Out-Law News | 23 Feb 2016 | 5:22 pm | 3 min. read
Mr Justice Teare's ruling means that JSC BTA Bank, based in Kazakhstan, can pursue the son-in-law of its former chairman Mukhtar Ablyazov for damages as a result of his helping Ablyazov defraud the bank. The bank has outstanding judgments and a worldwide freezing order (WFO) against Ablyazov, who according to the court "fled" the UK for France "on the eve of being committed to prison for contempt", worth over $4.6 billion.
The judgment does not necessarily mean that the bank's action against Ilyas Khrapunov, the son-in-law, will succeed but rather that it has a "good arguable case". Khrapunov is domiciled in Switzerland and had argued that this meant that the English courts had no jurisdiction over him. However, Mr Justice Teare disagreed on the grounds that Khrapunov and his father-in-law conspired together while the latter was living in England in 2009. This meant that the "event which gave rise to the damage" to the bank arguably took place in England, he said.
The decision of the court in this case was a "sensible and pragmatic" one, according to civil fraud and asset recovery expert Alan Sheeley of Pinsent Masons, the law firm behind Out-Law.com.
"Although it awaits to be seen how this case will be followed in practice, the High Court's decision should in theory make it easier for the victims of an unlawful means conspiracy to establish their claim and, consequently, to attain a remedy," he said.
"Of course, without further direction from the courts as to the particular circumstances in which contempt of court will constitute unlawful means, or any limitations in relation to the same, claimants should be aware that this may not always be sufficient or appropriate grounds on which to establish the tort of conspiracy to injure by unlawful means. Anyone who considers that he or she may have been victim to a conspiracy should seek specialist legal advice as early as possible to get advice on their options and the potential claims available to them," he said.
Contempt of court, in this case via breach of a court order, is not in itself grounds for a damages claim. However, that was not what was being argued in this case. Instead, the bank put forward the idea that contempt of court could constitute the 'unlawful means' of an action for 'conspiracy to injure by unlawful means'; which in the words of the court "involves an arrangement between two or more parties, whereby they effectively agree that at least one of them will use 'unlawful means' against the claimant". The claimant must "suffer loss or damage" as a result of the conspiracy, although that damage "need not be the predominant intention of any of the parties".
The difficulty here was whether something that was not in itself actionable could be considered 'unlawful means', according to the judge. After reviewing previous case law and the civil procedure rules, he came to the conclusion that the 'positive rule' in contempt cases only prevented the courts from ordering damages for loss caused by contempt.
"In my judgment contempts of court, certainly those as serious as the contempts alleged in this case which amount to a very serious interference with the administration of justice, and in particular with the WFO which was issued to protect the bank, and are punishable by committal to prison, sequestration of assets or fines, are sufficiently reprehensible to justify treating them as unlawful means," he said. "The man in the street would agree."
"The 'positive rule' simply means that where reliance is placed on contempt alone as a reason for ordering the payment of damages the court will not order the payment of damages. Where, however, reliance is placed on a conspiracy to injure by the use of unlawful means, namely a contempt, the 'positive rule' has no role because reliance is not being placed on contempt alone as reason for ordering the payment of damages," he said.
Although the jurisdictional argument was more complicated, the judge concluded that the bank had at least "a good arguable case that the alleged conspiracy was hatched in England though it does not appear to me to be certain that it did".
"In my judgment it is necessary to keep well in mind that the court is seeking to identify the place of the event which gave rise to the damage, not the tort," he said.
"The damage ... occurred in the places where the assets, which were the subject of wrongful dealing, were located. The place of the event giving rise to that damage seems to me to be the place in which the conspiracy was implemented. It is the implementation of the conspiracy which gave rise to that damage," he said.