JSC BTA Bank v Granton Trade Ltd & Ors

A court may revoke an order granting relief from sanctions where it is satisfied on the civil standard, with regard to the nature of the allegation, that the order was obtained by misleading the court. It must also be satisfied that the issue can fairly be determined on the available material.

The court should consider whether cross-examination, further documents or a trial of the issue are required. It need not direct a trial merely because the opposing account is not fanciful. Where an unless order has taken effect, the court ordinarily proceeds on the basis that the relevant considerations and appropriate sanction were assessed when that order was made.

The Bank alleged that the appellant companies had participated in sham transactions through which its former chairman misappropriated more than US$1 billion. Following their non-compliance with disclosure obligations under a freezing order, Christopher Clarke J made an unless order debarring them from defending the proceedings unless specified information and documents were supplied.

The judge initially granted relief from that sanction. After the Bank discovered documents indicating that the appellants had misled the court about their ownership, control and direction, he revoked the relief and entered judgment for the Bank: [2011] EWHC 2506 (Comm).

The central issue on the limited appeal was whether the judge could determine on affidavit and documentary evidence that the court had been misled, or whether he was obliged to direct a trial of that issue or defer its resolution until the trial of the action.

1. Appeal dismissed. Tomlinson LJ, with whom Moore-Bick and Mummery LJJ agreed, held that the judge was entitled to decide on the interlocutory application that the court had been seriously misled. He was not obliged to direct a separate trial or defer the issue until trial of the action.

2. Before revoking relief from a sanction, the court must be satisfied to the civil standard, taking account of the nature of the allegation, that it was misled or that a relevant change of circumstances warrants revocation. It must also be satisfied that it can fairly reach that conclusion. The court must consider whether it requires cross-examination, further documents or a trial of the issue, but those procedural steps are not invariably necessary.

3. The suggested requirement that the court could determine the issue without a trial only if the appellants’ account was fanciful was rejected. That threshold concerns striking out an allegedly unsustainable claim and did not govern revocation of relief from the sanction imposed by an earlier unless order. Nor was the usual fair-trial approach to striking out for disclosure defaults analogous. Revocation concerned non-compliance with an order granting conditional relief from a sanction already imposed for breach of an earlier order.

4. Applying Marcan Shipping (London) Ltd v Kefalas [2007] 1 WLR 1864, the court proceeds on the basis that the relevant factors and the prospective sanction were considered when the unless order was made. A party contending that the order should not have been made must challenge it on appeal.

5. The judge had carefully examined whether the issue could fairly be determined on the available material. The appellants produced no evidence capable of undermining the documentary conclusion and the alleged controller had chosen not to give responsive evidence. There was therefore no useful purpose in ordering cross-examination or a trial of the issue. The judge was also entitled to infer that Incompro was administered like the associated companies. The Bank’s application to adduce fresh evidence required no determination.

1. Court of Appeal (Civil Division): The appeal was dismissed unanimously: [2012] EWCA Civ 564.
2. High Court, Commercial Court: Christopher Clarke J revoked the earlier order granting relief from sanctions, declined to grant fresh relief and entered judgment against the appellants for US$1,031,263,000: [2011] EWHC 2506 (Comm).
3. Permission to appeal: Rix LJ granted permission on limited grounds concerning the determination that the court had been misled. Permission concerning the fresh exercise of discretion was refused.