JSC BTA Bank (Respondent) v Khrapunov (Appellant)

Cite as:[2018] UKSC 19
Hand-down Date:March 21, 2018
 
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Hilary Term [2018] UKSC 19 On appeal from: [2017] EWCA Civ 40

JUDGMENT

JSC BTA Bank (Respondent) v Khrapunov (Appellant) before

Lord Mance, Deputy President Lord Sumption

Lord Hodge Lord Lloyd-Jones Lord Briggs JUDGMENT GIVEN ON 21 March 2018 Heard on 24 and 25 January 2018 Appellant Respondent Charles Samek QC

Stephen Smith QC Tim Akkouh (Instructed by Hogan Lovells International LLP) Marc Delehanty

(Instructed by Hughmans Solicitors)

LORD SUMPTION AND LORD LLOYD-JONES: (with whom Lord Mance, Lord Hodge and Lord Briggs agree)

Introduction

  1. This is litigation on a large scale. Between May 2005 and February 2009, Mr Mukhtar Ablyazov was the chairman and controlling shareholder of the claimant, a bank incorporated in Kazakhstan. It is alleged that during this period, he embezzled some US$6 billion of the Bank's funds. In February 2009, the Bank was nationalised and Mr Ablyazov was removed from office. He fled to England, where he ultimately obtained asylum. In August 2009, the Bank began proceedings against him in the Commercial Court, alleging misappropriation of its funds. Other proceedings followed, in the Commercial Court and the Chancery Division. Mr Ablyazov was ultimately the defendant in eleven actions brought by the Bank against him, either alone or in conjunction with alleged associates.

  2. At the outset of the litigation, the Bank obtained a disclosure order requiring Mr Ablyazov to identify and disclose the whereabouts of his assets and a worldwide freezing order preventing him from dealing with them. Subsequently, in August 2010, the High Court appointed receivers over all of Mr Ablyazov's assets. Later that year, the Bank obtained a number of search and disclosure orders. These yielded a haul of documents revealing a large number of undisclosed assets and a network of undisclosed companies through which Mr Ablyazov had sought to put them out of the reach of the Bank.

  3. In 2011, the Bank applied for an order committing Mr Ablyazov for contempt of court. Teare J gave judgment on that application on 16 February 2012. He held that Mr Ablyazov had failed to disclose his assets in breach of the disclosure order, that he had disposed of certain of them in breach of the freezing order and the receivership order, and that he had given false evidence and forged documents in an attempt to cover his tracks. Teare J sentenced him to 22 months imprisonment. However, by the time that the judgment was handed down, the bird had flown. Mr Ablyazov fled the country on receipt of the judge's draft judgment. He spent some time in prison in France pending the resolution of an application by Russia for his extradition, which ultimately failed. His present whereabouts are unknown. On 29 February 2012, Teare J ordered that Mr Ablyazov's defences in the Commercial Court actions should be struck out unless he gave full disclosure of his assets and surrendered himself to the tipstaff. He did neither of these things, and default judgments were subsequently obtained against him in four of the actions for sums

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    exceeding US$4.6 billion and in a fifth for damages to be assessed. Very little has been recovered.

  4. The present proceedings were commenced in July 2015. The defendants are Mr Ablyazov and his son-in-law Mr Khrapunov, who is domiciled in Switzerland. Mr Ablyazov has taken no part in these proceedings, and the present appeal is concerned only with the position of Mr Khrapunov. The Bank's case against him is that he has at all times been aware of the freezing order and the receivership order, and that in about 2009 he entered into a combination or understanding with Mr Ablyazov to assist him in dissipating and concealing his assets. For present purposes, it may be assumed that they entered into it in England where Mr Ablyazov was then living. Teare J found that there was sufficient evidence to that effect, and the point has not been contested before us. It is alleged that both before and after Mr Ablyazov's flight abroad Mr Khrapunov actively participated in the agreed scheme, both on Mr Ablyazov's instructions and from time to time on his own initiative. He is said to have been instrumental in extensive dealings in the assets of Swiss, Belizean and Russian companies controlled by Mr Ablyazov and in laying a trail of false documents to conceal what had become of them. This is relied upon as constituting the tort of conspiracy to cause financial loss to the Bank by unlawful means, namely serial breaches of the freezing order and the receivership order.

