearing of the second CMC”. The position was not clarified either before or at the second CMC.[37]In view of my conclusion that the date for disclosure ordered in June should not be deferred, it follows that pleadings should not be stayed. The issues should, so far as possible, be defined before disclosure.

The amendment application

[38]The Bank applied to amend the particulars of claim inter alia to introduce claims that, as part of the conspiracy, in and after late 2011 Mr Khrapunov together with Mr Ablyazov dealt with assets through instructions given to Mr Aggarwal, an English accountant based in Dubai. The information on which these allegations are based apparently was learned by the Bank from disclosure given by Mr Aggarwal in 2016 pursuant to a Norwich Pharmacal order made on 17 June 2016:according to Mr Aggarwal he was engaged by Mr Khrapunov to “develop a structure, which enabled the beneficial owners [of funds transferred to him] to hold their assets in an opaque way which maintained privacy”. The assets, the Bank alleges, were covered by court orders against Mr Ablyazov, but Mr Aggarwal was, he has said, misled about their beneficial ownership by Mr Khrapunov. Thus, the amendments arise from matters learned by the Bank only after these proceedings were brought and after the particulars of claim were served on 17 July 2015. Although there was some suggestion that the Bank might have applied to make the amendments sooner after Mr Aggarwal made the relevant disclosure, I do not understand that this is said to be a reason to refuse permission to amend, and certainly I would reject any such suggestion: the application was made well before disclosure is due and, if granted, the amendment would not affect the trial date or unfairly impact on preparations for trial.[39]According to the draft pleading, the assets that were laundered in this way amounted to some $495.8 millions, and Mr Aggarwal produced two flow charts apparently reflecting how the assets were dealt with. One flowchart concerns so-called “project A” assets, which were to the value of some $56.21 millions.The other concerns the so-called “project N” assets, said to be worth some $439.59 millions. The project N assets include monies paid to a company called Telford Investments Limited (“Telford”, a Marshall Islands company), and, according to Mr Aggarwal, as far as he recalls assisted by the flowcharts, Telford made a loan to Triadou SPV SA (“Triadou”) for the purpose of purchasing a mall in the USA. (Triadou is apparently incorporated in Luxembourg: the Bank so pleads and the US Federal Court describes it as a Luxembourg company, but Mr Peter Black, a solicitor and member of Hughmans Solicitors LLP, stated in his evidence that it is Swiss.) From the N project flowchart, the amount of the loan appears to be $71.69 millions.[40]The amendment application was indicated about a week before the June CMC when a draft pleading was served. On the day before that hearing, Mr Khrapunov raised two objections to the draft amendments in the skeleton argument served on his behalf: i) That it was “unclear whether the claim underlying the proposed amendment had been compromised” in a settlement agreement with third parties (the “compromise” point); and ii) That there “may be an overlap between the allegations made in the proposed amendment and proceedings which the Bank has brought against Mr Khrapunov in the United States such that it would not be appropriate to try these allegations [in these proceedings]” (the “overlap” point).[41]The Bank had not had time before the hearing in June to put forward evidence adequately to deal with the compromise point and it became clear during the hearing that not enough information about the American proceedings was available to deal with the overlap point. Accordingly, I permitted some uncontroversial amendments and otherwise stood the amendment application over to the second CMC.[42]More evidence about the compromise point has now been served, and in light of it Mr Khrapunov no longer relies on it. I need say no more about it.[43]The background to the overlap point is this: on 7 July 2015 entities connected with Mr Joseph Chetrit, a New York property developer and referred to as the “Chetrit entities”, brought interpleader proceedings before the New York State Court. They were later transferred to the Federal Court.It appears that the Chetrit entities had agreed with Triadou to pay $21 million in consideration of Triadou assigning to them an interest in a company connected with New York property development. The City of Almaty claimed that this payment represented monies stolen from it by Mr Viktor Khrapunov, Almaty’s former mayor and the step-father of the second defendant in this action. On 12 October 2015 the Bank sought to intervene in the New York proceedings to bring cross-claims against the Chetrit entities and also Triadou, Mr Viktor Khrapunov, Mr Khrapunov and Mr Ablyazov, alleging that monies that Mr Ablyazov had stolen from it had been laundered through property investments made in New York by Triadou. The Bank pleaded various causes of action, including RICO claims, that it to say claims based on contravention of the US Racketeer Influenced and Corrupt Organizations Act. On 7 September 2016 the Bank served amended cross-claims, and also sought to join FBME Bank.