Alliance Bank JSC v Baglan Zhunus & Others  EWHC 714 (Comm)
On 14 November 2014, on the ex parte application of Kazakhstan’s Alliance Bank, Flaux J. granted permission to serve proceedings on Mr Arip out of the jurisdiction in Dubai (on the basis that he was a necessary or proper party to the claim made against Mr Zhunus who was domiciled in England) and made a Worldwide Freezing Order over his assets in the amount of £206 million. As the case had been presented to him, the Judge considered there to have been a “blatant fraud”. On 18 March 2015, Cooke J. set both orders aside: on the evidence as presented at the inter partes hearing, there was no serious issue to be tried as any claim the Bank might have had against Mr Arip was barred by the Kazakh limitation period and there had been serious non-disclosures of highly material facts relevant to both limitation and the merits of the claim.
The Bank contended that, in 2008, the individual Defendants had devised a scheme to secure the release of valuable shares pledged to secure loans made to third party borrowers and had subsequently benefited from those shares at the expense of the Bank. It was alleged that the Defendants caused companies owned by them to take loans which they intended should never be repaid and used the funds to acquire the third party borrowers and discharge their indebtedness to the bank. The loans procured by the Defendants had been secured by pledges over shares in other Russian companies which it was alleged were unenforceable because they were not notarised. The loans had not been repaid. Accordingly, it was alleged that the Defendants were liable under Article 917 of the Kazakh Civil Code which imposes tort-like liability for harm caused by wrongful acts.
It was common ground that the three year limitation period began to run from the point when the claimant learned or should have learned that it had suffered harm from a violation of its rights. The Bank relied on the decision of the Court of Appeal in Kazakhstan Kagazy v Zhunus & Ors  EWCA Civ 74 to the effect that if a defendant alleged that a claimant “should have learned” the relevant facts by a particular time, triable issues would arise and that it was only in “clear” cases that a limitation defence would be sufficient at an interlocutory stage. In the present case, Mr Arip alleged that documents not disclosed to Flaux J. revealed that the Bank had known everything it now relied on from which it inferred fraud on the part of the Defendants more than three years before proceedings had been issued.
The Bank had failed to disclose Credit Committee Minutes and Internal Audit Reports from 2009, and an Internal Investigation Report which had been attached to a complaint to the Financial Police in 2010. Together these documents revealed that the Bank had come to the view that Mr Arip had deliberately caused it to make loans with no prospect of repayment. The material facts which had not been disclosed were also relevant to the merits of the allegations as the Judge had not been told that the pledges provided by Mr Arip’s companies had been over shares which the Bank had independently assessed to be sufficiently valuable to secure the borrowing (which strongly militated against the allegation that Mr Arip had ever intended to cause harm to the Bank) or that there had in fact been no attempt to enforce the security or that the borrowers had offered shares in satisfaction of the loans or that the Financial Police had concluded there had been no fraud.
Cooke J. discharged the Freezing Order, set aside the Order granting permission to serve out and ordered the Bank to pay Mr Arip’s costs on an indemnity basis. Permission to Appeal was refused but the Freezing Order was allowed to remain in place for 7 days to permit the Claimant to apply to the Court of Appeal for an extension of it.
The judgment is here.
Mark Howard QC and Alec Haydon represented Mr Arip, instructed by Cleary, Gottlieb, Steen and Hamilton LLP.