JSC BTA Bank v Solodchenko & Ors

A deliberate and substantial breach of the disclosure provisions of a freezing order is a serious civil contempt. It will normally attract an immediate prison sentence measured in months and may justify a term exceeding one year. Continuing non-disclosure may warrant a sentence up to the two-year maximum under the Contempt of Court Act 1981.

The sentence serves punitive and deterrent purposes and may also encourage compliance. The court may identify the portion appropriate for past misconduct and the portion potentially remittable following prompt and full compliance. That indication guides, but does not bind, a future court. A substantial fine may suffice where the contempt has been purged and relevant assets recovered.

The bank obtained a worldwide freezing order requiring the second defendant to disclose assets and information concerning alleged fraudulent transfers. He deliberately failed to comply. The High Court found him in contempt but, in JSC BTA Bank v Solodchenko [2010] EWHC 2843 (Ch), [2011] 1 WLR 906, imposed no substantive sentence. It proceeded on the assumption that he had purged his contempt and ordered only indemnity costs.

The bank appealed. Fresh evidence admitted by the Court of Appeal, together with the defendant's admissions, established that his purported disclosure contained deliberate falsehoods and concealed a large email archive. His non-compliance remained continuing. The issues were whether the High Court's sentencing decision could stand and, if not, what sentence the Court of Appeal should substitute.

1. Appeal allowed unanimously. Jackson LJ delivered the judgment, with Carnwath LJ and the Master of the Rolls agreeing. The High Court's order was discharged and a sentence of 21 months' imprisonment was substituted.
2. A civil contempt sentence for non-compliance with a court order has punitive and deterrent functions. Where the breach continues, it may also coerce compliance because the contemnor can seek variation or discharge after purging the contempt. The public interest lies in securing obedience to court orders, rather than protecting the court's dignity. The approach in Lightfoot v Lightfoot [1989] 1 FLR 414 was applied.
3. A deliberate and substantial breach of the restraint or disclosure provisions of a freezing order is serious and normally requires immediate imprisonment. The term will generally be measured in months rather than weeks and may exceed one year. A substantial fine may sometimes suffice, particularly where contempt has been purged and the relevant assets recovered. Continuing refusal to disclose can justify a long sentence, potentially the two-year maximum permitted by section 12 of the Contempt of Court Act 1981.
4. The court may indicate the portion of a sentence which should be served as punishment for past misconduct and the portion which might be remitted following prompt and full compliance. Such an indication is persuasive but cannot bind the court hearing a future application. Applying the approach approved in Shalson v Russo, the court balanced the incentive to comply against the public interest in effective punishment and deterrence. The nominal sentence must be fixed without allowance for remission, release on tagging or similar matters.
5. The High Court had sentenced on the incorrect assumption that the contempt had been purged. The fresh evidence showed that the defendant had submitted deliberate lies, concealed relevant emails and continued to withhold proper answers and documents. His presentation of false evidence at the sentencing hearing aggravated the contempt. Remittal would waste costs because the Court of Appeal possessed the relevant facts. Of the substituted 21-month term, nine months represented the punishment which the court considered should remain even following future compliance. That view was an advisory indication for any later application to vary the sentence.

1. Court of Appeal (Civil Division): In JSC BTA Bank v Solodchenko & Ors [2011] EWCA Civ 1241, the court allowed the appeal, discharged the sentencing order and substituted 21 months' imprisonment.
2. High Court, Chancery Division: In JSC BTA Bank v Solodchenko [2010] EWHC 2843 (Ch), [2011] 1 WLR 906, Proudman J found the second defendant in contempt but imposed no substantive sentence, proceeding on the assumption that the contempt had been purged. She ordered him to pay indemnity costs.