[44]On 26 September 2016 Mr Khrapunov applied to have the Bank’s claims against him dismissed on various grounds, including that the New York is forum non conveniens and that the RICO claims fail for want of domestic injury. He also maintains that the American Court does not have personal jurisdiction over him, and he accepted that some discovery is needed before this jurisdiction challenge can be determined. On 23 December 2016 the Court has upheld Mr Khrapunov’s challenge to the RICO claims and dismissed them.[45]On 25 September 2017, after the hearing before me had concluded, the US Federal District Court issued a ruling in the American proceedings and dismissed the challenge to the Court’s jurisdiction on the basis of forum non conveniens. This was one of the grounds on which Mr Khrapunov applied for me to revisit and reverse my decision of 22 September 2017 to allow the amendment application. Mr Jenkins gives evidence that, according to Mr Khrapunov’s New York attorneys, he will not appeal against this ruling.[46]Mr Jenkins also states in the application notice that he is informed by the New York attorneys that, following this ruling, “Mr Khrapunov has no extant motion to dismiss the claims in the New York proceedings on jurisdictional grounds” (emphasis added). That is not disputed as far as it goes. However, the Bank points out, and this too had not been disputed, that Mr Khrapunov’s stated position in the New York proceedings is that he intends to challenge the jurisdiction of the American Court after discovery, putting it as follows:
“We deny that Ilyas Khrapunov is subject to personal jurisdiction because he denies that allegations made against him in the Amended Counterclaim – ie that he was involved in an illegal conspiracy involving New York real estate – but we recognise that the Court may rely on BTA/Almaty’s pleadings during the pre-discovery stage of litigation… Because jurisdictional discovery would overlap with discovery on the merits of the case, Ilyas should be permitted to pursue a personal jurisdiction defense after discovery has taken place”
. Thus, he still intends to challenge jurisdiction in the American proceedings.[47]Mr Delehanty submitted that the Bank seeks by its proposed amendment to introduce into these proceedings allegations that are already in issue in the New York proceedings, and that the English courts have long recognised that such “multiplicity of proceedings” is undesirable. The authorities show that the courts have two concerns where one party sues another both here and elsewhere in respect of the same or similar matters. One is that it might be oppressive and vexatious for a defendant to face claims in different courts, or, if not actually oppressive or vexatious, the onus that it places on the defendant and the potential unfairness to him are relevant to the court’s decision whether in its discretion to permit an amendment. The other is the risk that the different courts might deliver inconsistent judgments. Mr Khrapunov relies upon both these points in arguing that the Bank should be refused permission to amend. Further, I would suppose, the courts prefer not to deploy their resources unnecessarily on duplicative litigation.[48]There is no rule of law that it is vexatious, oppressive or an abuse of process if a person brings more than one set of proceedings against a defendant. The leading authority is the judgment of the Privy Council in Societe Nationale Industrielle Aerospatiale v Lee Kui Jak, [1987] UKPC 12, which was delivered by Lord Goff. He emphasised that “there is no presumption that a multiplicity of proceedings is vexatious”. This authority was considered by the Court of Appeal in Kuwait Oil Tanker Co SAK and anor v Al Bader and ors, (27 November 1995, unrep), where the second defendant, Hasan Ali Hassan Qabazard, applied to have the proceedings against him in England stayed or struck out on the grounds of forum non conveniens and/or that the claimants be put to their election as to whether to proceed against him in England or Kuwait. Mr Qabazard was the subject of criminal proceedings in Kuwait, to which were attached civil proceedings against him by the claimants. Hobhouse LJ, with whose judgment the other members of the Court agreed, accepted that “[i]t is … correct for Mr Qabazard to say that he is subject to civil proceedings in more than one jurisdiction, at the same time, at the suit of the same person, and in respect of the same subject matter”. However, he upheld the decision of HHJ Diamond QC neither to put the claimants to an election to sue here or in Kuwait nor to stay the English proceedings. He made this observation:
“[i]t is unfortunately a feature of modern commercial litigation that proceedings in a number of countries may be necessary in order to enable the proceeds of fraud or other misfeasance to be recovered. It is onerous to a defendant that he should have to defend himself if he chooses to do so, in a number of jurisdictions. But that may be an inevitable consequence of permitting proper remedies to [claimants] who can show … a strong case that they have been defrauded. Multiplicity of proceedings is prima facie vexatious but is not necessarily so and it is a matter for the discretion of the Court whether it should put the [claimant] on terms and if so what terms”
