JSC BTA Bank v Khrapunov [2018] UKSC 19

JSC BTA Bank alleged Mr Khrapunov conspired with his father-in-law Mr Ablyazov to hide assets in breach of freezing and receivership orders. The Supreme Court held contempt of court could constitute unlawful means for conspiracy, and English courts had jurisdiction under the Lugano Convention as the conspiratorial agreement was made in England.

Facts

Mr Mukhtar Ablyazov, former chairman of JSC BTA Bank, was alleged to have embezzled approximately US$6 billion from the Bank. Following the Bank’s nationalisation in 2009, it commenced proceedings against him and obtained a worldwide freezing order, a disclosure order, and later a receivership order over his assets. In 2012, Teare J found Mr Ablyazov in contempt of court and sentenced him to 22 months’ imprisonment, but he fled the jurisdiction. Default judgments exceeding US$4.6 billion were obtained against him.

The Bank then commenced proceedings in 2015 against Mr Ablyazov and his son-in-law, Mr Khrapunov, who is domiciled in Switzerland. It alleged that Mr Khrapunov entered into an agreement in England with Mr Ablyazov around 2009 to assist in dissipating and concealing assets in breach of the freezing and receivership orders, thereby committing the tort of conspiracy to cause loss by unlawful means (namely contempt of court).

Mr Khrapunov contested the jurisdiction of the English court.

Issues

Two issues arose:

1. Whether contempt of court can constitute “unlawful means” for the purpose of the tort of unlawful means conspiracy, in circumstances where contempt of court is not independently actionable at the suit of the claimant.
2. Whether the English courts have jurisdiction under article 5(3) of the Lugano Convention, which confers jurisdiction on the courts of “the place where the harmful event occurred” — specifically, whether the conspiratorial agreement made in England constituted the event giving rise to the damage.

Arguments

Appellant (Mr Khrapunov)

Mr Samek QC submitted that means are unlawful for the purposes of conspiracy only if they would be actionable at the suit of the claimant apart from the combination. Contempt of court is not actionable as such. He further argued that a “preclusionary rule” of public policy prevents civil damages being founded on contempt, since the law of contempt requires the court to control all consequences through criminal penalties at its discretion. On jurisdiction, he argued the harmful event was not the conspiratorial agreement but the overt acts done pursuant to it, which occurred abroad.

Respondent (the Bank)

The Bank argued that contempt of court could constitute unlawful means regardless of independent actionability, and that the event giving rise to the damage for article 5(3) purposes was the conspiratorial agreement hatched in England.

Judgment

The cause of action

The Supreme Court (Lord Sumption and Lord Lloyd-Jones delivering the judgment, with Lord Mance, Lord Hodge and Lord Briggs agreeing) held that the tort of conspiracy is a tort of primary liability. The question of what constitutes unlawful means does not depend on whether those means would give rise to an independent cause of action. The real test is whether there is a just cause or excuse for combining to use unlawful means, depending on the nature of the unlawfulness and its relationship with the resultant damage.

Drawing heavily on Revenue and Customs Comrs v Total Network SL [2008] AC 1174, the Court confirmed that criminal conduct may constitute unlawful means provided it is objectively directed against the claimant and is the instrumentality by which harm is intentionally inflicted, even if the predominant purpose was not to injure the claimant.

Applying this to the facts, the Court found that although the predominant purpose of the defendants was to further Mr Ablyazov’s financial interests, damage to the Bank was necessarily intended. The freezing and receivership orders existed to protect the Bank’s right of recovery, and the object of the conspiracy was to prevent enforcement of judgments. The benefit to Mr Ablyazov was exactly concomitant with the detriment to the Bank.

The alleged “preclusionary rule”

The Court rejected the argument that a rule of public policy precluded founding a claim on contempt of court. While there are strong dicta (notably in Customs and Excise Comrs v Barclays Bank plc [2007] 1 AC 181) suggesting contempt is not actionable as a tort, these statements merely assert the absence of a private law right rather than establishing a preclusionary rule. Unlike witness immunity (e.g. Marrinan v Vibart), there is no special public policy immunity barring claims founded on contempt, and the same act may routinely give rise to both criminal and civil liability.

Jurisdiction under article 5(3) Lugano Convention

The Court considered the Bier test distinguishing between the place of damage and the place of the event giving rise to damage. Drawing on CJEU authority including Shevill, Wintersteiger, Hejduk, and particularly Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Akzo Nobel NV, the Court held that it is the formation of a cartel or conspiracy — not its implementation — which constitutes the event giving rise to the damage.

The Court endorsed the reasoning of Rix J in Domicrest Ltd v Swiss Bank Corpn [1999] QB 548, which focuses on the event that sets the tort in motion. Applied here, the conspiratorial agreement made in England was the harmful event which set the tort in motion. In entering the agreement, Mr Khrapunov encouraged and procured the commission of unlawful acts; subsequent dealings were undertaken in implementation of that agreement.

Disposal

The appeal was dismissed.

Implications

The decision clarifies several significant points in the law of economic torts and international jurisdiction:

• It confirms and develops the principle from Total Network that unlawful means for the tort of unlawful means conspiracy need not be independently actionable at the suit of the claimant. The test is whether there is just cause or excuse, assessed by reference to the nature of the unlawfulness and its relationship with the resulting damage.
• It establishes that criminal contempt of court can in principle constitute unlawful means for an unlawful means conspiracy, at least where the conspiracy is directed against the claimant and damage to the claimant is the necessary concomitant of the conspirators’ objectives.
• The Court expressly left open whether contempt of court gives rise to an independent tort claim, noting the powerful dicta in Customs and Excise Comrs v Barclays Bank plc but declining to settle the question.
• The Court also left open the more complex questions arising where unlawful means consist of breach of civil statutory duties, torts actionable only at the suit of third parties, or breaches of contract or fiduciary duty, recognising these raise different considerations.
• On jurisdiction, the judgment provides important guidance on locating the “event giving rise to damage” for conspiracy claims under the Brussels/Lugano regime: it is the place of the conspiratorial agreement, not the place of its implementation. This aligns English law with CJEU jurisprudence emphasising the event which “sets the tort in motion”.

The decision is particularly significant for claimants (especially financial institutions and judgment creditors) seeking to pursue those who assist debtors in dissipating assets contrary to court orders. It provides a meaningful civil remedy against non-parties who conspire to frustrate the enforcement of freezing and receivership orders, and it allows such claims to be brought in England where the conspiratorial agreement was made there, even if implementation occurred abroad.

Verdict: The appeal was dismissed. The Supreme Court held that the Bank had a good arguable cause of action in unlawful means conspiracy, with contempt of court constituting the unlawful means, and that the English courts had jurisdiction under article 5(3) of the Lugano Convention because the conspiratorial agreement was made in England.

Source: JSC BTA Bank v Khrapunov [2018] UKSC 19