JSC BTA Bank v Solodchenko & Ors

Factual and Procedural Background

The appellant, Company A, a bank incorporated in the Republic of Kazakhstan, initiated proceedings against multiple defendants, including Defendant, a British citizen residing in Cyprus who provides corporate nominee services. The dispute arose from transactions involving several companies registered in the British Virgin Islands ("BVI companies") which purportedly sold securities in June 2008. The bank alleged that these transactions were fraudulent and that substantial assets belonging to it, valued at approximately US $290 million, were misappropriated without consideration.

The bank obtained a worldwide freezing order ("the July order") against Defendant on 23rd July 2010, imposing disclosure obligations requiring Defendant to provide detailed information about his assets and certain transactions. Defendant failed to comply by the specified deadlines, leading the bank to apply for committal for contempt of court. Defendant admitted contempt but sought time to purge it by complying with the disclosure obligations.

The High Court judge found Defendant in contempt but, on the basis that the contempt had been purged by subsequent disclosure, declined to impose a custodial sentence, ordering only that Defendant pay costs. The bank appealed this decision to the Court of Appeal, arguing that the judge erred in treating the contempt as purged. Fresh evidence suggested Defendant had presented false evidence and withheld documents, aggravating the contempt.

During the appeal, Defendant changed legal representation, admitted to giving false evidence under duress, and provided further disclosure, although the court found continuing non-compliance. The Court of Appeal considered the appropriate sentence for contempt in light of the true facts and legal principles governing civil contempt for non-compliance with court orders.

Legal Issues Presented

1. Whether the High Court judge erred in treating the contempt as purged and consequently in failing to impose a custodial sentence on Defendant for contempt of court.
2. What is the appropriate sentence for contempt of court where a defendant has deliberately failed to comply with disclosure obligations under a freezing order, including the consideration of any purging of contempt.
3. How to balance punitive and coercive elements in sentencing for civil contempt involving non-compliance with court orders.

Arguments of the Parties

Appellant's Arguments

• The judge erred in relying on the assumption that Defendant had purged his contempt by complying with disclosure obligations.
• Fresh evidence demonstrated that Defendant had given false evidence and withheld relevant documents, thus aggravating the contempt.
• The court should set aside the judge's decision and impose an appropriate custodial sentence to uphold the authority of the court and deter similar conduct.

Respondent's Arguments

• Defendant maintained that he had purged his contempt by subsequent disclosure and cooperation.
• Defendant alleged that false evidence was given under duress, including threats and intimidation by other defendants.
• Defendant's legal representatives initially supported the High Court's decision but later withdrew their support following fresh evidence.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by reviewing the nature of the contempt, which was Defendant's deliberate failure to comply with disclosure provisions of a freezing order. It distinguished between punitive sentences, which punish past breaches, and coercive sentences, which aim to induce compliance. The maximum sentence for committal under the Contempt of Court Act 1981 is two years.

The court examined the evidence, including fresh material obtained after the High Court hearing, which showed that Defendant had knowingly given false evidence and concealed relevant documents, thereby aggravating the contempt. Defendant's claim that false evidence was given under duress was rejected as inconsistent with his own communications demanding payments from key defendants.

Given the continuing non-compliance and falsehoods, the court concluded that the assumption underlying the High Court's decision—that the contempt had been purged—was incorrect. Consequently, the earlier sentencing decision could not stand.

The court considered sentencing principles from precedent, emphasizing the seriousness of deliberate breaches of freezing orders and the need for condign punishment to uphold the authority of the court and deter similar conduct. It also recognized the importance of incentivizing future compliance by allowing for remission of part of the sentence upon full and prompt disclosure.

Balancing these factors, the court determined that a nominal sentence of 21 months imprisonment was appropriate, with a punitive portion of nine months to be served regardless, and the remainder potentially subject to reduction if Defendant complies fully in the future. This approach aligns with established sentencing principles for civil contempt involving non-compliance with disclosure orders.

Holding and Implications

The Court of Appeal DISCHARGED the High Court judge's order and substituted a sentence of 21 months imprisonment for Defendant's contempt of court.

The court emphasized that nine months of this sentence must be served as punishment for past non-compliance, while the remainder may be reduced upon prompt and full compliance with the disclosure obligations. This decision reinforces the principle that deliberate and substantial breaches of freezing orders merit custodial sentences and that false evidence aggravates contempt.

The direct effect is that Defendant faces a significant custodial sentence, reflecting the seriousness of the contempt and the court's role in upholding its authority. No new legal precedent was established beyond the application and clarification of existing principles governing sentencing for civil contempt.