. He went on to say this about complaints that multiplicity of proceedings would be unfairly onerous on the defendant and risk inconsistent decisions: “… if the proceedings in Kuwait follow a timetable which, in contrast to what appears to be happening at the moment, begins to impose serious practical difficulties upon Mr Qabazard, then the time-table of the action in London might have to be reconsidered to take account of his position. Similarly, if there was a risk of inconsistent decisions being arrived at by courts in different countries at the suit of the [claimants], appropriate orders might have to be made to avoid that risk. In my judgment, it would not be acceptable that the [claimants] should be asking courts, in actions in which they are the [claimants], to reach inconsistent decisions”. (The amendment that the Bank wishes to make is consistent with the allegations that it makes in New York.)[49]These authorities are, as was submitted by Mr Stephen Smith QC, who represented the Bank, in line with the decision of Teare J in Karafarin Bank v Mansoury-Dara,[2009] EWHC 1217, although it appears from the Lloyd’s Report ([2009] 2 Lloyd’s Rep 289) that they were not cited to him. The claim in that case was on 13 cheques, but the claimant had already brought proceedings in Iran on four of the cheques and obtained judgment on them there. The defendant applied to stay the English proceedings inter alia on the ground that in view of the claims and judgments in Iran the English proceedings were an abuse of process. Teare J accepted that prima facie “it is an abuse of process for a claimant to pursue a defendant for the same debt or damages in two jurisdictions”, citing the statement of Sir Nicholas Browne-Wilkinson V-C in Australian Commercial Research and Development Ltd v ANZ McCaughan Merchant Bank Ltd, [1989] 3 All ER 65. Nevertheless, on the facts of the case, Teare J decided that the English proceedings should not be stayed.[50]Mr Smith also referred me to the decision of the Vice-Chancellor in the ANZ Bank case, in which the claimant issued proceedings in England against the defendant bank, which brought a counterclaim. The claimant also brought proceedings in Queensland against both the bank and all the brokers involved in the relevant transactions: only one of the brokers was party to the English proceedings. The claimant then applied to stay the English claim and the counterclaim. Sir Nicholas Browne-Wilkinson granted the application, observing that “It is clear that the proceedings issued in Queensland … could raise and determine as between the [claimant] on the one hand and all the ANZ brokers on the other the issue which underlies the whole of the dispute between these parties …” (loc cit at p.69c). He said that “… where a [claimant] seeks to pursue the same defendant in two jurisdictions in relation to the same subject matter, the proceedings verge on the vexatious. I am not suggesting in any sense that the [claimant] in this case was being deliberately vexatious, but the outcome is vexatious” (at p.69j).[51]At the hearing before me on 21 and 22 September 2017, although I was referred to this judgment, no reference was made to the appeal from it or to the judgment of the Court of Appeal: unrep 23 February 1990. Further, in the exchanges before me it was observed that, according to the All England Report, the Vice-Chancellor was not referred to the judgment in the Aerospatiale case. The second ground upon which Mr Khrapunov argued that I should revisit my decision on the amendment application was that I should consider the judgments in the Court of Appeal. In his written submissions on the application, Mr Delehanty, who had previously not known of the appeal judgments, submitted that they are “vital”, the September hearing having proceeded on the basis that the ANZ case was decided at High Court level and “enunciated in ignorance of the [Aerospatiale] decision”. He relied particularly on the statement of Dillon LJ, with whom Woolf and McCowan LJJ agreed, that, “… the traditional view, where a [claimant] has for procedural reasons started proceedings against the same defendant in more than two jurisdictions, is that the defendant can require the [claimant] to elect in which of those jurisdictions the [claimant] will actually proceed, and the defendant can then have the others stayed, struck out or injuncted”. Mr Delehanty submitted that “insofar as the Court of Appeal judgment in Kuwait Oil Tanker Co v Al Bader … departs from the principle recognised in the antecedent Court of Appeal case of ANZ Bank, it is not to be followed”, pointing out that, as far as appears from the report, the judgment of Sir Nicholas Browne-Wilkinson, but not that of Dillon LJ, was cited to the Court of Appeal in the Kuwait Oil Tankers case. He also submitted that, if the Court of Appeal decision in ANZ Bank be inconsistent with the Aerospatiale decision, I should follow the authority of the Court of Appeal rather than the Privy Council, citing with regard to the applicable rules of precedent the judgment of Lord Neuberger in Willers v Joyce, [2016] UKSC 44 at paras 16,17. He observed that the Aerospatiale case had been cited to the Court of Appeal, albeit apparently on a different point. Thus he advanced the ambitious argument that the judgment of Dillon LJ might differ from those of Lord Goff and Hobhouse LJ, and that I should prefer and follow that of Dillon LJ.