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City firm must disclose contact details

Clyde & Co says client believes life and safety of family are in danger

5 September 2011

The High Court has ordered City firm Clyde & Co to reveal the contact details of a client who was in contempt of court and in breach of disclosure orders. It is understood to be the first ruling of its kind.

The BTA Bank, based in Kazakhstan, was applying for disclosure of information from the firm as part of its attempt to trace and recover the proceeds of AAA-rated investment bonds worth $290m which it claimed were fraudulently misappropriated by its former owner and a number of other conspirators.

The bank alleged that Syrym Shalabayev, Clyde & Co’s client and the brother-in-law of the bank’s former owner, was “a party to the conspiracy to defraud and played a leading role in administering a large network of some 600 companies, mostly located in offshore locations”.

Delivering judgment in JSC BTA Bank v Solodchenko, Shalabayev and others [2011] EWHC 2163 (Ch), Mr Justice Henderson said none of the defendants to the main action had ever “advanced any positive case that the transactions involving the AAA investments were commercially justified or otherwise legitimate”.

Henderson J said that in November 2010 he granted a worldwide freezing order against Shalabayev “on the footing that the bank had a good arguable case that he was party to the conspiracy to defraud.

“The order contained standard requirements for the disclosure of assets (very widely defined) and for the disclosure of information which would enable the allegedly misappropriated funds or their products to be traced.”

Henderson J went on: “Despite the personal service of the order, Mr Shalabayev has made no effort to comply with any of its provisions, and the only reasonable inference to draw is that he has been a fugitive from British justice since that date. It is most unlikely that he is anywhere within the jurisdiction.”

The bank issued committal proceedings, which were served on Shalabayev by email in April 2011. In June he was sentenced in his absence to two concurrent terms of 18 months’ imprisonment and one concurrent term of six months for refusing to comply with the freezing order.

Mr Justice Henderson said it was clear that Shalabayev was guilty of “grave and continuing contempts of court” and had not “paid a penny” of a £70,000 costs order made against him.

“However, Clydes act on his behalf, and are evidently able to communicate with him. Furthermore, Clydes can and do make applications on his instructions when it suits him to do so. That is the context in which the bank now seeks disclosure from Clydes.”

Henderson J said that Shalabayev was, despite his “deplorable conduct”, not an “outlaw”.

“The public interest in free and unfettered access to legal advice applies with just as much force to him as it does to anybody else,” he said.

“The court should therefore take no step which would whittle away or inhibit the ability of Mr Shalabayev to exercise his right to seek legal advice from the lawyer of his choice.”

He went on: “In my view any such order would tend to undermine the relationship of confidence which must subsist between solicitor and client if the client is to be able to unburden himself freely to the solicitor.”

Henderson J said the bank relied on the “strong countervailing public interest” in court orders being obeyed, in Shalabayev being apprehended and the bank being able to prosecute its claim to trace and recover the proceeds of a “massive international fraud”.

He referred to the Court of Appeal ruling in A J Bekhor v Bilton [1981] QB 923, where the majority held that the power of the court to grant a freezing injunction had within it the power to make such ancillary orders as “appear to the court to be just and convenient” to ensure the effectiveness of an earlier order.

Henderson J said that in his judgment this line of authority provided “ample justification” for making an order of the type sought by the bank. He added that he would “probably not have been prepared to make the order” in the absence of a committal order.

Henderson J ordered the disclosure by Clyde & Co of all the contact details, past and present, which they hold for Shalabayev. However, he decided that information relating to Shalabayev’s assets did not have to be disclosed.

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