A “non party” who assists in the breach of the terms of a freezing order can be liable for conspiracy

The Supreme Court has recently given judgment in JSC BTA Bank v Khrapunov.

Background and the Ablyazov litigation

The case is rooted in the Ablyazov litigation that took place between 2009 and 2012. From 2005 until 2009, Mr Ablyzov was the chairman and controlling shareholder of the Kazakhstan bank, JSC BTA Bank.

During his period of office, it is alleged that Mr Ablyazov embezzled US $6 billion from the bank. In April 2009, Mr Ablyazov fled Kazakhstan and obtained asylum in England. In August 2009, the bank commenced litigation against him in England. The bank obtained a disclosure order requiring Mr Ablyazov to identify and locate his assets. It also obtained a worldwide freezing order (WFO) preventing him dealing with his assets. Mr Ablyazov ostensibly complied with the disclosure order and WFO, but, in 2011, the bank applied for an order committing Mr Ablyzaov for contempt of court.

Teare J gave judgment on that issue. He held that Mr Ablyazov had failed to disclose assets and had also breached the freezing order and subsequent receivership orders. He also held that Mr Ablyazov had given false evidence and forged documents. Accordingly, Teare J sentenced Mr Ablyazov to 22 months’ imprisonment.

It would appear that Mr Ablyazov took advantage of the period between the release of the draft judgment and its handing down to flee the UK. He was eventually arrested in France, where Russia made an application for his extradition. This application failed and Mr Ablyazov fled again. His current whereabouts are unknown.

Mr Khrapunov’s involvement

Mr Khrapunov is Mr Ablyazov’s son-in-law. The bank commenced proceedings against Mr Ablyazov and Mr Khrapunov. Mr Khrapunov is domiciled in Switzerland. The bank’s case against Mr Khrapunov was that he was aware of the WFO and disclosure order granted against his father-in-law, and assisted with the dissipation and concealment of assets.

At first instance, Teare J found this to be well founded. He determined that Mr Khrapunov actively participated in the dissipation and concealment of assets, both on Mr Ablyazov’s instructions and on his own initiative. Mr Khrapunov contested the jurisdiction of the English Court on two grounds:

• That there was no such tort as conspiracy to commit contempt.
• That, as Mr Khrapunov was domiciled in Switzerland, there was no jurisdiction under the Lugano Convention.

The Supreme Court considered the position in detail.

The court’s decision

In relation to the first limb of Mr Khrapunov’s defence, the court reached the conclusion that, because Mr Ablyazov was already in contempt, he was already within the jurisdiction of the English courts. The claim in conspiracy was connected to Mr Ablyazov’s contempt, and the conspiracy occurred by Mr Khrapalov conspiring with Mr Ablyazov to breach the latter’s obligations under the WFO.

In relation to the second limb, the court considered the effect of the Lugano Convention. Article 2 of the Lugano Convention states that a person should be sued in his or her state of domicile. Both the UK and Switzerland are bound by the Lugano Convention. This would mean that any claim against Mr Khrapunov should have been bought in Switzerland.

The bank argued that articles 5 and 6 of the Lugano Convention applied. At paragraph 26 of the judgment, it was explained:

“Article 6 states that a person domiciled in a state bound by the Convention may also be sued, where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.”

This argument was rejected by the lower courts, as Mr Ablyazov had fled England by the time the conspiracy had occurred.

The bank then relied on article 5, which states:

“A person domiciled in a state bound by this Convention may, in another state bound by this Convention be sued:

…

(3) in matters relating to tort, delict or quasi delict in the courts for the place where the harmful event occurred or may occur.”

The court found that the damage occurred in England. The WFO and judgments had been “reduced in value” by the conspiracy, and that the conspiracy had been formed in England. England was where the agreement between Mr Ablyazov and Mr Khrapunov had been formulated and where the damage had originated.

Commentary

This case defines a number of important issues, both for “anchoring” international litigation in England and Wales, and also extending the law surrounding contempt. It gives clear guidance in relation to when a third party can be joined into such proceedings.

Practical points

Consider whether advice needs to be given to the family or friends of a recipient of an order which may result in a contempt application for failure to comply. A simple act of a family member could result in a claim for contempt of court against that family member, where they have agreed to hold a valuable chattel on behalf of a recipient of a disclosure order, so as to avoid revealing that chattel.

Of course, if there is any admission by a client that he or she will commit contempt, the adviser should cease to act immediately.

This article first appeared on the Practical Law Dispute Resolution Blog; April 2018.