[52]If I understand it correctly, the implication of Mr Delehanty’s argument was that Dillon LJ was stating something approaching a rule that the court will not, if a defendant objects, permit a claimant to proceed against him in two jurisdictions. I see no inconsistency or tension between the judgments, and I cannot accept this interpretation of Dillon LJ’s judgment. It is perhaps worth noting that after the statement cited above Dillon LJ continued, “It is not for the defendant to elect in which jurisdiction the [claimant] shall proceed, nor is the [claimant] automatically restricted to the jurisdiction in which the first writ was issued”. If this approach were adopted, permission for the amendment would not be refused, but the Bank would be put to an election whether to amend or to pursue the New York proceedings. Mr Khrapunov, however, has never argued that, as a condition of permission to amend, the Bank should be required to abandon the New York proceedings. On the contrary, his position is that the Bank is not entitled to pursue claims against him either in England or in New York, disputing the jurisdiction of both courts; and his contention on the amendment application is simply that it should be refused, adding that the proceedings in New York being “at a more advanced stage”. This too is a submission that I reject: although apparently discovery – both by way of demands for documents and depositions of the parties and third parties – are under way in America, no defence has been served, it appears that the first instance court will still have to rule on whether it has personal jurisdiction to hear the claims against Mr Khrapunov, and the evidence does not indicate that a trial date has been fixed or when it will be fixed or when the proceedings are likely to come to trial.[53]However that might be, I cannot accept that Dillon LJ intended to state anything as inflexible as was apparently suggested, rather than a broad statement of principle, which admits of exceptions. Any other interpretation of his judgment would attribute to him not only a different view from Lord Goff and Hobhouse LJ, but also a departure from the nineteenth century authorities cited by Lord Goff, specifically McHenry v Lewis, (1882) 22 Ch D 397 and Peruvian Guano Co v Bockwoldt, (1883) 23 Ch D 225. He could not have described such a departure as “the traditional view”.[54]It would also apparently mean that without recognising it in his judgment he was differing from Sir Nicholas Browne-Wilkinson, who referred to the statement about lis alibi pendens in the then current 11th edition of Dicey and Morris, Conflict of Laws (1987) p.395: that, where the same claimant sues the same defendant in England and abroad, the Court may be asked to stay the English proceedings or to enjoin the foreign proceedings, and that “it is not likely that the court would allow, except in very unusual circumstances, the continuation of proceedings by the same [claimant] against the same defendant for a similar cause of action in two jurisdictions”. I note that the current 15th edition of Dicey (2012), having referred to the citation of the 11th edition in the ANZ Bank case at para 12-044, continues at para 12-045 as follows: “But there will be other cases in which the claimant may justify the beginning of proceedings in more than one court, for example … it may be necessary or desirable to bring proceedings in two jurisdictions, in order to be able to obtain full satisfaction of the claim against the defendant. In such cases, the allegation that the claimant is acting oppressively, and the submission that he should be put to his election, or other relief granted, will be sufficiently answered”.[55]There is another answer to Mr Delehanty’s argument. It must be implicit in his statement of principle that Dillon LJ had in mind the position where the same or similar claims are being brought in more than one jurisdiction, or as Hobhouse LJ and Sir Nicholas Browne-Wilkinson put it, claims “in respect of the same subject matter”. Mr Delehanty himself cited other authorities to similar effect about two actions in different English courts: in Royal Bank of Scotland Ltd v Citrusdal Investments Ltd, [1971] 1 WLR 1469, Plowman J referred at p.1473 to “the substantial point” in the proceedings being the same, and in Airport Restaurants v Southend Corp, [1960] 1 WLR 880, Harman LJ said that “to allow two sets of proceedings to go on about practically the same matter, in two different courts at the same time must prima facie be a course that the court should avoid” (at p.883, emphasis added).