JSC BTA Bank v Solodchenko – disclosure of client contact and funding details

The court has jurisdiction to order a solicitor to disclose his client’s contact details for the purposes of enforcing a committal order but the court shouldn’t make an order which might inhibit the client’s fundamental right to obtain legal advice. It was appropriate to order disclosure of those details in this case.

The claimant bank, BTA, was Kazakhstan’s biggest lender before it was nationalized in 2009. It sued Mukhtar Ablyazov, the former chairman of the bank, and ex-Chief Executive Officer Roman Solodchenko, alleging that they defrauded the bank through fake loans to about 600 mainly offshore companies. Syrym Shalabayev, Mr Ablyazov’s brother-in-law, allegedly played a leading role in administering the companies and helped to create false documents to hide Mr Ablyazov’s ties to them. Mr Ablyazov now lives in the UK.

Clyde & Co were acting for Mr Shalabayev who is the fourteenth defendant in these proceedings. A worldwide freezing and disclosure order was made against him in November 2010 and served on him personally in Cyprus. He then disappeared without complying with the order and committal proceedings were served on him by email. In May 2011 he was declared to be in contempt of court. Clydes applied successfully for an adjournment of the sentencing hearing but he failed to show on the adjourned date in June 2011. He was sentenced to 18 months in prison and ordered to pay BTA’s costs on the indemnity basis, with £70,000 to be paid on account by 11 July 2011.

Mr Shalabayev has persisted in his refusal to comply with the disclosure obligations in the freezing order and failed to pay the £70,000.

BTA applied for disclosure against Clydes of Mr Shalabayev’s contact details and information about his assets. Clydes had only had intermittent contact with their client during the past year but were still retained by him. As the partner in question put it in his witness statement, “I know who my client is; I just do not know where he is”. He admitted to having mobile phone numbers and email addresses which Mr Shalabayev had instructed him to keep in strict confidence because of fears for his family’s safety.  

Disclosure of contact details

The judge distinguished between a client’s right to claim legal professional privilege which is absolute and the right to protection of confidential information which is capable of being overridden by other considerations. He concluded that Mr Shalabayev could not shelter behind the need to protect privilege because the committal proceedings were at an end. Whatever advice he needed for those proceedings had already been given and he did not appeal against the committal order. It was not right for him to be able to keep a confidential line of communication with Clydes open while expecting his contact details to be withheld from those charged with enforcing the committal order. The present state of affairs was liable to bring the administration of justice into disrepute and to give the impression “that British justice is an a la carte menu from which he can order at choice without ever having to pay the bill”.

Disclosure of information about assets

While disclosure of the contact details was necessary, disclosure of details of Mr Shalabayev’s assets was not appropriate. The judge accepted Clydes’ contention that any information such as bank details given to them would have been to enable them to give him legal advice and so came to them in privileged circumstances. Since they were still acting for him and might be asked to give advice about asset-related issues, disclosure would inhibit Mr Shalabayev’s right to seek legal advice and place Clydes in an impossible situation.

The judge was also concerned that if he made the order sought – the first of its kind to his knowledge - it would become standard practice for claimants like BTA in whose favour unsatisfied disclosure orders have been made to bring similar applications against the solicitors of the defaulting party. This prospect filled him with dismay.  

Disclosure relating to the funding of Clydes’ costs

BTA also applied for disclosure of the source of funding for Clydes’ costs in support of an application for a costs order against a non-party under s51 of the Senior Courts Act 1981 in respect of its unsatisfied costs order. Clydes gave evidence that they had never, as far as they were aware, been paid by Mr Shalabayev personally for their services. They also confirmed that their client’s defence was not being funded by a third party with a financial or commercial interest in its outcome or who was in any way controlling its course. On the assumption that this statement also included funding relating to the committal proceedings, the judge accepted Clydes’ evidence and dismissed the application.

Comment

This application forms part of what has been described as the largest series of fraud proceedings before the Commercial Court. Like other pending litigation concerning alleged international frauds and the former Soviet Union such as Cherney v Deripaska and Berezovsky v Abramovich, the claims against Mr Ablyazov and his associates involve gargantuan sums and a heavy use of court time. Cherney v Deripaska is due to go to trial in April 2012 and the hearing in Berezovsky v Abramovich begins in a couple of weeks.

Multiple interim applications in these cases have dealt with important issues of jurisdiction, case management, disclosure and privilege. In October 2010 the Court of Appeal upheld a receivership order against Mr Ablyazov because he could not be trusted to comply with an asset-freezing order. A failure to mention his ownership of the Eurasia Tower in Moscow to Clydes, who were his solicitors at the time, indicated the scale of the problem. As Maurice Kay LJ quipped, "an asset the size of Canary Wharf can hardly have slipped his mind".

There are also allegations in all of them about fears for personal safety. Questions about the cost of security measures for the Berezovsky trial were raised during the media furore over the news that the newly-appointed Justice of the Supreme Court, Jonathan Sumption QC, will be appearing for Mr Abramovich. In the present case, the judge dealt with Mr Shalabayev’s concerns on this score with the dry observation that his committal to prison would ensure his personal safety.

The issues in the present application may seem to be a world away from the case loads of most solicitors but they are of vital importance to all lawyers. Orders for disclosure of client details, whether addresses or other contact details, and the source of funding of fees place solicitors in an impossible position if the retainer is continuing, as the judge was at pains to emphasise. It was only because the committal proceedings were at an end that the judge was prepared to make the order for disclosure of contact details.

This analysis differs somewhat from the approach taken in a case involving criminal investigations where there was a continuing retainer. In R v Minshull Street Crown Court ex p Miller Gardner (not mentioned in the present case), the contact details of a client were held not to be privileged. The court concluded that the provision of a name and phone number is a formality which takes place before legal advice is given and is the channel through which advice may later be given. It ordered solicitors to disclose two of their clients’ telephone numbers, as well as the dates on which the clients phoned the office, the record of appointments in the office diary and attendance notes. The latter were disclosable to the extent that they recorded who was speaking to the solicitor and the number they were calling from but other details could be privileged depending on what was discussed.