JSC Mezhdunarodniy Promyshlenniy Bank & Anor v Pugachev

In contempt proceedings, liability must be proved beyond reasonable doubt. For alleged false evidence, the applicant must prove that the statement was untrue when made and that the witness lacked an honest belief in it at that time. Later disclosure alone does not establish earlier dishonesty. Orders carrying penal consequences are strictly construed, but their words are read in context and in light of their purpose. An obligation to surrender travel documents can extend to documents held elsewhere, requiring immediate steps to identify and deliver them. A party cannot justify disobedience by relying on an alleged collateral purpose of the proceedings or by using frozen assets outside the safeguards governing permitted expenditure. Duties to provide historic financial information are assessed realistically, but responsibility remains personal.

The applicants sought to commit Mr Pugachev for 17 alleged contempts arising from freezing, passport, travel, search, disclosure and evidence orders made in proceedings supporting Russian insolvency claims. Thirteen allegations concerned breaches of court orders and four concerned allegedly false evidence. The central issues included the construction and service of penal notices, the use of circumstantial evidence, the scope of duties to disclose historic financial transactions, the use of frozen assets, and the mental element required for false evidence. The court determined liability only after a six-day hearing and reserved sentence for further submissions.

1. Disposition. Twelve allegations were proved beyond reasonable doubt: A1, A2, A3, B1, B3, B4, B5, C1, C2, D3, E1 and E4. Allegations B2, D1, D2, E2 and E3 were not proved. Sentence was reserved.
2. Procedure and proof. Under Rules 81.4, 81.8 and 81.9 of the Civil Procedure Rules 1998, the court may dispense with service and a penal notice where the respondent had adequate notice and suffered no injustice, although the power should be used exceptionally. The court applied Gill v Darroch [2010] EWHC 2347 (Ch), Jolly v Hull [2002] FLR 69 and SOCA v Hymans [2011] EWHC 3599 (QB). The burden remained on the Bank and the criminal standard applied. For false evidence, the relevant question was the respondent’s state of mind when each statement was made, applying JSC BTA Bank v Ereshchenko [2013] EWCA Civ 829.
3. Construction and asset dealings. Applying the strict construction principle in JSC BTA Bank v Ablyazov (No 10) [2015] UKSC 64, the passport order covered all passports, including one held abroad, and required immediate steps to identify and deliver it. A later compliance deadline did not erase the earlier breach. An alleged collateral purpose did not suspend the duty to obey the orders, applying Ablyazov v JSC BTA Bank [2011] EWCA Civ 1386. Use of the motor vessel was insufficient to prove a power to dispose of it. By contrast, the transfer and dissipation of frozen funds, the sale of cars, and the assignment of expected arbitration proceeds were proved breaches.
4. Disclosure and expenditure. The duty to provide information to the best of the respondent’s ability after reasonable enquiries required personal responsibility, but had to be assessed realistically in light of the age and complexity of the transactions. D1 and D2 therefore failed, while D3 succeeded because reasonable enquiries of the relevant person had not been made. Frozen funds could not be used for expenses without observing the safeguards in the order; the principles in Tidewater Marine International v Phoenixtide Offshore Nigeria Ltd [2015] EWHC 2748 (Comm) were applied.
5. False evidence. An earlier decision declining indemnity costs did not preclude a later committal determination. The committal hearing was the proper forum for deciding whether statements were knowingly or recklessly false. E1 and E4 were proved; E2 and E3 were dismissed.

This was a first-instance determination of liability on committal applications. The judgment records earlier interlocutory orders and a Court of Appeal dismissal concerning refusal to return a passport: [2015] EWCA Civ 1108. Sentence was reserved for further submissions.