[56]As Mr Smith emphasised, the Bank’s claims in this action and the New York claims against Mr Khrapunov differ significantly: first, the basis of the New York claims is that Mr Khrapunov was party to laundering money that had been stolen, or “looted”, as it was put in the Bank’s New York pleading, and they include what, if not strictly a proprietary claim, is akin to one. In this action, on the other hand, the alleged conspiracy was to deal with assets covered by the court’s orders against Mr Ablyazov so as to prevent the Bank from enforcing its judgment against him, and it is no part of that claim that the assets were the product of fraud or theft or other wrongdoing. Secondly, the New York claims concern only the monies said to have been lent by Telford to Triadou and invested by Triadou in New York property, and the amendment for which the Bank is seeking permission is concerned with a much wider scheme involving many other transactions and would introduce far greater claims: the project A allegations do not concern Telford, Triadou or any transaction between them, and the transaction represents only some $71 millions of the monies in excess of $400 millions with which the project N allegations are concerned. (I add that the Bank has conceded that, “if (and to the extent that) it makes a recovery in the New York proceedings which means that it has not suffered the loss of the whole of the US$71 million, it will give credit in these proceedings for the net amount recovered as appropriate”: I quote from Mr Lewis’ affidavit in support of the application.)[57]Mr Khrapunov did not accept that the New York proceedings are or would remain so limited, and it was argued that the Bank might seek to expand the New York proceedings to include claims beyond the loan transaction between Triadou and Telford and the use of those funds. This seems fanciful: there is no evidence that the Bank has any such intention, and Mr Lewis has stated that he understands from New York counsel that it is “very unlikely” that the Bank would be permitted to expand its claim. Mr Khrapunov relies on wide discovery requests made by the Bank in New York, but Mr Lewis has explained, to my mind convincingly, that he understands that the scope of the New York proceedings cannot be expanded by discovery requests. According to his evidence, which is given on the basis of information from New York counsel and which I accept, “discovery exercises in US proceedings are typically very broad and often go significantly beyond the parties’ pleaded cases”. Mr Khrapunov also relies on a memorandum of law of 17 October 2016 that the Bank, together with the City of Almaty, filed in opposition to motions to dismiss the Bank’s claims, in which this is said of the Bank’s claim in conversion:
“The allegations in the Amended Counterclaims made clear that each entity [sc the so-called Kazakh entities, including the Bank]that the stolen funds have passed through has been controlled, either directly or indirectly, by Ablyazov or Viktor Khrapunov. That is all that is required to state a claim for conversion”
. It is said that the Bank here sets out “the very broad nature of the conversion claim”, but this is unremarkable in a memorandum of law of this kind. As Mr Lewis observed, no property is mentioned in the Bank’s American pleading other than that relating to the Triadou/Telford transactions.[58]However that might be, Mr Khrapunov argued that, even the Bank’s claim in New York about the loan transaction between Triadou and Telford and the use of those funds raises issues that overlap with those which would be introduced by the draft amendment, and for this reason the amendment should not be permitted. In both proceedings, it is argued, if the Bank is permitted to amend it will be alleging that Mr Khrapunov gave Mr Aggarwal instructions about dealing with money of Mr Ablyazov, and it would be unfairly onerous, it is said, for Mr Khrapunov to have to deal with this same issue in both actions.[59]One response to this argument is that Mr Khrapunov will have to deal with the issue in both jurisdictions only if his challenge to the jurisdiction of this court and his proposed challenge to the jurisdiction of the American Court both fail.[60]Secondly, the court is asked to suppose that, because the Bank makes this allegation in both claims, it will therefore be an important issue between the parties. However, when I asked Mr Delehanty precisely which matters alleged by the Bank will be disputed by Mr Khrapunov, he was unable to assist me: for example, he was unable to say whether Mr Khrapunov would dispute that emails sent to Mr Aggarwal were from him or from email addresses used by him. Mr Delehanty pointed out that no defence had been served in New York and said that the “best indicator” of the issues in the American proceedings is the Bank’s formulation of its claim. Similarly, of course, there is no defence to the proposed amendment. Mr Khrapunov is entitled at this stage of the proceedings to keep his cards to his chest, but he cannot suppose that the court will then necessarily make assumptions in his favour about what the issues between him and the Bank will be. There is no evidence that Mr Khrapunov will dispute that Mr Aggarwal dealt with funds on his instructions and that he effected the transfers on which the Bank relies. He might, for example, defend the New York claim on the basis that the funds were not “looted” from the Bank, and these proceedings on the basis that the dealings did not concern Mr Ablyazov or involve any breach of the Court’s orders. The contention that there is an overlapping issue of the kind asserted by Mr Delehanty has not been made out.