  5. The present appeal arises out of an application by Mr Khrapunov contesting the jurisdiction of the English court. The application is made on two grounds. The first is that there is no such tort as the Bank asserts, because contempt of court cannot constitute unlawful means for the purpose of the tort of conspiracy. This, Mr Samek QC submits on his behalf, is because means are unlawful for this purpose only if they would be actionable at the suit of the claimant apart from any combination. Contempt of court, he submits, is not actionable as such. There is therefore no good arguable case on which to found jurisdiction. The second ground is that, Mr Khrapunov being domiciled in Switzerland, there is no jurisdiction under the Lugano Convention unless the claim falls within the special jurisdiction conferred by article 5(3) on the courts of "the place where the harmful event occurred". The only event said to have happened in England is the conspiratorial agreement. Mr Khrapunov contends that the event that was harmful was not the conspiratorial agreement but the acts done pursuant to it. They were done outside England.

    The cause of action

  6. Conspiracy is one of a group of torts which tend to be loosely lumped together as "economic torts", the others being intimidation, procuring a breach of contract and unlawful interference with economic and other interests (sometimes called the "intentional harm" tort). Along with tortious misrepresentation (fraudulent or negligent), passing off, slander of title and infringement of intellectual

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    property rights, the economic torts are a major exception to the general rule that there is no duty in tort to avoid causing a purely economic loss unless it is parasitic upon some injury to person or property. The reason for the general rule is that, contract apart, common law duties to avoid causing pure economic loss tend to cut across the ordinary incidents of competitive business, one of which is that one man's gain may be another man's loss. The successful pursuit of commercial self-interest necessarily entails the risk of damaging the commercial interests of others. Identifying the point at which it transgresses legitimate bounds is therefore a task of exceptional delicacy. The elements of the four established economic torts are carefully defined so as to avoid trespassing on legitimate business activities or imposing any wider liability than can be justified in principle. Some of the elements of the torts, notably intention and unlawful means are common to more than one of them. But it is dangerous to assume that they have the same content in each context. In OBG Ltd v Allan [2008] AC 1, Lord Hoffmann drew attention to some of the confusions and category errors which have resulted from attempts by judges and scholars to formulate a unified theory on which these causes of action can be explained. Lord Hoffmann was not directly concerned with the tort of conspiracy, but of all the economic torts it is the one whose boundaries are perhaps the hardest to define in principled terms.

  7. The modern tort of conspiracy was developed in the late 19th and early 20th century, as a device for imposing civil liability on the organisers of strikes and other industrial action, once the Conspiracy and Protection of Property Act 1875 had provided that combinations in furtherance of trade disputes should no longer be indictable as crimes. It is an anomalous tort because it may make actionable acts which would be lawful apart from the element of combination. The ostensible rationale, that acts done in combination are inherently more coercive than those done by a single actor, has not always been found persuasive, least of all when the single actor may be a powerful corporation. There is much to be said for the view expressed by Lord Walker in Revenue and Customs Comrs v Total Network SL [2008] 1 AC 1174, para 78, that an unarticulated factor in the development of the tort was the conviction of late Victorian judges that large-scale collective action in the political and economic sphere by those outside the traditional governing class was a potential threat to the constitution and the framework of society. Nonetheless, the tort of conspiracy has an established place in the law of tort and its essential elements have been clarified by a series of modern decisions of high authority, most of them in contexts far removed from the modern tort's origin in the law relating to industrial disputes.

  8. It has been recognised since the decision of the House of Lords in Quinn v Leathem [1901] AC 495 that the tort takes two forms: (i) conspiracy to injure, where the overt acts done pursuant to the conspiracy may be lawful but the predominant purpose is to injure the claimant; and (ii) conspiracy to do by unlawful means an act which may be lawful in itself, albeit that injury to the claimant is not the predominant

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    purpose. In Lonrho Plc v Fayed [1992] 1 AC 448, Lord Bridge, with whom the rest of the Appellate Committee agreed, reviewed the earlier authorities and summarised the position as follows, at pp 465-466:

    "Where conspirators act with the predominant purpose of injuring the plaintiff and in fact inflict damage on him, but do nothing which would have been actionable if done by an individual acting alone, it is in the fact of their concerted action for that illegitimate...

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