Khrapunov v JSC BTA Bank

A simple breach of a court order does not itself create a private-law cause of action in damages. It may, however, constitute unlawful means for conspiracy to injure by unlawful means. A person outside the order may incur civil liability where, knowing the obligations imposed on its addressee, that person deliberately assists their violation pursuant to the conspiracy.

Under article 5(3) of the Lugano Convention, the place where damage occurs is where the initial or most immediate damage is sustained. The event giving rise to damage is the wrongful event principally founding liability under the applicable national law. For conspiracy, that event may be the agreement which sets the tort in motion.

The Bank alleged that Mr Khrapunov conspired with Mr Ablyazov to conceal or dissipate assets in breach of a worldwide freezing order and a receivership order. Mr Khrapunov lived in Switzerland, and the Bank sought to establish jurisdiction in England under articles 5(3) and 6 of the Lugano Convention.

Teare J, in [2016] EWHC 230 (Comm), held that the alleged contempts could constitute unlawful means. He rejected jurisdiction based on Mr Ablyazov's domicile and on the place where damage occurred. He accepted jurisdiction on the basis of events giving rise to damage in England, but only until Mr Ablyazov left England.

Mr Khrapunov appealed against the findings on unlawful means and jurisdiction. The Bank cross-appealed against the temporal limit and the rejection of its other jurisdictional grounds. The central issues concerned the effect of breaching a court order and the proper identification of the places specified by article 5(3).

1. Disposition. Mr Khrapunov's appeal was dismissed. The Bank's cross-appeal was dismissed under article 6 and under the place-of-damage limb of article 5(3), but allowed under its event-giving-rise-to-damage limb. Sales LJ gave the judgment, with which Beatson LJ and Gloster LJ agreed.
2. A simple breach of a court order does not itself constitute a private-law cause of action in damages. A freezing order creates an obligation owed to the court and carries its own remedies. A separate recognised cause of action or additional private-law element is therefore required.
3. No rule prevents breach of a court order from forming an element of a recognised tort. Deliberate civil contempt through breach of a court order can constitute unlawful means for conspiracy to injure by unlawful means. Such conduct is a clear and sufficiently reprehensible marker of illegitimate concerted action. The Bank therefore had a good arguable claim.
4. A co-conspirator outside the order may be liable where, with knowledge of the addressee's obligations, that person deliberately counsels, procures or assists their violation. A Babanaft proviso may protect a foreign person from penal contempt sanctions without immunising that person from compensatory civil liability for participation in the conspiracy.
5. The lawful-means conspiracy argument could not be introduced on appeal. It had been disavowed below and was neither pleaded nor supported by evidence that injury to the Bank was the conspirators' predominant purpose.
6. Article 6 did not confer jurisdiction. Section 41A(2) of the Civil Jurisdiction and Judgments Act 1982 supplies clear residence-based criteria. Its statutory scheme did not permit an uncertain implied qualification based on another person's unlawful departure from the jurisdiction.
7. For the damage limb of article 5(3), the relevant place was where the Bank first and most immediately lost or had impaired its ability to execute against the foreign assets. Consequential diminution in England of the value of its claims, orders and judgments did not suffice.
8. For the event limb, the relevant event was the alleged conspiracy agreement made in England. That agreement was the principal legal foundation of joint liability and the harmful event which set the tort in motion. Later instructions did not divide or temporally limit jurisdiction over the single alleged conspiracy.

1. Court of Appeal (Civil Division): In [2017] EWCA Civ 40 , dismissed Mr Khrapunov's appeal and allowed the Bank's cross-appeal only in respect of the event-giving-rise-to-damage limb of article 5(3) of the Lugano Convention.
2. High Court of Justice, Queen's Bench Division (Commercial Court): Teare J, in [2016] EWHC 230 (Comm) , found a good arguable conspiracy claim and accepted jurisdiction under article 5(3) for events before 16 February 2012, but rejected the Bank's other jurisdictional grounds.