High Court orders Kazakh businessman to reveal source of funding for legal fees

Robertson: Important to maintain effectiveness of court orders

The High Court has ordered Kazakh businessman Ilyas Khrapunov to provide “full and proper disclosure” as to how his legal expenses are being funded.

Mr Khrapunov is the son-of-law of Mukhtar Ablyazov, former chairman and controlling shareholder of Kazakhstan’s JSC BTA Bank. Mr Ablyazov is accused by the bank of embezzling $6bn before it was nationalised in 2009.

Patricia Robertson QC, sitting as a High Court judge, said both men were subject to worldwide freezing orders and the long-running court proceedings involving them was “litigation on a grand scale”.

She said the bank’s costs for this one application had, according to its solicitors Hogan Lovells, already exceeded £2m.

Ms Robertson said the bank questioned how Mr Khrapunov was funding his costs, given the “striking paucity” of his own assets and “took issue” with the claim that his mother was paying the bills.

The bank said Ms Khrapunova’s own website, describing her as a “visionary Kazakhstan businesswoman”, did not identify any ongoing businesses.

She was “unlikely to have acquired significant wealth” by reason of her sales of her past businesses, given her claim that she was “forced to suspend her businesses and sell up at less than their true value because of political pressure”.

The bank argued that she was also funding substantial legal costs, currently around £500,000, for Mr Ablyazov’s son, “purportedly by way of a loan”, when “the more obvious explanation is that she is acting as a channel for funding passing from Mr Ablyazov to his son”.

Ms Robertson said disclosure obtained from a Dubai-based corporate services provider, which administered assets on the instructions of Mr Khrapunov, showed he planned to place in the name of the Classic Design Trust, with his mother as beneficiary, certain assets under his control.

Ms Robertson said: “I do not accept that the evidence from Ms Khrapunova’s website proves that she herself lacks substantial wealth. That material is part of a campaign of rhetoric and counter-rhetoric being carried on in the media and is of limited weight as evidence.

“On its own terms it suggests she did derive some wealth from sale of her businesses and what is being alleged against her in the separate litigation in which she is involved is that she has in fact amassed significant wealth.

“However, the fact she may have the means does not establish that she is in fact the true source of the funds used to pay her son’s legal expenses.”

Ms Robertson said the Classic Design Trust “may have been used” as a channel for transferring money originating from Mr Ablyazov to Mr Khrapunov for the purpose of meeting his legal fees.

She said funds loaned to a company, Vilder Company SA, could be another route through which funds were transferred, in breach of the worldwide freezing orders.

Delivering judgment in JSC BTA Bank v Ablyazov and another [2018] EWHC 1368 (Comm), Ms Robertson described the importance of “maintaining, and being seen to maintain” the effectiveness of court orders as a “potent factor”, weighing “heavily in the scale” in favour of making a disclosure order.

She went on: “It does not seem to me oppressive to expect Mr Khrapunov to provide the disclosure that is sought, which extends only to what he knows or may by reasonable enquiry find out.

“Whilst it may be that the response that will be obtained is that Mr Khrapunov does not know and his mother refuses to tell him from where she is sourcing the funds, if that is the answer it will be open to the bank to test that answer in cross-examination.”

Ms Robertson concluded that, as a matter of discretion, the balance was “firmly in favour” of making the order requested by the bank.

Earlier in her ruling she complained that the time estimate for the application and a another one, which was consented to the day before the hearing, was “clearly inadequate”.

Ms Robertson said: “There is perhaps a tendency, when a matter is so frequently before the courts, to assume that successive judges can somehow magically acquire, as if by osmosis, the knowledge of the case which those judges who have dealt with it on previous occasions have acquired.

“Both sides need to remind themselves of the importance of encapsulating, in a manageable form, everything that is necessary to a given decision, by a given judge, on a given occasion.”

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