JSC BTA Bank v Khrapunov, United Kingdom Supreme Court, Judgment, Law, casemine.com

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JSC BTA Bank v. Khrapunov

Smart Summary

Factual and Procedural Background

Between 2005 and 2009 the Defendant was chairman and controlling shareholder of Company A, a bank incorporated in The State. Company A alleges that the Defendant misappropriated approximately US$6 billion during that period. After the bank was nationalised, Company A issued multiple actions in the Commercial Court and Chancery Division in The State. Early in the litigation the High Court granted a worldwide freezing order and a disclosure order. Receivers were appointed in 2010, and later search and disclosure orders uncovered undisclosed assets.

In 2012 Judge [Teare] found the Defendant in contempt for breaching the disclosure and freezing orders, sentenced him to 22 months’ imprisonment and, upon his failure to comply, struck out his defences. Default judgments exceeding US$4.6 billion were then entered; little has been recovered.

The present proceedings, issued in July 2015, name the Defendant and the Appellant (his son-in-law, domiciled in The State). Company A alleges that, knowing of the court orders, the Appellant conspired with the Defendant to dissipate assets through foreign companies, thereby frustrating enforcement of the freezing and receivership orders. The claim is framed as the tort of conspiracy to injure by unlawful means (the unlawful means alleged being serial breaches of the court orders, i.e. contempt).

The Appellant challenged English jurisdiction. The Commercial Court dismissed his challenge; the Court of Appeal upheld that decision. The present judgment is the Supreme Court’s determination of the Appellant’s further appeal.

Legal Issues Presented

Whether contempt of court can constitute “unlawful means” for the purpose of the economic tort of conspiracy where the contempt is not itself actionable as an independent tort.
Whether, for the purposes of Article 5(3) of the 2007 Lugano Convention, the English courts are the “place where the harmful event occurred,” given that the conspiratorial agreement was made in England but the alleged acts of asset dissipation occurred abroad.
Whether a principle of public policy (“the preclusionary rule”) bars a civil action for damages founded on contempt of court.

Arguments of the Parties

Appellant's Arguments

Contempt of court is not actionable; therefore it cannot amount to “unlawful means” in the tort of conspiracy, which (he argued) requires conduct that would be independently actionable by the claimant.
Because he is domiciled in The State, Article 5(3) of the Lugano Convention does not confer jurisdiction: the only alleged English element is the conspiratorial agreement, whereas the harmful acts occurred abroad.
Public policy recognises a “preclusionary rule” under which contemnors should face only the criminal sanctions chosen by the court, precluding any civil claim for damages based on contempt.