[61]But even leaving aside the jurisdictional challenges and assuming there to be the overlap in issues that Mr Khrapunov supposes, I still have to consider whether therefore I should refuse the Bank permission to amend, and so shut it out from pursuing not only its claim in respect of the funds transferred through Triadou and Telford but all the project A and project N monies. If I balance this prejudice to the Bank if this claim is not adjudicated upon in these proceedings against any prejudice to Mr Khrapunov in having to answer in two courts the allegations about dealings with Mr Aggarwal, justice requires the amendment be permitted.[62]What of the risk of inconsistent judgments in these proceedings and the New York proceedings? Here Mr Delehanty invoked the well-known description of inconsistent judgments as “a potential disaster from the legal point of view” coined by Brandon LJ in The El Amria, [1981] 2 Lloyd’s Rep 119, 128(2). Again, it is worth noting that the risk arises only if the challenges to jurisdiction fail in both courts and in both courts the actions proceed to trial. However, leaving that aside, the Court does not always prevent proper claims from being pursued in order to avoid any such possibility.[63]Mr Smith submitted that there is little or no risk of inconsistent decisions because the New York proceedings will be decided by a jury: according to the evidence of Mr Lewis on the basis of his understanding from New York counsel, “there will therefore be no judgment setting out the jury’s findings on the legal or factual issues and, as such, there will be no formal findings of fact in the New York proceedings and therefore little or no risk of inconsistent judgments”. Thus if, for example, the jury delivers a general verdict rejecting the claims against Mr Khrapunov, it will not indicate whether they were not satisfied that Mr Khrapunov was party to instructing Mr Aggarwal in relation to the loan to Triadou or that they reached their verdict for some other reason, for example that they were not satisfied that the loan derived from funds stolen from the Bank. If, on the other hand, their verdict accepts the claim, it would appear from the information that I have that the jury will necessarily have accepted that Mr Khrapunov was party to instructing Mr Aggarwal. Mr Delehanty told me in his submissions that his instructions were that American juries can be asked to give special verdicts, rather than a general verdict on a claim, and therefore, he argued, there might be inconsistent findings. Mr Smith understandably complained that this submission was not supported by evidence: certainly I have no means of knowing whether there might be a special verdict in this case. In any case I do not consider it a satisfactory answer to the concern about inconsistent judgments that the basis for one decision, and therefore any inconsistency, will be covert and not overt.[64]As is reflected in the judgment of Hobhouse LJ in the Kuwait Oil case, the courts can sometimes take steps as proceedings develop to reduce the risk of inconsistent judgments. It is not clear whether the New York case or the English action will come to trial first (assuming that both survive jurisdictional challenges). If the English decision is given first, then I would suppose that it would be for the American Court to decide what, if any, impact it should have on the proceedings there. What if the New York proceedings are determined before the trial in this Court? If the Bank’s claim against Mr Khrapunov succeeds, it would be for the Bank to consider whether the necessary implication is that Mr Khrapunov had given relevant instructions to Mr Aggarwal and whether it has any proper basis for deploying this (or otherwise deploying the New York decision) in these proceedings (for example, by seeking to raise an issue estoppel). If the Bank’s claim is dismissed, Mr Khrapunov might be able to argue that in those circumstances the claim against him should be stayed in part in order to protect him from the possibility that, for example, the New York jury had rejected the allegation that he gave instructions in respect of the Triadou/Telford transaction to Mr Aggarwal. I should make clear that I am not expressing any view about whether such course would prove arguable, still less that it would be successful, but I can see that the Court might in the future properly be asked to consider in light of changed circumstances whether the risk of inconsistent judgments can and should be minimised by court orders.[65]As it is, I was not persuaded that any risk of inconsistent judgments should lead me to refuse the Bank permission to amend its pleading and to introduce the new claims. I concluded that permission should be granted.

Cited in 1 later judgment