The Supreme Court dismissed Mr Khrapunov’s challenge to the English court’s jurisdiction over a claim that he conspired with Mr Ablyazov to conceal assets in breach of a freezing order and a receivership order. Contempt of court could be unlawful means for the tort of conspiracy even if it was not independently actionable, and there was no public-policy rule confining contempt to criminal penalties. For article 5(3) of the Lugano Convention, the harmful event was the conspiratorial agreement made in England, not the later acts said to have been carried out abroad.
The claim and the earlier proceedings
Between May 2005 and February 2009 Mr Mukhtar Ablyazov was chairman and controlling shareholder of JSC BTA Bank, a bank incorporated in Kazakhstan. The Bank alleges that he embezzled some US$6 billion. In February 2009 the Bank was nationalised and he was removed. He fled to England and obtained asylum. From August 2009 the Bank sued him in the Commercial Court and the Chancery Division. He was ultimately a defendant in eleven actions.
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The English court made disclosure and freezing orders and appointed receivers. The Bank alleged a concerted scheme to deal with restrained assets and frustrate enforcement. The appeal concerned whether that pleaded case could proceed here.
In July 2015 the Bank sued Mr Ablyazov and his son-in-law, Mr Khrapunov, who is domiciled in Switzerland. Mr Ablyazov took no part. The appeal concerned only Mr Khrapunov. The Bank alleges that he knew of the freezing and receivership orders and that, in about 2009, he agreed with Mr Ablyazov to help dissipate and conceal assets. For the appeal it was assumed that the agreement was made in England. Teare J had found sufficient evidence of that, and the point was not contested in the Supreme Court. Mr Khrapunov is alleged to have participated before and after Mr Ablyazov’s flight, including dealings with assets of Swiss, Belizean and Russian companies and the laying of a trail of false documents. The Bank relies on those allegations as the tort of conspiracy to cause it financial loss by unlawful means, namely serial breaches of the orders.
Mr Khrapunov challenged jurisdiction on two grounds. First, he said there was no such tort, because unlawful means must be actionable by the claimant apart from the combination, and contempt is not actionable. Secondly, under the Lugano Convention he could be sued outside Switzerland only if article 5(3) applied, and he said the harmful event was not the English agreement but the later acts abroad.
Unlawful means
Lord Sumption and Lord Lloyd-Jones gave the judgment, with which Lord Mance, Lord Hodge and Lord Briggs agreed. They treated conspiracy as a primary tort, not simply joint liability for another person’s wrong. One form is a lawful-means conspiracy: the acts may be lawful, but the predominant purpose is to injure the claimant. The other is an unlawful-means conspiracy: the conspirators intentionally injure the claimant by unlawful means, and it is no defence that their main purpose was to advance their own interests.
Whether the means are unlawful does not depend on their giving rise to a separate cause of action. In Revenue and Customs Commissioners v Total Network SL, the House of Lords held that a crime can be unlawful means if it is directed against the claimant and is the instrument by which harm is intentionally inflicted, even if it is not independently actionable and even if injury is not the predominant purpose. Harm that is merely incidental is not enough. This Court left open how far the same reasoning applies to non-criminal wrongs, including breaches of civil statutory duties, torts actionable only by third parties, and breaches of contract or fiduciary duty.
The means relied on were criminal contempt of court, punishable in civil proceedings. On the Bank’s case, the predominant purpose was not to injure the Bank but to further Mr Ablyazov’s financial interests. The Court nevertheless held that, in principle, damage to the Bank was necessarily intended rather than incidental. The orders had been made on the Bank’s application to protect its recovery if its claims succeeded. The alleged object was to prevent the Bank from enforcing its judgments, so the benefit to Mr Ablyazov and the detriment to the Bank went together.
No public-policy bar
The Bank had argued below that contempt is actionable even without a combination. The courts below described that argument as extreme and rejected it. The Supreme Court did not decide it, because independent actionability was irrelevant to whether the means were unlawful for conspiracy.
Mr Khrapunov argued for what he called a preclusionary rule: public policy, he said, exposes a contemnor only to criminal penalties at the court’s discretion, so a civil damages claim founded on contempt is barred however it is framed. Authorities on a direct right to damages for contempt point different ways, and dicta in Customs and Excise Commissioners v Barclays Bank plc treat punishment for contempt as the remedy for non-compliance with a freezing order. The Court said that the last word on a direct right of action had not necessarily been spoken, but that the question need not be resolved. Statements that the sole remedy is a criminal penalty describe the absence of a private-law right. They are not a public-policy rule excluding such a right where the elements of a cause of action otherwise exist.
The Court distinguished cases conferring immunity on witnesses. There was no equivalent immunity which would preclude a civil conspiracy claim based on contempt.
Article 5(3) of the Lugano Convention
The Lugano Convention generally requires suit in the defendant’s state of domicile. Special jurisdiction under article 6, based on Mr Ablyazov’s alleged English domicile, had failed below and was not appealed. Only article 5(3) remained: in matters relating to tort, the courts for the place where the harmful event occurred or may occur. That covers both the place of the damage and the place of the event giving rise to it.
The Bank’s argument that the damage occurred in England, because its freezing order and judgments were located there, had been rejected below. The nearer damage was the inability, or reduced ability, to execute against assets where they were located. Permission to cross-appeal that point was refused, so this Court did not decide it.
Teare J had held that implementation, not the agreement, caused the damage, and that implementation occurred in England only until Mr Ablyazov fled on 16 February 2012. The Court of Appeal held that the conspiratorial agreement in England was the relevant event. The Supreme Court agreed. Article 5(3) has an autonomous meaning and is strictly construed, but national law identifies the legally relevant conduct. The inquiry looks to the originating event that sets the tort in motion. In Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Akzo Nobel NV, the Court of Justice treated formation of the cartel, rather than its implementation, as that event where the place of formation could be identified. Entering the agreement in England would have encouraged and procured the later unlawful acts, and the alleged dealings were undertaken pursuant to it. The making of the agreement was therefore the harmful event.
Verdict: The Court unanimously dismissed Mr Khrapunov’s appeal. The Bank had an arguable unlawful-means conspiracy claim and could bring it in England, where the agreement was alleged to have been made. Liability remained to be tried.