Company A's Arguments

Following Revenue and Customs v Total Network SL, criminal conduct—even if not actionable—is capable of being “unlawful means” for conspiracy; contempt should be treated similarly.
The conspiratorial agreement made in England is the “event giving rise to the damage,” satisfying Article 5(3).
No public-policy bar prevents a civil claim: the absence of an existing cause of action is not the same as a rule precluding such a claim, and parallel civil and criminal liability is common in English law.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
OBG Ltd v Allan	Distinct elements of economic torts; caution against unifying theories	Background on complexity of “unlawful means” concepts
Revenue and Customs Comrs v Total Network SL	Criminal conduct can be unlawful means in conspiracy even if not independently actionable	Primary authority supporting Company A’s position that contempt may qualify as unlawful means
Quinn v Leathem	Two forms of conspiracy recognised (lawful means & unlawful means)	Framework for analysing the pleaded conspiracy
Lonrho Plc v Fayed	Definition of predominant-purpose and unlawful-means conspiracies	Cited to classify the Bank’s pleaded tort
Lonrho Ltd v Shell Petroleum Co Ltd (1982)	Example of harm incidental to unlawful acts	Illustrates distinction between instrumental and incidental harm
Mogul Steamship Co v McGregor Gow & Co	Concept of “just cause or excuse” in economic torts	Used in analysing when combination becomes tortious
Sorrell v Smith	Further discussion of “just cause or excuse”	Supports analysis of unlawfulness in conspiracy
Crofter Hand Woven Harris Tweed Ltd v Veitch	Unlawfulness resides in the fact of conspiracy	Relied upon to show conspiracy is a primary liability
Canada Cement LaFarge Ltd v British Columbia Lightweight Aggregate Ltd	Two categories of intention in conspiracies	Cited to distinguish predominant-purpose from constructive intent
Couling v Coxe	Historic example of damages for contemptuous conduct	Part of review of older authorities
Fairclough & Sons v The Manchester Ship Canal	Judicial suggestion that damages might be available for breach of injunction	Supports possibility of civil remedy for contempt
In re Mileage Conference Group (1966)	Obiter recognition that penal order might include damages	Similar support as above
Chapman v Honig	Whether contempt is actionable left open	Cited in review of conflicting authorities
The MESSINIAKI TOLMI	Court declined to strike out potential claim for damages for contempt	Supports arguability of such claims
In re Hudson	Contempt gives rise to no private right	Relied on by Appellant; distinguished by Court
N v Agrawal	Stated that contempt is not actionable	Appellant’s authority; Court found statement not determinative
Customs and Excise Comrs v Barclays Bank plc	Dicta suggesting punishment for contempt is sole remedy	Court held dicta do not create a public-policy bar
Midland Marts Ltd v Hobday	Breach of order actionable where it gives effect to underlying private right	Shows coexistence of civil and contempt remedies
Parker v Rasalingham	Same principle as Midland Marts	Cited similarly
Independiente Ltd v Music Trading On-line (HK) Ltd	Same principle as Midland Marts	Cited similarly
Marrinan v Vibart	Witness immunity bars conspiracy claim	Used as example of true public-policy bar
Z Bank v D1	Contempt sanctions can be tailored to encourage restitution	Demonstrates criminal/civil overlap
Handelskwekerij G J Bier BV v Mines de Potasse d’Alsace SA	Article 5(3) allows jurisdiction at place of damage or event giving rise to it	Foundation for Lugano analysis
AMT Futures Ltd v Marzillier mbH	Special jurisdiction provisions narrowly construed	Guides strict approach to Article 5(3)
Dumez France SA v Hessische Landesbank	Need for close connection under Article 5(3)	Referenced in jurisdiction analysis
Marinari v Lloyds Bank plc	Further clarification of “place of damage”	Part of jurisdiction framework
Rosler v Rottwinkel GmbH	Importance of autonomous Convention interpretation	Applied to disregard domestic concepts
Melzer v MF Global UK Ltd	Same principle as Rosler	Referenced in jurisdiction section
Shevill v Presse Alliance SA	Originating event concept in Article 5(3)	Analogous reasoning adopted
Wintersteiger AG v Products 4U Sondermaschinenbau GmbH	Location of act activating infringement	Supports focus on originating act
Hejduk v EnergieAgentur NRW GmbH	Event where defendant decided to upload infringing content	Analogous support for locating conspiracy in England
Kolassa v Barclays Bank plc	Place of decisions forming prospectus	Cited in jurisdiction analysis
Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Akzo Nobel NV	Formation of cartel is “event giving rise to damage”	Direct precedent for treating conspiratorial agreement as originating event
Domicrest Ltd v Swiss Bank Corpn	Event giving rise to damage is place where mis-statement originated	English authority relied on by Court
Dunhill Ltd v Diffusion Internationale Maroquinerie de Prestige SARL	Applied Domicrest reasoning	Cited in jurisdiction survey
Newsat Holdings Ltd v Zani	Applied Domicrest reasoning	Cited in jurisdiction survey
London Helicopters Ltd v Heliportugal LDA-INAC	Applied Domicrest reasoning	Cited in jurisdiction survey
ABCI v Banque Franco-Tunisienne	Court of Appeal approval of Domicrest	Supports chosen test for originating event
Stovin v Wise	Liability for omissions in negligence	Analogy used in Barclays dicta; noted by Court
Gorringe v Calderdale MBC	Statutory duty cannot itself create duty of care	Cited in Barclays analogy

Court's Reasoning and Analysis

Unlawful Means: Conspiracy is a tort of primary liability; its unlawfulness does not depend on the existence of another actionable wrong. Following Total Network, criminal conduct directed against the claimant can constitute unlawful means even if not independently actionable. Contempt of court, though punishable in civil proceedings, is a criminal offence and, in the facts pleaded, was aimed precisely at depriving Company A of the benefit of the freezing and receivership orders. The detriment to Company A was the concomitant benefit to the Defendant; harm was not merely incidental. Accordingly, the pleaded conspiracy discloses a viable cause of action.

Public-Policy Argument: The Court rejected the asserted “preclusionary rule”. Authorities suggesting contempt is not actionable amount to statements that no such right presently exists, not a rule forbidding it. True public-policy immunities (e.g. witness immunity) operate differently and could not be analogised to contempt in this context. Moreover, civil liability can and often does coexist with criminal sanctions.

Jurisdiction under Article 5(3): Special jurisdiction provisions are to be interpreted strictly. Consistent with Bier, Shevill and CDC Hydrogen Peroxide, the relevant originating event is the conspiratorial agreement, made in England, which “set the tort in motion.” Subsequent acts abroad were implementations of that agreement. Therefore, England is “the place where the harmful event occurred,” conferring jurisdiction irrespective of the Appellant’s domicile.

Holding and Implications

DISMISSED

The Supreme Court affirmed that (1) criminal contempt can amount to “unlawful means” in an unlawful-means conspiracy, and (2) for Lugano Article 5(3) the formation of a conspiracy in England is sufficient to ground jurisdiction even where implementation occurs abroad. The decision strengthens the reach of English freezing-order protections and clarifies that no public-policy bar prevents civil damages claims predicated on contempt of court. No new standalone cause of action was created, but the ruling confirms that contempt may supply the unlawfulness element in economic-tort conspiracies.